Prediction Market Theorists Question Kalshi, Polymarket Boom

WEBVTT - Prediction Market Theorists Question Kalshi, Polymarket Boom Bloomberg Audio Studios, podcasts, radio news. You're listening to Bloomberg Business Week with Carol Masser and tim Stenoveek on Bloomberg Radio. Robin Hood, you know, has a prediction market, so it's sort of a good little indicator. They've had a banner year, though.

I keep seeing that. Do you see that Timothy shallow may Ad when you're watching the World Cup, if he's at the dentist. Yes, have you seen Chris? Have you seen this thing?

Okay, only one, You're the only one, and you write about predictions. But you don't really know, Like it's just so odd. He's doing this whole marketing campaign with them. Traditional trading volume on kalsh has rocketed from one hundreds of millions of dollars per month and early twenty twenty five to more than eighteen billion dollars in May.

It's real polymarket has also seen rapid growth. Both platforms are mined and lawsuits with state regulators who accuse them of offering illegal gambling. Yet the CFTC has come to their defense, arguing that trading doesn't amount to gambling, a position the companies hold too, all right. So, in other words, as Bloomberg BusinessWeek senior writer Chris being rights, It's never been a better time for someone trying to bet on the world.

Chris joins us here in the Bloomberg Interactive Brokers studio. Chris, good to have you here. Maybe, as you're write, it's never been a better time for someone to bet on the world. Like, tell us what's going on here?

Well, you know, for all the controversy that Calci and Polymarket are generating, they just keep growing. You know, we're seeing more people trading, and we're seeing growth inside the US and especially in areas that are outside sports. So we have this UH trade. Maybe never never a better time to bet on these companies.

It almost feels like, but go ahead. Well yeah, I mean, so sports have become the sort of dominant UH area that you can bet on on Calcier Polymarket, but they're pointing out out that that dominance is slowly ebbing, that other areas like politics and crypto and other things are growing. So I want to get to your recent story in Bloomberg Business Week that is just it. It's so great because I had no idea there were purists out there for the prediction market, but you actually went to this gathering where you spent some time with folks who say that prediction markets can actually be a force for good in the world.

But these are folks who say, yeah, if we get the sports out of it, what's left exactly? And prediction markets love to talk about this too. Like the platforms, they say, yeah, bet on the next FED decision. Understand hedge your insurance companies can hedge their bets based on you know, by betting on weather, those sorts of things.

But compared to what happens versus sports, it's pretty small. Yeah. So this conference that I went to is an annual gathering in Berkeley of as you say, prediction market purists, basically people who've been following the space for decades, back to the nineteen eighties, way before anyone. I didn't realize it was that all, but anyway, oh.

Yeah, And you know, underlying the original prediction markets was this idea that a group of people betting on an event will be better at predicting what happens than any individual. And they see that as a force for good, like a public good, that it will help people make better decisions and plan their lives. Can you give us an example of like a public good that would be the result of a prediction market. Well, I mean a very simple example is just predicting using prediction markets to bet on interest rates.

You know, what is the Federal Reserve going to do next quarter? But don't we have markets for that already? Yes, definitely, so you know some prediction market. There have been studies that show that prediction markets are as accurate and in some cases better than the other forecasters that we already have out there.

So in that case, is just another tool. But you could talk about whether events, you could talk about elections and what the global geopolitical outcomes. I guess I would say that, like so much has been institutionalized, right, So, like opening up something to the masses, I do wonder whether or not we get a much more balanced view on something, whether it's rates, whether it's elections. We certainly saw that play out in terms of prediction markets.

But I do wonder about is it a broader, better set of data. Well, they certainly argue that it is, or they argue that it's as good as anything we have and therefore we should be considering them in our decision making. So how do the folks at this conference feel about the rise of polymarketing Callsha. They're not psyched about it.

I mean, fundamentally, they think that prediction markets are a better source of information than anything else we have, and they're disappointed that CALCI and polymarket are predominantly betting on sports. I'm curious about digging into a little more to this group. You make the point in the piece that there are some connections to Sam Altman Sambankment Freed, and I think to myself, Okay, is this effective altruism that we're talking about, Is there then diagram with these prediction market purists and the folks who think about effective altruism.

Yeah, there's a lot of overlap. I'd say the sort of umbrella category here is rationalists, which is sort of a Silicon Valley group that is dedicated to kind of analyzing the world through data and probabilistic thinking in an attempt, as they would probably put it, to make the world a better place. Obviously you mentioned Sambankment Freed. Sometimes those best intentions can go awry, But there's a lot of overlap within the rationalists between the effective altruists.

Yeah, and also people who are excited about prediction. Markets because it's interesting you do talk about their ideas have inspired Sam Altman, Ario Amada, Sam Bankmin freed Elon Musk. But it it's interesting to see how some things evolve as we get into kind of the capitalistic side of this, right, and the business side of all of this. Yeah, So that's why I would draw a distinction between, as I say, like the purests, the people who are ideologically and kind of philosophically interested in prediction markets and how they can play a role in society, versus people who just want to make money by making better bets on the future than other people.

They're also betting on. What about mentioned markets and the things that get a lot of attention now, you know, remember when FED H. J. Powell was asked by that Harvard class a few months ago what he was going to say at the next FED meeting, And it was clearly a question to get him to, you know, help him with a prediction market.

What do they say about mentioned markets? I think most, even the staunchest defenders of prediction markets probably wouldn't say that mentioned markets have a real social utility. It is kind of the closest thing to gambling that you can have out there. Sure, there are some examples of mentioned markets where you can bet on, say, the words coming out of Jerome Powell's mouth, or if Trump is going to say, you know, tariff or Iran or ceasefire like.

Sure, you can argue that some of those mentioned markets might have some sort of broader social implication, but for the most part, it doesn't really matter. There are romantic prediction markets. Well, there's also things that maybe people wouldn't argue as romantic, but events occurring at certain conferences that I'm just going to say, you have to read Chris's piece to to understand what people at the conference were betting on, and it was it has to do with romance. I guess some could say yeah, or is correct?

Well, people could set up part of the fun of the conferences. They use this platform to set up their own prediction markets, guessing what's going to happen at the conference. I don't know if I'm allowed to talk. About this on the air, but well, you have five seconds ago.

They did set up a market where you could bet whether they would begin a Workie, yeah, I saw that part too. They could search on it too in the story and get right to that point. Bloomberg BusinessWeek senior writer Chris Beam a great read. Check it out.