From Bets to Bonds: How Prediction Markets Are Becoming Wall Street’s New Frontier

Prediction markets are rapidly transitioning from niche crypto platforms to mainstream financial infrastructure, attracting institutional capital even as regulators struggle to define them as innovation rather than gambling. A key conflict involves state versus federal oversight, exemplified by Massachusetts' lawsuit against Kalshi over NFL contracts, despite prior CFTC approval. Experts like Juan Pellicer argue for federal preemption to ensure clarity necessary for institutional adoption. Market health metrics are also debated; while weekly volume exceeds $2 billion, leaders like Rachel Lin suggest focusing on time-weighted open interest and net settled notional to reflect true risk transfer, moving beyond inflated volume figures. Valuations for major players like Kalshi and Polymarket are high, justified by rapid scaling and potential disruption to traditional derivatives markets. For these markets to become true financial utilities, experts agree they need institutional-grade governance, including volatility-adjusted margins and transparent disclosures, similar to options markets. Globally, while Europe's MiCA framework is ambiguous and some Asian nations ban them, jurisdictions like the UAE and Hong Kong are emerging as test beds, suggesting a future where collective foresight is monetized as a new asset class.

(Source：BeInCrypto)