The prediction market bubble is here - and the Super Bowl proves it

"Prediction markets are everywhere right now. The Golden Globes! The Oscars! The airwaves! For the Super Bowl, people can use prediction markets not only to wager on the outcome of the big game but also on which commercials will run and what song Bad Bunny will play first. Sportsbooks, media companies, and even traditional investment entities seem to want to get in on prediction market action. The enthusiasm makes sense given how industry boosters talk about these markets."

"But the rhetoric and the reality still don't line up. There's a lot of chatter about big institutions using prediction markets as hedges for everything from inflation to elections to the weather, but the amount of money flowing through platforms such as Kalshi and Polymarket is tiny compared to the stock market or even crypto. While that makes sense given their relatively new entry into the US, even in countries where betting exchanges have existed for years, they're largely a niche product."

"The result: a fragile "boom." Prediction markets are having a moment, not because they've solved forecasting or finance, but thanks to a legal workaround and a deluge of marketing money. That combination has fueled rapid growth and breathless valuations, but it's built on a narrow, unstable foundation that could crumble once regulations catch up or if bettors decide the value proposition is less compelling than advertised."

Prediction markets have proliferated across entertainment and sports events, enabling wagers on awards shows, Super Bowl outcomes, commercials, and musical choices. Sportsbooks, media firms, and investment entities have shown interest, framing betting on diverse outcomes as a new financial frontier. Despite marketing-fueled growth and high valuations, trading volumes on platforms like Kalshi and Polymarket remain tiny compared with stock markets and crypto. Betting exchange models remain niche even in long-established jurisdictions. Regulatory anomalies have allowed prediction platforms to offer sports wagers where traditional sportsbooks cannot, producing a fragile boom reliant on legal workarounds and heavy marketing that could unravel with stricter rules or changing bettor preferences.

Read at Business Insider