Polymarket Explained: How Prediction Markets Work and the Ethical Risks of Betting on Everything

In recent years, a new kind of online platform has emerged that blurs the line between finance, gambling, and social forecasting. Instead of betting on sports teams or casino games, users bet on real-world events: elections, wars, economic indicators, celebrity outcomes, and even global crises. One of the most prominent examples of this trend is Polymarket.

Polymarket presents itself not as a gambling site, but as a prediction market — a tool for aggregating collective intelligence about the future. Supporters claim it produces more accurate forecasts than polls or experts. Critics argue it opens the door to moral hazards, manipulation, and profiting from human suffering.

To understand why Polymarket is so controversial, it’s important to understand how it works, what it offers, and what ethical problems arise when people are allowed to “bet on anything.”

What Is Polymarket?

Polymarket is an online platform where users trade on the outcomes of future events. Each event is framed as a question with clearly defined outcomes, usually Yes or No.

Examples include:

• Will a particular political candidate win an election?

• Will a central bank raise interest rates by a certain date?

• Will a country enter a conflict?

• Will a company approve a merger?

• Will a specific cultural or entertainment event occur?

Rather than placing a traditional bet against a bookmaker, users buy and sell shares tied to these outcomes. Each share represents a claim that pays out if the outcome happens.

Polymarket runs on blockchain technology and uses a dollar-pegged digital currency, which allows users to trade without relying on traditional banks or payment processors.

How Polymarket Works

1. Market Creation

Each market begins with a clearly worded question and a set resolution date. The question must be objectively verifiable, meaning that at a future point it will be possible to say definitively whether the outcome occurred.

For example:

“Will Event X happen before Date Y?”

The platform defines in advance what counts as a valid resolution so disputes can be minimized — though, as discussed later, they are not always avoided.

2. Buying and Selling Shares

Each outcome has shares priced between $0.00 and $1.00.

• A share priced at $0.70 implies the market believes there is roughly a 70% chance the event will occur.

• If the event happens, each winning share pays out $1.

• If it does not happen, the share becomes worthless.

Users can:

• Buy shares if they believe the market is underestimating an outcome

• Sell shares if they believe the market is overestimating it

• Trade before resolution to lock in profits or cut losses

This turns belief about the future into a tradable financial instrument.

3. Market Prices as Probabilities

One of Polymarket’s core claims is that prices represent collective probabilities.

As new information becomes available — breaking news, reports, rumors, or data — traders adjust their positions. Prices move accordingly, reflecting the crowd’s updated expectations.

In theory, this creates a constantly updating forecast that aggregates thousands of independent judgments into a single number.

4. Settlement and Resolution

Once the event’s deadline passes and the outcome is determined, the market resolves.

• Winning shares automatically pay out

• Losing shares expire worthless

The process is automated through smart contracts and predefined resolution rules, reducing the need for trust in a central authority — though judgment calls can still be involved.

What Polymarket Offers Users

Polymarket appeals to users for several reasons:

Forecasting Power

Supporters argue that prediction markets can outperform polls and experts because participants have money on the line, incentivizing accuracy over opinion.

Financial Opportunity

Skilled traders can profit from spotting mispriced probabilities or reacting quickly to new information.

Hedging and Risk Management

Some users treat markets as a hedge. For example, someone exposed to political or economic risk may trade markets that offset potential losses.

Anonymity and Accessibility

Blockchain-based systems allow users to participate with fewer barriers than traditional financial platforms, often without identity verification.

Where Ethical Concerns Begin

The phrase “bet on anything” is both Polymarket’s greatest strength and its most serious ethical problem.

1. Profiting From Tragedy and Suffering

When markets involve wars, assassinations, pandemics, terrorist attacks, or natural disasters, a troubling dynamic emerges: someone profits when bad things happen.

Even if no one causes the event, the idea that financial gain is tied to human suffering feels morally unsettling to many critics. It raises questions such as:

• Should people be allowed to make money from death, violence, or catastrophe?

• Does financial speculation trivialize human pain?

• Where should moral boundaries be drawn?

While defenders argue that markets merely reflect reality rather than influence it, the optics are difficult to ignore.

2. Perverse Incentives

A more serious concern is whether prediction markets can create perverse incentives.

If someone holds a large financial position tied to a harmful outcome, they may:

• Spread misinformation to influence perceptions

• Attempt to manipulate events

• Benefit from destabilization or chaos

Even if actual causation is rare, the possibility alone raises ethical alarms. Markets tied to sensitive outcomes can blur the line between observation and influence.

3. Insider Information and Unfair Advantage

Prediction markets are especially vulnerable to insider trading.

People with access to non-public information — government officials, corporate insiders, military personnel, journalists — may know outcomes before the public does. If they trade on that information, they gain an unfair advantage and undermine market integrity.

Unlike traditional financial markets, prediction platforms often operate across jurisdictions with limited enforcement, making detection and prevention difficult.

4. Market Manipulation and Narrative Control

Because prices are public and often cited as “probabilities,” prediction markets can shape public perception.

A well-funded trader can:

• Push prices up or down to create the appearance of inevitability

• Influence media narratives

• Affect voter confidence or public sentiment

This is particularly concerning for political markets, where perception itself can influence outcomes.

5. Ambiguous Outcomes and Resolution Disputes

Real-world events are messy, but markets require binary answers.

This leads to disputes when:

• Outcomes are technically true but contextually unclear

• Definitions are narrow or legalistic

• Events partially occur

When large sums of money depend on precise wording, resolution decisions can feel arbitrary or unfair, undermining trust in the platform.

6. Gambling Disguised as Intelligence

While Polymarket emphasizes forecasting and information aggregation, critics argue it is still gambling, just dressed in intellectual language.

Users may:

• Overestimate their knowledge

• Trade impulsively

• Develop addictive behaviors similar to traditional betting

The financial and psychological risks are real, particularly for inexperienced participants drawn in by the promise of “beating the crowd.”

The Bigger Question: Should Everything Be a Market?

Polymarket forces society to confront a deeper philosophical issue:

Should every aspect of reality be turned into a financial market?

Markets are powerful tools for allocating resources and information, but they are not morally neutral. When applied to elections, wars, public health, or personal tragedy, the logic of profit can clash with human values.

Supporters see prediction markets as:

• Honest reflections of belief

• Tools for better decision-making

• Innovations in collective intelligence

Critics see them as:

• Commodification of uncertainty and suffering

• Vehicles for exploitation and manipulation

• A step too far in financializing human life

Final Thoughts

Polymarket is a striking example of how technology can reshape the way we think about the future. By turning predictions into tradable assets, it offers a new way to aggregate information and express belief.

But the same feature that makes Polymarket powerful — the ability to bet on almost anything — is also what makes it ethically fraught.

As prediction markets grow in popularity and influence, society will need to decide where to draw the line between useful forecasting and morally questionable speculation. Polymarket may not just be a platform for betting on the future — it may be a test case for how far we are willing to let markets reach into human affairs.