The forecast for prediction markets
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What is the main topic discussed in this episode?
Pushkin.
What are prediction markets and which events can people bet on?
Prediction markets let you bet on pretty much anything. You can bet on sport and politics, both things that Brits have been used to for years, but that Americans have gone absolutely bonkers for more recently. Not sure how healthy that is. But anyway, those clever young things in Silicon Valley think we should be betting on everything. Every life event is something that you can bet on. One thing that's becoming increasingly popular is betting on markets, financial markets. So will the US raise interest rates? Will the UK? What will the euro be doing in the next few days? Will it be up or down against the dollar? At a certain point, this starts to look and smell a lot like mainstream wholesale derivative markets.
So today on the show, is this a disaster waiting to happen or actually a useful way for investors to gauge the mood? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist in London. And by the time you hear this, I'll be relaxing on a sun lounger in Greece.
Hooray!
Joining me from New York City is the big man, Rob Armstrong, off of the Unhedged newsletter. Rob, like the US has gone kind of gambling crazy, right? Like sports betting is quite new for you guys, isn't it?
It is. I was shocked when I moved to the UK and there were betting shops on every street. Whereas in America, there's like one dreary place that you were allowed to bet on horse racing in every city. They called these things off track betting. And it was like 80 year old men chain smoking cigarettes and losing money. But it's a different story now. And everybody can do it from their phone. And you watch any sporting event and half the ads seem to be for sports betting products. As a sports fan, I think this is a complete disaster and I don't approve of it.
No, but it sounds like so when was it permitted over that? This is something that's quite recent in the past couple of years, isn't it? It does sound like the Americans have jumped in with both feet. There's a lot of people with sports gambling problems all of a sudden that weren't there before.
Yeah, I think that is all true. And, you know, I don't I don't claim not to be a hypocrite on this topic. You can't be interested in finance financially. like you and I are, without having some admiration for the principle of settling a disagreement about what the world is going to do by putting some money on it. You think you're right and the rest of the world is wrong? You have two options. You can gas on about it until everybody throws you out of the house, or you can put some money down and see who's right and who's wrong. And so I think betting... in the broadest sense, is a really good way to clarify your thoughts.
There are some like bad things that come from this.
Very bad things. Yeah, no question.
So these prediction markets allow you to bet on things like wars. And to me, that's like uncool. You shouldn't be betting on wars. And then there was that whole thing recently where some people have bet on one of these prediction markets that the U.S. was going to invade Venezuela. Yes. And then it became this whole dispute because it was like, well, did the U.S. invade or not invade? What is an invasion really? Does it require boots on the ground? How many boots on the ground actually counts as an actual invasion? So a bunch of people who had bet on the U.S. invading Venezuela were cross that they didn't get paid out by one of the big betting platforms.
It was just a kidnapping, not an invasion. Yeah.
So to me, some of this is like deeply nihilistic and awful. The other thing that I think is deeply nihilistic and awful is that apparently some betting platforms are at least considering allowing you to bet on wildfires. So will Rob Armstrong's house catch fire, for example? Yes.
What does that incentivize people to do? Right. Right. And so it is bad to bet on a war. It's really bad to bet on a war if you're one of the people participating in it and you have information other people don't have.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:06–0:09
2
What are prediction markets and which events can people bet on?
0:09–6:48
3
How has US sports betting changed recently and why does it worry commentators?
6:48–15:21
4
What ethical problems arise from betting on wars and natural disasters?
15:21–18:11