Will the U.S. government announce that aliens exist? Where will Taylor Swift and Travis Kelce tie the knot?

Questions like these — along with geopolitically charged ones like the timing of Venezuelan President Nicolás Maduro’s capture — have been bet on by millions of people worldwide using prediction market websites.

As these platforms surge in popularity, with a planned launch in Canada this summer, Brock University Professor of Finance Ernest Biktimirov is sounding the alarm on the problematic nature of their structure and their potential for exploitation and manipulation.

Prediction markets — Polymarket and Kalshi among the most popular — allow people to trade on the outcome and timing of future events by buying and selling online contracts. The price of contracts range between one and 99 cents, with the price reflecting the market’s estimated probability of occurrence and the number of buyers on either side.

Brock University Professor of Finance Ernest Biktimirov.

“Because many contracts are set up as event X will happen by time Y, prediction markets provide financial incentives for sharing and trading insider information,” Biktimirov says. “What’s worse is that, in some cases, they are essentially putting a price tag on war and on peace, with the outcomes associated with these contracts affecting the lives of thousands of people.”

The Canadian government has imposed restrictions on Wealthsimple’s planned prediction market platform that will limit available contracts in this country — a move Biktimirov supports.

“These contracts resemble traditional financial derivative instruments, with payoffs tied to economic, financial or weather-related outcomes,” he says. “As a result, they are more likely to attract people who have at least some familiarity with financial markets and understand risk-return trade-offs, rather than the much broader audience drawn to sports and entertainment-related prediction markets.”

Restricting political contracts, he says, also avoids concerns that prediction markets could be used to influence or create the perception of influencing political outcomes.

However, Canadians may choose to circumvent geographic restrictions, using VPNs to access U.S. markets and contracts unavailable locally, Biktimirov says.

Contrary to other gambling platforms where betting takes place against a “house,” traders in prediction markets bet directly against one another.

“These firms try to create the illusion that it’s easy to make money in this market, but it’s usually a very small number of people that profit,” Biktimirov says. “It’s also basically a zero-sum game: How much money I will win is exactly how much money the person on the other side of the transaction will lose.”

He says the way the market is structured also allows it to be easily manipulated.

“When the market is thin, if there aren’t enough trades and somebody submits a big contract, it suggests a high probability of that event occurring and could sway public opinion,” he says. “We have to recognize, however, that even though the platforms provide aggregate opinions, they may not always be accurate, especially if traders are intentionally trying to impact the market.”

For instance, three political candidates in New York were suspended from Kalshi earlier this year after betting on their own campaigns.

“By purchasing contracts that pay off if a candidate wins, the price of those contracts will go up, leading people to think that candidate is going to win, so maybe they shouldn’t go to the polling station,” Biktimirov says.

The public nature of these wagers is especially problematic when military actions or other geopolitical developments are being wagered on, he says.

“When the value of a contract suddenly starts to go up, it may drive pre-emptive actions based on this information,” he says. “It can give a warning to adversaries or other parties and jeopardize the success of the military action, for instance, or even incentivize executing an attack and reaping the financial benefits from doing so.”

Biktimirov will be watching the evolution of the market, saying its addictive nature and penchant for accuracy means it will undoubtedly have staying power — problematic or not.