You’re reading Dispatch Markets, a weekly dive into the forces driving economic growth—and those holding it back—featuring Scott Lincicome, Kyla Scanlon, Karl Smith, Marian Tupy, and Adam Ozimek.
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You → read → Lincicome
If you open up your brokerage app, you will likely see them: Robinhood has a prediction markets hub, and so do Coinbase, Webull, Interactive Brokers, and Tastytrade.
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Coinbase → open → hub
Many of those trades done on the apps flow to Kalshi, a federally licensed exchange that now pays interest on idle cash that users have in the app, like a brokerage would.
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brokerage → do → app
The message is pretty clear: Prediction markets are a new kind of investment, and you should jump in if you want to make a lot of money.
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you → jump → money
When you buy a stock, you own a small piece of a company.
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you → buy → company
Think of it like an apple—every slice of the apple is a share that you buy to own.
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you → think → that
The company makes things, sells them to people, earns money in doing so, and eventually, some of that money comes back to you in the form of dividends or a higher price when you sell the stock.
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you → make → stock
When you buy a bond, you are lending money to some entity, maybe the U.S. government or Amazon, and getting paid interest in return.
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you → buy → return
With both shares and bonds, there are underlying fundamentals that produce value over time.
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that → be → time
But an event contract, which is what prediction markets trade, has nothing underneath it that produces value over time.
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that → trade → time
It’s a binary.
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It → ’ → ?
Say you think the Kansas City Chiefs will win Sunday and someone else thinks that they won’t.
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they → say → ?
The contract pays $1 to whoever is right and $0 to whoever is wrong.
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whoever → pay → 1
It’s just taking money from one person and giving it to another, with the exchange taking a cut for arranging that transaction.
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exchange → take → transaction
On Kalshi, the fee is 3.5 cents for every dollar the buyer puts in on a 50-cent contract, with proportionally higher fees for long shots.
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buyer → put → shots
Say you put $10 on the Kansas City Chiefs and the market has the game as a coin flip (other traders decide the odds here, not Kalshi).
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traders → say → odds
A contract will pay $1 if they win and costs you 50 cents.
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they → pay → cents
Your $10 buys 20 contracts.
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10 → buy → contracts
Kalshi’s fee is 7 percent of the contract price times the chance of losing on every contract—so 20 x $0.50 x 0.50 x 0.07, which comes to 35 cents.
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which → lose → cents
So $10.35 leaves your account: $10 for the contracts and 35 cents for Kalshi.
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10.35 → leave → Kalshi
If the Chiefs win, each contract pays $1, and you collect $20.
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you → win → 20
That’s a profit of $9.65 after the fee.
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That → ’ → fee
If they lose, you collect nothing and are out $10.35.
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you → lose → nothing
Say it is a coin flip, and you win 50 of them, collecting $20 each.
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you → say → 20
You get $1,000, but you paid $1,035.
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you → get → 1,035
Even if you’re right exactly as often as the odds say, you lose.
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you → ’re → ?
Get the U.S. Chamber’s free newsletter for insights on the economic policy, workforce trends, and regulatory landscape that affect businesses and markets.
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that → get → businesses
By subscribing you agree to receive communications from the U.S. Chamber of Commerce.
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you → subscribe → Commerce
Michael Mauboussin, the head of consilient research at Morgan Stanley Investment Management, has a test for asking whether something requires skill: Can someone lose on purpose?
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someone → have → purpose
A chess master can lose whenever he or she wants.
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he → lose → ?
But a roulette player cannot lose on purpose because the wheel spins due to physics.
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wheel → lose → physics
Mauboussin found that investing sits closer to the luck end of the scale than most people think.
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people → find → scale
Picking a stock is closer to a slot machine than most people think, but a stock held long enough is expected to pay you, whereas a slot machine is expected to rob you.
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machine → pick → you
For a person clicking buy, a prediction market behaves like a slot machine.
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market → click → machine
In the example above, it’s truly a coin flip.
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it → ’ → example
And a coin-flip example is the best case here, as ordinary users tend to do a lot worse.
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users → tend → ?
A team of economists led by Karl Whelan of University College Dublin studied more than 300,000 Kalshi contracts using data through early 2025 and found that long shots are overpriced.
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shots → lead → 2025
Contracts costing under 10 cents lose more than half of the money that people put into them.
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people → cost → them
They also found that people who post offers on the website lose about 10 percent on average across all contracts, whereas people clicking to accept the offer lose almost 32 percent, with the worst of it on long shots.
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people → find → shots
The Wall Street Journal looked at 1.6 million accounts on Polymarket, Kalshi’s main rival, and found that 67 percent of all the profit on the platform went to 0.1 percent of accounts.
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percent → look → accounts
…and 83 more, not listed.
