Financial Opportunities Uncovered: A Keeler & Nadler Family Wealth Podcast
Come take a journey with us as we explore topics and concepts from the obscure to those hiding in plain sight, so obvious that you wonder how you missed the low lying fruit. Financial planner and host Andy Keeler and his team, thought leaders, and guests discuss everything from maximizing your money and lowering taxes to how to gain the upper hand in an auction and the math behind online gambling. We discuss wealth building strategies and wander into deeper aspects of the human mind that can improve or inhibit our ability to build wealth with confidence.
Financial Opportunities Uncovered: A Keeler & Nadler Family Wealth Podcast
How Prediction Markets Turn Bets Into Real-Time Forecasts
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A contract trading at 70 cents can tell you something simple and powerful: the crowd believes there’s about a 70% chance an event will happen, and that number moves as the world changes. That’s the core idea behind prediction markets, and it’s why they’ve become one of the most fascinating meeting points of behavioral finance, economics, and real-time forecasting.
Andy is joined by Mark Beaver, partner at Keeler and Nadler Family Wealth and head of our investment committee, to unpack how “event contracts” work, why their prices behave like living probability estimates, and why money on the line can sharpen judgment. We connect the dots to the wisdom of crowds with concrete examples, from the jelly bean jar effect to game show audience lifelines, and then trace the modern rise of platforms like Polymarket and Kalshi along with earlier research such as the Iowa Electronic Markets.
We also dig into the practical uses beyond politics. Internal prediction markets at companies like Google and HP show how collective information inside an organization can outperform traditional forecasting models, while sometimes stripping away corporate politics. Then we face the hard questions: regulation vs innovation, the risk of insider trading, and whether market manipulation can distort public perception even briefly.
If you like investing, decision-making, or simply understanding how forecasts get made, this conversation will give you a clearer framework for thinking about probability in the real world. Subscribe, share the show with a friend who loves predicting the future, and leave a review with your take: are prediction markets a helpful tool or a slippery slope?
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations.
It is only intended to provide education about finance, tax, retirement and related planning topics. To determine which investments or strategies may be appropriate for you, consult your financial, tax or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results.
Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Keeler & Nadler Family Wealth is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Keeler & Nadler Family Wealth and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Keeler & Nadler Family Wealth unless a client service agreement is in place.
Wild Examples That Hook You
SPEAKER_00Did you know you can bet on whether members of Congress will be banned from trading stocks? Or who will win the Oscar for Best Actor? Today on Financial Opportunities Uncovered, we're diving into one of the most fascinating intersections of economics, technology, and human psychology, prediction markets. These are markets where people trade contracts based on the outcomes of future events, essentially putting money behind their predictions. To help us unpack how they work and why they matter, I'm joined by one of our regulars, Mark Beaver. Mark is a partner here at Keeler and Nether Family Wealth and heads our investment committee. Welcome back, Mark.
SPEAKER_01Thanks, Andy. I predict this will be a good episode.
SPEAKER_00I think you're right. So we're talking about the wisdom of a crowd of two. We'll get into wisdom of crowds here in a second.
What Prediction Markets Actually Are
SPEAKER_00So let's start with the basics. For someone hearing the term prediction market for the first time, what exactly is it?
SPEAKER_01So prediction markets are really just a way for people to bet on outcomes on everyday events. Um you can bet on just about anything. Uh everything from who's going to win the Oscars to is the Fed chairman going to say rates five times in the next Fed meeting? Really, it's it's limitless. Uh and so they they call each of these bets an event contract. And so you're saying yes or no to the outcome of these events. Um if the event takes place, that contract is worth a dollar. If the event doesn't take place, it's not worth anything. So an example will be uh will it rain tomorrow? You could bet yes or you could bet no. If you're right, you get a dollar, if you're wrong, you get nothing. And the price of that contract will vary based on the likelihood of that event taking place.
SPEAKER_00Well, so the first thing that that I want to come back to is you've said the word bets a number of times. If you're an avid listener to the podcast, you might remember one of the episodes called Why Smart People Make Dumb Bets. In that episode, we really picked on parlay bets, which um are referred to as sucker bets. This is a whole totally different animal. Um, and as you will hear, the wisdom of the crowd, which we'll talk about, the probability of you winning is probably a lot higher. And the um the outcome in Mark's example is much more known.
