Daybreak - Prediction markets are a $150 billion industry. And they had money on Bengal and Tamil Nadu

Episode Date: May 4, 2026

West Bengal and Tamil Nadu declared their results yesterday. BJP swept Bengal after fifteen years of TMC rule. In Tamil Nadu, Vijay's TVK won, upending the DMK return almost everyone had predicted, including the platforms that had money on it.Prediction markets are now a $150 billion industry. And they were taking live bets on India's assembly elections, on a platform India officially banned last year. In a recent edition of The Ken's Make In India Competitive Again, Seema Singh wrote about an interesting research paper. While most assume the trading volumes were not high enough for concern, this peer-reviewed paper in Science says otherwise. In fact, this it says, it matters even when the volumes are thin, or maybe especially then. So what is India's ban actually achieving?Tune in.Also listen to: India banned online betting. Polymarket is wagering on our elections anyway. 

The results for the Assembly elections in West Bengal, Tamil Nadu, Kerala and the Sam are coming in as I record this today. And what a day it's been for all of us. Especially for some people outside India's jurisdiction, because they are going to be making money out of this. On polymarket, the offshore prediction market that is officially banned in India, there are bets on all four state elections. $6.5 million on West Bengal, more than $22 million on Tamil Nadu, and more than $450,000 on Kerala and over $220,000 on Assam. These are numbers as of Monday late afternoon. Now, as most of you would know, Indians are not supposed to be betting on these platforms. A few weeks ago, my colleague, the Ken editor, Seymar Singh, wrote a piece asking a very interesting question.

Does any of this matter? Because these bets are relatively small, thin volumes, a little over $6 million on West Bengal and more than $22 million on Tamil Nadu. In the larger scheme of things, you would think this is harmless, background noise or whatever. Seema found a researcher who thinks that framing is exactly backwards. And the more I read about the prediction markets, which I covered on daybreak about a month ago, the more I think she might be right. So today, I want to give you an update on that story with where things stand now

and with what a major new piece of research is saying about what these platforms have actually become. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Vargis and I will come to you with one business story that is worth understanding and worth your time. time. Today is Tuesday, the 5th of May. When I did the earlier episode, the story was about scale and speed. Prediction markets had their global coming out party in the 2024 U.S. elections.

By last year, Kalshi and Polly Market combined were processing $44 billion in annual volume. Institutional money was pouring in. Media companies, Dow Jones, CNN were signing partnerships. Kalshi's co-founder Tarek Mansur was saying that by mid-20207, having a position in an election will not be an unusual thing for an institution to have. In the last one month or so, that trajectory has only accelerated. According to data from the blog, Kalshi and Polly Markets combined lifetime trading volumes have crossed $150 billion in April. Nine months ago, they were doing about $2 billion a month. But last month, in April, they did $28 billion combined.

Kalshi alone posted nearly $15 billion in the same month, which is a new record for the platform. Now, India is watching all of this from the outside behind a ban that, as Sima reported, is already leaking. For example, polymarket is not blocked. I myself accessed it today to check the betting volumes on 11. To place bets, Indians are also getting in through VPNs. They are converting rupees to USDC stable coin to fund their wallets. After my earlier episode on this, I actually got a very

interesting message from a listener, a 25-year-old B-tech graduate working full-time in Mumbai who had been trading on polymarket for a while. He had made money on the New York City mayor race, lost some on the F-1, and he had positions open on the West Bengal and Tamil Nadu. elections backing DMK and TMC when he wrote in to me. And he said something that stuck with me. He said that these India state election markets are too shallow and illiquid to be predictors of anything. That is the intuitive read.

