Thomas Peterffy, Founder and Chairman of Interactive
Brokers, appeared on CNBC to discuss prediction markets and their differences
from long-term investing.
The segment began by replaying an earlier discussion in
which Josh Brown noted, “most of them, the more they play, will lose money,”
and added that prediction markets are “not the same as investing in the stock
market.” Peterffy was invited to offer his perspective and disagreed with these
points.
Serious Questions, Not Celebrities: Peterffy Explains
Peterffy explained that his interest in prediction-style
questions began about ten years ago as an educational tool. He described the
approach as asking “yes or no questions” to illustrate the probabilistic nature
of future events, aiming to help customers understand uncertainty.
He acknowledged that some markets have shifted toward less
serious topics, noting that “some people picked up on this idea” and created
questions about celebrities. However, he emphasized that the core intent was to
focus on economic and climate indicators, which he described as “very, very
serious questions.”
49.5% Profit Rate Shows Market Efficiency
According to Peterffy, prediction markets can help form a
consensus view about the future and serve as a hedging mechanism. He compared
the risk of outcomes going to zero with options trading, saying that “options
can go to zero” without making them invalid trading tools.
Interactive Brokers has expanded into prediction markets in
recent years. Brown questioned whether demand for bets on topics such as
climate outcomes or awards would ever rival traditional investing. Peterffy
responded that in prediction markets, “49.5% of the people make money and 50.5%
of the people lose money,” noting that such balance does not undermine the
usefulness of the market.
Prediction Markets Require Regulation Oversight, Guidance
The discussion also covered regulation and misuse. Brown
raised concerns about betting on military actions and potential insider
activity. Peterffy said the Commodity Futures Trading Commission requires
surveillance for manipulation and insider information and that questions about
“war or military action” are “supposed to be prohibited.”
Despite these concerns, Peterffy expressed optimism about
growth. He said he believes these markets will become “much, much larger,”
arguing that they address “all the questions about our future.” Brown agreed on
their informational value but emphasized the distinction between long-term
investment and sequential betting markets.
This article was written by Tareq Sikder at www.financemagnates.com.
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