Kalshi hits back: “significant flaws” in institute’s analysis of prediction markets
Kalshi claims to have found “significant flaws” in the Roosevelt Institute’s recent analysis of prediction markets, saying they “invalidate” the think tank’s findings and “paint a concerning picture about the creep of the casino lobby’s influence on policy.”
On 7 July, progressive US think tank the Roosevelt Institute published the first of a four-part series endeavoring to explore the dynamics and social impact of prediction markets.
It claimed that “ordinary users of [Kalshi] have lost more than half a billion dollars from its launch in July 2021 to May 2026.” However, in a long rebuttal on 10 July, Kalshi argued that the report’s findings hang on “a hilariously wrong methodology error.”
The prediction market said even the title of the report was flawed. The Hidden House: Prediction Markets and How They’re Shaping Society, it said, implied that prediction markets have a “house” in the same way that a casino does.
In its study, the Roosevelt Institute says, “ordinary people participating in prediction markets are largely betting against professional traders using sophisticated methods” and likens this perceived mismatch to a house advantage against “ordinary” traders.
Kalshi said that to draw its conclusions, the think tank had conflated “maker” and “taker” data from the Kalshi API with “professional” and “casual” users. The prediction market operator scoffed that “It would be hard to make a worse methodological error if you tried,” also arguing the think tank had conflated “wallets” with “accounts.”
Listing several other complaints about the way in which the Roosevelt Institute had represented prediction market data and dynamics, Kalshi said the report “obscured the key societal difference between exchanges and casinos.”
The prediction market operator claims that, “directly or indirectly,” the report had been influenced by the casino industry. “The study shows consistent and demonstrable ideological bias towards the casino industry, raising doubts about the integrity of not only this report, but the forthcoming parts in this series,” it stated.
The spat comes off the back of a period of rapid growth in the prediction market industry, as the Roosevelt Institute reports, Kalshi and Polymarket grew to US$24.2 billion in trading volume in April 2026, up from $1.8 billion just the previous year. It cited forecasts that the industry will hit US$1 trillion in trading volume by 2030.
Prediction markets, which are regulated as derivatives exchanges by the Commodity Trading Futures Commission, have been challenged in states across the US for offering what the state gambling regulators deem to be unregulated rival sports betting products in the form of event contracts.
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The Backstory
Prediction markets move from niche contracts to political fight
Kalshi’s dispute with the Roosevelt Institute lands at a moment when prediction markets have moved from a narrow financial-products debate into a broader fight over gambling, consumer protection and state authority. The central question is no longer whether event contracts can attract users. It is whether fast-growing platforms are financial exchanges overseen by the Commodity Futures Trading Commission or national betting products operating beyond the reach of state gambling regulators.
That tension has intensified as trading volumes have expanded and sports contracts have become a major driver of activity. Kalshi and other platforms argue that they operate exchanges where users trade against one another, not casinos where customers bet against the house. Critics counter that the practical experience for many customers resembles wagering, particularly when contracts are tied to sports outcomes and are marketed in states where online sports betting remains illegal.
The Roosevelt Institute report escalated the consumer-harm argument by claiming ordinary users had lost more than half a billion dollars on Kalshi. Kalshi’s rebuttal, focused on methodology and terminology, reflects the industry’s larger defense: that critics are misreading market structure and importing casino concepts into a derivatives framework. The stakes are significant because that framing could influence courts, regulators and lawmakers as they decide whether prediction markets remain federally regulated financial products or face a patchwork of state gambling restrictions.
Gaming industry frames the issue as lost tax revenue
The casino industry has been pushing the opposite message: prediction markets are competing with regulated sportsbooks without paying the same taxes or meeting the same compliance requirements. American Gaming Association President and CEO Bill Miller said estimates show states and tribes have lost more than $1 billion in revenue because of the rise of these platforms, a claim he made during a CNBC appearance covered in the association’s warning on prediction-market tax losses.
That argument has gained traction because state sports betting systems were built around licensing fees, tax rates, responsible gambling rules and integrity monitoring. Prediction markets, by contrast, rely on federal derivatives regulation. Operators say that structure is appropriate because contracts are traded on regulated exchanges. The gaming industry says the result is an uneven marketplace in which sportsbook operators are confined by state law while prediction markets can offer similar sports exposure across state lines.
The revenue claim also gives state officials a concrete political argument. Sports betting taxes support state budgets, local programs and, in some cases, tribal revenue-sharing agreements. If sports-related event contracts continue to grow outside those systems, states could lose both control over gambling policy and money that lawmakers expected from regulated wagering. That is why the debate has moved beyond legal classification and into fiscal policy.
