Meta builds prediction market app 'Arena' to challenge Polymarket and Kalshi, starting with points not cash

Meta's new bet

Meta CEO Mark Zuckerberg has personally directed a small internal team to build a standalone prediction market app called Arena, according to a Tuesday report from The New York Times. The app is designed to compete with existing platforms Polymarket and Kalshi, replicating their model of letting users bet on real-world events from election outcomes to sports results. Arena would initially operate without real money, instead using a video-game-style points system, but insiders say introducing cash wagers later has not been ruled out. The project is described internally as experimental but a top priority, separate from Facebook and Instagram yet poised to leverage Meta's billions of users.

The prediction market boom

Prediction markets have exploded in popularity since the 2024 US presidential election. Kalshi, founded in 2018, reached a $22 billion valuation in May 2026, double its figure from six months earlier. Combined monthly trading volume on Polymarket and Kalshi quadrupled from under $5 billion in September 2025 to $24 billion in April 2026, according to Pew Research data cited by The Next Web. Total bets placed on prediction market apps last month hit nearly $30 billion.

The sector's rapid rise has drawn both profits and controversy. A Wall Street Journal investigation found that most profits go to a tiny minority of bettors. Legal troubles have accumulated: a former special forces soldier allegedly used insider knowledge of an operation to capture Nicolás Maduro to profit; former Congressman George Santos is under investigation over Kalshi trades; and states are suing platforms for violating gambling laws. At the same time, the current US administration, which supports prediction markets, has sued states that sued the platforms.

Meta's competitive advantage and market impact

News of Arena sent shares of existing gaming companies lower on Tuesday. DraftKings fell more than 2%, Flutter Entertainment dropped roughly 2%, and Robinhood also declined. The market reaction reflects the threat of Meta's distribution muscle: the company could direct its roughly 3 billion monthly active users toward the app, a scale unmatched by any competitor. DraftKings launched its own Predictions platform in December 2025, but its stock has fallen 37% year to date, with 2026 revenue guidance missing analyst expectations.

Meta shows that we are still in the early stages of the prediction market experiment... Perhaps we don't yet grasp the extent to which the market will change - how many new platforms there will be and how much gambling will continue to penetrate every corner of American life.

From Stories to Reels: Meta's cloning playbook

Arena fits a well-established pattern for Meta: identifying a popular third-party service and building a clone backed by its massive social graphs. Instagram Stories followed Snapchat, Reels copied TikTok's vertical video feed, Threads emerged after Twitter's turmoil, and Facebook Dating mirrored Tinder. This history suggests Arena could become a serious contender if prediction markets continue to grow. However, Meta's previous attempt at a prediction market app, Forecast, launched in 2020, never gained traction and was shut down in 2022.

Regulatory wildcard

The regulatory landscape for prediction markets remains fluid. The Commodity Futures Trading Commission proposed new rules on June 10, 2026, that would ban contracts tied to war, assassinations, and terrorism while potentially legalizing wagers on sports. Meta's entry could accelerate the mainstreaming of prediction markets, but also trigger stricter oversight. The app's initial points-only model may sidestep CFTC jurisdiction, which applies to real-money wagers, but any future shift to cash betting would place Arena squarely under federal regulation.