"In early December, Time magazine named the “Architects of AI” its 2025 Person of the Year. The lead-up to this announcement has always generated considerable speculation, but this year millions of dollars were riding on it: people placed $55 million in bets on the gambling website Polymarket and $19 million on Kalshi, a rival platform.

But while the platforms allowed users to bet on “Elon Musk,” “Jensen Huang,” and even “AI” as Time’s Person of the Year, no one anticipated the magazine’s exact phrasing. The announcement ignited a furor. Which bets, if any, would pay out? The answer illustrates an important lesson about how prediction markets function.

In recent years, online prediction markets have flourished, bolstered by regulatory leniency in the United States. On platforms like Polymarket and Kalshi, users bet on the outcomes of discrete political, social, and economic events. The resulting “event contracts” vary considerably in the specificity of the conditions under which a bet is considered a win."

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