Have you been caught up in the prediction market craze? If you haven’t yet, I predict you will be. I feel so confident that you will consider visiting a platform that I am going to buy an 80¢ contract.
You may ask yourself, did the author just place an 80-cent bet? Technically no. Emotionally yes.
An 80¢ contract on a prediction market indicates the odds that I expect for something to happen. Those odds could be on an election outcome, an album release date, a daily temperature high, or a sporting event outcome. On the opposite side of my 80 cents is someone with a 20¢ contract. If my prediction comes true, I win their 20 cents. If my prediction goes their way, they win my 80 cents. Hence, you can see that highly anticipated outcomes pay less than highly improbable outcomes. The only way for me to get paid is for someone on the other side of my prediction to be willing to take the opposite stance. The platform doesn’t fund either of our payouts; they focus entirely on facilitating the contract and taking a cut of the payout.
Still, you may read this and push back, saying it just feels like betting to you. In a way, it is. In another way, it isn’t.
The prediction market platforms won a major lawsuit in late 2024, arguing that, given the market dynamics and contractual nature of what they sell, prediction markets are just like the stock market. Now their activities have the approval of the Commodity Futures Trading Commission (CFTC). You have buyers and sellers who are willing to invest their money based on their expectations of an outcome. For a company, it is usually its ability to generate profits, pay dividends, drive innovation, or acquire assets such as customers and patents that will make it an attractive acquisition target at some point.
The prediction market is a twist on this. The entities that are driving the payouts don’t receive any direct financial benefit from the contracts being exchanged. Unlike stock, which provides liquidity for a company to pursue its objectives, the subjects of prediction contracts are, like a sports team, the markers for the contract payout. But when you are making money on predicting the weather, who are you to pay?
Still, it feels like betting, gambling, and gaming to me. Not surprisingly, some 80% of the action on prediction markets is around sports events. With the Super Bowl, the undisputed peak betting event of the year, approaching, you will see this percentage spike. This muckiness is causing all sorts of angst.
Legitimate sports betting sites, regulatory bodies, and rights holders are feeling betrayed. They invested enormous sums of money, time, and energy, along with significant marketing, to participate in the legitimate betting market. Jurisdictions that feel they have control over betting are now being usurped by other bodies. Entities that have generated revenue streams from legitimate betting activities now feel their revenues will be threatened.
Worst of all, prediction markets appear rife with insider trading, with bizarre bets placed just hours before military interventions, the passage of political bills, album releases, and more. I mean, if you know what time a tree is going to fall in the forest, and you can buy a contract to make money on that occurrence, isn’t that insider trading? How is this any different from knowing when a major company has an announcement to make before the public does?
The intriguing aspect of prediction markets to me is the consumer behaviour at play. I am not the only one. Major news outlets such as CNN and CNBC have partnered with market-leading platforms, including Kashi. Polymarket and Coinbase have enabled crypto-based participation. Consumers on these platforms don’t just buy contracts; they vocalize their positions, argue for their perspectives, and research as many sources as possible to gain an edge.
Perhaps in a twisted way, prediction markets could be the saviour that traditional journalism is searching for. If traditional outlets can provide more reliable information than less vetted sources, consumers who are winning and losing in prediction markets will be financially motivated to engage more consistently on these platforms. Perhaps, by osmosis, they will migrate from topics tied to their buying and selling to absorb less event-based content.
There is also a pretty cool activation opportunity for brands looking to create new buzz around product launches, limited-edition products, format changes, revealing spokespeople, personnel changes, plant location announcements, and more. Gambling made the NFL what it is today. Long before it was legal in multiple markets, betting odds on games were among the most consumed content on sports pages. Fantasy football gave the sport an unimaginable jolt that no marketer could have predicted. Football is clearly being prioritized in prediction markets; take a look at any of their home pages.
Yet this new outlet seems primed for so much more. I don’t know the psychological reason humans love to predict; however, I know we do. Stuck for a conversation starter at a business lunch, roll out the question of who will be our next mayor, pope, sports champion, weather system, or winning AI platform, and you will have no problem filling the void until coffee is served. You could even debate, if not predict, how many coffee versus matcha drinkers are at the table.
Concerns about problem gambling will apply to prediction markets the same way they do to rampant sports betting. They should. Howvere there is a unique layer here that needs to be studied and dissected as consumers once again exhibit powerful behaviours driven by their passion and desire to earn a quick buck.
If I encourage you to check out a platform, you may be rightfully concerned that I have taken a position that you will. Rest assured, I haven’t, so go for it; there is a lot to take in.