What sport scandals can teach us about legalizing prediction markets

What are prediction markets?

Prediction markets are platforms where participants place bets on the outcomes of future events. These events can include anything from election outcomes and economic trends to sports games and even natural disasters.

Here’s a simple example: imagine a prediction market for an upcoming presidential election. Bettors place money on the candidate they think will win. If many people believe Candidate A will win, more money flows towards Candidate A, increasing the price (or odds) of bets in their favor. Similar to horse racing, these odds shift in real-time, reflecting the collective beliefs of all the bettors. As the event approaches, these odds ideally provide accurate, aggregated predictions because participants have a financial incentive to be correct.

This collective forecasting can help individuals, businesses, and even governments make better decisions.

At least, that's the idea.