Can sports betting overthrow Iran?
Dustin Gouker on Polymarket, Kalshi, and whether prediction markets will take over our world.
I’m going to admit, sports betting isn’t really my thing. I don’t know my parlay from my parler (that’s a French joke), and I can barely keep three balls in the air at work, let alone track the balls across dozens of matches every weekend. But I’m an odd duck, since that is what Americans — and increasingly the world — do for entertainment. Nearly a majority of men in the United States have a sports betting account, and now the betting markets have opened to politics, culture and much more through prediction markets like Polymarket and Kalshi.
Will predictions become reality — or can reality be made to conform to predictions? That’s just part of the conversation I have with Dustin Gouker. Dustin is the writer of “The Closing Line” and “The Event Horizon” newsletters covering prediction markets and the sports betting landscape.
We talk about why prediction markets remain a small sliver of betting, how new underwriting models are taking market share from incumbents, the interface between betting and parametric insurance (because why not?), why sports will always dominate the industry, how performativity is increasingly interacting with international relations, and whether betting markets can be optimized for propaganda value.
This interview has been edited for length and clarity. For the full conversation, please check out our podcast.
Danny Crichton:
You’ve covered prediction markets for a long time. They’re going through a transition from being very niche maybe two–three years ago, to being broader. And this year, it seems like they’re poised to break out and become a nationwide phenomenon. Every retirement village is going to skip out on Bingo night and have Polymarket nights to bet on the future of Iran or whatever.
But what are you seeing? What are your predictions going into 2026?
Dustin Gouker:
The big thing, I think, is on the information side of things. The big idea of prediction markets is that people are trading on information. It’s not the gambling part, it’s not the sports part. People believe in this as a disseminator of information — I largely believe them.
I always come back to Intercontinental Exchange, the owner of the New York Stock Exchange, which basically said, “We don’t care about the sports stuff. What we care about is the information we are going to glean from the rise of prediction markets and disseminating that to partners.”
That’s one of the themes we’re going to see driven home this year and into the future: What’s the value of that information? Where else does this go? It also, of course, creates some controversy around insider trading and whether we actually need to be able to trade on some questions. But that information is the key piece.
The example I always go to is the federal government shutdown. It’s always been hard to place probabilities on whether the government will shut down. But we got that from prediction markets. Is the government going to shut down? Last year, the traders thought it would, and it did. And then, how long will the government shutdown go on? We were able to price that in real-time in a way I don’t think was possible before.
Danny Crichton:
You go back to the mid-2000s and there was this goal of crowdsourcing knowledge. The idea was that it wouldn’t be experts. I’m thinking of folks like Philip Tetlock, who showed that if you ask experts about political events, they’re not just wrong, they’re consistently wrong.
There were some startups around this in the late 2000s, early 2010s, but it petered out. And now you have Polymarket, Kalshi, and others that came out in the last couple of years and have done extremely well. I don’t know if you have an opinion on this, but I’m curious: Why the success today when, theoretically, prediction markets have been around for decades.
Every retirement village is going to skip out on Bingo night and have Polymarket nights to bet on the future of Iran.
Dustin Gouker:
I started coming into prediction markets along with PredictIt back several election cycles ago. You could bet on elections — the presidency and down-ballot races. Polymarket and Kalshi have been growing up in parallel, but differently.
Polymarket tapped into something from a crypto standpoint. This is all on-chain. This is crypto native. And it’s international. Wink wink, it’s not in the United States.
Kalshi was founded in 2018, but it didn’t really launch until much later. It wasn’t doing a whole lot — a little election betting, started fighting the CFTC under the Biden administration to allow election betting, won in court. In 2024, they start blowing up, with hundreds of millions of dollars getting bet on the Harris/Trump election. And then early last year, sports betting rolls around, and that’s been most of what’s happened at Kalshi.
A lot of people talk about the other stuff, but 90% of the volume at Kalshi is sports contracts, between football, basketball, golf, you name it. Everything else has been kind of de minimis. There’s still hundreds of millions being traded on this stuff, but it’s dwarfed, absolutely dwarfed, by all the sports stuff.
And now we’re at a point where there are all these other players, and it’ll be fascinating to see what happens. There’s tons of crypto projects. There’s the blending of on-chain and off-chain, like Kalshi’s trying to do. There’s going to be a lot happening in 2026.
Danny Crichton:
When we go from sports into politics, culture, and society, these markets seem to have a huge amount of influence, or at least they do in my world. Polymarket just signed this partnership agreement with Dow Jones, the owner of Wall Street Journal, Barron’s, and a bunch of other products. Presumably they’re going to start to include some of that betting — the tickers and predictions — in articles.
