Prediction markets can feel like a product of the internet age, but the underlying idea — letting people bet on future events to reveal a probability — is well over a century old. Tracing that history helps explain why today’s regulated exchanges look the way they do.
Early betting markets
Long before modern polling existed, there was organised betting on elections. In the decades around 1900, huge sums were wagered on presidential races through open markets on Wall Street, and the prices were often reported in newspapers as a serious gauge of who would win — frequently proving remarkably accurate. Betting on uncertain outcomes, from horse races to political contests, is one of the oldest financial activities there is; prediction markets simply formalised it around real-world events.
The Iowa experiment
The modern, academic form arrived in 1988 with the Iowa Electronic Markets, launched by the University of Iowa as a small-stakes, real-money research project. Operating under regulatory no-action relief with tight limits on how much anyone could invest, it consistently forecast election results as well as or better than the polls — powerful early evidence that markets could aggregate information into accurate probabilities. Play-money experiments such as the Hollywood Stock Exchange, which predicted box-office takings and awards, showed the same aggregation effect without real cash at stake.
Intrade and the 2000s
In the 2000s, the Dublin-based exchange Intrade brought event trading to a wide audience, with markets on elections, economic figures and current events that were widely cited in the media. It became the public face of prediction markets — until a 2012 action by US regulators barred American customers, and financial irregularities surfaced soon after, leading it to shut down in 2013. Around the same period, a US government proposal for a “policy analysis market” on geopolitical events was cancelled amid public outcry, a reminder of how politically sensitive the concept could be.
The modern boom
The current era began when Kalshi launched around 2021 as the first exchange federally regulated to offer event contracts to US traders, giving the sector legitimacy it had long lacked. Alongside it, the crypto-native Polymarket brought on-chain markets and enormous global liquidity, drawing intense attention around the 2024 US election. Brokerages and sportsbooks have since entered the space, and regulatory clarity is slowly improving. For where things stand now, see are prediction markets legal? and our full platform reviews.
Frequently asked questions
When did prediction markets start?
Organised betting on elections dates back well over a century, with active markets around 1900 that often predicted results accurately. The modern academic form began with the Iowa Electronic Markets in 1988, and today's regulated era started with Kalshi's launch around 2021.
What was Intrade?
Intrade was a Dublin-based prediction market, popular in the 2000s, that offered widely-cited contracts on elections, economics and current events. It shut down in 2013 after US regulators barred American customers and financial irregularities came to light.
Why are today's prediction markets different?
The current generation is defined by regulation and scale: Kalshi is federally regulated to offer event contracts in the US, while Polymarket brings large on-chain liquidity. Earlier markets operated in legal grey areas or as small academic experiments.