Polymarket, a major prediction market platform, is listing contracts on several German state elections later this year even though such betting is illegal in Germany.
Prediction markets allow anonymous wagers on events ranging from military actions to political outcomes. Regulators have grown increasingly concerned about these sites. In the United States, the Justice Department last year dropped its probe into Polymarket, clearing the way for expansion there. In Europe, however, some countries have blocked access to these platforms as unlicensed gambling services.
In Germany both Polymarket and rival Kalshi can still be reached online, but the joint gambling regulator for the states, the Glücksspielaufsicht der Länder (GGL), has warned that taking part in these markets is unlawful. The GGL says so-called social betting covers public events such as elections, court rulings and natural disasters, and is especially vulnerable to manipulation because outcomes can be ambiguous, subjective or open to influence.
The regulator told DW that while the websites remain accessible from German IP addresses, moving funds to them from Germany is not possible. The GGL also said it passes information about illegal betting activity to law enforcement agencies.
Despite those restrictions, Polymarket currently shows live markets on the September regional ballots in Saxony-Anhalt, Berlin and Mecklenburg-Western Pomerania, and a separate market asking whether Chancellor Friedrich Merz will leave office before 2027. The Berlin election contract has attracted the most activity, with roughly $3 million (€2.6 million) traded so far.
Researchers and policy experts say prediction markets pose particular risks for democratic processes. Burkhard Stiller, a computer science professor and specialist in financial technologies at the University of Zurich, warns that these platforms frame political choices as game-theory problems and can be used to shape narratives rather than merely reflect them.
High-profile episodes have illustrated insider-trading concerns. Large, well-timed wagers on the collapse of Venezuela’s Nicolás Maduro and on possible US-Israeli strikes on Iran have led to suspicions that people with privileged information profited. In one reported case, newly created Polymarket accounts earned big sums by betting on a US-Iran ceasefire hours before it was publicly announced. Because bets can be placed anonymously and transactions often use cryptocurrency, tracking who placed them is difficult.
Stiller says the financial incentives created by these markets are disconnected from the substantive merits of democratic debate and can distort public conversation. Alexander Bechtel, a digital economics researcher at the University of St. Gallen, adds that wealthy actors can skew market prices by placing large bets, producing a bandwagon effect that affects other bettors and wider public perception.
Prediction markets drew attention in 2024 when market prices appeared to forecast a Donald Trump victory over Kamala Harris more accurately than some opinion polls. US media organizations have started treating market odds as a data source; CNN has announced a partnership with Kalshi to use market information in its election coverage. Some political scientists argue markets can sometimes be more revealing than polls because the presence of monetary stakes may elicit more candid assessments.
But many experts urge caution. A market price is not the same as public endorsement, and prices can be distorted. Markets can be designed with obscure or narrowly defined questions that are particularly prone to manipulation, whereas polling institutes typically craft surveys to measure attitudes across defined demographic groups.
Bechtel concludes that while prediction markets are not an existential threat to democracy, they carry risks that should be managed. Suggested regulatory steps include stronger identity verification to deter insider trading and prohibitions on highly specific political bets that invite manipulation.
Edited by Rina Goldenberg