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Happy Tuesday. Let’s look at todays top stories:
Two University of Toronto and Calgary finance professors published a Globe and Mail op-ed titled "Put plainly, prediction markets are not for you".
Charles Martineau and Marius Zoican make three claims: prediction markets are zero-sum before fees and negative-sum after; the top 1% of Polymarket accounts capture 77% of all profits; and every dollar in prediction markets is a dollar not compounding in a diversified ETF.
Options trading is zero-sum before fees. Day trading stocks is negative-sum after commissions. The top 1% of active traders capture a disproportionate share of profits in every liquid market that exists. The ETF argument applies equally to anyone who buys individual stocks, trades forex, or plays poker.
The professors' own carve-out is that prediction markets are useful for hedgers and sophisticated traders who can spot mispriced contracts. That’s the entire point though. The ice cream shop owner hedging cold summers and the modeler spotting mispriced contracts are doing the same thing: using information asymmetry.
At the end of the day they’re probably right, prediction markets aren't for 99% of people. But they're wrong that this distinguishes prediction markets from most financial products.
A Louisville TV segment covered prediction market platforms from a consumer finance perspective — consumer finance expert Erica Sandberg: "Ask yourself do I want to participate, if so, how far do I want to go?" The segment covers Kalshi, Polymarket, and PredictIt as platforms now in your pocket.
Horse racing, casino games, lottery tickets — and now this. The mainstream consumer press has fully arrived at prediction markets as a personal finance topic.
Fair enough.
But while academics debate who should participate, capital keeps moving anyway.
And this morning it's moving into places most financial products don't touch.
A place where it’s likely the debating professors know nothing about…
GlobalPost published a piece four days ago headlined "Eritrea and Ethiopia on the Verge of Another Conflict That Could Become Africa's Second World War."
The two countries fought a devastating border war from 1998 to 2000, tens of thousands killed, hundreds of thousands displaced.
Which is really interesting since there[s an event on Polymarket, whether 🇪🇷 Eritrea invades Ethiopia by December 31?
But not only that, this wallet put $1,200 on an Eritrea-Ethiopia war before year end.
6.0 cents. YES. $1,200. at 7:33 AM this morning.
The current tension centers on Assab, an Eritrean Red Sea port that Ethiopia used after Eritrea's independence until war broke out. Ethiopian Prime Minister Abiy Ahmed wants Red Sea access.
Eritrean officials say that's exactly what he's pursuing through Assab. Observers don't disagree. "Anyone who thinks that Ethiopia does not need a seaport is mistaken in a natural law, the Red Sea and Ethiopia cannot be separated forever."
In Eritrea, compulsory national service can last years. War veterans are already saying publicly they fear being sent back to the front. The AFP is quoting people in Asmara by name about it.
This is a documented, named, actively deteriorating situation that regional analysts are already calling potentially the largest African conflict since the Congo wars.
At 6 cents, $1,200 buys 20,000 YES shares. Payout if Eritrea invades Ethiopia before December 31: approximately $20,000.
And it looks like he (or she) is already ahead. this screenshot was taken at 09:15 AM EST.
The December 31 contract now sits at 21% probability, YES at 29 cents, NO at 88 cents, $41,291 already traded.
The October 31 contract is at 12%.
One-in-five odds on a major African war before year end. That's a live market pricing a documented, rapidly deteriorating geopolitical situation.
Also, the 29 + 88 = 117 cents is worth noting. The spread is 17 cents, wide, meaning market makers are demanding a big cushion because nobody knows how to price this cleanly. Wide spreads like that typically signal genuine uncertainty.
More moonshot opportunities updated in real time at Prediction Market Whales.
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