When Brian Armstrong, CEO of crypto trading firm Coinbase, released last year’s third quarter report, he concluded in a seemingly strange way: “I just want to add the words Bitcoin, Ethereum, Blockchain, Staking and Web 3 here to make sure we understand them before the conversation ends.”
The reason for this was that he had noticed that people on the Polymarket and Kalshi prediction markets had speculated that these words would be mentioned. In total, users are said to have bet a total of $84,000 on this very slim thing.
– This is part of a kind of consumer culture where you can turn almost anything into an asset to speculate on. “It’s a very interesting area that of course also attracts attention when it comes to people like Peter Thiel and Donald Trump Jr.,” says Mattias Hjelm, who conducts research at the Research Center for Market Philosophy at the School of Economics.
Beyond Polymarket and Kalshi There are many gamers who want to take advantage of the gaming-hungry part of humanity. Speaking of the Trump family, there have long been plans to launch its own prediction market called Truth Predict.
To explain prediction markets, many have drawn parallels to other phenomena in recent years. Think, for example, of the small saver speculation in the games chain Gamestop shares, which shook the entire stock market in 2021, or of NFT – a crypto technology that creates proof of ownership for digital works.
– It’s about betting against the market, but not in the more traditional or rational way. It feels like this new thing is about the same culture and kind of fun. Instead of trading stocks, you might bet money that the artist Bad Bunny will do this or that during his concert, says Mattias Hjelm.
But there is also those who noticed a relatively stark market where people are literally betting money on the life and death of others. For example, at the time of writing, $217 million had been bet on whether the United States would attack Iran on February 13th or 20th, and in January someone had bet $32,537 on the arrest of former Venezuelan President Nicolás Maduro, making the gambler $436,000 richer.
– It differs from ordinary bets in several ways, including that some kind of fee is charged for each bet and the money, in turn, appears to go to those who have contributed capital to the company’s liquidity. You don’t bet against the “house”, but against other users, says Mattias Hjelm.
– A special feature is that there are bets on about two levels. For example, I saw a bet that Jesus would be resurrected before 2027, and in that bet someone was betting on whether the percentage of yes votes on the Jesus bet would exceed 5 percent.
The fact that everyone acts This is what is happening with cryptocurrencies and the fact that anyone can start betting on anything raises questions about both ecocrime and market manipulation. Less calculated people could arrange bets where they can control the outcome, as has been the case in the past with match-fixing in sports, for example, and in several parts of the world prediction markets are wholly or partially closed.
– It is clear that there are great opportunities for manipulation, and it is also clear that new technologies open, to put it mildly, gray markets where one does not know what is allowed and what is not. It’s a bit of a mixed bag and doesn’t really seem to fall under the legislation for either betting or stock trading, says Mattias Hjelm.