Is this just, here’s another vertical, another opportunity to bet? Or is there something deeper there that I’m not seeing?
Dustin Gouker:
Bloomberg Terminal has added a bunch of functionality to ingest and then put back out Polymarket and Kalshi data, which is fascinating. People were asking, “Who’s going to create the Bloomberg Terminal of prediction markets?” It’s going to be Bloomberg!
Now we have these probabilities for things we never had probabilities for.
The sports betting part of this is interesting because we have an ingrained world around sports betting and how the media does it. We might get a little too in-the-weeds, but the lifetime value of a customer at a sportsbook is way higher than the lifetime value of a single customer at a prediction market. So a sportsbook will pay more to acquire a customer or retain a customer than a prediction market ever will. That’s not going to change, I don’t think, even with competition.
So are we going to see this on ESPN and all the other networks? Arguably not, because they’re ingrained within the sports betting industry. I’m not saying it could never happen, but there are reasons why the sports ecosystem is not necessarily going to jump into this. Now, we saw the NHL do seven-figure deals with Kalshi and Polymarket to become their marketing partners and official partners. There’s something there, but at the same time, I just don’t see it being adopted in the same way.
The difference is that we now have these probabilities for things we never had probabilities for. Temperature, for example. Before, you were looking at weather apps or to your local meteorologist. Instead, we now have what traders think the temperature is going to be, how many tornadoes there are going to be, how many hurricanes we think there are going to be. All those things — that data and those probabilities — are what we haven’t had.
Could we see a partnership with the Weather Channel? Sure. Why not? Obviously, the Weather Channel probably really believes in its meteorologists, but at the same time, here’s another data point we can use to validate what we think is going to happen on any given day and in any given season.
Danny Crichton:
Is the Weather Channel still owned by IBM? IBM purchased them at some point back 15 years ago. [Editor’s note: IBM sold the Weather Channel in 2024.] IBM Watson is really what’s getting fired here, getting replaced with a prediction market.
I think of parametric insurance, this model that’s taking insurance markets from traditional insurance — where you’re guaranteed around damage — to a parametric model where you say, “Look, if winds hit 135 miles an hour sustained for more than five minutes in your area, you get a payout automatically, whether there’s damage or not.” Parametric models dramatically lower the cost of administration. It sounds subtle, but this is literally tens and tens and tens of millions of dollars of lawyer fees that go back and forth between insurance companies to figure out who’s at fault and who’s not. So it’s interesting to me to think of a future in which prediction markets will determine your parametric home insurance rates.
Dustin Gouker:
The insurance stuff is definitely interesting. I’m skeptical that average retail — you and me trying to insure our homes — are going to do it through a prediction market. I could definitely see institutional capital coming in trying to hedge against bad outcomes and hurricanes and things like that, though. That seems like a pretty likely outcome.
Now, is somebody going to strike a country because of a prediction market? Probably not. What I think is actually more interesting is, if these get to scale, would you make a bet to send false information.
Polymarket just did a deal with an on-chain housing site called Parcl to start launching prediction markets for housing prices. Real estate is this huge market that, for you and me, the only way we intersect with it is buying and selling houses. I can sell my house or I can take out a home equity line of credit. It’s limited.
If we have markets where you can hedge on the price going up or down over a day, a month, a year, a quarter, whatever, then you have a real way to protect against bad outcomes related to your house.
Danny Crichton:
I want us to take a step back, because one of the goals with prediction markets was that they cover phenomena in the real world and you could get these bets that were, let’s call them objective, or crowdsourced. But now there’s a loop — actions in the real world can be altered based on what the bets are showing.
We’ve already seen some major scandals in sports, where players were trying to hit their own betting targets or trying to throw a game — whatever the case may be. We’re starting to see this a little bit with politics, although I don’t think we would ever blow up Iran just to hit a Polymarket deadline.
But I’m thinking of a little tempest-in-a-teapot scandal, where a press conference went an extra couple minutes. Say there was a prediction that the press conference would go for longer than 60 minutes, and so is a press secretary going to be looking at their clock and being like, “If I hold another minute, I can make $500 on Polymarket”?
How real is the feedback loop, and is that something you’re concerned about long term?
Dustin Gouker:
So far it’s been — I think most people believe it has been — on the up and up. Sometimes there’s insider trading, where somebody who has information is trading and profiting off of it.
But the Venezuela markets are the one that’s been ... I’ve talked to a lot of mainstream media folks about this, where somebody who was probably an insider at Polymarket traded on three other markets right ahead of the attacks in Venezuela on Maduro being out. It’s hard to believe it was a coincidence.
