Posted on: May 20, 2026, 11:20h.
Last updated on: May 20, 2026, 11:20h.
Prediction markets may offer investors utility in the form of new avenues for assessing risk, but the still young industry still has some wrinkles to be ironed out.
American Century says there are benefits in prediction markets, but the industry must address its regulatory outlook and insider trading concerns. (Image: Shutterstock)In a new report, American Century says event contracts can make previously hard-to-reach signals more accessible. Those include inflation and supply chain indicators, which are useful to businesses and scores of investors.
Event contracts do something similar with an even larger set of questions,” notes the asset manager. “Businesses, for example, might turn to prediction markets to gauge the likelihood of Congress passing a critical piece of legislation or to estimate when a strike will end.”
There’s something to that school of thought. As one example, the Consumer Price Index (CPI) is one of the most widely watched economic data releases every month. Covering February 2023 through mid-2025, a report by Kalshi Research confirmed the CPI estimates on the prediction market were more accurate than the forecasts generated by Wall Street economists. American Century says insight diversification could bode well for prediction markets going forward.
“Prediction markets may benefit from the ‘wisdom of the crowd’ by combining diverse insights from multiple participants. Aggregating these views might yield more accurate forecasts than those from a single expert,” adds the fund manager.
Investor Access Challenges
With prediction markets generating more mainstream media attention and with estimates indicating volume could reach or top $1 trillion by 2030, some investors are clamoring to get involved.
The challenge lies in a dearth of a pure-play options because, for now, Kalshi and Polymarket are private companies. Lack of direct access to prediction market operators is compelling some market participants to consider stocks such as Coinbase Global (NASDAQ: COIN) and Robinhood Markets (NASDAQ: HOOD) as alternatives.
“Examples include financial services app Robinhood and sports betting app DraftKings,” observes American Century. “CME Group, a leading derivatives marketplace, and Interactive Brokers Group, a broker/dealer, also offer event contracts.”
Another idea is Intercontinental Exchange (NYSE: ICE), the owner of the New York Stock Exchange (NYSE). The exchange operator is the largest financial backer of Polymarket.
Prediction Markets Face Real Risks
Prediction markets are expanding use cases and actively courting increased participation among institutional investors in an effort to reduce reliance on sports derivatives, but the industry also faces myriad legal and regulatory risks. Those are among the reasons American Century has a “cautious outlook” on yes/no exchanges.
The asset manager cites potential for manipulation (insider trading) and a murky regulatory outlook as two of the primary headwinds facing the prediction market industry, noting that if the public perceives prediction markets as unfair trading venues, there could be consequences in the form of reputational damage.
“We’re also watching the regulatory environment to see how the battle between the states and the CFTC will be resolved and to gain clarity on insider trading enforcement,” concludes the money manger. “Until the odds of increased regulation are clearer, we believe investors would be wise to adopt a wait-and-see approach before increasing their exposure to prediction markets.”
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