Informational Purposes: Prediction Markets as Data

Prediction markets are not just for betting. They are increasingly used as real-time forecasting tools, cited by broadcasters, analysts, and political campaigns. As we detail in our full review of the Prediction Markets presentation, Luke Lango identifies this informational utility as one of five structural forces driving prediction market growth.

Prediction Markets as Forecasting Engines

When CNN or Fox references “the markets” on election night, they are increasingly citing prediction market data rather than traditional polls. The prices of shares in prediction markets reflect the collective wisdom of participants who have real money at stake. This often produces more accurate forecasts than opinion polls, because people who are willing to bet real money on an outcome tend to be better informed than people answering a phone survey.

The informational value of prediction markets creates a positive feedback loop. The more accurate prediction market forecasts prove to be, the more attention they receive from broadcasters and analysts. The more attention they receive, the more users they attract. The more users they attract, the more liquid and accurate the markets become. For more on the structural forces, see our article on prediction market investing.

The Broader Market Growth

Lango cites estimates suggesting the prediction market could grow from $64 billion today to $1 trillion by 2030. Trading volume is up 400 percent in recent quarters, according to Pew Research data. The informational utility of prediction markets is one reason for this growth. When prediction markets become a recognized data source, their credibility and adoption increase.

The 2024 Kalshi court victory against the CFTC established legal clarity for prediction markets in the United States. This regulatory milestone, combined with the informational utility, a better product than traditional gambling, institutional interest from Goldman Sachs, and an economic stress parallel to the 1970s, creates a structural case for sustained growth. For more on Kalshi, see our article on what is the Kalshi app.

The Infrastructure Investment Approach

Lango’s thesis is that you profit from prediction markets by investing in the infrastructure companies, not by placing bets. The informational utility of prediction markets makes the infrastructure investment thesis stronger because it means the category has value beyond pure speculation. Prediction markets serve a genuine purpose as forecasting tools, which gives them staying power.

Robinhood (HOOD) has partnered with Susquehanna to offer prediction markets to its 27 million users at $0.01 per contract. Coinbase (COIN) owns the crypto infrastructure that Polymarket depends on. Both are publicly traded stocks available through any brokerage. For more, see our article on prediction market stocks.

Why Informational Utility Matters for Investors

The informational utility of prediction markets matters for investors because it provides a non-speculative use case. If prediction markets were only used for betting, their long-term growth potential would be limited to the gambling market. But because they serve as forecasting tools, they have utility for media, research, political campaigns, and financial analysis. This broader utility supports the growth projections.

When broadcasters cite prediction market odds, they are providing free marketing for the platforms. When analysts use prediction market data in their research, they are legitimizing the category. Each use case drives adoption, which drives volume, which benefits the infrastructure companies. For more on the investment approach, see our article on prediction market investing.

The Risks

The $1 trillion market projection is an estimate. The “fastest growing market in the U.S.” superlative is unverified. The informational utility of prediction markets is real but does not guarantee that any specific platform will succeed. Kalshi and Polymarket are the leading platforms today, but competition could emerge. Robinhood and Coinbase are exposed to broader market conditions and regulatory changes.

But the structural thesis is sound. Prediction markets provide real informational value. That value drives adoption. Adoption drives volume. Volume benefits infrastructure companies. For investors, the approach is to own the infrastructure, not to place bets. For more on the broader thesis, see our article on prediction market stocks. For more on Robinhood specifically, see our article on Robinhood prediction markets.

This is not financial advice. Always do your own research before investing.

The Forecasting Value

Prediction markets have gained credibility as forecasting tools because they aggregate the collective wisdom of many participants. When thousands of people put real money on the line to predict an outcome, the resulting prices tend to be more accurate than opinion polls or expert predictions. This is the “wisdom of crowds” effect, and it has been validated in academic research.

Broadcasters, analysts, and political campaigns are increasingly using prediction market odds as a real-time forecasting tool. When CNN or Fox references “the markets” on election night, they are increasingly citing prediction market data rather than traditional polls. This mainstream adoption drives awareness, which drives user growth, which drives volume, which drives revenue for the infrastructure companies.

The Investment Thesis

Lango’s thesis, as we detail in our full review, is the “backdoor access” approach. Rather than using prediction markets for informational purposes, you invest in the companies that build the infrastructure. Robinhood (HOOD) and Coinbase (COIN) are the free tickers he reveals.

The key insight is that prediction markets serve multiple purposes: speculation, hedging, information, and entertainment. Regardless of which purpose drives individual user behavior, the platforms that facilitate the trading capture the revenue. The growth from $64 billion to a projected $1 trillion by 2030 would benefit the infrastructure providers regardless of how users engage with the markets.

For more on Robinhood specifically, see our Robinhood LLC account article. For more on the broader thesis, see our prediction market investing article.

Considerations

The informational value of prediction markets is genuine and well-documented. The investment thesis is about capturing the growth of the infrastructure that enables them. The risks are regulatory uncertainty, competition, and the possibility that the market does not grow as projected. But for investors interested in the thesis, the infrastructure approach is the most prudent way to participate.

If you want to explore Lango’s full thesis, you can access the Prediction Markets presentation through InvestorPlace.