Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Ryan Kirkley explains how crypto prediction markets can risk encouraging manipulation and amplifying misinformation on a massive scale.
- Institutions making headlines should pay attention, according to Francisco Rodrigues.
- Geodnet decoupling suggests a fundamental revaluation in the chart of the week.
Thanks for joining us!
-Alexandra Lévis
Expert Views
Prediction markets don’t just predict power: they reshape it
By Ryan Kirkley, Co-Founder and CEO of Global Settlement Network
Prediction markets are often presented as neutral forecasting tools: efficient ways of aggregating information and converting collective beliefs into prices. This matter is not entirely false. Academic literature has long shown that prediction markets can produce forecasts that outperform many conventional benchmarks. But as someone who believes in crypto’s role in modernizing market infrastructure, I think we should be honest about what the industry is building here. The crypto version of prediction markets is no longer just about forecasting. It’s about financializing the instability of the real world.
This distinction is important. On Polymarket, for example, users can link assets from Ethereum, Solana, Bitcoin and other chains; these deposits are converted to USDC.e on Polygon, where fully collateralized yes/no positions are traded and settled on-chain as tokenized claims. In other words, cryptocurrencies don’t just host these markets. This gives them global reach, cross-chain funding, and low-friction settlement. This is an impressive market design. This is also precisely what increases social risk.
Once you turn war, political violence, public unrest, or institutional collapse into tradable cryptographic instruments, you create new incentives for bad actors. The first is obvious: people with inside information can try to monetize it. U.S. regulators have long recognized that not all events have a place in a financial market. CFTC Regulation 40.11 prohibits event contracts involving terrorism, assassinations, and war, among other categories deemed contrary to the public interest. This is not anti-market moralizing. It is recognized that some contracts do more than reveal information; they can distort behavior around the underlying event.
The second problem is even more serious: Prediction markets can reward people who are not only informed about an outcome, but also able to influence it. Academic research has warned that when traders benefit from outside incentives or can take actions that affect the underlying event, information aggregation can break down. A market is supposed to measure probability. But when the market itself becomes a source of incentive, it begins to reshape the probability it claims to observe.
This concern is no longer theoretical. Reuters reported this month that trading on strikes on Iran and the ouster of Ayatollah Ali Khamenei had sparked ethical scrutiny and insider trading after unusually opportune bets were reported; In a separate report, Reuters noted that Polymarket removed bets on a nuclear explosion after public backlash. Even if only a small number of traders act on non-public information, the message to everyone else is corrosive: it may be access, not knowledge, that is rewarded.
There is a third risk, and it is profoundly crypto-native: these platforms increasingly function as media engines as much as markets. Axios reported in February that prediction market accounts were spreading false, misleading or context-free claims to millions of people on social media, turning market probabilities into viral stories before the facts were established. When screenshots of thin or sensational markets are circulated as “truth,” bad actors have no need to influence the event itself. They just need to influence the information environment around them.
The mistake for advisors and allocators is to view any liquid market as legitimate simply because price discovery exists. Crypto has real work to do: modernize regulation, improve transparency, and make capital markets more programmable. But building the most efficient rails for speculating on war, regime changes or the collapse of civil society is not a financial innovation. This is an internet-wide moral hazard. Prediction markets don’t just predict power. In their current cryptographic form, they reshape it by rewarding those most willing to exploit instability.
Headlines of the week
Francisco Rodrigues
Although this week showed clear progress on the regulatory front, market anxiety associated with AI disruption has started to impact the crypto industry.
Chart of the week
Geodnet decoupling suggests potential fundamental reassessment
Geodnet, a decentralized physical infrastructure network (DePIN) protocol providing high-precision positioning for robotics and physical AI, shows a clear fundamental decoupling. As its price has moved sideways alongside an underperforming DePIN index (down 3% against BTC, according to CoinDesk Data), monthly token burns have reached $500,000, currently neutralizing around 60-80% of new issuance. This divergence is driven by growing data revenues from autonomous drone fleets and humanoid robot developers. As the network shifts from building infrastructure to a high-margin data layer for the machine economy, the current imbalance between supply and demand suggests a potential fundamental reassessment.
Listen. Read. Watch. Get involved.
Looking for more? Get the latest crypto news at PK Press Club.com and market updates at PK Press Club.com/institutions.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or its owners and affiliates.
