Publication date: May 20, 2026, 11:20 AM.
Updated on: May 20, 2026, 11:20 AM.
- Asset management firm highlights event contracts as a fresh way to evaluate risk.
- They emphasize the possibility for enhanced forecasting accuracy.
- Fund manager points out potential for manipulation and uncertain regulations as significant challenges.
Although prediction markets could provide investors with innovative tools for risk assessment, the industry is still in its infancy and requires further development.
In a recent analysis, American Century asserts that event contracts can provide crucial insights that were previously hard to access, such as inflation and supply chain metrics, which can be beneficial for businesses and various investors.
“Event contracts tackle a wider array of inquiries,” emphasizes the asset management company. “For instance, businesses may utilize prediction markets to assess the chances of Congress approving essential legislation or to predict the duration of a strike.”
This perspective holds merit. For example, the Consumer Price Index (CPI) ranks among the most closely monitored economic indicators each month. Kalshi Research’s report covering the period from February 2023 to mid-2025 indicated that CPI estimates produced by the prediction market outperformed those forecasted by Wall Street economists. American Century believes that the diversification of insights could benefit prediction markets in the future.
“Prediction markets stand to gain from the collective intelligence of various participants, as aggregating these insights might yield forecasts that surpass those from any single expert,” remarks the fund manager.
Challenges for Investor Engagement
As prediction markets receive increased mainstream coverage and projections suggest that their volume could exceed $1 trillion by 2030, more investors are eager to participate.
However, the lack of pure-play options poses a challenge, as Kalshi and Polymarket are currently private enterprises. This absence of direct access to prediction market platforms is driving some investors to consider stocks like Coinbase Global (NASDAQ: COIN) and Robinhood Markets (NASDAQ: HOOD) as alternatives.
“For instance, financial services apps like Robinhood and sports betting platforms such as DraftKings are options,” notes American Century. “Moreover, CME Group, a premier derivatives marketplace, and Interactive Brokers Group, a brokerage firm, also provide event contracts.”
Additionally, Intercontinental Exchange (NYSE: ICE), which owns the New York Stock Exchange (NYSE), stands out as a significant financial supporter of Polymarket.
Inherent Risks in Prediction Markets
While prediction markets are broadening their applications and seeking to attract more institutional investors to lessen their reliance on sports derivatives, the industry is beleaguered by various legal and regulatory uncertainties. These concerns contribute to American Century’s “cautious perspective” on yes/no exchanges.
The asset manager points to risks of manipulation (including insider trading) and an unclear regulatory landscape as two primary obstacles confronting the prediction market sector. Public perception of these markets as unfair trading venues could lead to reputational harm.
“We are closely monitoring the regulatory climate to understand how the conflict between state laws and the CFTC will unfold and to gain insights into insider trading enforcement,” concludes the fund manager. “Until the potential for increased regulation becomes clearer, we believe it is prudent for investors to adopt a wait-and-see attitude before expanding their involvement in prediction markets.”