Spain’s ministry of consumer rights blocked access to Kalshi and Polymarket this week. The country has paused the use of the prediction markets (also known as event contracts) as it determines whether their models are operating legally without a gambling license.
Spain joins France, Belgium, the Netherlands, and Romania, which have all limited or blocked access to Polymarket.
The controversy begs the question: are prediction markets useful forecasting tools, speculative tools, or simply gambling platforms wrapped in fintech language? With that in mind, here’s a look at three arguments for and three arguments against event contracts.
Three arguments for
Supporters argue that prediction markets are not necessarily about gambling, but rather about information discovery.
Prediction markets can aggregate information more efficiently than polls or expertsPrediction markets force participants to put money behind their convictions, which essentially rewards accuracy with financial incentives. Supporters argue this makes them more effective than polls or expert commentary at forecasting future events because markets continuously absorb new information and update probabilities in real time.
Financial markets already operate as forms of event contractsIf you’ve ever invested in single stocks, you’ve essentially participated in prediction markets. The only difference is that, with stocks, investors are limited to predicting the outcome of a company instead of an event. Bonds and derivatives are also a type of prediction as well, as bonds essentially price default risk and derivatives price probabilities. This raises the question, why is betting on election outcomes different from betting on interest-rate moves.
Prediction markets could improve forecastingBecause they are a useful tool for crowdsourcing information, prediction markets can be used by businesses or governments to improve decision-making. Users are more likely to make predictions on events about which they are knowledgeable, and this information could be helpful for forecasting recessions, fraud, supply chains, elections, and demand. Because they can source this information quickly, prediction markets can surface truths faster than committees or social media.
Three arguments against
Opponents argue that event contracts cause unwanted externalities
They may incentivize harmful or unethical behaviorOftentimes, event contracts offer events surrounding wars, assassinations, elections, and disasters. These are uncomfortable things to bet on, as it may feel as if users are rooting for these outcomes. Additionally, this raises ethics concerns over investors profiting from others’ tragedies.
Markets can be manipulatedEven though prediction market outcomes may appear more organic than the performance of publicly traded companies, they are not immune to manipulation. Deep-pocketed participants willing to absorb larger losses may attempt to distort market odds, while coordinated misinformation campaigns and bot-driven activity can artificially influence sentiment and pricing. As event contracts become more popular, concerns are growing that the markets themselves could shape public perception rather than simply reflect it.
They lack consumer protections and regulatory frameworksAcross the globe, prediction markets are relatively new and therefore lack regulation, as they don’t fit cleanly into existing categories. It is unclear if they are considered securities, gambling, or derivatives and therefore lack proper regulatory oversight and consumer protection standards.
As prediction markets continue to grow in popularity, regulators will increasingly need to decide whether these platforms belong within financial services, gambling, or an entirely new category. Spain’s move suggests that many jurisdictions are still uncomfortable with the idea of turning elections, world events, and public sentiment into tradeable assets.
Photo by Dante Grime Kahan
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