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I am at the Next.io Summit today and Wednesday; reply here if you want to meet! Also Next did a prediction markets report which you can check out on the link.
I also emceed Monday’s event on emerging verticals, mostly about prediction markets:
On this week’s podcast, I spoke with Novig CEO Jacob Fortinsky about his plans to become a federally regulated exchange after the company raised $75 million.
Prediction markets roundup
Representatives Moore, Carbajal Introduce Bipartisan Bill to Regulate Prediction Markets (press release): Representatives Blake Moore (R-UT) and Salud Carbajal (D-CA) introduced bipartisan legislation to ensure event contracts can continue to serve legitimate business interests while protecting Americans from the safety and national security risks of dangerous or otherwise problematic event contracts.
Event contracts are longstanding financial instruments that many industries, particularly farmers, use to hedge against potential losses. In recent years, prediction markets have sponsored contracts related to topics that expose our country to national security, public safety, or insider trading risks by creating incentives for insiders to leak or profit from exclusive information, or for criminals to invest in contracts related to their own wrongdoing. The Event Contract Enforcement Act strengthens existing law to empower the Commodity Futures Trading Commission (CFTC) to prohibit the listing of contracts for sale related to terrorism, assassination, war, gaming (sports or athletic competitions), or illegal activity.
“Under-regulated prediction markets have exposed America to needless public safety and national security risks by allowing traders to invest in outcomes related to sensitive matters like terrorism, assassination, war, or elections,” Rep. Moore said. “Prediction markets also sponsor sports-related contracts against the wishes of many states, including Utah, that would otherwise prohibit these contracts if offered as traditional sports betting. I am excited to partner with my friend, Rep. Carbajal, on this nonpartisan issue to ensure event contracts can continue to serve legitimate business interests while protecting Americans from risk.”
“Under-regulated prediction markets are creating an environment ripe for insider trading. The monetization of military activities or election processes threatens our national security and further erodes public trust in government,” Rep. Carbajal said. “The Event Contract Enforcement Act is a strong first step toward protecting consumers and upholding ethical standards across all levels of government. I am committed to working across the aisle to bring transparency and accountability to this under-regulated sector.”
More coverage from InGame.
CFTC Chairman Michael S. Selig, Chairman: FIA Global Cleared Markets Conference (speech, CFTC web site; excerpts on prediction markets; emphasis added): In a similar fashion to the Constitution’s use of checks and balances to prevent overreach and tyranny, markets can be a check and balance against dishonesty and abuse, so I would like to take the opportunity to talk about prediction markets—or event contracts as we refer to them—and the role the agency plays in their regulation. A properly functioning financial market enables legitimate price discovery, ensuring transactions are fair and orderly.
The CFTC has regulated prediction markets for decades. The agency first recognized the University of Iowa’s political prediction markets through a no-action letter in 1992 that was then expanded into a full-fledged policy under the Clinton administration.
I would also remind folks that the CFTC’s authority over a broad definition of the term “commodity” has been upheld repeatedly in the federal courts. That is why the onslaught of lawsuits by states attempting to undermine our authority to regulate these markets is not going to work and, candidly, surprising.
These markets are comfortably within the CFTC’s regulatory authority. I do admit, however, that we need to make up for lost time as prior administrations ignored these critical markets.
As I suspect most of you are aware, the agency filed an amicus brief in a state-led lawsuit against one of our registrants a few weeks back. The CFTC has the responsibility to defend its exclusive jurisdiction over commodity derivatives. And we will continue to assess litigation strategies to make sure the agency’s voice is heard.
I am also pleased to announce that I have directed staff to draft guidance addressing how event contracts may be listed and traded consistent with the CFTC’s statutory framework. Market participants deserve clarity. And—once that clarity is provided—the CFTC will be an active and vigilant overseer of these markets.
While clarity is helpful, we must do more.
