Vitalik: 'Prediction markets have too much gambling-style betting' — a blunt critique

Uk Jin

Summary

Vitalik Buterin said he criticized today’s prediction markets for being confined to areas with low social information value, such as crypto-asset prices and sports.
He said he is concerned that the current prediction market structure is drawing in money from retail investors making poor judgments and increasing sensational short-term betting products.
Buterin said prediction markets should establish themselves as a long-term sustainable financial infrastructure that serves as a hedging tool and a socially meaningful risk-management tool.

Ethereum (ETH) founder Vitalik Buterin pointed out problems currently found in prediction markets.

On the 14th (Korea time), in a post on Farcaster, Buterin wrote, "So far, prediction markets have seen some success, but they are still used only within a limited range with low social information value, such as crypto-asset (cryptocurrency) prices and sports."

A prediction market refers to a market where people bet on whether a specific event will occur (elections, policies, price moves, etc.).

Buterin said, "Looking at how today’s prediction markets are structured, they are sucking in money from retail investors making poor judgments," adding that "this structure is leading to an increase in sensational, short-term betting products on platforms."

He went on to say that prediction markets need to grow into financial infrastructure that can serve as a 'hedging tool.'

"Prediction markets are not simply a structure that profits from someone’s wrong forecast; they can be a tool to reduce risk," he said. He added, "For prediction markets to become sustainable financial infrastructure over the long term, they must establish themselves not as short-term gambling-style bets but as socially meaningful risk-management tools," emphasizing that "we should be building the next generation of finance, not remaining stuck on sensational products."