Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Ryan Kirkley on how crypto prediction markets risk encouraging manipulation and amplifying misinformation on a large scale.
- Top headlines institutions should be aware of by Francisco Rodrigues.
- Geodnet decoupling suggests fundamental reassessment in Chart of the Week.
Thanks for joining us!
-Alexandra Levis
Expert insight
Prediction markets don’t just predict power – they transform it
By Ryan Kirkley, Co-Founder and CEO of Global Settlement Network
Prediction markets are often set up as neutral forecasting tools: efficient ways to gather information and convert collective belief into a price. That case is not entirely wrong. The academic literature has long found 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 need to be honest about what the sector is building here. The crypto version of prediction markets is no longer just about forecasts. It is about the financialization of instability in the real world.
That distinction matters. On Polymarket, for example, users can bridge assets from Ethereum, Solana, Bitcoin and other chains; these deposits are converted to USDC.e on Polygon, where fully supported yes/no positions trade and settle on-chain as tokenized claims. In other words, crypto does not only host these markets. It gives them global reach, cross-chain financing and low-friction settlement. It is impressive market design. This is also precisely what makes the social risk greater.
Once you turn war, political violence, public disorder, or institutional breakdown into tradable crypto instruments, you create new incentives for bad actors. The first is obvious: people with privileged information can try to make money from it. US regulators have long recognized that not all events belong in a financial market. CFTC Regulation 40.11 excludes event contracts involving terrorism, assassination and war, among other categories deemed contrary to the public interest. It is not anti-market moralizing. It is a recognition that some contracts do more than disclose 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 who are able to influence it. Academic research has warned that when traders have 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.
That concern is no longer theoretical. Reuters reported this month that markets for Iran strikes and Ayatollah Ali Khamenei’s ouster prompted ethics and insider trading scrutiny after unusually well-timed bets were flagged; in a separate report, Reuters noted that Polymarket removed bets on a nuclear explosion following public backlash. Although only a small number of traders act on non-public information, the message to everyone else is corrosive: access, not insight, may be what gets rewarded.
There is a third risk, and it is profoundly crypto-native: These platforms are increasingly acting as media engines as much as markets. Axios reported in February that prediction market accounts spread false, misleading or context-free claims to millions on social media, turning market odds into viral narratives before the facts were established. When screenshots of thin or sensational markets circulate as “truth,” bad actors don’t need to influence the event itself. They only need to influence the information environment around it.
For advisors and allocators, the mistake is to treat any liquid market as legitimate simply because price discovery exists. Crypto has real work to do: modernizing settlement, improving transparency, and making capital markets more programmable. But building the most efficient rails to speculate on war, regime change or civil collapse is not financial innovation. It’s moral hazard on an internet scale. Prediction markets don’t just predict power. In their current crypto form, they are reshaping it by rewarding those most willing to exploit instability.
This week’s headlines
Francisco Rodrigues
While this week has shown clear progress on the regulatory front, market anxiety combined with AI disruption has begun to affect the crypto industry.
Chart of the week
Geogrid decoupling suggests potential fundamental re-transformation
Geodnet, a DePIN (Decentralized Physical Infrastructure Network) protocol that provides high-precision positioning for Robotics and Physical AI, shows a clear fundamental decoupling. While the 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 the growing data revenue from autonomous drone fleets and humanoid robot developers. As the network pivots from infrastructure build-out to a high-margin data layer for the machine economy, the current supply-demand imbalance suggests a potential fundamental reassessment.
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Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.
