Prediction Markets: How Polymarket and Kalshi Work and Why India Is Cracking Down

Prediction markets are online exchanges where people trade contracts tied to the outcome of real‑world events—from elections and sports games to economic indicators or global developments. Platforms such as Polymarket and Kalshi have popularized this model by letting users buy and sell simple “yes” or “no” contracts whose prices move as traders collectively reassess the odds.

These platforms have grown quickly in recent years, but their structure also raises regulatory questions. In India, authorities now view many prediction‑market platforms as effectively offshore betting services, and the government is reportedly moving to block access to them.

What Prediction Markets Are

A prediction market is a marketplace where participants trade contracts linked to whether a specific future event will occur. These contracts typically have a binary payoff—for example, paying $1 if the event happens and $0 if it does not.

The market price acts as an implied probability. If a “Yes” contract trades at $0.70, the market is effectively estimating a 70% chance that the event will occur. As new information emerges, traders buy or sell positions, pushing the price up or down.

This mechanism aggregates many participants’ beliefs—sometimes called the “wisdom of crowds”—into a constantly updating forecast of real‑world outcomes.

How Platforms Like Polymarket and Kalshi Work

While implementations differ, the core mechanics are similar across most prediction markets.

1. Markets are created around real‑world questions
Examples might include:

• Who will win a particular election
• Whether a sports team will win a championship
• Whether a specific policy or economic milestone will occur

2. Users trade “Yes” or “No” contracts
Participants purchase shares in either outcome. Each contract pays a fixed amount—often $1—if the prediction proves correct.

3. Prices move with market sentiment
If traders believe an outcome is becoming more likely, they buy the corresponding contracts, raising the price. That price becomes a real‑time probability estimate.

4. Contracts settle when the event resolves
Once the outcome is verified, winning contracts pay out while losing ones become worthless.

The system resembles a stock exchange more than a traditional sportsbook because traders buy and sell contracts with one another rather than betting directly against a house.

Why Governments Sometimes Treat Them Like Gambling

Despite their forecasting function, prediction markets often look similar to betting platforms because users put money on uncertain outcomes such as elections or sports results. Some regulators argue that event contracts are simply gambling products under a different structure.

Critics also worry about potential issues such as:

• Financial risk for users
• Market manipulation or disinformation
• Conflicts with existing gambling or gaming laws

Supporters, on the other hand, argue that prediction markets can produce useful information by aggregating public expectations about future events.

Why India Is Planning to Block Polymarket and Kalshi

India’s Ministry of Electronics and Information Technology (MeitY) has been examining offshore prediction‑market platforms amid a rise in their use by Indian users. Authorities say these services are being used for betting on election outcomes, sports events such as the IPL, and other real‑world developments.

Officials argue that such platforms operate outside India’s regulatory framework for online gaming and betting and are therefore considered illegal services for Indian users.

Reports indicate that the government is concerned about:

• A surge in election‑related betting activity
• Platforms accepting Indian users despite domestic prohibitions
• Payments routed through crypto assets such as stablecoins to bypass restrictions.

What Actions the Indian Government Is Taking

The enforcement push has unfolded in stages.

First, MeitY issued warnings and advisories to internet intermediaries and service providers. In April 2026, the ministry instructed VPN providers and online platforms to ensure they do not facilitate access to prediction‑market or betting sites such as Polymarket.

Next, regulators began moving toward formal blocking measures. Reports say the government has already issued a blocking order against Polymarket and is preparing a similar order for Kalshi, likely using powers under Section 69A of the Information Technology Act, which allows authorities to restrict access to online content.

The crackdown follows claims that both platforms continued allowing Indian users to sign up and trade even after regulatory warnings.

Why the Platforms Were Still Accessible

Even after restrictions were announced, many users reportedly continued accessing these services.

Authorities say enforcement has been complicated by:

• VPN access that bypasses regional blocks
• mirror sites and alternative domains
• crypto‑based payment systems

Officials have described the situation as a “whack‑a‑mole” enforcement challenge, where new access points appear as quickly as others are blocked.

The Bigger Debate Around Prediction Markets

India’s move highlights a broader global debate about whether prediction markets should be treated as financial instruments, information tools, or gambling products.

Some jurisdictions allow regulated event‑contract exchanges, while others restrict them because they closely resemble betting on uncertain events. The dispute reflects a larger question facing regulators worldwide: whether these markets represent a new forecasting tool—or simply a new form of online wagering.