Are Prediction Markets Really Changing Betting?

Prediction Markets Require Us To Think Like Sharp Bettors

Prediction markets probably aren’t reinventing the betting wheel, so much as highlighting how to do betting ‘right’. Sharp bettors have always thought in terms of probability, rather than winners. It’s not about who will win the football match; it’s about whether the current market price accurately reflects the probability.

Prediction markets do exactly the same.

They ask you to look at the probability of a scenario happening and determine whether you think the price reflects it. They use information like volume indicators, liquidity data, percentages - just like good sports bettors do ^[1]. The difference is that prediction markets make this look like finance, rather than gambling.

The Language Shift

The biggest difference, for me, is the language shift. Customers on trading platforms are ‘taking a position on political sentiment’. Customers on betting platforms are ‘taking a punt on the election result’. Yet the behaviour is more or less the same.

The language we use to describe things is enormously important. Bookmakers use language to make sports betting feel accessible, or even entertainment-led. Things like accas and odds boosts sound inviting and maybe even exciting.

The people behind the language choice on prediction market platforms are leaning the other way. They use terms like market depth, pricing inefficiency, and volume to make the markets feel more analytical or, dare I say it, more intelligent than they actually are.

Both operators are advertising a similar thing, but in a totally different way. Losing money ‘pricing probabilities’ might feel intellectually serious in a way that ‘losing an acca’ might not. But the financial risk is just the same.

Cleaner, Cleverer Interfaces

Prediction markets encourage probabilistic thinking, so portraying them as more intelligent might seem fair. But prediction markets are not automatically more informed than mature betting markets. In fact, most major sports markets are extraordinarily data-rich environments.

Premier League football, horse racing, and elite tennis markets contain huge volumes of historical data, professional modelling, public information, and market liquidity. Prices move within highly developed ecosystems that are shaped by syndicates, traders, bookmakers, exchanges, and years of pricing history.

Some prediction markets operate in much the same way, but most prediction markets actually work in much thinner informational environments. If you’re pricing political rumours or celebrity controversies, there’s not a whole lot of professional modelling you can do. You’re relying on sentiment and incomplete information - so why do many of us feel prediction markets are automatically more intelligent? 

The Aesthetics Of Finance

Prediction markets tend to look different from betting sites. They seem more financially aesthetic. They might look cleaner or more analytical, and the public seems to have an appetite for that.

A sharper interface and more sophisticated language can make a market seem more reliable than it really is. But that’s not to say prediction markets are shallow or meaningless. They can provide a fascinating insight into crowd psychology and public perception. Though they’re just as susceptible to herd behaviour, emotional trading, and overconfidence as gambling markets are. 

Legally, Prediction Markets Are Gambling Products

Whenever a new betting product enters the market, it’s up to the UK Gambling Commission to decide where it belongs and how it should be regulated. Prediction markets have yet to ‘hit’ the UK market in nearly the same way as has happened in the US. However, ahead of the curve, the UKGC published some thoughts on the product earlier this year ^[2].

It’s clear from this blog alone that the UKGC believes prediction markets will fall within existing gambling regulation, most likely as betting intermediary products (the same category as betting exchanges, like Betfair).