From Kalshi to Meta's Arena: How prediction market platforms work

As Kalshi restricts Indian users and Meta develops Arena, here is a look at how prediction market platforms work and how they differ from betting apps

US-based prediction market platform Kalshi added India to its list of restricted jurisdictions on Monday. In a separate development, a New York Times report said Meta CEO Mark Zuckerberg directed a team to build a standalone prediction market-style app called Arena.

 

Together, these developments have brought prediction markets back into focus. The sector is growing rapidly, trading volumes are surging, and regulators are stepping up scrutiny. This has triggered wider questions: how these platforms work and how they differ from stock markets and betting apps.

 

What are prediction markets?

 

Prediction markets are platforms where users trade contracts tied to the outcomes of future events. Participants buy or sell positions based on whether they believe an event will occur, and prices reflect the collective probability assigned by the market.

 

 

These platforms cover a wide range of outcomes, from elections and sports to economic decisions, entertainment awards, and geopolitical events. According to the US Commodity Futures Trading Commission (CFTC), prediction markets provide tools that help participants forecast, plan, hedge, and respond to future developments. The instruments traded are commonly known as event contracts.

 

The mechanism is straightforward. If a contract asking whether the US Federal Reserve will cut interest rates in September trades at $0.62, the market implies a 62 per cent probability of that outcome. As new information emerges, prices adjust in real time.

 

Many modern platforms are built on blockchain infrastructure. Polymarket, one of the largest players, operates on the Polygon blockchain, enabling transparent recording of trades, settlements, and price movements on a public ledger. French newspaper Le Monde notes that while political bets, such as on elections including Donald Trump’s 2024 run, have driven attention and ethical concerns, sports now account for an increasing share of platforms' activity.

 

Meanwhile, the US Federal Reserve research paper published in February found that prediction market prices can forecast rate decisions with accuracy comparable to Bloomberg consensus estimates and Fed funds futures.

 

How do prediction markets work?

 

Prediction markets resemble stock exchanges in design and user experience. They feature live price charts, order books, and continuously updating prices. Platforms such as Kalshi and Polymarket allow trading across a wide spectrum of topics, including politics, sports, economics, weather, entertainment, and global affairs.

 

Most prediction markets use binary contracts with only two outcomes: “Yes” or “No”. For example, consider an India vs Australia cricket match. If the “Yes, India will win” contract trades at ₹70 and the “No” contract at ₹30, the market implies a 70 per cent probability of an Indian win. If India wins, the “Yes” contract settles at ₹100, while the “No” contract becomes worthless. If India loses, the opposite happens.

 

How are prediction markets different from stock markets?

 

Despite similar trading mechanics, prediction markets and stock markets are fundamentally different.

 

Stock markets involve ownership in companies. Investors buy equity, gaining rights to future earnings, dividends, and long-term value creation. Stock prices reflect business fundamentals such as profitability, assets, and growth potential.

 

Prediction markets, by contrast, involve no ownership stake. Participants trade contracts tied solely to event outcomes. The purpose is forecasting rather than investment. Stocks can be held indefinitely, while prediction contracts expire once the event is resolved.

 

Are prediction markets the same as betting platforms?

 

While prediction markets are often compared to betting platforms, there are important differences.

 

In traditional betting, bookmakers set odds and act as counterparties to all wagers, earning a margin built into pricing. Bettors place money directly against the house.

 

Prediction markets operate differently. Prices are set by participants in an open market, and users trade against each other rather than a central bookmaker. The market collectively determines probability.

 

For instance, a bookmaker might offer 2:1 odds on India winning a match. In a prediction market, a contract might trade at ₹65, implying a 65 per cent probability. Traders can also exit early by selling contracts if sentiment shifts.

 

Why are prediction markets growing rapidly?

 

The sector has seen explosive growth over the past year. According to a Pew Research Center analysis of data from The Block, combined monthly trading volumes on leading prediction platforms such as Polymarket and Kalshi rose from under $5 billion in September 2025 to about $24 billion by April 2026.

 

Meanwhile, The New York Times report suggests that Kalshi and Polymarket together processed around $50 billion in trades in 2025, while 2026 volumes have already crossed $130 billion.

 

Kalshi processed nearly $15 billion in April 2026 alone, with sports accounting for about $11.5 billion. On the other hand, Polymarket recorded around $9 billion in monthly volume, including roughly $4 billion from sports contracts

 

The growing popularity of such platforms also reflects Meta’s reported move into this space through its Arena app. Unlike existing players, Arena is expected to begin with a video-game-style points system rather than real-money trading, though future monetisation through real-money markets has not been ruled out. The app would operate independently of Facebook, Instagram, WhatsApp, and Messenger.

 

Are prediction markets legal in India?

 

India does not currently allow real-money prediction markets. Authorities classify them under online gambling or money gaming. This position was reinforced by the Promotion and Regulation of Online Gaming Act, 2025 (PROGA), which came into effect on May 1, 2026. The law is part of a broader push to regulate or restrict money-based online gaming platforms.

 

Scrutiny intensified after platforms like Kalshi and Polymarket allowed Indian users to access markets despite warnings. In April, the Ministry of Electronics and Information Technology cautioned VPN providers that users were bypassing restrictions, warning of potential legal consequences for facilitating access. Following this, Kalshi moved India into its restricted jurisdictions list.

 

Why did prediction markets come under scrutiny in India?

 

The issue became more visible during the Indian Premier League (IPL) season. A Bloomberg report found that one IPL match between Lucknow Super Giants and Royal Challengers Bengaluru on May 7 generated about $27.7 million (₹266 crore) in trading volume across Kalshi and Polymarket. While the share of Indian users is unclear, the scale highlighted rising participation in sports-linked contracts.

 

The government has raised concerns associated with such platforms, such as addiction, financial distress, and potential money laundering linked to real-money speculative platforms.

 

Prediction markets have thus evolved from niche online experiments into a fast-growing global financial-adjacent industry with billions in monthly activity. As companies like Meta experiment with new formats and trading volumes continue to expand, regulatory debate is expected to intensify, especially in countries like India.