This analysis was first published in SvD Näringsliv, in Swedish, on March 31st, 2026. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
Is it geopolitical analysis or gambling? Prediction markets have suddenly taken on a prominent role in geopolitics. But now questions are being raised about corruption — and military risks.
“Will American troops land in Iran before… 31 March?”
The question is not merely geopolitical — it is also the basis for bets worth around 200 million kronor. On the American prediction market Polymarket, bettors placed the probability of a “yes” at 29 percent about a week ago. By Monday it was down to 6 percent.
By making assessments about world affairs, war has been turned into a game. On prediction markets, however, no odds are set — instead participants bet against each other. Get your forecast right and you can win a lot of money. And if you have information nobody else has, you are almost guaranteed to do so.
Prediction markets originally came from the American DARPA — a kind of research unit funded by the US government. One of the first was called PAM, Policy Analysis Market. Its purpose was to try to forecast political developments in the Middle East, and to provide financial incentives to make the forecasts more reliable. It was a simple model: get it right and you get money.
PAM barely made it out of the starting blocks before the controversies began. In 2003 a Democratic senator called the idea “a federal gaming parlour on atrocities and terrorism” and added that the entire concept was “grotesque.” The project was shut down shortly after.
Over the past few years, a new generation of prediction markets has blossomed again. The vast majority of the activity is not political, however — it is pure sports betting. By using a legal loophole they have been able to circumvent the gambling legislation that prohibits many forms of wagering in most American states. They are now considered a type of futures contract — financial instruments — rather than a form of gambling. Not everyone agrees. The state of Nevada recently sued prediction market Kalshi in an attempt to ban them. But it is legal in the US, for the moment at least.
People betting money on a football match might sound harmless enough. But there are two major challenges with prediction markets.
The first is that it is difficult to mix two different purposes on the same market. On a stock market, there are strict rules against insider trading. Otherwise it can feel unfair that some participants in the market have access to more and better information than everyone else.
If you set aside the money, however — and simply want to arrive at as accurate a forecast about the future as possible — then insider trading is actually beneficial. You want those with unique information to share it, because that makes the forecast better. The money is only there as an incentive to bring it to light.
It goes without saying that these two motives are in conflict with each other.
Either you want to get to the truth — or you want a market with equal conditions for all.
This brings us to the second challenge. If people with secret information about, for example, military operations can make money from it — are the security of those involved not put at risk?
Already now, unusual forecasts with high betting volumes stand out. This can come to influence the actual matter at hand. If an enemy sees that an attack is expected to occur within a certain time period, it can prepare for it. The forecast was correct — but it influenced how the outcome unfolded, which can threaten the safety of those involved.
When geopolitics is mixed with gambling, a new type of problem is created. Much of the money being staked is in cryptocurrency, which makes it difficult to identify the people behind the bets. Interest has grown to such a degree that states, exchanges, and other societal institutions now follow prediction markets on a regular basis. And by betting large sums on unexpected questions, one can through this influence public opinion. It looks like an insider — but it can also be an influence operation, with prediction markets as the method.
When CNN analysed one particular player, they found that he had earned over 1 million dollars by correctly predicting how Israeli and American military operations would be conducted. The anonymous player won 93 percent of the time. The prediction market arrived at the truth. But the military was left with an enormous security problem — and a market that pays millions for valuable and confidential information to leak out.
We have transformed security policy into a kind of unregulated, anonymous stock exchange. That it would lead to problems is something everyone should have been able to foresee — even without a prediction market doing the work.
