Prediction about prediction markets

Among regulators, the hot topic in blockchains at the moment is prediction markets (or "event contracts" in government-speak).

Why it matters: It looks like a billion dollars will probably get bet on a variety of ways of looking at the U.S. election on the leading prediction market this year.

• Polymarket's terms of service prohibit Americans from using the site, but there's not much money being bet on any other country's elections.

Driving the news: The CFTC just completed public comment on a draft rule that it proposed, which would ban betting on elections (among other things).

• It's something of a hot-button issue (for electeds and investors).

The other side: An essay published in May comes at it another way. The authors, Works in Progress editor Nick Whitaker and Oxford doctoral candidate J. Zachary Mazlish, point out that events-based markets are legal — with restrictions — and already regulated. But they've never really seemed to take off.

• In their view, most normal people just don't like the all-or-nothing risk.
• For people who really like gambling, the markets take too long. The typical gambler wants a resolution quickly. (If you look around Polymarket, what's noteworthy is all the longer-term markets you don't see.)

Friction point: Finally, the other group that loves gambling are the sharps — folks who have an actual edge on some topic. But there's not enough dumb money in the markets for them to bet against.

• Sharps just playing against other sharps? They know better.

The bottom line: It may be that prediction markets simply never get popular enough to actually matter.