Recent findings challenge the stereotype that prediction market participants are merely sports bettors under a different guise. Ian Baer, who created the ELI Report, aims to replace intuition with data-driven insights, akin to traders evaluating new contracts.
In his latest analysis, Baer approached the task of defining the growing demographic of prediction market users in the United States with some preconceived notions. While some assumptions were validated, others were disproved, particularly regarding the identity of these traders.
“I initially thought they were a mix of cryptocurrency enthusiasts and sports gamblers,” Baer shared with Gambling Insider. “However, that’s not entirely accurate. There’s actually a 40-50% overlap between the worlds of sports betting and prediction markets.”
Interestingly, Baer noted a strong connection between prediction markets and cryptocurrency fans. Yet, he was surprised to discover that engaging in prediction markets is a distinct profession, markedly different from traditional gambling.
The ELI Report's behavioral analysis predicts that 17 million individuals will engage with prediction markets this year. Notably, many of these participants do not view their activities as gambling, despite the fact that a significant number incur losses on these platforms. In fact, 43% of them are less inclined to identify as gamblers compared to the average American, showing a preference against the element of chance found in typical gambling.
Baer argues that there are enough nuances in how these traders operate to explain why they don’t see themselves as bettors, even though sports contracts account for around 85-90% of the trading volume at Kalshi. The report highlights that this group is four times more likely than the national average to have engaged in fantasy sports, indicating their proclivity for “probabilistic” thinking.
“In prediction markets, we discuss political and economic trends, requiring a deep understanding of market dynamics and policy-making,” Baer explained. “This group is more knowledgeable and attuned to data than typical sports gamblers. To succeed in prediction markets, one must grasp the complex interrelations between various sectors, politics, and market forces.”
Baer also observed that this educated demographic considers prediction market data to be a more trustworthy news source than conventional media. While they stay updated with traditional outlets, they regard this information as mere data points rather than definitive truths.
“For over a century, we’ve treated political polls as news. However, the predictive shortcomings observed in recent presidential elections raise questions about their validity,” he remarked. “Thus, is prediction market data a superior reflection of public sentiment compared to surveys or polls? Absolutely. I would always prefer to see where people invest their money rather than rely on opinions without stakes involved.”
Moreover, this group is 2.8 times more likely to opt for high-risk investments and 13 times more likely to show interest in political matters, showcasing their unique profile as engaged and informed participants in the financial landscape.