How Prices Become Probabilities
SPEAKER_00So if a contract that pays a dollar, if an event happens, is trading at, say, 70 cents, the market is basically saying there's a 70% chance that the event will happen, right?
SPEAKER_01That's right. Yeah, the price is basically changing as the probability changes over time, as the as information becomes more available.
SPEAKER_00Probability estimate.
SPEAKER_01Right. Yeah. So as you get closer to the event, typically you get more accurate, you know, as closer as you get, but it's changing in real time.
SPEAKER_00Aaron Powell That's something I think some people find counterintuitive. You'd think that experts or analysts would do better than a crowd of traders, but prediction markets leverage what economists call the wisdom of crowds, and I've said that a couple of times already. Different participants have different pieces of information. Maybe someone follows a political race closely,
Why Crowds Can Beat Experts
SPEAKER_00someone else has insider industry knowledge, maybe not insider uh information, someone else is good at statistical model modeling. When they all trade in the same market, their information gets aggregated into that price, and money on the line sharpens the incentives.
SPEAKER_01Yeah, that's that's a good point. You know, you think about the the game that you might have seen at school or other events where they've got a jar of jelly beans and they say how many guess guess the amount of jelly beans in the jar. Um in a lot of cases nobody gets it right. But if you took all of those guesses and you averaged them all up, a lot of times that's very accurate uh to the actual number. So as a whole, they were pretty accurate. Individually, not so accurate.
SPEAKER_00That's so cool. Well, prediction markets, that term is perhaps a new concept. Um, some form of prediction markets have been around a while. One example is Who Wants to Be a Millionaire, the game show. The the audience lifeline is essentially a collection of the audience's collect uh collective wisdom, and it's accurate 91% of the time. I'm an avid Ohio State football fan. I go to the the all the home games, and one of the local real estate firms has a contest where they choose one audience member, um, one spectator to participate in this game. But they show the game up on the big screen for 100,000 people to watch. And when it comes time for the participant to give the answer, the crowd screams the letter C, for example. And because you're pulling it, like the jelly bean example, um, you you have the collective wisdom of that crowd. And maybe some people are seeing things that other people aren't or whatever.
From Iowa To Polymarket
SPEAKER_00One of the most famous prediction markets is Iowa Electronic Markets, which was run by researchers at the University of Iowa. It's been around since the late 1980s and allowed small stakes trading on election outcomes. What researchers found was fascinating, the market predictions were often more accurate than traditional opinion polls.
SPEAKER_01And now what we're seeing in in today's markets, two very popular uh marketplaces out there, one's called poly market, another one's called CalShi. Uh, and so that's where they're they're letting users buy and sell these contracts, and it can be again, you know, political outcomes, uh, economic information, political events, social and pop culture events that are taking place. For instance, during the US presidential elections, uh, markets like these consistently are updating the probability of each candidate winning uh as new information comes about. So polymarket uh actually correctly indicated that Trump would win the presidential race in 2024, far before most pollsters and other experts were willing to come to that conclusion.
SPEAKER_00Aaron Powell And obviously these are being used heavily in political forecasting. When I I looked at um polymarkets a week or two ago, and there's a whole section or category
Corporate Forecasting With Internal Markets
SPEAKER_00on politics. Trevor Burrus, Jr.
SPEAKER_01They're also being used in business and research, even different uh corporate decision-making processes as well.
SPEAKER_00Yeah, I think that's one of the coolest applications. A famous example comes from Google, which ran internal markets where employees could trade contracts on things like product launch dates or whether a project would hit a milestone. Because employees throughout the company had different information, engineers, managers, analysts, the market often surfaced insights that the leadership didn't realize existed. So instead of asking one manager for a forecast, you basically ask the entire organization.
SPEAKER_01And what's interesting in that example too is you might actually in this case strip out some of the politics. I know there's some political issues potentially with in these markets that we'll talk about, but in this case, you might strip out some of the corporate politics because you're not saying your boss asking you what you think about their idea, you're betting into this predictive market as a collective unit and maybe being more honest about how you're going about it. Trevor Burrus, Jr.
