Prediction Markets Complement Traditional Assets
Kurush Dubash, CEO of Dome, on unified API for prediction markets
Prediction markets fit best as a layer on top of stocks, bonds, and sports books, not as a replacement for them. An equity tells whether a company becomes more valuable over years. A prediction contract answers a narrower question, like whether the FDA approves a drug this quarter or whether rates rise next month. That makes them useful both for expressing a view and for hedging a specific event that traditional assets only capture indirectly.
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They complement equities because they isolate event risk. A fund can own biotech stocks for long term upside, then buy a yes or no contract on an approval decision to hedge the exact catalyst that could move those stocks in a single day. Regulated venues explicitly position event contracts as commodity derivatives that finance professionals can trade.
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They also complement information markets. Research on prediction markets shows they can absorb new information quickly and often forecast better than polls or expert estimates. That gives traders, media companies, and investors a live probability feed they can use alongside prices in stocks, bonds, and commodities.
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They become substitutes only in some categories, mainly sports betting. In sports, prediction markets can look cheaper and more flexible than sportsbooks, with lower fees and faster capital recycling, which is why Kalshi and Polymarket have grown quickly there. But in politics, macro, weather, and niche local events, they open markets that traditional finance often does not serve at all.
The next step is prediction markets becoming embedded inside other financial products and media. As regulation settles and infrastructure matures, the category is likely to grow into a standard event risk layer, with large exchanges covering broad national markets and smaller operators specializing in local, industry, and workflow specific contracts that sit beside traditional portfolios.