Small market, low volume cannot really tell you much. But here is where what a researcher found kind of changes the entire picture. Nizan Gesslerich Paken, a professor at City University of of New York and the University of Haifa spent months studying the space and arrived at the opposite conclusion. Her pure-reviewed paper published in the journal Science in April argues that thin markets are not less dangerous. They are more dangerous. And here's the logic. Low trading volume means prices can be moved cheaply. A small number of accounts, including foreign accounts, with no stake in the actual election outcome

can push odds around and manufacture what looks like consensus. That manufactured signal then gets picked up by the media and is presented as collective wisdom and shapes how people think about electoral viability. And the residents who actually live under the governments being bet on are excluded from that market. The people moving prices face no consequences, either way. Back in Tolsema, and I'm quoting, in low-volume environments, that signal can be moved

relatively cheaply by a small number of factors. She flagged Indian state election markets as exactly the kind of scenario her paper identifies as under-examined. More on this in the next segment. When I covered prediction markets last month, a lot of concern was lingering around. This could happen. The manipulation risks, the insider trading vulnerabilities, these were things that researchers were warning about. In the week since, some of them have started happening in plain sight. In the United States, where these platforms are legal and regulated by the CFTC, the Senate unanimously passed a resolution this week banning senators from trading on prediction markets. This came after Carl Shee suspended and fined a Senate candidate and

and two-house candidates for trading on their own election campaigns. And a U.S. Army Special Forces soldier was arrested and charged with using classified military information to place bets on polymarket about the operation that captured Venezuelan President Nicholas Maduro. He reportedly made close to $410,000 on those trades. Now, this is worth sitting with. The Hansen-Yawin debate that I covered in my earlier episode about weather prediction market, would be captured by people with conflicts of interest is no longer theoretical.

In Yarvins framing, the person who can move the real world outcome is also placing the bet before anyone else knows. That is what a soldier with classified information betting on his own mission looks like. Now, bring that back to India. If these dynamics are playing out in the most regulated prediction market environment in the world, the question for India is not just whether this ban makes sense. It is whether a ban by itself is enough of a response. Seymour's piece makes a careful distinction here that I think is worth holding on to. The science paper raises three concerns about prediction markets. Democratic manipulation, gambling-like design and public health risk.

They are real concerns. But they're not equally strong arguments and bundling them together. As the paper does, we can see. each one. Democratic manipulation affects everybody, including people who never touch these platforms. Behavioral addiction affects individual users. They need different responses. Packing herself acknowledged to Seema that this is a fair challenge. What both concerns point towards though is the same thing, oversight and audit, not necessarily prohibition. The paper is explicit it that it is not calling for banning prediction markets. It recognizes their value in economic forecasting, in research, and even in public health modeling. The ask is that platforms prove

their safety rather than regulators proving harm, and that platforms also disclose their concentrated positions, that there are anti-money laundering standards, and there is an independent audit. A Wall Street Journal investigation published just this week at texture to what audit might actually reveal. Looking at 1.6 million polymarket accounts, the Wall Street Journal found that 67% of profits go to just 0.1% of the accounts, fewer than 2,000 accounts, taking home nearly half a billion dollars. More than 70% of users actually end up losing money. These platforms are increasingly dominated by algorithmic trading firms running.

tens of thousands of trades a day on proprietary data feeds. The journal found that casual retail traders are, in the words of one professional trader, they interviewed, up against competition with no chance, systematically. India's ban reduced retail exposure to exactly this kind of an environment. That's not nothing. But the ban did not make the manipulation risk disappear, because that risk does not require Indian participation to affect. affect Indian elections. And it did not build any of the regulatory infrastructure that would be

needed if and when the ban gets revisited. At some point, that revisit will come. These platforms are too large, too liquid and too embedded in global media and institutional finance to stay out of India indefinitely. The CFTC is already suing state regulators in the US to prevent them from blocking prediction markets at the state level. The direction of travel globally is towards regulated access and not prohibition. So what the ban buys is time. The question is whether that time is being used to prepare anything, to study the kind of market design, to develop a framework or to build the kind of regulatory muscle that

Seema's piece says is currently absent. Right now, the answer appears to be no. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted and produced by my colleague, Snitha Sharma, and edited by Rajiv CN.