The online betting company Kalshi is expanding beyond elections and sporting events into a new corner of prediction markets: drug development.
The company launched a pilot program this month allowing users to bet on the outcomes of clinical trials, FDA regulatory decisions and drug approvals from companies like Sanofi and Gilead Sciences. Unlike traditional sportsbooks, Kalshi operates as a Commodity Futures Trading Commission-regulated exchange, where users buy and sell contracts tied to the probability that a future event will occur. Kalshi’s platform, which was developed in partnership with tech company AppliedXL, lets users bet on almost anything under the sun, from the state of the Strait of Hormuz to the results of the pending midterm elections.
In the case of biotech, Kalshi argues prediction markets could bring greater transparency to the drug approval process by generating “continuously updated” public estimates of a drug's likelihood of success. But Kalshi’s foray into the space is already drawing criticism from drug development professionals and analysts, who argue that attaching financial incentives to clinical milestones could create more problems than it solves.
“If markets are built around clinical trial outcomes, it raises obvious questions about incentives and the potential for misuse,” said Kimberly Ha, founder and CEO of KKH Advisors.
Supporters see transparency, critics see risks
Kalshi’s vision for pairing drug development with prediction markets has some powerful supporters, including CFTC Chair Mike Selig. Selig told Punchbowl News in March that he saw value in allowing patients to use prediction markets to “manage the potential risk of having a future treatment or medical costs.”
Kalshi CEO Tarek Mansour said the main benefit is not its financial upside for users, but in allowing information to flow more freely.
"Drug development is one of the most important and most information-constrained industries on earth," said Mansour in a statement.
While banks, pharma companies and experts already develop internal estimates of a drug's chances of success, Kalshi argued those assessments typically remain private. Public prediction markets would generate probabilities that update as new information emerges — keeping investors, companies, clinicians and patients alike in the loop.
“Surfacing information is what Kalshi is for, and we are committed to doing it right: compliance-first, carefully scoped and built for the long term,” the CEO said.
“What could go wrong?” Ha quipped, before providing a lengthy list of potential pitfalls, including insider trading, increased dissemination of misinformation and the risk of market manipulation. The ability to bet on drug approvals could also further diminish public trust in the FDA, Ha noted.
But the pilot includes several safeguards, according to Kalshi. Contracts will be limited to late-stage trials with publicly defined primary endpoints, listed only after enrollment has closed to avoid affecting patient recruitment, and subject to employment verification intended to reduce insider trading risks.
These safeguards, paradoxically, could make the program less impactful toward Kalshi’s goal of transparency. By limiting contracts to late-stage trials, the markets will be focused on well-funded and likely widely followed programs rather than earlier-stage research, where less information is readily available about a drug.
Kalshi acknowledged this in its roadmap, noting, “the initial scope is a sequencing choice, not a permanent limitation. Early stage trials with well-specified endpoints will be added when the resolution framework for earlier-stage readouts is validated. Small-cap programs will be added when manipulation-surveillance infrastructure is adequate.”
Industry opposition grows
But those guardrails might not be enough, according to David Tsai, the associate director of program management and clinical operations at Scribe Therapeutics, who’s voiced public opposition to drug development betting. Tsai noted that a typical multicenter study can involve manufacturers, couriers and clinical site staff across more than 10 locations. There are "easily over 100 people involved" in a single trial, according to Tsai, many of whom could potentially influence how a study is conducted without falling under existing trading restrictions.
Markets could also increase incentives to obtain or leak nonpublic clinical trial information and encourage coordinated misinformation campaigns around key development milestones, he added.
Among the potential consequences, Ha cited increased market manipulation, greater volatility around important clinical and regulatory events, online campaigns that discourage eligible patients from enrolling in trials and an erosion of public trust in clinical research.
Those concerns, and more, are echoed in a Change.org petition Tsai launched to ban prediction markets from gambling on clinical trials. The petition argues that turning clinical milestones into betting events introduces "systemic moral hazards" that could undermine confidence in clinical data and damage trust between biotechnology companies and patient communities.
The petition calls on regulators to establish rules preventing speculative betting on clinical trial outcomes. It has so far netted fewer than 200 signatures since it was created July 16.
Meanwhile, enthusiasm for prediction markets generally is swelling as Kalshi and its competitors expand into new areas. The company brought in 3 million additional monthly users during the recent World Cup alone.
Still, there are signs Kalshi’s expansion efforts won’t go entirely unchecked.
The company recently explored contracts tied to airport flight cancellations before pausing the effort amid concerns users could attempt to influence outcomes. Its biotech initiative now raises a similar question for the life sciences industry over whether prediction markets can produce useful public information about drug development without creating incentives that affect the events they are intended to forecast.
