The intellectual case for prediction markets is strong. (Image: reve.art) It is an unspoken axiom of investment that rich and connected people get juicier opportunities than the rest of us.
Access to private-company equity, private credit deals, pre-IPO shares and all manner of financial feasts is not available to the proletariat. It is so deeply embedded in how the capitalist system works that hardly anyone questions it.
And so the rich get richer, and the rest of us are left with the crumbs of money market accounts, index funds retail shares and the occasional hot tip.
All that is now changing – and from a surprising place.
Before I get there, this asymmetry was supposed to be righted by DeFi and the tokenisation of real-world assets. The promise was intoxicating: every office block, private loan, royalty stream, venture fund and pre-IPO company would be sliced into tokens and made available to anyone with a wallet and a Wi-Fi connection. And to be fair, tokenisation has not been a complete bust. RWA.xyz currently tracks about $26.7- billion in distributed tokenised asset value. But the most successful bits are still largely tokenised Treasuries or money market-like instruments – useful, clever, but not yet the storming of the Bastille. And how many of us can say we know how to access pre-IPO SpaceX shares on a tokenised blockchain? No one; that product does not exist.
So where might the rest of us look if we want to place bets on deals that still happen behind closed doors, out of sight?
The answer is prediction markets.
Prediction market leaders
Strictly speaking, prediction markets are not new. The Iowa Electronic Markets go back to 1988 and were built as academic experiments in forecasting elections. What is new is the simplicity, the emerging regulatory scaffolding, the friendly user experience and the size of the menu. Prediction markets are no longer just odd little laboratories for future event prediction. They are turning into something more useful and far more disruptive – a public derivatives layer for almost anything.
The two big names in the field are Polymarket and Kalshi, which dominate this space, and about which I have previously written.
The mechanics are wonderfully simple. A market asks a question: Will X happen by date Y? The contract trades between zero and one dollar. If “Yes” is trading at 63 cents, the market is saying – roughly – that traders collectively assign a 63% probability to the event. If it happens, the contract pays out pro-rata to the odds. If it does not, it pays out nothing. Tiny instrument, giant idea.
Originally, the natural habitats for these markets were elections, sports, interest-rate decisions, film awards, weather events and crypto prices. All delightful, all tradable, all faintly degenerate. But recently the plot has thickened.
Polymarket has now launched prediction markets tied to private companies, in partnership with Nasdaq Private Market. Reuters described the move as letting users speculate on private-company performance through markets tied to companies that would normally sit far beyond the reach of ordinary investors.
This is the small door in the previously impenetrable wall through which anyone can now walk.
Chance to bet on SpaceX IPO
You will probably not be invited into the SpaceX pre-IPO round. That is because you do not know the investment bankers. You don’t have the accreditation or the minimum ticket size or high-level connections. But if there is a liquid market asking whether SpaceX will IPO by a certain date, or whether its closing market capitalisation will exceed a certain threshold, or whether it will remain the world’s most valuable private company at month-end, you have suddenly obtained an economic proxy to the thing you were excluded from.
It is not the same as owning SpaceX shares. You do not get ownership, voting rights, dividends, unlimited upside or the glow of being on the cap table with Elon Musk. You get a binary payoff attached to a defined event. That is more like an option than a share. But from the point of view of practical exposure, the resemblance is not trivial. If the private company hits the milestone, you make money. If it misses, you lose money. That is a back-alley version of institutional-grade access – imperfect, synthetic, but real.
The SpaceX example is already visible. Polymarket has a live SpaceX prediction-market page showing multiple active markets, including questions about its IPO and closing market capitalisation. It recently listed 20 live SpaceX markets with more than $24-million in aggregate trading volume (thin, but early days still). Kalshi also has SpaceX-related IPO markets, including contracts on when the company will officially announce an IPO.
This is how financial innovation often arrives – first as a toy, then as a proof-of-concept, then as infrastructure. Options were once regarded as a sideshow. ETFs were once a curiosity. Now they are financial commodities. Prediction markets are walking the same road.
And they are particularly powerful because they separate exposure from ownership. A farmer does not need to own an oil company to hedge diesel costs. And now, perhaps, a retail investor does not need to own OpenAI, Anthropic or SpaceX to express a view on whether those companies are achieving the milestones that matter, such as earnings forecasts.
The intellectual case for prediction markets is strong. Markets force people to put money behind opinions. Traditional pundits can be endlessly wrong and continue to appear on television or social media, spouting confidence and certainty, and traders still blindly follow their advice, sometimes to their disadvantage. A prediction-market price is not truth, but it is a constantly updating number produced by people with something at stake. Economists studying Kalshi’s macro markets have found that its prices can be informative and become more accurate as resolution approaches.
Prediction markets are a Wild West… for now
However, there are dangers – insider trading, market manipulation, regulatory battles and what seems to be the thin line between investing and gambling. Let’s be practical about this – it is a new market, a Wild West of sorts. These things will get ironed out sooner or later. But the direction of travel is unmistakable. The old private markets were built around exclusion. The new prediction markets are built around inclusion. They do not yet democratise ownership, but they do democratise opinion backed by cash.
That may sound like a small distinction. It is not, because these markets are, at their core, information aggregation machines across a large universe of hunch, data, analysis, faith, opinion and expertise backed by real skin in the game. When money is at stake, people reveal what they actually believe rather than what sounds impressive in a conference room or what looks good on TV. The result is a real-time, continuously updated probability estimate that distils the collective knowledge of everyone willing to bet on it.
Prediction markets have crossed from novelty to nascent asset class in roughly 24 months. They have done so not because of marketing, but because they solve a genuine problem: the pricing of specific future events in a transparent, accessible, real-time market. That is as valuable to a hedge fund hedging a regulatory decision as it is to a retail investor in Cape Town or Cincinnati who wants exposure to whether a particular company hits its earnings targets – without needing a brokerage account or a Bloomberg terminal.
The rich will still get richer. The structural advantages of capital access, and connection do not dissolve overnight. But for the first time, the rest of us can sit at something resembling the same table, trading the same contracts, reading the same odds, and occasionally – when stars align – winning. DM
Steven Boykey Sidley is a professor of practice at JBS, University of Johannesburg, a partner at Bridge Capital and a columnist-at-large at Daily Maverick. His new book, It’s Mine: How the Crypto Industry is Redefining Ownership, is published by Maverick451 in South Africa and Legend Times Group in the UK/EU, and is available now.