Power and Consequences Episode 5: Prediction Markets
Mar 30, 2026
They debate how prediction markets work and whether regulators should step in. They unpack controversies over event contracts on geopolitics and the ethics of betting on real-world harm. They trace the history of betting, market integrity risks like insider trading and match-fixing, and how crypto platforms revive old policy dilemmas. They close with reflections on consumer protection and the role of regulation.
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Prediction Markets Can Target Real-World Regimes
- Prediction markets let people bet on virtually any event, from regime survival to precise military actions.
- Gary Gensler and Simon Johnson highlight high-profile Iran and Venezuela contracts that sparked lawsuits and ethical concerns about betting on political outcomes.
How Early US Futures Rules Were Shaped By Anti‑Gambling Sentiment
- Historical resistance to gambling shaped early U.S. futures regulation, limiting tradable items to an enumerated list to protect farmers and public morals.
- Gary recounts 1920s–30s compromises creating Commodity Exchange Authority and later debates balancing hedgers and speculators.
Why Prediction Markets Claim Public Value
- Two intellectual defenses drive prediction markets: Hayekian price discovery and Galtonian wisdom of crowds.
- Simon explains markets aggregate dispersed information while Gary notes capital markets already price collective opinions on risk.
