For a long time, financial markets have had an impact on people’s perceptions. However, according to economist Kyla Scanlon, prediction markets can create a permission framework for potential future events prematurely.
In a recent [missing content], she referred to a phenomenon that trading legend George Soros once noticed, which is that market expectations not only predict the future but also help shape reality.
Traders of stocks, bonds, currencies, and commodities react to events and make forecasts based on them. Scanlon warned that what makes prediction markets different is that they can give the impression of a consensus for something that hasn’t occurred yet.
“The uncomfortable fact is that prediction tools have become the foundation for the legitimacy of event results, regardless of how absurd they are. When markets process political events before democratic institutions like Congress can have in – depth discussions, market outcomes are regarded as validation and authorization for political actions,” she explained.
Scanlon, who has been called Gen Z’s [missing description] economic commentator and is the author of the book , also said that the speed at which prediction markets price events is another worry.
As traders place bets on the probability of a particular outcome, a story is established before an alternative one from a more democratic process can challenge it.
“Legitimacy is increasingly going to those who deal with uncertainty first,” she wrote. “Markets have been optimized for speed, while democracy is designed for deliberation.”
Moreover, large traders have an excessive influence in prediction markets and may be benefiting from insider information.
This was a concern earlier this month after the U.S. military captured Venezuelan dictator Nicolás Maduro. Just before the raid happened, [missing content] on Maduro’s departure by Jan. 31, 2026, resulting in a payout of more than $400,000.
Since the operation was a highly classified military secret, Rep. Ritchie Torres (D.-N.Y.) has introduced a bill to prevent federal officials from using non – public information to trade on policy outcomes.
“If you are both a government insider and a participant in the prediction market, you now have a wrong incentive to advocate for policy decisions that will benefit you personally,” he [missing verb] on Jan. 9. “That kind of profiting in the prediction market has no place in the federal government.”
Scanlon also pointed out that some media companies have partnered with prediction markets and regularly report on whether the odds of an event are rising or falling.
This further changes what the overall market sees as a consensus. The odds turn into forecasts until “inevitability becomes acceptance,” she wrote.
“So when large traders move the markets and those movements are reported as a consensus, what you are actually seeing are capital – weighted bets from those who have the most information (whether they are insiders or not),” Scanlon explained. “But those bets are made to seem legitimate through the language of collective wisdom and truth machines, with only a little bit of regulation.”
Top prediction markets Kalshi and Polymarket didn’t immediately respond to ‘s requests for comment.
To reduce the power to confer legitimacy, Scanlon proposed that prediction markets adopt “know – your – customer” standards, disclose the total amount of bets to show if single traders are influencing the market, extend the settlement period so that a consensus doesn’t form quickly, and require event settlements to be labeled as “contractual arbitration.”
Meanwhile, sports betting and prediction markets have become more and more popular among Gen Z as they turn to them for income due to growing pessimism about their financial future.
This has also led to “economic nihilism,” a term that Scanlon also made well – known, leading to [missing content].
“When every traditional path becomes narrower, people start to look for other options. In practice, this means turning to the few places where there still seems to be a real chance of gain, even if the risks are high,” she recently [missing verb] in The Wall Street Journal. “When people start treating the economy like a game, it shows that the traditional ways of succeeding no longer seem real.”