SPEAKER_00That's a that's a great point. In other words, maybe the rank and file employees, they don't necessarily have, they don't have to stake their particular view one way or the other because the outcome doesn't necessarily reflect on them individually. Whereas uh a C-suite executive, where this is part of their decision-making process, might feel jaded one way or the other. That's a that's a great point, Mark.
SPEAKER_01Another company experiment with with that was HP. Their internal prediction markets helped them forecast things like printer sales more accurately than their traditional forecasting models even could do.
SPEAKER_00Can you give an example of how that might work?
SPEAKER_01Yeah, so an example of how these these contracts and markets work. Uh let's say that there was a contract that would pay you one dollar if a technology company went public before the end of the year. Okay. So at first the contract is trading, let's say, for 40 cents, which means that traders think there's a 40% chance that that's going to take place. But then news breaks that the company's hired an investment bank to prepare for an IPO, and then all of a sudden that contract spikes up to 70, 80% because the probability is obviously much higher at that point.
SPEAKER_00And so again, you know the outcome is one dollar and it's costing you 70 cents. This is very different from the parlay bets we covered in that that um betting episode or gambling episode that we had uh last year, where you're betting on Jalen Hurts throwing an interception in the third quarter to a specific player. There's so many variables there. The outcome, the only the o the the only thing that's gonna be able to predict the outcome of that is a supercomputer. It can't predict that a gust of wind came in during the middle of the play or that Jalen Hertz was out the night before binge drinking.
SPEAKER_01That a fan storms the field and tries streaking across, you know, right before it.
SPEAKER_00Yeah, here it's uh a lot more certain. So in the example you just gave, where at first the contract is trading at 40 cents, but new information emerges, the contract starts trading at at 70 cents, it's fascinating because it's almost like a living forecast. Trevor Burrus, Jr.
SPEAKER_01Yeah. Every every trade is updating uh the prediction in real time. And in some ways, that's not unlike the stock market. You know, the stock market is reacting to news, influences, data that the company is providing, but this is uh even more real time than that.
SPEAKER_00Another concept uh that that um you encounter with these prediction markets is this concept of decentralization. So the what we just described is basically turning forecasting into something that's decentralized.
SPEAKER_01Aaron Ross Powell Yeah, I mentioned you know that there's some similarities to how the stock market is operating, but in in stock markets, you have analysts that are reviewing financial reports and saying, you know, your growth rate is X and your profit is Y, and so therefore we predict your price should be here in five years. Uh there's not so much of that happening here. You know, this is really letting anybody and anybody with any kind of insight or idea on what is going to take place participate in what's going on.
Regulation And Insider Trading Risks
SPEAKER_00But they're not without controversy. I know um there's been a lot of talk about insider trading, their regulatory questions, because again, the prediction market concept, polymarkets and call she are relatively new. Uh it's sort of like betting, and one would think that there would be an opportunity for insider trading to run amok.
SPEAKER_01Yeah, there there definitely is. It's there is a lot of uh gray around this whole thing right now. In many countries, prediction markets fall into that gray area between financial markets and gambling. And so they're trying to figure out you know, how do you actually regulate this? Who is supposed to be regulating it, what's the influence that this is having on political outcomes or other outcomes in in different cases. Um, but you know, at the same time, there is a strong argument that uh the markets uh are productive in providing valuable information.
SPEAKER_00And prediction markets, we should say, are regulated. Here in the U.S., they're regulated by the Commodity Trading Commission. And so there's there is this tension. They can be powerful forecasting tools, but they look a lot like betting.
SPEAKER_01Aaron Powell Yeah. And and how regulators treat them uh will probably continue to be an evolving process here into the future. We're still in the very early stages of things.
SPEAKER_00Aaron Powell What about the threat of insider trading? I think there have been a few uh few documented cases of insider trading or allegations and some settlements.
SPEAKER_01Aaron Powell And so when you think about these outcomes and the fact that there are people involved in those events that could alter the outcome of that event. Right. Um so uh there have been some issues. It kind of reminds, you know, there's a lot of conversation around uh professional sports and gambling and betting going on with that. And it's similar because they can affect the outcome of a game. Um so that's why you're seeing those events pop up. A couple that are are interesting, uh, one way to put it is uh there were bets on uh Maduro being ousted in Venezuela.
