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The line between gambling and investing is blurring fastest for the generation that grew up with both on the same smartphone.

Eric Balchunas, Bloomberg's senior ETF analyst, dropped a stat on X that said according to a Betterment survey, 52% of Gen Z investors have redirected investment funds to sports betting.

Big surprise? To some. What’s more, is a quarter of them treat sports betting as a deliberate part of their long-term financial plan. Balchunas called it a "wow" moment.

But the follow-up exchange was equally interesting.

When asked about prediction market ETFs and who they'd attract, Balchunas said "degens mostly" — but then made a more serious point: there's a legitimate case for prediction market ETFs attracting professional investors specifically because they let you make binary bets on geopolitical or economic data outcomes without having to guess how the broader market will react to the news.

Which is kinda odd if you think about it. Because typical degen behavior isn’t interested in ETFs. Really smart dude so I don’t know if I agree with him there.

Continuing the story, again, it is super interesting that sports betting is gaining ground in Gen Z's long-term wealth plans — Wealth Management published a piece on how younger investors are increasingly incorporating prediction markets and sports betting into how they think about building wealth, not just entertainment spending.

I mean, the sample size is 14-29, not exactly the demographic primed to prepare for or stomach the idea of investing for something a few decades away.

Moving on…

New York City just launched a sweeping investigation into Polymarket and Kalshi — the New York City Council is targeting four prediction market platforms for alleged deceptive marketing practices and targeting minors, per the Wall Street Journal.

This is a new front in the state-by-state legal war — not a state AG, not a federal regulator, but a city council opening its own probe.

A city council? Yep. New York State already sued Kalshi. Now New York City is investigating separately. The platforms are fighting on multiple jurisdictional levels simultaneously. Who’s next? The bodegas?

ON CALIBRATION — The Podcast Got It Half Right

The Animal Spirits podcast, friends of the newsletter, made a compelling point this week: Kalshi's win rate tracks contract price almost one-to-one, meaning the market sets accurate odds.

While that's directionally true, there’s more to the stats.

You see, in the mid-range and near resolution, prediction markets are impressively calibrated.

A full-history analysis of 67.8 million matched Kalshi trades found contracts priced at 50 cents resolved YES exactly 50.0% of the time, with the calibration curve tracking the diagonal closely through the 30–70 cent range — per Kalshi Longshot's analysis. A separate study of ~23 million NBA, MLB, and NHL moneyline trades found the calibration curve is visually indistinguishable from perfect in the final hours before settlement — per an arXiv systematic bias study.

But the largest study — 292 million trades across 327,000 contracts on Kalshi and Polymarket through December 2025 — tells a more complicated story. Calibration slope rises from 0.99 within an hour of resolution to 1.32 beyond one month, meaning long-dated prices are systematically compressed toward 50% — per Decomposing Crowd Wisdom. Three specific breakdowns stand out:

Politics is the worst offender. Kalshi's mean political calibration slope is 1.637 — versus 1.150 for sports and 1.114 for crypto. At the 2-day-to-1-month horizon it hits 1.83. Political markets price too conservatively — they don't move far enough from 50% even when the evidence is strong.

Longshots are overpriced. Across the 1–15 cent range, actual win rates fall below implied probabilities by about 0.8 percentage points on average. 9-cent contracts win 7.8% of the time — not 9%.

Calibration is U-shaped in time. Sports contracts inside the final 10 minutes deteriorate sharply — Platt slopes of 1.62 for NBA and 4.56 for NHL against a perfect-calibration reference of 1.0. The market gets sloppy at the very end.

The honest summary: on Kalshi, win rate tracks contract price closely in the mid-range and near resolution — 50-cent contracts resolve YES 50% of the time. But calibration degrades with time horizon and varies sharply by category. Political markets and long-dated contracts price too conservatively. Longshots under 15 cents are systematically overpriced. And extreme buckets dominate the datasets — in one Kalshi political sample, 6,849 of ~7,460 markets sat in the 0–10% or 90–100% range, meaning headline accuracy figures are flattered by markets that were already obvious before trading even started.

The market sets good odds. It sets better odds closer to resolution. And it sets its worst odds on the markets people care about most — politics, long time horizons, and extreme longshots.

That's not an argument against prediction markets. Rather, it's an argument for reading them carefully — which is exactly what prediction market whales is meant to do.

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