Why Investors Are Placing Bets on Wildfires, Wars, and Elections
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Wednesday, February 5th. I'm Arianna Aspuru for The Wall Street Journal. The platforms that let users bet millions on the outcome of the 2024 election are offering contracts based on major events like the Los Angeles wildfires. Prediction markets are now testing the limits of what they can get away with.
How did prediction markets spike during the 2024 presidential election?
day will offer you a chance to bet on economic policies. Is the Fed going to cut interest rates? Or who is Trump going to appoint to such and such a cabinet position? Will that person get confirmed by the Senate? There is also pop culture markets.
Which platforms led the surge in election betting volume and why?
For instance, you can bet on the Oscars.
We'll talk with Wall Street Journal reporter Alexander Osipovich about what you should know before placing a bet after the break.
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The line between sports betting and financial markets is becoming increasingly blurred with the growth of prediction markets. Wall Street Journal reporter Alexander Osipovich joins me. Alexander, prediction markets have surged in popularity last year with the presidential election, but just how popular were they?
They're still much smaller than general trading in the stock or options market, but they are growing.
How do prediction markets differ from traditional sports betting and gambling?
They have a tendency to get a lot of attention during elections. In particular, there's this one big offshore crypto-based prediction market platform called PolyMarket that was doing billions of dollars in monthly volume during the election. In the month of November, it was more than $2.5 billion. And that's a lot of turnover. We had a very unique election where President Biden dropped out. and then turned into this horse race with Kamala Harris and Donald Trump. Generally speaking, if you follow the mainstream media, they were referencing the odds on polymarket. And later on, after Kalshi, a U.S.-based platform, started election betting, that got some press attention as well, which offers a lot of bets in a sort of like a polymarket light, isn't quite as aggressive about some of the contracts it lists.
And it just became a bigger part of the public conversation.
What makes prediction markets different from something like sports betting on FanDuel?
Prediction markets are federally regulated and they're accessible in all 50 states, whereas traditional gambling is regulated at the state level. And there is still a number of states, the number has shrunk over the years, that ban online betting and you can't bet on the Super Bowl in those states.
What are these bets offering now to keep people engaged?
So all these prediction market platforms do a bunch of other things besides elections. They will offer you a chance to bet on economic policies. Is the Fed going to cut interest rates? Or who is Trump going to appoint to such and such a cabinet position? Will that person get confirmed? by the Senate. There is also pop culture markets.
What kinds of contracts are platforms offering beyond elections (economic, cabinet picks, Oscars)?
For instance, you can bet on the Oscars. There's also interest in sports. For a very long time, the prediction markets that were allowed to serve U.S. customers did not offer any kind of sports trades because it was seen as being illegal.
We've also seen things that seem like they're right out of the headline that you can bet on.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:00–0:56
2
How did prediction markets spike during the 2024 presidential election?
0:56–1:12
3
Which platforms led the surge in election betting volume and why?
1:12–2:37
4
How do prediction markets differ from traditional sports betting and gambling?
2:37–4:14
5
What kinds of contracts are platforms offering beyond elections (economic, cabinet picks, Oscars)?
4:14–5:25
6
Which controversial headline-driven markets provoked public backlash (wildfires, wars)?
5:25–7:59
7
How do prediction market mechanics and pricing translate to implied probabilities?
7:59–8:34
Speakers
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