From Pop Stars to Politics: The Rise of Prediction Markets

Prediction Markets – Betting on a Bad Idea

Prediction markets are having a moment. Once confined to academic experiments and niche political betting, they are now increasingly mainstream. Platforms invite users to “trade” on everything from election outcomes and interest-rate decisions to the weather, movie ratings, and pop-culture events. The language is intentionally financial: contracts, prices, probabilities, liquidity.

At their core, many prediction markets are not meaningfully different from betting. Whether someone is wagering on a presidential election, next month’s rainfall, or the date of an album release, the participant is staking money on an outcome they cannot control, based on incomplete information, in a zero-sum environment.

When “Markets” Are Just Bets

Proponents argue that prediction markets aggregate collective wisdom better than polls or expert forecasts. In theory, prices reflect the probability of an event occurring. However, these platforms are more like casinos than financial markets.

Consider the growing trend of contracts tied to cultural or environmental outcomes:

• Will a movie receive a score above 80%?

• Will it rain more than two inches next week?

• Will a particular candidate win an election?

• What will the announcers say during the upcoming Phoenix at New York Basketball Game on 1/17/2026? – Yes!  This is for real!

  
  

These outcomes do not generate cash flow, productivity, or long-term value. There is no underlying asset, no ownership interest, no economic engine. The only way to make money is for someone else to lose it. That is gambling, regardless of how sophisticated the interface appears.

Market terminology can lull participants into believing they are engaging in informed investing rather than probabilistic betting. For many users, especially those already comfortable with trading apps like Robinhood or crypto trading on Coinbase, the line between speculation and gambling becomes dangerously blurred.

The Lack of Transparency

Unlike regulated financial markets, many prediction platforms operate with limited disclosure around liquidity, counterparty risk, or the identity and incentives of large participants.

Just recently, multiple credible outlets reported that an anonymous trader on the prediction-market platform Polymarket made over $400,000 by correctly betting that Venezuelan President Nicolás Maduro would be removed from office. The wagers placed shortly before the U.S. military operation that led to his arrest raises questions about insider knowledge or trading practices on the platform.

A Call for Caution

None of this is to say that prediction markets have no informational value or academic interest. They can, in certain contexts, demonstrate collective sentiment more efficiently than surveys. But for individual participants, especially retail users, it is critical to be honest about what these platforms are and what they are not.

They are not investments.

They are not diversified portfolios.

They are not tied to value creation.

Ernest Hemingway captured the nature of financial ruin in a single exchange in his novel The Sun Also Rises. When Bill asks Mike how he went bankrupt, the reply was simple: “Two ways. Gradually, then suddenly.”

Losses may begin small, an election here, a movie release there. Early wins reinforce overconfidence. Over time, position sizes grow, risk tolerance expands, and losses compound.

Trading on prediction markets is a bad idea. I am willing to bet on that.