'The Big Short' Investor Michael Burry Says Prediction Markets Are 'Gambling No Matter What Anyone Calls It'

Michael Burry, the investor best known for predicting the 2008 US housing market collapse, has warned that prediction markets are 'gambling no matter what anyone calls it', arguing that platforms such as Kalshi are taking advantage of a regulatory loophole that allows them to operate across the United States.

Prediction markets have continued to expand, with platforms offering contracts tied to elections, inflation, interest-rate decisions, employment data and other real-world events. The sector has also drawn increasing legal scrutiny as states and federal authorities dispute whether event contracts should be regulated as financial products or gambling.

Burry's Warning On 'Loophole' And Cheating

Writing on X, Burry described prediction markets as operating through 'a regulatory loophole' within what he called an otherwise heavily taxed and tightly regulated gambling industry. Referring to Kalshi, he wrote the platform had become the market leader because of that regulatory treatment.

'So of course it is number 1 by a mile and will keep growing as long as society steps aside,' Burry wrote.

He also argued there was 'nothing preventing cheating in prediction markets', describing cheating as 'as old as gambling' and saying both had the power to drive people 'to extremes'. Burry did not provide evidence or examples to support those claims.

New York Ruling Puts Focus On Kalshi

Burry's criticism comes days after a New York federal judge rejected Kalshi's attempt to block state regulators from enforcing gambling laws against the prediction market platform.

US District Judge Analisa Torres denied Kalshi's request for a preliminary injunction, ruling the company had not shown it was likely to succeed on its claim that the Commodity Exchange Act pre-empted New York's regulatory authority. Torres pointed to provisions of the law preserving the powers of other federal and state regulators.

The dispute centres on whether prediction-market contracts fall exclusively under the jurisdiction of the Commodity Futures Trading Commission or whether states can also apply their own gambling laws. New York argued Kalshi was offering sports betting without a state licence, while Kalshi maintained its event contracts are federally regulated derivatives.

The ruling was the latest legal challenge facing prediction-market platforms as several states continue to scrutinise their operations.

Expanding Markets, Unsettled Rules

Prediction markets have broadened beyond specialist forecasting platforms into markets covering politics, economics, sport and other real-world events. Rather than buying or selling an underlying asset, participants trade contracts tied to whether a specified outcome will occur before a set deadline.

Their expansion has placed greater attention on where event contracts fit within the broader financial system and whether existing regulatory frameworks adequately address products that combine elements of derivatives trading and wagering.

Burry did not propose specific regulatory changes. Instead, his criticism focused on the industry's legal treatment, arguing prediction markets should be judged by the activity they facilitate rather than the regulatory category under which they operate.

The New York decision is one of several disputes testing how prediction markets should be regulated as more states examine whether event contracts fall under gambling laws or federal derivatives regulation.