The Roosevelt Institute, a New York-based think tank, has published a study suggesting that since the inception of prediction market Kalshi in 2018, regular users have lost approximately $583.5m due to competition against professional traders.
Brad Lipton, co-author of the study and Director of Corporate Power & Financial Regulation at the Roosevelt Institute, argues that ordinary traders are often at a disadvantage, unaware of the professional traders on the opposite side of their bets.
In response, Kalshi strongly refutes the findings, stating: “There is no ‘house’ on Kalshi, hidden or otherwise.” They further explain that Kalshi operates by matching orders like any other financial exchange, suggesting that the report’s title, The Hidden House: Prediction Markets and How They’re Shaping Society, reflects a fundamental misunderstanding of financial exchange operations.
Kalshi’s rebuttal also addresses accusations of a skill gap being misconstrued as a structural market flaw. The company has previously countered similar allegations, striving to differentiate prediction markets from traditional gambling platforms.
Nevertheless, Lipton remains sceptical, pointing to a lack of transparency about who users are betting against and questioning the effectiveness of measures against insider trading.
The think tank’s report coincides with findings from The Wall Street Journal, which indicated that most users on platforms like Kalshi and Polymarket tend to lose money, with a small fraction of accounts reaping most profits. On Polymarket, researchers identified ‘informed’ traders making $143m in ‘anomalous’ profits since 2024.
Kalshi asserts that the Roosevelt Institute’s conclusions are flawed due to methodological errors. A spokesperson for Kalshi explained that the study mistakenly classifies high-frequency trades by institutional market makers as those of ordinary users, while categorising trades from casual app users as those of professional traders.
Kalshi has emphasized its commitment to banning insider trading activities. However, Lipton argues that the enforcement of these rules lacks clarity. He told Business Insider that the platform’s marketing claims of having no house are misleading, questioning the transparency of trade oppositions.
As prediction markets face scrutiny over potential insider trading and manipulation, Kalshi continues to defend its operating model and challenge claims of disproportionate user losses. The ongoing debate highlights the complexities of ensuring fairness and transparency in emerging financial markets.
