Everyone’s betting; nobody’s winning.
In this episode of Galaxy Brain, Charlie Warzel explores the burgeoning industry of prediction markets. These platforms let people wager on everything from elections and award shows to the most trivial internet ephemera, framing bets as tradable “shares” that rise and fall like stocks. With billions in weekly trading volume, massive new funding rounds, and even a CNN partnership with the prediction-betting platform, Kalshi, prediction markets are quickly moving from niche curiosity to mainstream-media fixture—openly touting ambitions to financialize everything.
Warzel is joined by writer Max Read, who argues that prediction markets sit at the intersection of gambling, finance, and a broader “suckerification” economy aimed at young men. Together they unpack whether the markets actually reflect the “wisdom of crowds” or whether they’re little more than a meta-game of vibes, ideology, and misvalued dumb money. The pair explore the culture of these platforms and offer a diagnosis of the attention economy: When it’s hard to sell anything directly, it’s easier to sell derivatives of everything. Prediction markets may promise clarity, Warzel and Read suggest, but what they really offer is another way to feel excitement in a world that feels rigged.
The following is a transcript of the episode:
Max Read: When I say a “suckerification crisis,” I don’t simply mean, Oh, you know, they’re getting bilked out of their money, though I think that’s part of it. I think there’s a whole kind of both commercial and political kind of apparatus that is working really hard to separate young guys from their money.
Charlie Warzel: I am Charlie Warzel, and this is Galaxy Brain. A few weeks ago on this podcast, the journalist Pablo Torre told me this.
Pablo Torre: It feels like, you know, we’re living at a time in which lots of young people were promised things they were not delivered. Perhaps because of the generations that continued to wield power in our government, economy, et cetera, the Boomers—and the way to, like, Chutes and Ladders your way to the American dream is gambling on shit. And in that casino premise, I think you just see again a through line across all these sectors of American life now. Sports being one that has so naturally taken to it. Because, my gosh, here’s an unlimited menu. I mean, literally.
Warzel: Today we’re going to explore another part of that unlimited menu of gambling in the casino-ification of the American economy: prediction markets. Chances are you’ve been hearing a lot about prediction markets lately. At their core, prediction markets are online spaces where people can place wagers on the outcome of events.
They share similarities with sports books except, unlike a traditional bed at a casino, your wager is a futures contract—the value of which fluctuates based on the market value of the outcome of any given event. Right now, people use the markets to bet on sports, events like the Oscars, whether Elon Musk will tweet a specific number of times in a given month, or about the outcome of an election.
The top platforms now for prediction markets collectively report several billion dollars’ worth of weekly trading volume. Kalshi, one of the biggest prediction markets in this space, announced this month that it raised a billion dollars from many of Silicon Valley’s biggest venture-capital firms.
Recently, CNN announced it was partnering with Kalshi to integrate the company’s prediction-market data in the news coverage. The company’s CEO, Tarek Mansour, has big ambitions. At a conference in October, he said this about Kalshi’s future:
Tarek Mansour: The long-term vision is to financialize everything and create a tradable asset out of any difference in opinion.
Warzel: “Financialize everything.”
That’s essentially the quiet part out loud. That is the blueprint for the actual casinoification of the world, brought to you by one of the more ascendant companies that’s moving everything toward gambling. So what’s really going on here? How do prediction markets work? Is there some truth to what boosters allege: that people putting their money where their mouths are is actually a good way to tap into the wisdom of crowds?
Or is this just a dystopian development? An example of companies preying on a society with a burgeoning gambling addiction? Today I am joined by Max Read, author of the Great Substack Read Max. Read covers culture and power on the internet and has this really intuitive understanding of platforms and people.
Recently he wrote a great piece titled “Prediction Markets and the Suckerification Crisis.” Max and I talk about where all this is going and why everyone is gambling and no one is happy. Now, my conversation with Max Read.
Warzel: Max Read, welcome to Galaxy Brain.
Read: Thanks for having me, Charlie.
Warzel: Yeah. So we’re going to talk about prediction markets. Hopefully come up with some grand theory as to why they are ascendant and why everything feels a little bit broken. But I want to just first—for the normies out there who aren’t, you know, using them.
How would you describe them? How are they different from straight-up gambling or a sports book?
Read: Yeah, well, the first time I wrote about them, I described them as sports books that allowed you to place wagers on non-sports events. But I think the extra sort of bit that’s important to understand about them—because at the end of the day, that is what they are, and it’s the way a lot of people use them. And I should note, by the way, that when I say they’re not: They’re sports books that allow you to place bets on non-sporting events. Many of them are actually also sports books. Kalshi in particular allows you to place wagers on games.
