How AI Will Save Prediction Markets

Prediction Markets, originating from Robin Hanson's Idea Futures, were designed as tools to aid social decision-making and forecast the future. In particular, governance models like Futarchy have the potential to aggregate information and compensate for the weaknesses of democracy.

Vitalik Buterin expanded this into the concept of Info Finance. This refers to mechanisms that use financial incentives to surface the truth, and it can be applied to various fields such as improving scientific peer review.

However, major platforms like Kalshi and Polymarket are currently trapped in the 'curse of soccer.' A significant portion of trading volume is concentrated in sports betting, while STEM markets account for only 1.2% of the total.

This skew reduces prediction markets to mere gambling, drawing pressure from regulators. For prediction markets to truly function as 'truth machines,' creating more valuable markets and securing participants is an urgent task.