There were two major developments last week:
First, Kalshi secured a $300 million Series D investment led by Sequoia and a16z, valuing the company at $5 billion. Kalshi also announced plans to go international, expanding its offering to more than 140 countries and is now the largest prediction market in the world.
That announcement came just a few days after ICE invested $2 billion into Polymarket at a pre-money valuation of $8 billion. We covered that move earlier in detail, then unpacked the legal nuances around federal vs. state jurisdiction on Full Court Press.
A trend emerged across both releases: Investing and prediction markets are flirting with each other. Or, perhaps we should say, prediction markets are trying to woo investing? From the a16z piece announcing the Kalshi investment:
Every question—whether about politics, economics, technology, sports, or the weather—becomes an investable asset.
And from Shayne Coplan, quoted in the ICE press release:
By combining ICE’s institutional scale and credibility with Polymarket’s consumer savvy, we will be able to deliver world-class products for the modern investor.
Coplan’s quote begs the question: What exactly is the product for the “modern investor?” Tokenized stocks perhaps? That seems to be in the works. Or is it prediction markets? Because here’s the thing– tokenized or not, stocks can be investments. Prediction markets can’t because you can lose everything, and there is no margin of safety.
The a16z quote, by contrast, leaves no room for interpretation. It explicitly characterizes prediction market contracts as investable assets. This is heartbreaking to see from one of the country’s leading VC firms. Their job, literally, is to invest. So it’s difficult to believe that some of the sharpest minds don’t realize and/or don’t care that if you can lose everything based on a contingency, you’re not investing.
The lines between finance and gambling were already blurring. Now, apparently, a sports bet is an investable asset. What’s next–parlays in portfolios, or, dare we say it, in retirement accounts? Do you see the absurdity here?
This is not sustainable. Either the courts will intervene (hopefully before a crisis), or Congress will react (likely after one), or AI will call out the increasingly nonsensical positions and repackage them in a way a 5th grader can understand–triggering a backlash strong enough to force change. There’s also a darker possibility: If the courts don’t step in and wrangle this issue, we could soon see gambling style prediction markets entering our school curriculums and potentially financial literacy classes, under the guise of investing. Even more stark, your favorite athlete may get hurt because someone, somewhere, had meaningful money riding on it. We pray it doesn’t come to that–but at this rate, we wouldn’t bet against it.
We don’t believe a16z genuinely thinks a sports bet is an investment. More likely, they’re expanding the definition of investing to make their investment thesis work. Crypto went through a very similar journey, but we digress.
So yes, prediction markets are sliding into investing’s DMs. These two announcements were just the latest opportunities for flirtation. But the seduction has been underway for a while.