Not Speculation but Necessity: The Four Unique Values of Prediction Markets
- Core View: Prediction markets are not merely gambling platforms. Their core value lies in betting on event outcomes, providing participants with multiple unique functions such as entertainment consumption, limited insurance, risk hedging, and truth revelation, demonstrating immense development potential.
- Key Elements:
- Market Size and Growth: Polymarket completed a $4 billion financing round, reaching a valuation of $15 billion; the nominal trading volume of prediction markets reached $25.7 billion in March 2026, a month-on-month increase of 10.6%, showing strong growth momentum.
- Entertainment Consumption Attribute: The act of betting in prediction markets is itself a form of mental consumption, stimulating user interest and spending in areas like sports events, similar to the derivative economic model of the sports industry (worth approximately $1 trillion).
- Limited Insurance Value: Prediction markets can serve as a "new form of insurance," providing cost-certain, settlement-transparent risk coverage for specific events like hurricanes, bypassing the complex claims and operational processes of traditional insurance.
- Risk Hedging Tool: Institutions (e.g., Citadel Securities) value the hedging utility of prediction markets in events like geopolitics. Investors can hedge risks related to commodity price fluctuations, election outcomes, etc., by holding "NO" shares.
- Truth Revelation Potential: Prediction markets price information through incentive-driven mechanisms, with the potential to become a "truth machine" in the future, countering information distortion caused by bias or agenda-setting in traditional media.
Original｜Odaily (@OdailyChina)
Author｜Wenser (@wenser 2010 )
Recently, Polymarket completed a $400 million funding round, with its valuation rising to $15 billion. According to statistics, the nominal trading volume of prediction markets reached $25.7 billion in March 2026, a 10.6% increase from $23.2 billion in February 2026; while in October last year, this figure was only $8.7 billion. While the broader crypto market fluctuates with macroeconomic conditions and regional conflicts, prediction markets have become the most dazzling sector in the crypto space. As prediction market trading volume continues to grow rapidly, combined with Odaily's previous article "Why Prediction Markets Are Truly Not Gambling Platforms", perhaps it's time to discuss the unique value of prediction markets to set the record straight.
The Unique Value of Prediction Markets: Entertainment Consumption, Insurance Value, Risk Hedging, and Truth Machine
What inspired the author to view prediction markets from the perspective of "non-gambling value" was a post titled "Most People's Misunderstandings About Prediction Markets" published yesterday by Bitwise advisor Jeff Park.
In this lengthy post of several thousand words, Jeff Park pointed out the similarities and differences between prediction markets, stock selection, and poker games, and gave positive affirmation to the entertainment consumption attributes, financial innovation attributes, and precise information attributes of prediction markets.
If the article "Why Prediction Markets Are Truly Not Gambling Platforms" provided a detailed comparative analysis of prediction markets and gambling platforms from the perspectives of price mechanisms, usage differences, user structure, and regulatory logic, then what we aim to clarify today with this article is their diverse value.
Entertainment Consumption Stimulates Economic Development
In "The Theory of the Leisure Class," American economist Thorstein Veblen argued that the essence of the leisure class is not simply enjoying leisure, but using freedom from labor and the squandering of wealth as a symbolic system to gain prestige. The so-called alienation of humans by capitalism through money is precisely accomplished through various forms of consumption.
Yet today, the value of consumption is also evident.
In a modern society with clear divisions of labor, consumption is a necessary process of value exchange, and entertainment itself is a form of economic consumption and one of the life pursuits that distinguishes humans from machines. Taking the sports industry alone, its overall industry output value is on the scale of $1 trillion; taking the sports brand NIKE as an example, on one hand, they earn profits by controlling the supply chain, manufacturing goods, and completing sales; on the other hand, they in turn shape the sports industry through sponsoring teams, endorsements, and sports events. Based on the actual performance of various sports events and athletes in reality, betting in prediction markets is also a form of entertainment that stimulates mental consumption, and this in turn influences prediction market users and even the general public's attention to sports events, consumption of sports brands, and spending on mental entertainment.
