Why I hate prediction markets (read: gambling)

I understand that gambling has been part of human history almost as long as drinking alcohol or discovering new and interesting ways to eat creatures and berries. But I have always seen it as a dark pit where people pour in money for a cheap hit, but end up disappointed or poorer 99% of the time. Gambling often parades itself as a legitimate and engaging way to interact with stories, but underneath that cloak lies the barbed dagger of self-sabotage and loss.

I also understand why prediction markets are growing in popularity. They have become a second-screen experience for sports fans, allowing people to interact with events as they happen. And sure, second-screen experiences have been a trend for a while, whether it's watching Netflix alongside scrolling on your phone or following other television programmes. But instead of chatting with friends, it’s to follow the odds as a person misses goals or chips in a sideways win.

This is fine for fantasy leagues, where users can bet on outcomes with no money at stake (well, except for a cheeky pint at the end of a season). But the problem is that prediction markets are essentially collective gambling forums, and a very risky form of it. There is a minimal centralised body defining the odds; the value of bets depends entirely on the supply and demand of users predicting particular outcomes. This is deeply concerning as the setup can lead to real harm as users wish to optimise their stake. For instance, a journalist in Israel was attacked online because of bets placed on missile events, with around $23m at stake. For a time, we could have bet on the likelihood of a war — which is obviously obscene.

Even worse, some prediction markets try to present themselves as a form of journalism. That is like comparing Michelangelo to a PowerPoint artist. It is blatantly a user acquisition strategy from prediction market companies. But the horrific comparison has the structural integrity of the rusting Titanic at the bottom of the ocean.

Supporters argue that prediction markets can sometimes anticipate certain events, because insider traders use these platforms to bet on outcomes. If bets about X rise, then X may be about to happen. For example, anonymous bets on Iran went up before the strikes, so anonymous gamblers won a lot of money.*

But the fact that insider trading is a “feature” highlights the core problem. Users rarely generate meaningful income unless they have some advantage or insight. This is very similar to cryptocurrency trading, where only a small number of people benefit, often through dark patterns in user acquisition. Insiders win, everyone else loses.

I know that prediction markets are part of a larger discourse on gambling in the UK, an old and common tale. In the UK, tax receipts from gambling continue to rise, although it remains a small percentage of the national GDP. The relationship between the government, tax receipts and the health of gambling is a long-fought and troublesome history. But to me, it clearly warrants either heavy regulation or a ban. UK betting stocks surged when the US saw sense and may regulate sports bets on prediction markets - and I hope the UK follows suit.

* Though unconfirmed at the time of writing, I agree with others that insider trading may have happened before the missiles launched.