SPEAKER_00Uh what's the probability he's gonna be ousted?
SPEAKER_01Yeah, but will he be ousted by Xdate or yes or no, something along those lines? Well, yeah, as you remember, you know, nobody really knew that. It just kind of came out of nowhere. All of a sudden, you know, there was this big announcement that he was taken out, and here's how it happened. Well, there was a trader that bet $400,000 that he would be removed right before it happened. So they can't really prove exactly that this was insider information, but it strongly looks that way for someone to put that kind of money down right before it happened. Uh, and so that that was one event that people are are speculating. That was probably somebody that had inside information that it was going to take place.
SPEAKER_00And I'm not sure if it was that one, but one of the cases, the person that's accused of insider trading had never placed a bet before. So for someone to never bet and then all of a sudden bet $400,000, it's and get it right, it's a little suspect.
SPEAKER_01Or go from your little $50 bets to you know $400 million. That's a that's quite a difference. Another one I thought was interesting was there was a a quarterly earnings call with the CEO of Coinbase. So he's talking about how the business is doing, blah, blah, blah. And all of a sudden he says, Um, oh, sorry, I was just looking at the polymarket uh for this call, and I want to make sure I say uh crypto wallet, blah, blah. He listed off like 12 words. And they were there was an actual polymarket that said, Will he say these words in the thing? So he's he even literally said why he defined the outcome. So I uh, you know, speculation on whether he was trying to influence that for himself, probably not. I mean, I would think he's doing pretty well, but uh the fact that he just blatantly said that and and played right into the market is obviously manipulating the outcome of it in real time.
Manipulation Plus The Future Ahead
SPEAKER_00Really, what we're kind of talking about is manipulation. What if someone tries to move the market price to influence public perception? Does that actually work?
SPEAKER_01It it could. And this used to happen back in the day, maybe it still does in the stock market, where you'd have these big stock barons moving prices of the market just so they could get in or out at a better price. Not as much today because there's so much trading going on. Um but in these markets it it could happen, but it probably wouldn't last very long because there's so much information coming in that the the crowd again would kind of come in and wipe away any of those anomalies that would take place.
SPEAKER_00Aaron Powell Thinking about the future, I can see these expand in two directions. First, more integration into decision making. Governments, companies, and research institutions could increasingly use prediction markets as forecasting tools. Second, we talked a little bit about decentralization. Blockchain-based platforms are experimenting with prediction markets that operate globally without a central operator. If those systems mature, prediction markets could become more accessible and widespread.
Biggest Misconception And Wrap
SPEAKER_00Before we wrap up, what's the biggest misconception people have about prediction markets?
SPEAKER_01Probably that it's just gambling. I know I've said the word bet a lot, uh, and there is, of course, an element of that involved. But uh so while it involves betting and there is a degree of gambling, the I think the main difference is the just informational value of things and how all of that information is being aggregated into all of these decisions and how that could guide things. Um it's not just about winning or losing money. Uh, I think discovering that collective information and what what crowds believe about the future is an interesting point.
SPEAKER_00It's fascinating. That's a great way to put it. Markets as information engines. Clearly, these can be a valuable tool or a slippery slope. Mark, thanks for joining us today. And as always, we thank our listeners. I'm Andy Keeler, and this is Financial Opportunities Uncovered, brought to you by Keeler and Nadler Family Wealth. If you enjoyed this episode, be sure to subscribe and share it with someone who likes thinking about the future and how we might predict it. Or connect with us on LinkedIn or email me at andy.keeler at knwealth.com.
SPEAKER_01The opinions expressed in this program are for general information purposes only and are not intended to provide specific advice or recommendations. It is only intended to provide education about finance, tax, retirement, and related planning topics. To determine which investment strategies are appropriate for you, consult your finance, tax, or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always, please remember investing involves risk and possible loss of principal. Please seek advice from a licensed professional. Keeler and Nadler Family Wealth is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Keeler and Nadler Family Wealth and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Keeler and Nadler Family Wealth unless a client service agreement is in place.