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Prediction markets are moving onto Wall Street’s turf — and regulators are starting to push back. A September 28 Reuters investigation found the industry pioneered by Polymarket and Kalshi is rapidly expanding into equity-linked products, raising investor-protection and market-oversight concerns.
What happened
According to an analysis by blockchain research firm Allium prepared for Reuters:
- Polymarket International launched individual-stock markets last October; traders have bet more than $220 million across roughly 31,000 equity-linked markets through early September.
- Nearly 60% of that volume was tied to individual stock moves, with Nvidia, Alphabet, Apple and Tesla the most popular names.
- Kalshi does not offer individual-stock wagers but offers around 2,500 daily markets on indexes and corporate “KPIs” such as iPhone launches and Tesla deliveries.
Separately, the Sixth Circuit Court of Appeals ruled against Kalshi, holding Ohio and Tennessee can apply their gambling laws to its sports-event contracts. That creates a circuit split: the Third Circuit sided with Kalshi in April (New Jersey), while the Ninth Circuit went the other way in August (Nevada). New Jersey has asked the Supreme Court to review the case. Meanwhile, Polymarket has sued the Massachusetts attorney general over state enforcement, and New York sued Kalshi in August.
Why it matters
Equity-linked prediction markets create a new venue for betting on US securities outside the investor protections and market surveillance rules that govern regulated exchanges. Legal experts warn that if growth continues, these markets could eventually influence trading in the underlying shares. Contracts tied to a single stock are generally considered security-based swaps under US law — SEC territory, mostly restricted to professional investors — and KPI markets raise insider-trading risks. “You could envision insider trading taking place in these KPIs just as easily as you could in the stocks,” former SEC official Ben Schiffrin told Reuters. The CFTC claims it should oversee prediction markets; the two agencies jointly sought public feedback in June on who should be the primary watchdog. This matters beyond compliance theater: Robinhood and sports-betting stocks sit in the middle of the blast radius.
What to watch
- Whether the Supreme Court takes the New Jersey/Kalshi case — a decision could settle federal vs. state jurisdiction for the whole industry.
- The outcome of the SEC/CFTC joint review.
- Further state enforcement actions, and whether Polymarket’s Massachusetts suit establishes federal preemption.
Sources: https://www.reuters.com/legal/government/prediction-markets-push-into-us-stocks-raises-regulatory-alarm-bells-2026-09-28/ | https://www.barrons.com/articles/kalshi-ruling-prediction-markets-robinhood-sports-betting-stocks-f80bd837
Related reading: our coverage of the CLARITY Act fallout (https://bullounge.com/forums/topic/clarity-act-fallout-blockchain-association-ceo-summer-mersinger-steps-down/) and the Senate crypto vote (https://bullounge.com/forums/topic/xrp-and-solana-surge-22-after-clarity-act-fails-in-senate/).
Should stock-linked prediction markets face the same rules as stock exchanges — or would that kill the innovation?
Not financial advice.
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