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We need liquidity. Only so many contracts will have it.
If you think about prediction markets, the opportunities for making predictions are endless. From sports, to stock & crypto prices, to elections, events, music, celebrity rumors, and so much more. To actually make this interesting to the institutions, to have the quants and high-frequency traders get involved, you need volume and liquidity. It’s only interesting if you can trade hundreds of millions or billions of dollars.
You will have tons of niches, with niche traders, with special skills and knowledge making great money. Expertise in small niches like Spotify music trends, or predictions on Golden Globes and other awards. These are your penny stocks and microcap equivalents. People make money trading penny stocks and small-cap stocks, but you don’t have a ton of institutional interest because you can’t put enough cash to work.
But then you have the mega caps, the big dogs, the $AMZN ( ▼ 1.51% ) $GOOG ( ▲ 0.02% ) $NVDA ( ▼ 0.65% ) type stocks. You will have this in prediction markets. On huge events like the Superbowl, or Jake Paul fights, or IPO’s like SpaceX, or the next US election. These will see tons of cash, tons of predictions, and if we have enough of these events and enough of these contracts trading, then we will see entire trading teams specialized in this. We will have intriguing data, analytics, ways to measure the risk, and build an optimized portfolio with hedges. This is where it gets interesting and why there is so much interest in being involved.
My prediction is that by the end of 2026, we will have prediction markets scaling with institutions having trading desks. It’s just a matter of time till we see a WSJ article about Citadel, Millennium, Point 72, and a dozen other hedge funds or quants hiring prediction market traders. We will see big winners in the niches, too. Chris Camillo, a close friend of mine, is the face of social arb investing. He has crushed it over the years investing based on TikTok and Google Trends data. You could argue Chris and his followers of DumbMoney.tv are the real winners with prediction markets, as they can predict how the next $LULU ( ▲ 0.5% ) quarter is going to go based on social trends. They will see the trends before Wall Street because they follow the data in their own way. It’s only a matter of time before Chris finds the next social arb opportunity, and instead of owning the stock or in addition to owning the stock, he and his followers own the prediction market as well.
2026 is shaping up to be exciting!
