Polymarket Hits $1.2B Volume as Regulation Battles Escalate

- Polymarket surpasses $1.2 billion in weekly trading volume amid controversies. - Concerns over market manipulation, insider trading, and regulatory scrutiny grow. Prediction markets, led by players like Polymarket and Kalshi, are experiencing rapid growth, capturing attention for both their innovative potential and their ethical challenges. On December 9, 2025, Cointelegraph reported that Polymarket recently recorded a notional trading volume of over $1.2 billion in a single week. Meanwhile, Kalshi has also gained traction through its partnership with CNBC, which integrates prediction data into the network’s platforms. Tarek Mansour, co-founder of Kalshi, envisions creating a tradable asset out of any difference in opinion and positions these markets as a disruptive financial category that rivals traditional stock markets. However, this expanding popularity brings serious ethical and regulatory concerns, with allegations of market manipulation coming to the forefront. One controversial incident involved an unauthorized alteration of an Institute for the Study of War (ISW) map during the Russo-Ukrainian War. The edit falsely suggested Russian troop movements in Myrnohrad, which suspiciously aligned with the closing of related bets on Polymarket. The ISW reversed the edit on November 17, 2025, after the market had already resolved, raising concerns about foul play designed to influence outcomes. The platforms also face scrutiny for possible insider trading, as some participants have allegedly exploited non-public information for personal gain. For example, one user reportedly profited $1 million by using insider knowledge of Google’s search engine rankings, while another made $150,000 by correctly predicting the launch of a Google AI product. These incidents ignite debate over the use of privileged insights, which undermines market integrity. Additionally, questions about fraudulent trading practices have surfaced. In a November 2025 report, researchers from Columbia Business School revealed that wash trading—a practice that artificially inflates trading volume—accounted for an average of 25% of Polymarket’s activity. The report noted that this figure spiked as high as 60% in December 2024, undermining the platform's claims to provide accurate market intelligence. Regulatory challenges further complicate the landscape. While platforms like Polymarket and Kalshi operate under the oversight of the U.S. Commodity Futures Trading Commission (CFTC), they also face mounting scrutiny from state regulators. Officials in Nevada, New Jersey, and New York are debating whether to categorize prediction markets as gambling under state law. More critically, the Connecticut Department of Consumer Protection has issued cease-and-desist notices against several entities, including Kalshi, arguing that their licenses fail to comply with gambling regulations and pose risks to consumer protection. Adding to the scrutiny are concerns from financial institutions. Bank of America analysts cautioned that platform features like "gamified interfaces" might encourage impulsive betting behavior, potentially leading to consumer debt and creating a ripple effect on broader financial stability. As a result, the intersection of innovative technology and potential risks places prediction markets under the lens of skeptical stakeholders. As prediction markets evolve, their growth highlights both revolutionary potential and significant ethical and regulatory challenges. Balancing their promise of financial innovation with accountability and oversight will be key to establishing their long-term legitimacy.