Now, is somebody going to strike a country because of a prediction market? Probably not. What I think is actually more interesting is, if these get to scale, would you make a bet to send false information. That doesn’t seem impossible to me. There are already, I’m certain, governments using Polymarket to inform decision-making about world leaders and things like that. Khamenei in Iran, that’s a huge one that people are keeping tabs on. What do traders think? Are there insiders trading on it who know more than we do? So I don’t think there’s this impossibility of using markets to send information.
You’re definitely going to see it in politics, with people trying to manipulate markets by putting a lot of money on X, Y, or Z to make it look like somebody should win when they don’t. That’s impossible to do at the presidential level with the amount of liquidity you’re going to have to beat down, but on smaller, down-ballot races, it’s not impossible. Now, Kalshi makes a point of prohibiting that kind of betting, but I think there’s some skepticism about how well they can actually police it. On Polymarket, and anything that’s on-chain, you’re anonymous. You’re linked to a wallet, but we don’t know who you are.
Danny Crichton:
You’re getting at the concept of “performativity”: Do markets conform to the metric or do metrics conform to the market? Hypothetically, metrics come out of the market. But I think there’s a lot of work, particularly in the last 20–30 years, that shows it’s actually quite the opposite, that expectations set the market more than the actual market itself.
You can certainly imagine that in the context of polls, where a lot of people just care that their side wins, or they don’t want to vote for the loser and so they just don’t show up at the polls.
The other piece I think is really interesting is this: I’m on the Polymarket homepage right now. There’s a lot of stuff on Iran, but the volumes are low. To your point earlier, some of the Iran markets are $700,000. The Super Bowl is $700 million. Okay. So you’re probably not going to win a lot trying to influence the Super Bowl outcome. But if you put $30,000, $40,000, $50,000 on a $700,000 market, yes, it will adjust. If the media were to start reporting that Polymarket says there’s an 85%, 90% chance of strikes in the next month, does that put pressure on a president? If something doesn’t happen, now it looks like TACO ... Trump always chickens out.
Dustin Gouker:
The CEO of Kalshi at one point was talking about the idea of prediction markets informing policy. I want to say it was a podcast with the Coinbase CEO where he said, “Should we be taking prediction markets and then using that to inform policy?”
If I’m pricing it, it’s a coin flip that sports betting survives.
That’s could definitely happen. We can see approval numbers or how races are trending or what people think about GDP. Can all of that turn into information people use to inform their policy decisions? For sure. I don’t think we’re going to see the collapse of democracy. But I do think there are concerns here.
And again, the lower liquidity the market is, the worse this is, and that’s why they want to get the scale. If there’s enough money, you’ll get hammered in the market. There’s proposed legislation about insider trading that may or may not help all of this. But this has all happened so fast that I don’t think a whole lot of people have stopped to think about some of the knock-on effects.
Danny Crichton:
We already talked a lot about 2026, but let’s project out. It feels like Polymarket and Kalshi have really built up the category. They’re likely to continue to grow. And we have these additional societal effects. How does this all come together over the next couple of years?
Dustin Gouker:
In the short-term, it is all about sports.
In two to three years, we’re going to have a Supreme Court case about all of this, and whether it’s legal and whether federal laws preempt all the state gambling laws or not. We get a decision there, then we have clarity, one way or the other. This is either here to stay or it’s gone.
The other one I remind people about is a presidential regime change in 2028. If the Democrats come in, or even if the Democrats win in midterms, there’s going to be, I think, more coming out against the sports part of this. I’m not overstating it to say that there are dozens of states — there are attorney generals, both red and blue — who have said, “This is sports gambling. Can’t have it here.”
So all the political and legal contours are going to shape all of this. That might be years down the road.
But longer term, I don’t know. If I’m pricing it, it’s a coin flip that sports betting survives. And then how much during these two to three years has everybody pivoted to elections and other stuff? Elections are going to be huge no matter what, but getting people to trade on what’s the price of Bitcoin, financial markets, cultural markets? How much adoption do they get?
For Kalshi, it has been pretty de minimis so far. It’s been sports, and then everything else is a rounding error. 10% of trading is everything else that’s not sports. Polymarket has done a good job of getting people to care about all these other things and put their money on it. So if they can replicate that here in the United States, or anybody else who comes along, that’s the part that is interesting and is going to be here no matter what.
I found this fascinating, especially on the heels of reading Breakneck. I understand that there’s value to be harvested in the prediction markets, I’m just unsure of where the value created is? Are we really better off with prediction markets in our pockets that we can bet on? Or is, this as the Chinese would say, a “fictitious economy” where money changes hands, but nothing of value has actually been created? I honestly don’t know.