{"text":[[{"start":7.18,"text":"In business, uncertainty is usually a liability. But some companies are turning it into a product. Online platforms, such as US-based Polymarket and Kalshi, which allow users to make wagers on all sorts of binary public events, are thriving. In just two years, punts placed per month — on topics ranging from whether US President Donald Trump will acquire Greenland before 2027, to whether Taylor Swift will announce she is pregnant before the end of March — are estimated to have ballooned 130 times to over $13bn. It is tempting to dismiss these activities as mere gambling, or as a symptom of a society that has pushed financialisation to its limits. But prediction markets could yet serve a useful financial function, with careful policing."}],[{"start":62.48,"text":"In theory, they harness the wisdom of crowds by forcing punters to put money behind their beliefs. In doing so, they can help to price risk in markets and provide investors and companies with unique opportunities to hedge against an array of events in real time. Their appeal for forecasting is particularly strong in an era of information overload and geopolitical upheaval. Polymarket, a crypto-based platform, for instance accurately predicted a decisive win for Trump in the run-up to the 2024 US election, while opinion polls portrayed a much tighter contest."}],[{"start":103.96,"text":"But prediction markets still have a long way to go if they are to become a trusted part of the financial infrastructure. For starters, the industry is plagued by issues of insider trading and manipulation. Hours before the US announced the exfiltration of Nicolás Maduro, an anonymous Polymarket user curiously bet that Venezuela’s president would fall. They made more than $400,000. Reasonably, some US lawmakers want to formalise constraints on platform use for officials, political appointees and executive branch employees."}],[{"start":140.74,"text":"The sector also needs coherent regulation. In the US, the Commodity Futures Trading Commission is its primary regulator. However, state gambling authorities argue that contracts tied to sports games are unlicensed bets and should be under their oversight. As for politics, a federal appeals court ruling in 2024 made bets on US elections legal, but internationally there are restrictions around making wagers on political events in general. Event contracts also need clear definitions and standards. For now, investors in platform providers have been emboldened by the Trump administration’s light-touch approach to financial regulation. But the patchwork of oversight leaves both operators and traders exposed."}],[{"start":193.14000000000001,"text":"A lack of liquidity is another limitation. While trading volume is growing, thin markets weaken price signals, facilitate manipulation and restrict hedging as major users cannot enter or exit positions without distorting prices. This undermines the platforms’ usefulness as a risk-management tool. Unsurprisingly, major trading companies are hiring quantitative analysts to arbitrage fleeting price discrepancies between contracts in prediction markets."}],[{"start":225.82000000000002,"text":"Still, it would be a mistake to write off prediction markets. Their greatest potential value lies in economic event contracts which can complement traditional finance, rather than whether a pop star is expecting or not. Bets on inflation releases, interest-rate decisions or specific policy outcomes could offer targeted price signals and bespoke hedges which may be harder to replicate through existing derivatives markets. But if they are to mature, the online platforms will need deeper liquidity. That will, in turn, require clearer regulation and credible enforcement. Unless that happens, they will continue to feel more like noisy casinos than reliable financial instruments."}],[{"start":280.05,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1769409687_8305.mp3"}