Danny Moses, the money manager made famous by The Big Short, says prediction markets take out “the intimidation factor” of betting on the S&P 500.

The S&P 500 closed Friday around 6,740.

On Kalshi’s S&P 500 year-end range market, a 4-cent contract implies a 4% chance the index finishes 2026 between 8,000 and 8,200. That means a $2,190 position pays out nearly $44,000 if it hits.

The equivalent options call spread caps gains at roughly $20,000.

Not everyone is sold. Marko Papic, chief strategist at BCA Research, says using a prediction market to bet on the index is “like calling a girl on the phone to ask her out when she is right in front of you, on your date.”

The Numbers Are Still Small

Since late December, Kalshi users have traded over $1 million in S&P 500 year-end bets.

The options market moves over $100 million in notional volume daily in equivalent contracts.

The volumes are way off, but the pricing is surprisingly close.

A mid-February Kalshi contract implied 6% odds on that same S&P range.

Citigroup (NYSE:C) equity trading strategist Stuart Kaiser pegged the over-the-counter derivatives market at roughly 7%.

Institutional market makers like Susquehanna International Group provide liquidity on both sides, which explains the convergence.

Wall Street Wants Its Own Version

The major exchanges are not waiting around.

Nasdaq Inc (NASDAQ:NDAQ) filed with the SEC in early March to list binary options on the Nasdaq-100, essentially building its own prediction market inside the regulated securities framework.

Cboe Global Markets (BATS:CBOE) is targeting Q2 for a similar product.

CME Group (NASDAQ:CME) is already there, hitting 100 million event contracts traded in eight weeks by February and powering Flutter Entertainment’s (NYSE:FLUT) FanDuel Predicts app.

Citigroup’s Kaiser told Bloomberg some institutional clients are sniffing around prediction markets “the same way they sniffed around crypto to begin with: a little bit cautiously.”

Who Regulates This?

That depends on whom you ask.

Kalshi operates under the CFTC, but Cboe CEO Craig Donohue, whose own exchange is building a competing product, told a joint SEC-CFTC roundtable the contracts look like securities.

Polymarket is mostly offshore and largely beyond U.S. rules for now.

The political pressure is mounting from both directions.

Several states have sued both platforms as illegal gambling operations, and Sen. Chris Murphy (D-CT) is drafting federal legislation to ban certain prediction market trades entirely.

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