Do prediction market bettors make anything better?

Key Takeaways

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  Prediction markets leverage legal swap loopholes

  “Prediction markets have taken off in the past few years, using the same legal loopholes as the crypto market to essentially claim they are a 'swap,' or 'futures market,' similar to that of the totally legal grain and pork belly markets, and less like the state-regulated sports gambling market.”

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  Alpha stems from extreme real-world research

  “Caden Booth bought a stopwatch and this device used for listening to bird sounds and hung out on the sidewalk outside of the stadium waiting for the rehearsal to start so he could time it. I thought I was gonna show up here, and there would be 500 people sitting outside; to me, I was like, this is just common sense.”

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  Regulators view these markets as information tools

  “These prediction market companies exist because they’ve convinced regulators that they’re also great for the rest of us. They're adding new knowledge to the world, making us more informed about the future by providing a clearer picture of what people actually expect to happen.”

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  Gamified apps drive intense user engagement

  “The app is very brightly colored and super engaging. There's charts all over the place, and you kinda can't stop looking at the thing. You can literally see trades just flowing all over the screen in real time, and it feels like being in an arcade.”

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  Mention markets monetize specific political keywords

  “Most people are downloading these apps right now because of sports, but then there's all this other stuff, like mention markets where people bet on whether someone will or won't say something. We decided to bet on which words Trump would say in the speech, looking at probability odds for specific strikes.”

Episode Description

Have you noticed a lot of young people getting into antenna-maxxing as alpha? Or, maybe searching for any bit of copium after they fat-fingered and got rinsed? Or maybe they farmed during a yes-fest on Mention Markets resulting in some serious printing?  If none of that made sense to you, then we have the perfect episode for you.  Prediction markets have taken off in the past few years, using the same legal loopholes as the crypto market to essentially claim they are a “swap,” or “futures market,” similar to that of the totally legal grain and pork belly markets, and less like the state-regulated sports gambling market.  And they are great for the bondsharps who print on the regular (or, in English, “well known market makers who often make a lot of money”).  These prediction market companies exist because they’ve convinced regulators that they’re also great for the rest of us. They're adding new knowledge to the world. Making us more informed about the future.  On today’s episode, the case Kalshi has been making to regulators, the courts and the public as to why what looks like gambling and seems like gambling … is not. Why that argument’s kinda been working. And – if no one stops them – what prediction markets could do to our future. If you want to hear more about how federal regulators investigate trades on prediction markets, The Indicator will have an episode on Monday with former CFTC Commissioner Kristin Johnson. Live show tour and book info. / Subscribe to Planet Money+ Listen free: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts. Facebook / Instagram / TikTok / Our weekly Newsletter. This episode of Planet Money was hosted by Bobby Allyn and Mary Childs. It was produced by Sam Yellowhorse Kesler. It was edited by Marianne McCune, fact-checked by Sierra Juarez, and engineered by Cena Loffredo. Alex Goldmark is Planet Money’s executive producer. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. NPR Privacy Policy