I promised to come back with one more thought from Next Summit, this time on prediction markets. The conference gave them a dedicated panel, and right at the start it announced a separate NEXTPredict conference in New York. There is a lot of money around: Kalshi is valued at 22 billion dollars, Polymarket is raising a round at a 15 billion dollar valuation, you all know this.
Here is my forecast for prediction markets. The PM peak is the FIFA World Cup in the US, and right after it stagnation and a pullback will begin. Why?
First. PMs sell themselves as fintech, but by their economics they are an ordinary betting exchange. Which means they live by the same laws as poker rooms and Betfair: profit is created not by forecasting accuracy but by a constant inflow of fish money that the sharks eat. Hence the predictable life cycle: hype, an inflow of fresh money, saturation, measures against pros, optionally a regulatory hit, decline. Tim Heath of Yolo Group said straight from the stage that only around 1.5% are in the green on Kalshi. By other data from Google, around 74% of Kalshi traders are in the red, and on Polymarket 0.1% of accounts took two thirds of all the profit. A bot does close to 100 trades a day, an ordinary person 2-3. The casual thinks he is playing against a crowd just like him, while across from him sit market makers, bots and insiders. The World Cup will bring the largest inflow of newcomers in PM history, and they are exactly the ones who will be eaten first. That is how it went in poker, that is how it went with the Betfair Premium Charge. As soon as pros start to dominate, the fish stop coming in, turnover falls, and the venue either fines the pros, losing its fair-market narrative, or dies.
Second. Regulation and lobbying. PM market cap can fold over a single tweet. A ban on sports wagering, lobbying by classic casinos that are losing share to them. The analogy with Black Friday in poker could not be more obvious. Lawsuits are running right now, and the main target is sports betting, while sports is the largest part of turnover. A hit to it right after the World Cup could be the catalyst.
Third. Even the top names on the stage of a tier-1 gambling conference could not explain how a PM is fundamentally different from the old betting exchanges. If they themselves put an equals sign with Betfair, which is already 25 years old, then the ceiling is known in advance. Betfair, in its time, did not eat the bookmakers but stayed a niche for pros, while the mass player went to ordinary betting for a simple interface and live betting. It is an events exchange, and the claims about a tech unicorn are just part of a marketing strategy.
The model of expanding into other geos is weaker, since they already have a formed iGaming landscape and their own regulatory complications and bans, bans, bans.
If you could leave a forecast on the prediction markets crashing, I would do it.