Limited Insurance Protects Personal Interests
As Jeff Park proposed in his article "Most People's Misunderstandings About Prediction Markets": "The value of derivatives lies in allowing risk transfer, which means speculators are on the side of insurance institutions (Odaily note: i.e., the insured transfers uncertain risk to risk-bearing speculators in exchange for a certain cost). But the reality is that government intervention distorts the true market price for insurance holders, leading to insurance default behavior. Without government intervention, there is no other way to achieve risk transfer in a transparent and open market."
In this regard, the two major advantages of prediction markets over conventional derivatives become prominent: first, the event precision of prediction markets; second, the finite duration of prediction markets. The former means a prediction market is a binary, well-defined proposition with no room for ambiguous loss estimation, and settlement conditions are completely transparent and verifiable; the latter clarifies that the outcome of a prediction market is not an artificially set contract deadline.
Furthermore, as SIG founder (Kalshi's official market maker institution) Jeff Yass mentioned in a previous interview, "To some extent, prediction markets play the role of a 'new type of insurance.' In hurricane-prone Florida where there are insurance price caps, users can completely use bets on events like 'Will wind speed in this area exceed 80 mph?' in the region's weather markets on prediction platforms for reverse insurance. This channel also eliminates complex processes like claims, operations, and marketing costs found in traditional insurance."
In summary, prediction markets can provide participants with clear-cost, fact-following protection value for well-defined betting events.
Risk Hedging Addresses Event Crises
Not long ago, Kalshi announced the official launch of a 24/7 commodity market, offering price prediction services for commodities including crude oil, diesel, gold, silver, copper, lithium, natural gas, sugar, soybeans, wheat, corn, coffee, cocoa, live cattle, and more.
Citadel Securities President Jim Esposito also stated at the recent Semafor World Economic Forum in Washington that the company might provide liquidity for prediction markets, but compared to sports events, they place greater value on the role of prediction markets in hedging geopolitical risks. Using the US midterm elections in November this year as an example, he called the event "one of the biggest risks facing investors' portfolios," and stated that prediction markets would become a new tool for institutions to hedge risks.
From this perspective, investors can achieve risk hedging by holding "NO" related positions in events on prediction markets, enabling more flexible responses to risks such as price fluctuations of various commodities and changes in the economic landscape. Considering the surge in trading volume in the political situation sector since the US-Iran conflict began on February 28th, prediction markets have already begun to serve as risk hedging tools for individuals and institutions.
Truth Revelation Counters Media Bias
Beyond the above values, from an information pricing perspective, the role of prediction markets in countering agenda-setting and media bias in mass media cannot be ignored.
American writer and media editor Ashley Rindsberg, in his book "The Gray Lady Winks: How the New York Times's Misreporting, Distortions, and Fabrications Radically Alter History," detailed the negative impact of The New York Times in numerous historical events, listing many institutional failures over recent decades, including the suppression of Stalin's famine by Cuban Duranty, Castro's sudden rise, Iraq's weapons of mass destruction, and the systematic softening of Hitler's rise. In these historical events, The New York Times, due to information channels, ideology, and institutional self-protection, blurred the pursuit of truth about the events, ultimately leading to a series of negative consequences.
Although the judgment rules for many events in prediction markets still heavily rely on media, with the development of industry platforms, the acceleration of information transmission speed, and the expansion of the dissemination breadth of event contracts, prediction markets are expected to become a true truth machine to counter a series of biases arising from media due to personal preferences of staff, workflow, ideology, and platform interests.
Previously, Crypto.com COO Ericnode remarked, Prediction markets could become a trillion-dollar market, and because users have a vested interest, their accuracy can be 30% higher than surveys.
In the near future, the roles prediction markets play, the functions they serve, and the value they can realize are far greater than we have previously imagined.
Recommended Reading:
Most People's Misunderstandings About Prediction Markets
