Regular stock exchange observers will know all about prediction markets. Users buy and sell contracts that pay a fixed sum if a specified event occurs – a sports team wins a match, a candidate is elected.

The price at which such a contract trades represents the collective estimate of the probability of the event. It resembles a bet in function and a derivative in form. Whether the law classifies it as the one or the other has consequences that extend well beyond the circle of specialists. Lawmakers and courts in the United States and Europe are currently grappling with this issue.

The wager on public events is not a novelty: betting on papal conclaves to select a new pope was so widespread in 16th-century Rome that Pope Gregory XIV prohibited it in 1591 under pain of excommunication, exclusion from the church. What is new is the scale of the phenomenon and the claim that accompanies it.

Kalshi, the principal regulated operator in the US, approached an annualised trading volume of US$50 billion (£37 billion) in early 2026. The operators’ legal argument is simple: they are not........

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