Ethereum co-founder Vitalik Buterin has pushed back against growing criticism of prediction markets, arguing that their risks are overstated and often comparable to those already present in traditional financial markets. His comments come amid intensifying scrutiny of the sector, with critics warning about the potential for market manipulation and the creation of perverse incentives, particularly around bets on geopolitical events and sports. Buterin addressed these concerns, claiming that equal or even greater risks are present in conventional finance.
“Many of the downsides of PMs — prediction markets — are replicated by regular stock markets,” he said, noting that a bad actor seeking to profit from a disaster could simply short the broader market, which offers far higher liquidity and volume. He argues that prediction markets offer a distinct advantage as an environment for expressing views that “favours truth-seeking,” in contrast to social media, where sensationalism is rewarded and accountability is limited. “With prediction markets, if you make a dumb bet, you lose,” Buterin said, adding that this financial accountability can make them a more reliable gauge of genuine uncertainty than news headlines or online discourse.
Buterin went further, describing participation in prediction markets as “healthier” than in traditional markets, largely because their structure limits certain forms of speculative excess. Buterin’s endorsement adds support to a rapidly expanding sector. “Prices are bounded between 0 and 1, so they are much less dominated by reflexivity effects, ‘greater fool theory’, pump-and-dumps and similar dynamics,” he said.
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