But what they do is really emphasize the wager as a security that you can purchase and sell the way you would a share on the stock market, say. So if you believed, say, that there would be a Democratic sweep across New Jersey, Virginia, and New York City back in November, you could have bought shares. Or you could have bet on that outcome for, you know, what, like 30—like, they’ll do it as prices, right? You bet, you wager 30 cents for the return of a dollar, right? So you could buy the shares at 30 cents. You buy 10 shares at 30 cents; you get $10 back. If that comes off.
Now, I mentioned 30 cents, say, because a couple weeks—I’m not sure if that’s the exact price—but a couple weeks before this election, it was kind of unclear what Democrats’ chances were going to be in any of these elections. There’s a lot of polls coming out saying that Mikie Sherrill in New Jersey was running dangerously sort of close in the race against … I can’t even remember the name of her opponent at this point.
But, you know, it was a fairly low probability according to the betters on the app. Right? But as the returns start to come in on Tuesday night—and it becomes clear that actually the chances that this is going to be a sweep across all these elections get higher—all of a sudden the price of a given wager rises. Or the price of a given share, so to speak.
So at 30 cents—suddenly it’s 40 cents, suddenly it’s 60 cents. The way you would think about that if you were just talking gambling odds is, all of a sudden, you’re getting less return on your wager, basically. Your odds are getting significantly easier.
And, you could have, say—let me give a slightly different example of election. So recently in Tennessee, this woman, Aftyn Behn, was running for a congressional seat. And, she was absolutely not the favorite. It was a “Trump plus 30” congressional district or whatever, and you could buy shares for her victory at like, you know, 20 cents, something like that, the week before the election. The night of the election, as returns start coming in, she’s looking actually kind of good for it. The early returns are quite good for her. And I watched as the price of her shares climbed up. I’m not going to say whether or not I had any horse in this race, any money on this. But I was watching it closely, let’s just say.
And there was a point where if you had bought shares at 30—and again, who knows who I’m talking about here—but if you had bought shares at 30, you could have sold them for a 100 percent profit. Sold them at 60 cents. Only for those shares to come crashing down as the results continue coming over the night, and it becomes clear it’s not happening.
So—sorry, this is a sort of complicated explanation—but I think it’s useful to understand how you use it. Right? That when you go on these sites, what you’re doing is: You’re doing this kind of thing that’s kind of a hybrid. Like stock-market day-trading activity and a betting activity. And I do think it’s worth saying, as much as they emphasize the sort of security, quality of these wagers.
You can do this at a sports book too, right? That odds will change at a sports book depending on who’s taking which side of the bet, and you can cash out. Most sports books will allow you to cash out various times, you know, after you’ve placed your wager. And if the odds of the wager have changed in between the period where you placed your wager and you’re cashing out, you could make a small profit just from cashing out, right?
If you wager a team is going to win, and then you could cash out with five minutes to go and they’re up by 20 points, you’re not going to get as much as you would if you saw the whole thing out. But you can cash out at a fairly high profit. So in that sense, you know, it’s sort of another way of looking at, or another way of thinking about, gambling that emphasizes the sort of up-and-down nature of odds. And I think that’s how most people kind of approach it when they’re on the site placing these wagers—they’re thinking about it like betting. But I think it’s also important to understand why [these sites] have become so ubiquitous in media is that they are exciting to a lot of economists and libertarians. especially libertarian economists. It’s that they offer a kind of semi-accurate—accurate depending on the liquidity of the market, accurate depending on the size of the market—accurate picture of what you might think of as the conventional wisdom. Right? Because there’s all these people collectively saying how much [they’re] placing their own odds, so to speak, on a given outcome.
Wagering their own actual money, so they have skin in the game. So nobody’s doing this just for propaganda purposes, or whatever. You can say, Conventional wisdom has the chances of this event happening at 50 percent, 30 percent, whatever. Now, these markets are still fairly small, and many of them are not very liquid at all.
So it is not like there’s millions of people betting a couple bucks at a time to make them, you know, as sort of accurate as possible. You’ll have a couple whales who are placing large wagers, which makes them interesting in what they tell you. Because it’s not saying, necessarily, the conventional wisdom according to the kind of person who places a bet on this kind of a thing.
But that’s the other side of it. The nonuser side, the media side, the philosophical side of this is: Prediction markets allow us to start to look at the future in this way that allows us to set probabilities about things.
Warzel: I’m curious what you make of the “wisdom of crowds” bit, because this is the part of me that stops and feels a little insane sometimes with this. Because I think about, like, this is essentially a meta-game, right? Where you have this system that produces outcomes and incentives for certain outcomes that arise in it, and you wrap that system in an apparatus that is also concerned with influencing those outcomes.
It’s this second-order thing like you have with poker—where good poker players can technically predict the outcome of hands, but that is also influencing the outcomes of the games. It just feels to me like what you’re doing is: Prediction markets aren’t what people think will happen. It’s what people think other people think will happen, right? So it feels to me it’s confusing.
Read: I do think there’s a use for that. You could come up with reasons. And from a financial sort of market perspective, one way of thinking about it is that these are effectively tools. Instruments for hedging, right?
That you have a sense of—you think something’s going to happen, but you also want to place some wagers on the side in case it doesn’t happen to limit your losses. And for that, you don’t need it to be wholly accurate, right? You just need it to sort of approximate a given outcome that allows you to make money off of that.
I think there’s sort of two ways to go with what you’re saying. One is that, until recently, prediction markets have largely been a sort of theoretical idea, right? I mean, we could talk about the stock market—or a sports book, for that matter—as a prediction market. But this sort of all-encompassing marketplace to make wagers on.
I mean, recently there were wagers on the Time magazine “Person of the Year” cover, all the Oscars, all the award-season stuff. You can wager on who’s going to get nominated and who’s going to win. We’ve talked about elections already. There’s even, often, marketplaces for words getting mentioned by prominent figures in—what’s the word I’m looking for—in speeches or in, you know, earnings calls. If you believe really strongly in the idea of the wisdom of crowds, it’s very exciting.
But the theoretical model of the prediction market is, as I was sort of emphasizing before, is one that everybody is participating in. The market is fully liquid. Everybody has a stake in it. Everybody is placing wagers there. And these markets are fairly far from that, right? On Election Night, there tends to be enough money, and enough people, to sort of approximate what we’ve been talking about as the conventional wisdom about who’s going to win and who’s going to lose.
But that’s not always the case, and certainly not the case for stuff like these culture categories that I’m talking about. I wanted to ask—without you having to divulge whether you are, or are not, actively participating in these markets—what’s the culture like on these? I think it mirrors some of the culture on X/Twitter in the Musk era.
But when you go either to try to place some wagers, or for reporting purposes,what’s the culture like?
Read: So, I can talk about the culture in the comment sections—which I wouldn’t want to suggest is wholly reflective of the culture of these places in general.
And I think there is a wide range. There is smart money. There are sharks out there who are running programs and bots to identify. Especially on an election night, you’ll get guys who are pulling results all doing this automated, basically HFD—like high-frequency traders pulling results from The New York Times or Decision Desk or whoever. And, like, immediately placing orders on shares to take advantage of that. Like, you don’t have to do it in the milliseconds the way you do on Wall Street, but you can do it if you just do it in a couple seconds. We’ll still make it advantageous.
And you have people who are quite good—for example, the Time magazine cover leaked before it was announced. And a bunch of people made a tidy little profit, because it took a while for the market to catch up. So I say that just to say that there are smart people. Just as a to be sure thing before I get into the comments—which are really stupid. I mean, there’s just a lot of stupid people there. And there’s a funny mix of just really obviously stupid people—you know, Free Republic–commenter type, X, like bottom-of-the-barrel, Trumpist X types. And then there’s stupid, just guys who have sort of wandered in. Every wager, if you scroll far enough, you’ll find a guy who took the stupid side of the wager because he didn’t read the terms until after he’d put his $50 down.
He is like, Oh, I didn’t realize that I was actually betting, you know, against this. I thought I was betting for it. Oh, well, now I’m out 50 bucks. The tone reminds me a lot of—I think the closest thing I can think of online, or the two closest things, are the: If you play fantasy football in Yahoo, every player has their own little comment section. And you can pull it up as you’re deciding who’s to start and who to bench.
And it’s just filled with people just clinging to the most desperate of threads. You know, citing articles they read somewhere. Nobody’s linking to anything. Everyone’s like, Oh, I heard he is going to play. Oh, I heard he is injured. Oh, I heard he’s, you know, he’s not going to be the first QB.
He’s not going to get any catches. He is not going to get any throws this game. Whatever it is. And the comments on the bets kind of remind me of this on all the markets. It’s somebody being like, Oh, you know, there’s one market that’s which member of Trump’s Cabinet is going to leave first.
