There’s a Prediction Market for That?
What’s great about financial innovation in 2026 is that if you want to wager on the NFL playoffs, there’s a prediction market for that. If you want to bet on the next FED Chair, there’s a prediction market for that. And, if you want to predict the next country targeted by the U.S. military (at the time of writing, the front runner is Iran at 66%) there’s a prediction market for that, too.
I wonder if Steve Jobs would appreciate the technological leap and utility increase that prediction markets offer much like he did the iPhone in 2009…
Surprisingly, the PR surrounding prediction markets is not all sunshine and roses. Accompanying the adoption of these betting vehicles is an undercurrent of grift that is enabled by insider trading and manipulation. You have markets with very specific outcomes, people with material information that can control said outcomes, and a way to monetize that information in just a few clicks. Show me the incentive, and I’ll show you the outcome.[1]
Ethical concerns and considerations aside, the incidence of insider trading can be viewed as a feature rather than a bug: the public wins by having access to more accurate forecasts from more informed market participants. However, I would wager that the most popular category for Kalshi and Polymarket by volume being sports is evidence that participants are largely viewing the platforms as gambling platforms, not as some impartial arbitrator of truth.
A Shift in Retail Risk-Taking
As a market analyst, I can’t help but notice that the rise of these prediction markets is just yet another contribution to the post-covid zeitgeist of financial gamification. Whether it be sports betting, crypto trading, or stock market activity, the incidence of retail participation has taken off and, with it, an all-or-nothing approach to risk. This is evidenced by these betting mediums being typified by their most extreme and riskiest products: multi-leg parlays, leveraged fartcoin, and 0DTE option trading.
Source: Cboe as of 9/30/2025
These products are more akin to lottery tickets than stock market returns. This can seriously alter the dynamics of the stock market as typical analyses of value are thrown out the window and replaced with the idea of gambling on some extreme right-tail outcome. When one is accustomed to their bets going to 0, there may be an irrational lack of fear when one of their securities (also seemingly bets) declines. Conversely, when one is conditioned to chase outsized returns, there may be an irrational exuberance that results in them riding their winning hand much longer than they otherwise would.
The Spillover Effects on Public Markets
An interesting subtlety to this behavior in the stock market is that, unlike prediction markets or sports betting, there is no settlement date for one’s wager. This allows for the manufacturing of gains from pure belief. With enough belief these bets can become self-fulfilling. Evidenced by the GameStop saga in 2021, “fighting” this irrationality can be very costly. Consequently, the stock market starts to feel like a craps game where everyone is making money tailing the hot shooter.
This places investors in quite a predicament. Fighting the tide seems foolhardy, but riding the wave seems precarious with U.S. equity markets looking increasingly unaffordable.
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The charts and infographics contained in this blog are typically based on data obtained from third parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.
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[1] This phrase is commonly attributed to the late Charlie Munger, longtime Vice Chairman of Berkshire Hathaway