Prediction markets allow anyone to bet on anything – from the death of a foreign country’s leader to most recently, the beginning of U.S. strikes on Iran.
Platforms, like Kalshi and Polymarket, make their money by taking a small cut of every transaction encouraging more action, contracts and bigger bets.
A Virginia Tech professor believes that these kind of investments appeal to people who are fascinated with the idea of being rich and the ability to “make money in your sleep.”
The truth, according to economist David Bieri, is that the platform owners are the ones that are actually getting rich, and there is no incentive to police insider trading.
“These platforms have seen large bets placed by newly-created accounts shortly before major geopolitical events, like the U.S. strikes on Iran and the arrest of Venezuelan President Nicolás Maduro, raising questions about whether traders may have acted on privileged information,” said Bieri, an associate professor in the School of Public and International Affairs and an associate professor of economics at Virginia Tech.
While investing used to be limited to high-level specialists, the use of smartphones and other technological advances have created a landscape that allows everyday Americans to tap into these markets.
“It’s part of the gamification and digitization of financial markets, which turn everything now,” said Bieri. “There’s been a reduction of friction for participating in risky things that could get you killed or lose your money if you do them underground.
“Now everyone can do them,” he said. “We’re at a unique junction where technology meets that mindset.”
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