Prediction Markets Explained: Kalshi & Polymarket's $40B Boom — Which Stocks Win?

Prediction markets are taking the financial world by storm. Kalshi and Polymarket have gone from under $1 billion in combined monthly trading volume to over $40 billion in just one year, a 30X explosion fueled by the World Cup, the NFL, elections, and even bets on AI milestones. In this episode of 7investing Live, Simon Erickson is joined by Brett Schafer and Ryan Henderson of the Chit Chat Stocks podcast to break down what this meteoric rise means for investors.We dig into how prediction markets actually work: peer-to-peer event contracts regulated by the CFTC, take rates of just 0.7-1.5% versus the 7-10% cut traditional sportsbooks capture, and why that efficiency gap could be a massive disruption threat to online sports betting giants like DraftKings (NASDAQ:DKNG) and FanDuel parent Flutter Entertainment (NYSE:FLUT). We also explore which brokerages stand to benefit; Interactive Brokers (NASDAQ:IBKR) and Robinhood (NASDAQ:HOOD) are racing to bring event contracts onto their platforms, and whether derivatives exchange CME Group (NASDAQ:CME), now trading near its cheapest valuation in a decade, is being unfairly punished by the market.Plus: the ethical concerns around insider trading and political betting, the coming regulatory showdown between the states and federal government, and our panel's picks when forced to choose between Interactive Brokers, Robinhood, Kalshi, Polymarket, and DraftKings at today's valuations.0:00 - Introduction to Prediction Markets and Chit Chat Stocks1:56 - Predicting the Winner of the 2026 World Cup3:26 - Prediction Market Trading Volumes and the Growth Drivers8:28 - Overview of Kalshi and Polymarket and how they differ from Casinos and Online Sports Betting12:03 - Impact to Brokerages: Robinhood and Interactive Brokers14:07 - Controversial Topics: Government-related events and cracking down on bad behaviors16:19 - The shifting role of state-based and Federal regulations18:32 - DraftKings and the scalability of consumer-facing platforms26:15 - Robinhood and Interactive Brokers and the upside for brokerages29:02 - Closing Game! Which stock would you invest in: Interactive Brokers, Robinhood, Kalshi, Polymarket, or DraftKings? Publicly Traded Companies Mentioned:Interactive Brokers (NASDAQ:IBKR)Robinhood (NASDAQ:HOOD)DraftKings (NASDAQ:DKNG)Flutter Entertainment / FanDuel (NYSE:FLUT)CME Group (NASDAQ:CME)Intercontinental Exchange (NYSE:ICE)Spotify (NYSE:SPOT)Boeing (NYSE:BA)Meta Platforms (NASDAQ:META)Duolingo (NASDAQ:DUOL)SpaceX (NASDAQ: SPCX)Private / Pre-IPO Companies Mentioned:Kalshi (~$22B valuation, Series F)Polymarket (~$15B valuation)AnthropicFiscal AIWant to see all of our official stock recommendations? Visit https://7investing.com/subscribe get your first 7 days of premium access completely freeFind more of Brett and Ryan's stock research at chitchatstocks.substack.comand www.youtube.com/@UCG5Ni-SI-jyrEsoNUhqftNQ Hashtags#7investing #SimonErickson #PredictionMarkets #Kalshi #Polymarket #DraftKings #InteractiveBrokers #Robinhood #stocks #investing #sportsbetting #stockmarket