This article explains how prediction markets work, allowing users to trade on the outcomes of future events, and examines the current regulatory environment in Japan, along with developments in the United States and examples of leading services.
Prediction markets are platforms where users forecast the outcomes of specific future events and trade shares whose value depends on those outcomes. They cover a wide range of areas, including politics, economic indicators and sports. Shares tied to outcomes deemed correct receive a predetermined payout, while those tied to incorrect outcomes lose their value. Market prices reflect participants’ forecast probabilities in real time.
The main advantage of prediction markets is that they aggregate the wisdom of crowds, potentially achieving a high level of forecasting accuracy. Because participants have a financial incentive, they conduct extensive research, and the resulting insights can also be used for risk management in decision-making and policymaking. At the same time, concerns include the risk of market manipulation and insider trading, as well as declining data reliability in markets with limited liquidity.
In Japan, operating a prediction market in practice is difficult because of its relationship with gambling laws, and using overseas platforms from within Japan also carries risks. In 2026, the U.S. CFTC is moving to strengthen regulation and formulate new rules. While efforts to improve market integrity are advancing globally, Japan continues to maintain a strict prohibition policy.
Several services exist, including Polymarket, with particular attention focused on decentralized markets built on blockchain technology. Looking ahead, key areas of focus are expected to include developments in U.S. regulation and the evolution of decentralized markets using cryptocurrencies.