And in this spirit, I have asked staff to prepare an advanced notice of proposed rulemaking so that the agency can solicit critical feedback on important issues permeating throughout this market. Make no mistake—the CFTC is no longer going to sit idly while these markets develop within our framework.
The reality is that prediction market platforms are now viewed by the public as more accurate than political polls, which have been shown to be weighted against certain opponents, especially in the past 10-15 years.
This type of weaponized disinformation reminds us of earlier days in our country’s history, when newspapers published “yellow journalism,” or sensationalized, inaccurate reporting, to push unverified partisan claims that contributed to political instability and potentially pushed the country into foreign wars.
You must look no further than the 2024 presidential election when these prediction markets captured the scale of President Trump’s victory in ways that pollsters either could not capture or refused to capture.
When participants express views on future events—and back those views with capital—they create accountability, transparency and information. These markets, when properly regulated, are as valuable as any stock or commodity price movement.
An ever-increasing number of Americans are checking prediction markets to learn about everything from the projected amount of snowfall in their hometowns to the likelihood of a government shutdown.
They don’t trust the news media or so-called ‘experts’ anymore and are looking to social media, podcasts, and prediction markets for reliable information.
Markets that work well are truth machines.
Additionally, highly liquid prediction markets better inform Americans about the likelihood and underlying nature of political elections and global events.
Prices then aggregate dispersed information. Money disciplines those who take losing positions.
It’s my hope that, by marrying prediction markets with blockchains, we can see how decentralized trust and truth can act as a check on disinformation, outright falsity, and the threat of debanking.
💡My take: I’ll be interested to see the Trump administration’s takes on the utility of prediction markets when they point to less-than-stellar narratives for Republicans. For instance, Kalshi prices Democrats to take control of the House at 84%. Is that also a truth machine, or is it a truth machine only when convenient?
Cboe Introduces Innovative Prediction Markets Framework, Expanding Choice Beyond Yes-Or-No Outcomes (press release): Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, today announced its vision for a new and innovative prediction markets framework that aims to redefine how people engage with outcome-based trading. Drawing inspiration from concepts in the traditional options markets, Cboe’s new product suite will introduce a fresh approach that moves beyond the limitations of traditional binary event contracts.
Today’s event contracts only offer two binary outcomes: “yes or no,” “all or nothing.” Cboe’s prediction markets will introduce a third dimension – a new middle ground – enabling customers to engage with defined risk, while gaining the opportunity to earn a partial payout when they are directionally correct, even if the result is not precisely on their target.
Under Cboe’s new proprietary and patent-pending framework, customers could participate in contracts that deliver three potential payout outcomes: a $0 payout, a partial payout within a defined “payout zone,” or a full $100 payout. Cboe plans to offer this framework first through a Mini S&P 500 Index prediction market contract. This will allow traders to express their outlook on the U.S. equity market – such as where the S&P 500 Index (SPX) may close at the end of a trading day – by taking a traditional “yes” or “no” position, or by leveraging the added “payout zone” position to reduce potential losses and potentially benefit from being directionally correct without needing to make a perfect call.
“Our new prediction market contracts essentially take the mechanics of a traditional vertical spread – one of the most popular options strategies – and package them in an intuitive, accessible format for a broader audience,” said JJ Kinahan, Head of Retail Expansion and Alternative Investment Products at Cboe. “These contracts will offer greater flexibility and clearly defined risk compared to traditional event contracts, along with the opportunity to earn a partial return when traders are directionally correct. Real-world opinions aren’t always binary, and investors shouldn’t be confined to a yes-or-no framework. Our more nuanced model is designed to reward informed perspectives – giving retail traders credit even when they are mostly right – and introduce an entirely new way for people to engage with outcome-based trading that simply doesn’t exist today.”
Cboe plans to launch its first Mini-SPX prediction market contract in the second quarter of 2026. The product will use a traditional options wrapper to deliver fixed-return outcome and settle in cash, similar to standard index options. This securities-based product will be listed on Cboe Options Exchange and centrally cleared by OCC.
