Vitalik Buterin Cautions That Prediction Markets Are Becoming Excessively Speculative

Ethereum co-founder Vitalik Buterin has expressed apprehension regarding the current trajectory of prediction markets, contending that the industry is veering away from valuable economic instruments and towards short-term gambling.

Key Takeaways:

• Vitalik Buterin cautions that prediction markets are shifting towards short-term speculation and wagering.
• He advocates for the integration of onchain markets and AI to mitigate everyday expenses and inflation risks.
• Proponents argue that platforms like Polymarket and Kalshi can also function as decentralized market intelligence.

In a recent post on X, Buterin remarked that numerous platforms are “over-converging” into offerings focused on quick price bets and speculative trading rather than practical uses.

He cautioned that this trend threatens to reduce prediction markets to mere gambling establishments instead of frameworks that facilitate genuine economic planning.

Buterin Proposes Transitioning Prediction Markets from Betting to Hedging

Instead of concentrating on event betting or short-term financial results, Buterin proposed that prediction markets should transform into hedging tools aimed at shielding consumers and businesses from price fluctuations.

He described a model where onchain prediction markets collaborate with large language models (LLMs).

This system would monitor price indices across various categories of goods and services, such as food, housing, or transportation, categorized by region.

A user’s personal AI assistant would evaluate spending habits and create a customized portfolio of prediction-market positions reflecting anticipated future expenses.

The concept is to assist households and businesses in countering rising costs. Individuals could maintain traditional investments for growth while holding a collection of prediction-market shares linked to living expenses, establishing a safeguard against inflation in fiat currencies.

Advocates of prediction markets assert that the technology already possesses broader significance beyond speculation.

These platforms aggregate expectations regarding events, financial trends, and economic conditions, generating signals that some researchers claim can rival polling data.

Recently I have been starting to worry about the state of prediction markets, in their current form. They have achieved a certain level of success: market volume is high enough to make meaningful bets and have a full-time job as a trader, and they often prove useful as a…

— vitalik.eth (@VitalikButerin) February 14, 2026

Markets such as Polymarket and Kalshi have gained popularity by providing alternative perspectives on political and economic events.

Supporters claim they offer a decentralized source of intelligence that is less susceptible to manipulation by centralized narratives.

State Opposition to Prediction Markets Grows Amid Consumer Concerns

State opposition to prediction markets has been increasing for several months.

In 2025, the SWC urged the CFTC to ban sports event contracts, asserting that such products circumvent state protections like age verification, responsible gaming regulations, and anti-money laundering measures.

As reported, new legislation aimed at restricting interactions between government officials and prediction markets is being backed by over 30 Democrats in the US House of Representatives, including former Speaker Nancy Pelosi.

The impetus for these new restrictions stems from a controversial Polymarket wager, which began as a $32,000 bet but ultimately exceeded $400,000 shortly before the unexpected arrest of Venezuelan President Nicolás Maduro.

The bill introduced by New York Representative Ritchie Torres is the Public Integrity in Financial Prediction Markets Act of 2026.

Last month, Kalshi established a new office in Washington, D.C., as it intensifies efforts to influence federal and state policy amid increasing scrutiny of its products across the United States.

The company also appointed veteran political strategist John Bivona as its inaugural head of federal government relations.

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