The multi‑billion‑dollar prediction market Polymarket is taking bets on German regional elections later this year, despite such platforms being illegal in Germany.
Prediction markets let people bet anonymously on a wide range of events — from military strikes to political outcomes — and have increasingly alarmed gambling regulators. In the US, the Justice Department last year dropped its investigation into Polymarket, one of the leading platforms alongside Kalshi, clearing the way for their US expansion. In Europe, however, several countries have blocked access to these sites as unlicensed gambling platforms.
In Germany both Polymarket and Kalshi remain accessible online, even though the central gambling authority for Germany’s states, the GGL, has warned that participation is illegal. The GGL said social betting covers events in public life such as political elections, court rulings, natural disasters and other non‑sporting developments, and is particularly susceptible to manipulation because such events are often unclear, subjective or easily influenced.
Speaking to DW, the GGL said while the websites were reachable, transferring money to them from a German IP address was not possible and that the authority forwards information about illegal betting to law enforcement.
Nonetheless, Polymarket currently lists active markets for three state elections in September — Saxony‑Anhalt, Berlin and Mecklenburg‑Western Pomerania — and a market on whether Chancellor Friedrich Merz will leave office before 2027. The Berlin vote is the most heavily traded, with roughly $3 million (€2.6 million) wagered so far.
Experts warn prediction markets pose risks to democratic processes. Burkhard Stiller, a computer science professor and financial technologies specialist at the University of Zurich, says the platforms attempt to convert political decisions into game‑theory models and can be used to manipulate narratives.
High‑profile episodes have highlighted the insider‑trading danger: heavy, timely bets on the fall of Venezuelan President Nicolás Maduro and on US‑Israeli strikes on Iran raised suspicions that insiders exploited privileged knowledge. Reports also said newly created Polymarket accounts made large sums by betting on a US‑Iran ceasefire hours before it was announced. Because users can bet anonymously and platforms often transact in cryptocurrency, tracing who placed such bets is extremely difficult.
Stiller argues these markets introduce incentives unrelated to the substance of democratic decision‑making, potentially distorting debate. Alexander Bechtel, a digital economics specialist at the University of St. Gallen, notes the risk of market manipulation: wealthy actors can bet heavily to skew perceived probabilities, prompting a bandwagon effect that influences other bettors and public perception.
Prediction markets gained attention in 2024 when they seemed to predict Donald Trump’s victory over Kamala Harris more accurately than some opinion polls. US news outlets have begun treating market prices as data; CNN announced a partnership with Kalshi to supplement election coverage. Some political scientists now regard markets as more reliable than polls because respondents may be more candid when money is at stake.
But experts caution against equating prediction markets with polls. Betting on an outcome does not mean endorsing it, and markets can be distorted. Market users can create obscure, niche questions that are especially vulnerable to manipulation, while polling institutes design questions to gauge views across specific demographics.
Bechtel says prediction markets do not pose a structural threat to democracy but do carry dangers that require regulation. Possible measures include forcing users to verify their identity to deter insider trading and banning highly specific political bets that invite manipulation.
Edited by Rina Goldenberg