Prediction markets are in desperate need of clear, coherent communication. The basics: What they are, who they are for and why they are needed.
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Instead, what too many people are seeing now, is a hydrant sheared off at the kerb, spraying water off in several, uncontrolled directions.
The same Brooklyn commuter might encounter one version of the prediction markets on a subway turnstile, another on CNBC, a third on their LinkedIn and the fourth while doomscrolling on TikTok. While different consumers need targeted messages, what’s happening now is leading to brand confusion.
Consider Kalshi and 28wishes, an ice cream shop in Downtown Los Angeles. Sales would fall 20% on cloudy and cool days, but with a $20 hedge, a grey day leads to a payout, offsetting the unsold cones and then some. On a cheery video posted on X, we hear that the brothers cover more than 40% of their rent with Kalshi. Kalshi’s website says it enables businesses to “turn an unplanned event into a planned cost.”
Here, we see futures and options brought to a wider audience. Whereas a similar idea might have been available to a specialist before, this requires no B-UNIT or large black monitor.
But then there’s Instagram, which is increasingly filled with videos for the same company. Here (at least on my algorithm) it’s a group of frat brothers or recent grads, sitting around a couch making money on “the big game”. This is clearly pitched at the DraftKings crowd, ready to put money on events.
Now, just after PREDICT, the first major institutional conference for the prediction markets, we see an entirely different message, one for institutions.
Is the company sober or rowdy, marginal or tilting? What of the live political trackers or winner’s odds sometimes replacing chyrons in live events? And contracts that involve absolute chance, like the number of syllables in a particular tweet released at a certain time?
Prediction markets face a conflict; in wanting to be everything to everyone, they risk annoying everyone.
This includes arguably their most important audience: the branches of government. Most of this action has been in the courts, where federal and state courts issue rulings almost daily.
Dissenting in the Third Circuit in April, Judge Roth described Kalshi's registration as a designated contract market and the branding of its wagers as sports-event contracts as acts of alchemy. She used the word branding in a ruling Kalshi won. In August, the Ninth Circuit held the contracts were not swaps because they were sports bets, and Nevada's attorney general's office later said sports betting does not become something else just because a company calls it an event contract. The Supreme Court may or may not settle this in its upcoming term. For now, uncertainty reigns.
Europe remains largely cut off, although important consultations could clarify which, if any, parts of the markets sophisticated retail traders could access.
Smarter minds than I (cough, cough, Matt Levine) are debating the correct taxonomy of the market structure involved, especially around liquidity pools and market making. From a brand-building perspective, however, I do think some consideration is warranted. This is because Kalshi, and its relative Polymarket, represent the single most disruptive market force of the last three years. Digital assets have been spreading for a decade, while extended trading hours largely promise more access to an existing product. These prediction markets, however, feel like something brand new.
They have elements of gambling and financial trading platforms, yet not really either. They lie in a gap that is, as of now, mostly unclaimed real estate.
A new market has to assemble its nouns before it can be regulated, sold or defended, and the assembly normally happens outside of the main conference stage. Michael Milken renamed junk bonds high yield over lunches. The swaps market acquired its vocabulary across a decade of detailed documentation.
The ecosystem growing around these markets is far, far more than just two companies. There are smaller players, ones explicitly focused on liquidity. Some try to get right at the market. Others are discovery.
Then you have the partnerships and initiatives from existing players. Institutions that would never say they are “gambling” are rushing into the market. Cantor opened institutional block trading on Kalshi in August, Susquehanna is pricing, the Weather Company supplies settlement data, and Kentucky and Wisconsin have named distribution partners in their suits alongside the platforms.
One instinct for people aiming at the more institutional side of the market would be to wait. Let the courts sort it out, while the structured products and weather derivatives providers wait on the sidelines. That instinct is expensive. There won’t be some sort of completely new race once a ‘final’ or ‘stable’ regime comes into place – just look at the digital assets markets in Europe. If all of the smart people decide to sit on their hands for a year or two, they may find the mature, stable market they expect never actually crystallises. Complete silence is tantamount to capitulation. Well-capitalised markets are making a play for volume, racing to reach scale.
Deepen the hedging narrative. Somebody at Kalshi is writing copy that the people writing the briefs have not read, at a firm whose entire legal position rests on the difference between the two vocabularies. The hedging page itself opens on the Knicks, the USA's World Cup margin and a mattress retailer covering a refund promotion tied to the winners of Love Island. Promotional-liability hedging is a real and old use case. It is still a page led by basketball and a dating show, published in the same season the CFTC wrote to prediction markets warning them against resembling sportsbooks.
Be ready to offer praise when it is due as well. Weather risk has been transferred for thirty years through insurers, CME contracts and bilateral structures. In all that time, the industry has not produced a paragraph as clear as the one about the two brothers. Perhaps basis risk, the tenor and the absence of indemnity were never the point; that fine print obfuscated and scared off a genuine audience. The rise of cheap, widely available ETFs shows that far more people were willing to make active bets with their investments than was assumed a decade ago.
For those who have the professional latitude to be bold, be bold. Strike at the major debates beneath this market. What's a new instrument here, and what is new money? What’s the implied premium imposed by limited access to retail products? How does this relate to other trends and broadening access in retail trading?
Start there, and you’ll have the attention of the growing number of people who care about these things.