TLDR
- Ethereum co-founder Vitalik Buterin expressed concern that prediction markets focus too much on short-term crypto betting and sports wagering instead of long-term financial tools.
- Buterin proposes prediction markets should become hedging platforms where users hold personalized baskets of market positions to offset inflation and protect purchasing power.
- Prediction market trading volumes have grown four times over the past year, with platforms like Polymarket and Kalshi leading the sector.
- Buterin suggested combining prediction markets with AI language models to create custom portfolios based on individual spending patterns and expenses.
- A statistics professor from Rutgers University said prediction markets provide more accurate insights than polls and offer information that cannot be easily manipulated by centralized entities.
Vitalik Buterin Calls for Prediction Markets to Shift from Betting to Hedging Tools
Ethereum co-founder Vitalik Buterin has raised concerns about the current state of prediction markets. He worries the platforms are becoming too focused on short-term speculation.
In a recent post on X, Buterin said prediction markets are “over-converging” to unhealthy products. These products prioritize short-duration crypto price bets and sports-style wagering.
Recently I have been starting to worry about the state of prediction markets, in their current form. They have achieved a certain level of success: market volume is high enough to make meaningful bets and have a full-time job as a trader, and they often prove useful as a…
— vitalik.eth (@VitalikButerin) February 14, 2026
Buterin acknowledged that prediction markets have gained traction. Trading volumes are now large enough to support professional traders. The platforms also complement traditional media by collecting forward-looking information.
However, he warned that most activity concentrates on areas with limited long-term value. Short-lived engagement dominates the current model. This creates a system that relies heavily on uninformed traders.
Buterin described three typical categories of participants in prediction markets. These include inexperienced speculators, institutional information buyers, and hedgers. The current model depends on the first group to sustain profits for informed traders.
While not unethical, this approach can distort platform incentives. It encourages strategies that prioritize trading volume over useful information. Buterin sees this as a structural problem that needs addressing.
Prediction Markets as Personal Insurance
Buterin proposed a different direction for prediction markets. He suggested they should become generalized hedging tools for consumers and businesses.
In this system, participants would accept slightly negative expected returns. In exchange, they would reduce exposure to external price risks. This would function similar to insurance rather than gambling.
Buterin explained how this would work with AI integration. Local AI language models would understand a user’s expenses. These models would offer personalized baskets of prediction market shares.
These baskets would represent days of expected future expenses. Users could hold growth assets like ETH alongside these positions. This combination would protect against inflation in fiat currencies.
For example, an investor holding biotech stocks could use election prediction markets. They would hedge against political outcomes that might hurt the sector. This improves risk-adjusted stability without seeking speculative profit.
Industry Growth and Security Concerns
Prediction market trading volumes have grown four times over the past year. A recent CertiK report tracked this expansion across the sector.
The study identified Kalshi, Polymarket, and Opinion as dominant platforms globally. Liquidity has concentrated heavily on these few marketplaces. The platforms moved from niche products to widely used financial tools.
Rapid growth has brought structural weaknesses. In late 2025, a third-party authentication service used by Polymarket suffered a breach. Smart contracts were not compromised, but the incident exposed vulnerabilities in hybrid Web2-Web3 designs.
Harry Crane, a statistics professor at Rutgers University, defended prediction markets as valuable tools. He told Cointelegraph that opponents in the US government want to restrict these platforms. They offer insights that cannot be easily ignored or manipulated.
Prediction markets provide an alternative to information in official sources or media reports. These sources can be controlled to feed certain narratives. Prediction markets are more accurate than polls and should be treated as a public good, according to Crane.
Looking Forward
Buterin’s proposal envisions prediction markets denominated in productive or yield-bearing assets. This would enable sustained participation from sophisticated capital. The system could eventually function as personalized economic stabilizers.
Rather than relying on fiat-backed stablecoins, individuals would hold tailored market positions. These positions would link to price indices representing their future spending needs. Over time, this could reduce reliance on traditional currency structures.
CertiK projects continued institutional interest in the sector. The firm expects expanded regulatory clarity in select regions. Technical upgrades aimed at strengthening privacy and resilience are also anticipated.
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