A new academic report is raising some uncomfortable questions about whether prediction market platforms like Kalshi and Polymarket are treating their users fairly. Hersh Shefrin from Santa Clara University’s Markkula Center for Applied Ethics has taken a hard look at how these rapidly growing trading venues actually work, and what he’s found is sobering: their expansion has arguably outpaced the ethical and regulatory frameworks that ought to be protecting consumers.

The Rise of Prediction Markets

Prediction markets have exploded in popularity over the past few years. These platforms let you trade on the outcomes of real-world events, from elections to sports results. The appeal is straightforward: they’re fast, accessible, and they attract both traditional sports bettors and retail investors. That combination has propelled the major platforms into the mainstream. Billions in trading volume now flows through them.

But popularity doesn’t necessarily equal fairness. That’s the central argument in Shefrin’s analysis, which breaks fairness down into multiple components. Voluntary participation and transparent information are just the starting point. Equally important are equal access to data, balanced decision-making, and protection against exploitation.

The Professional Advantage

Here’s where the real problems emerge. Professional traders are paying for access to sophisticated data streams and tools that give them a decisive edge. Meanwhile, casual participants are flying blind by comparison. It’s hardly surprising that a small group of advanced traders captures a disproportionate share of profits while the majority of users lose money over time.

This power imbalance isn’t unique to prediction markets. But the scale of it could grow worse as the gap between professional and retail players widens. Without some kind of intervention, the fairness question becomes increasingly difficult to answer.

Consumer Safeguards and Behavioural Risks

Beyond the trading mechanics, Shefrin flags serious concerns about how these platforms operate from a consumer protection angle. Many UK platforms use strategies borrowed directly from gambling apps: fear of missing out, the promise of quick wins, frictionless access that lets users place trades in seconds. The demographic skew is worth noting too. Young men in particular are drawn to prediction market contracts that resemble sports betting.

Then there’s the integrity question. When real-world outcomes translate directly into financial gain, users have incentives to influence those outcomes. Combined with ease of access and behavioural design tactics, that’s a concerning mix.

The Path Forward

What makes this report worth your attention is that it doesn’t call for a blanket ban. Instead, it asks something more constructive: how can prediction markets operate more fairly? Shefrin recommends stronger consumer safeguards including trading limits, clearer disclosures, and proper protections against gambling-related harm. Narrowing the information gap between retail and professional traders would help level the field, though implementation would be genuinely challenging.

The prediction market industry is here to stay. The real conversation now is about building frameworks that protect users without strangling the innovation that makes these platforms attractive in the first place.