Ask three people what a prediction market is and expect three answers: a sophisticated gambling platform, an opinion platform, or a crowd-intelligence engine—depending on how much vested interest they have in the industry. After months of conversations with users, founders, investors, and sceptics, I’ve heard all three.
To the uninitiated, prediction markets are platforms where users back a “yes” or “no” position on whether an event will happen, with the market price reflecting how likely participants think that outcome is. In effect, people with domain knowledge can put a price on their conviction.
My strongest case for prediction markets starts with what they were originally built to do: turn dispersed knowledge into a signal. The Iowa Electronic Markets, a University of Iowa research project launched for the 1988 US elections and one of the earliest examples of prediction markets, tested whether people putting money behind their beliefs could forecast better than traditional polling. It worked. A 2008 study from the university’s researchers compared the market with 964 national polls across five presidential elections and found it closer to the final result 74% of the time.
However, modern prediction markets have since undergone several iterations, evolving into platforms like Polymarket and Kalshi that trade contracts on everything from elections to inflation to sports. In recent years, sports contracts have come to dominate trading volume on Kalshi and Polymarket, while politics accounts for a smaller but still significant share, according to the Pew Research Centre.
Originally published by TechCabal.