Sports contracts turned growth into a regulatory flashpoint
Prediction markets’ expansion into sports has sharpened scrutiny. Kalshi’s March Madness activity showed how quickly event contracts can rival or surpass traditional betting in high-profile sports moments. The company recorded more than $800 million in trading during the first weekend of the NCAA men’s basketball tournament, according to reporting on Kalshi’s March Madness trading record. That nearly doubled the amount traded across the full three-week tournament the previous year.
The surge highlighted two competing realities. For prediction-market companies, sports contracts demonstrated mainstream demand and liquidity, key ingredients for any exchange. For critics, the numbers showed that these platforms had become large-scale sports betting substitutes, especially because March Madness is one of the biggest wagering events in the U.S. calendar.
The NCAA’s objections underscored another layer of risk. NCAA President Charlie Baker asked the CFTC to temporarily suspend college sports contracts, citing concerns about competition integrity and student-athlete safety. Those concerns mirror long-standing arguments in the sports betting sector, where regulators have imposed limits, data rules and integrity-monitoring obligations. Prediction markets have not been regulated through the same state sports wagering channels, creating a gap that leagues, colleges and gambling regulators increasingly see as untenable.
This is the environment in which Kalshi is defending itself against claims of consumer losses. If sports contracts are driving user growth, critics can more easily argue the platforms should be viewed through a gambling lens. If Kalshi can persuade policymakers that these are exchange-traded instruments with different mechanics, it strengthens its case for continued CFTC oversight.
User data complicates the industry’s preferred framing
Survey data has added nuance to both sides of the debate. Truist Securities analyst Barry Jonas found that prediction-market users skew younger and overlap heavily with online sports betting and daily fantasy players, according to a Truist survey of prediction-market customers. Just 7% of users were older than 49, while the largest group was between 30 and 39. The survey also found that 74% of prediction-market users also used online sportsbooks or daily fantasy products.
Those findings support the gaming industry’s claim that prediction markets are drawing from the same customer base as sports betting. Sports was the most popular category in the survey, with 76% of respondents trading on sports outcomes. Many users were in states where traditional online sports betting is unavailable, including California and Texas, suggesting prediction markets may be filling a legal-access gap rather than serving only as financial hedging tools.
But the same data also helps explain why operators reject a simple casino comparison. Some users viewed event contracts as legitimate investment vehicles and 42% also traded options or futures. That overlap with financial markets gives platforms like Kalshi a basis to argue that prediction markets are part of a broader trading ecosystem, not merely a sportsbook workaround.
The Roosevelt Institute’s focus on “ordinary” users touches the most politically sensitive part of that picture. If casual participants are consistently losing to more sophisticated traders, consumer-protection questions become harder to dismiss. Kalshi’s response attacks that premise by arguing the report confused market roles with user types. Whether regulators accept that distinction could shape how future studies, enforcement actions and legislation define harm.
Big tech interest signals a broader land grab
The fight is also being fueled by signs that prediction markets could expand beyond specialist exchanges. Meta considered acquiring Kalshi before developing its own prediction market app, according to a report on Meta’s Kalshi talks and Arena plans. Meta later partnered with Kalshi to integrate markets on Threads, while also working on a separate app expected to use points and virtual currency rather than real money.
Big tech’s interest raises the possibility that prediction mechanics could become embedded in social media, news discovery and consumer engagement. That would widen the debate from gambling regulation to platform design, data use and algorithmic amplification. If artificial intelligence systems generate questions and determine outcomes, as internal documents reportedly suggested for Meta’s Arena concept, regulators may face new issues around transparency and fairness.
For Kalshi, mainstream technology partnerships help validate prediction markets as information tools. For opponents, they increase urgency. A product that begins as a derivatives exchange can become far more consequential if prediction prompts are distributed through major social networks, especially to younger users accustomed to gamified financial apps and sports betting interfaces.
State control remains the unresolved fault line
The prediction-market dispute mirrors broader battles over who controls online wagering in the U.S. Florida’s sports betting compact with the Seminole Tribe, for example, has faced litigation over whether statewide mobile betting fits within tribal gaming and voter-approval rules. The state has defended the compact, saying it benefits both Florida and tribal communities, as detailed in Florida’s motion to dismiss a challenge to the Seminole betting compact.
That case is not about prediction markets, but it illustrates the same structural tension: online betting products often stretch legal frameworks that were written before mobile markets became dominant. States, tribes, federal agencies and private operators all have competing claims. Prediction markets add another layer because they invoke federal commodities law rather than state gambling statutes.
Kalshi’s clash with the Roosevelt Institute therefore is not just a dispute over one report’s calculations. It is part of a larger contest over definitions. If prediction markets are treated as exchanges, federal oversight may continue to anchor the industry’s expansion. If they are treated as sports betting or gambling substitutes, states and tribes could demand licensing, taxes and product limits. The outcome will determine not only how much Kalshi can grow but who captures the economic and regulatory value of a market now racing into the mainstream.