Updates in federal court cases, courtesy of attorney Dan Wallach:
Ohio: Kalshi lost its attempt to stop the state from enforcing its sports betting law in district court. More in Dan’s thread on Twitter.
Nevada:
Kalshi, Polymarket Take on Stock Options With S&P 500 Bets (Bloomberg): The classic way to bet on the direction of the S&P 500 Index is in the options market, buying puts or calls tied to a preset price. But now, there’s an alternative: placing a bet on Kalshi Inc. or Polymarket, using event contracts that allow rookie investors to make all-or-nothing wagers on stocks and indexes hitting a certain level.
Gen Z’s ‘Financial Nihilism’ Finds Outlet in Prediction Bets, Crypto (Bloomberg): “Many young adults who feel behind financially are looking to high-risk, speculative areas such as prediction markets, sports betting and crypto to reach financial goals faster, according to an annual Northwestern Mutual Planning & Progress study released Monday.”
More from the press release: Northwestern Mutual’s 18th annual Planning & Progress Study finds half of adults in America now saying they feel financially secure – an increase from 44% last year. Over half also consider themselves to be ‘disciplined’ financial planners. Even optimism around homeownership is on the rise.
But at the same time, a sizeable number of Americans – particularly young adults – are investing in or are considering investing in high-risk/speculative assets such as prediction markets, sports betting, and cryptocurrencies. Among those using or considering these financial instruments, 73% say they’re doing so because they feel financially behind and think those investments offer a faster path to their goals than traditional methods. And among Gen Z, the number is 80%.
These are some of the first findings from Northwestern Mutual’s newly released 2026 Planning & Progress Study, the company’s proprietary research series that explores Americans’ attitudes, behaviors, and perspectives across a broad set of issues impacting their long-term financial security.
Jay Clayton on regulating prediction markets: My prosecutors are looking at what laws we can use (CNBC, video): “Jay Clayton, U.S. Attorney for Southern District of New York and former SEC chair, joins ‘Squawk Box’ to discuss the violence outside New York City Mayor Zohran Mamdani’s residence, Anthropic’s battle with the Pentagon, the case against former Venezuela President Madura, regulating prediction markets, and more.”
How prediction markets are spawning an entire trading industry (NBC News, video):
That’s pretty interesting…: And that’s with almost no fees charged by Polymarket.
Recession odds jump on Kalshi after oil tops $100 (CNBC): “Prediction market bettors are increasingly expecting the U.S. economy to enter a recession this year as oil prices soar. Kalshi’s market for whether the U.S. goes into a recession in 2026 jumped above 34% on Monday — its highest level since November, according to data from the platform. Late last week, the market had a likelihood for that outcome at under 25%.
Precision-Guided Predictions: Intelligence Risk in Prediction Markets (Irregular Warfare): “What if an alarm in the presidential residence in Caracas didn’t come from a radar hit or a defecting general, but came from a smartphone? Imagine if the security detail for Nicolás Maduro was monitoring the prediction markets when suddenly they witnessed a vertical spike. The probability of Maduro’s “removal from power” on January 3rd surged from 7 percent to 38 percent in less than 120 minutes. There was no corresponding news, no force movements detected by the media, and no diplomatic shifts. But the market knew.”
PolyGun Acquires Polymarket Analytics in a Landmark Deal for the Prediction Market Industry (press release): PolyGun, the world's leading copy trading platform for prediction markets, today announced the acquisition of Polymarket Analytics, the number one data and intelligence platform in the global prediction market space. PolyGun has earned its reputation as the most powerful and intuitive copy trading tool in the space, enabling users to automatically mirror the trades of the best-performing Polymarket wallets in real time. Polymarket Analytics, meanwhile, has built the most comprehensive prediction market intelligence platform on the internet, cited by The Wall Street Journal and CoinDesk, powered by Goldsky, and supported directly by Polymarket.
I am sharing this mostly because I think the thumbnail is hilarious:
