From "to cut or not to cut interest rates" to "who will be elected", predicting this business, it's on fire!
Since 2021, the prediction market has been heating up, attracting a large number of investors. Interactive Brokers has launched the ForecastEx prediction platform, offering contract products based on key economic data releases. At the same time, SIG and Kalshi have also introduced prediction contract products in this market, achieving decent growth in trading volume. However, regulatory agencies have started to pay attention to the prediction market, determining that it falls within the regulatory scope of the Commodity Futures Trading Commission. In May of this year, the CFTC announced new rules prohibiting contracts based on political contests, award ceremonies, or sports competitions. The development trend of the prediction market will be influenced by regulation
From new movie reviews to key economic data, from the Fed rate cut to the U.S. election... the prediction market is quietly rising.
On Monday, Interactive Brokers founded by electronic trading pioneer Thomas Peterffy will launch the ForecastEx prediction platform, providing contract products based on the release of key economic data, predicting data such as weekly jobless claims reports, monthly consumer confidence data, etc.
Similarly, in April, the trading company Susquehanna International Group (SIG) co-founded by billionaire Jeff Yass established a dedicated team on the Kalshi platform to provide speculative opportunities for users on events such as the possibility of a Fed rate cut.
It is reported that the prediction contracts on the Kalshi platform usually only have two types of bets, "yes" or "no". If correct, the platform will pay individuals $1 per contract, and if incorrect, no payment is required. Before the contract expires, its price will fluctuate based on market expectations.
Related data shows that since 2021, the number of new prediction contracts each year has exceeded the total for the previous 15 years. In the past year, the monthly trading volume of prediction contract products under SIG and Kalshi has increased by 227%.
Steve Sanders, Director of Marketing and Product Development at Interactive Brokers, said:
"Hedge funds may use the ForecastEx platform to provide risk protection for their portfolios, and individual investors may also use it to predict the direction of economic indicators."
However, as the prediction market heats up, regulatory agencies have also taken notice of this "new business".
Some analysts point out that the prediction market essentially falls under the category of futures contracts and is therefore regulated by the Commodity Futures Trading Commission (CFTC).
In May of this year, the CFTC announced a new rule: banning contracts based on political contests, award ceremonies, or sports competitions, deeming these to be contrary to the "public interest".
CFTC Chairman Rostin Behnam believes that these specific themed contracts, especially political ones, go beyond the agency's jurisdiction and may even force regulatory agencies to be labeled as "election manipulators".
However, currently, PredictIt is the only platform in the U.S. that can provide contracts related to U.S. election predictions; last year, Kalshi sued the CFTC for prohibiting it from offering election-related contract products