According to a report by The New York Times, the project has been personally championed by Meta chief executive Mark Zuckerberg and is currently being developed under the internal name "Arena".
The app is expected to let users compete by predicting the outcome of real-world events, initially using a points-based system similar to a video game.
However, the report claims Meta could eventually expand the platform to support real-money wagering.
Arena is expected to launch separately from Meta's existing family of social media platforms, including Facebook and Instagram.
The move would place Meta alongside fast-growing prediction market platforms such as Polymarket and Kalshi, which allow users to place bets on the outcome of political, sporting and economic events.
Those services have surged in popularity in recent years, particularly during the 2024 US presidential election, as users wagered millions of dollars on political outcomes.
Meta has not publicly confirmed the project.
According to the report, Arena may be one of several standalone apps currently under development.
The company is also said to be exploring a separate Meta Photos app, while continuing to expand its Meta AI application, which allows users to generate AI-created images and manage the company's smart glasses.
The latest project reflects Meta's broader strategy of launching dedicated apps around specific services rather than relying solely on Facebook and Instagram.
Prediction markets have become increasingly influential as investors and enthusiasts use them to forecast everything from election results to sporting competitions and financial events.
However, they have also attracted criticism from regulators and ethics experts.
Critics argue that prediction markets blur the line between forecasting and gambling, while others have raised concerns that traders with access to confidential information could profit from events before they become public.
Large trades placed ahead of major policy announcements by US President Donald Trump have fuelled questions over whether some prediction markets could be vulnerable to insider activity.
If Meta ultimately introduces real-money betting, the company could face heightened regulatory scrutiny in multiple countries, adding another layer of complexity to its expanding portfolio of AI-powered products and digital services.
