View / Where are the customers’ hedges?

Looking around at our casino economy, I keep asking: Who is all this for?

The long tail of nonsense bets on prediction markets can’t possibly be what Dwight Eisenhower had in mind when he endorsed the “people’s capitalism” put forward by America’s greatest Cold War propagandist, Theodore Repplier. The future of commerce can’t be a prediction market for whether someone will deliver me four kiwis. The future of investing can’t be crypto perps and a series of rolling bets on Nvidia stock that expire every midnight in a white-knuckled Groundhog Day portfolio.

These products confuse populist capitalism, the urge to beat the elite at their own game, with Repplier’s people’s capitalism, where access is broad, affordable, and fair. Robinhood is on a mission to “democratize finance for all.” The mutual fund did that 100 years ago. Index funds perfected it 50 years later. Trump Accounts — which launch today — could expand it now. A fund that charges fees seven times higher than an S&P 500 index fund for 200% exposure to a nuclear-reactor company with zero revenue is something else entirely.

At their most benign, these products are the Dubai Chocolate of markets. They were nowhere, are suddenly everywhere, and are a fun novelty but nothing we couldn’t actually live without. At their most pernicious, they are financial poison.

The head of the Commodity Futures Trading Commission was right when he said that prediction markets can perform “useful functions for society… to hedge commercial risks like increases in temperature.” But he was wrong that the ideal users are “everyday Americans.”

In theory, it makes sense to offset your heating bill by correctly predicting a cold snap on Kalshi. But a better route to that outcome would be for your electric utility to do that hedging itself and share those savings with you. This already happens: The option that utilities offer to smooth out your monthly bill is made possible by an old prediction market — electricity futures, around and regulated since the 1990s — and doesn’t require furiously gambling on your phone.

When we had Vail Resorts’ CEO on Compound Interest earlier this week, he surprised me by saying the ski-mountain operator doesn’t hedge weather. There are nearly 800 weather-related bets available on Kalshi and Polymarket today. They could hit big for someone bold enough to tamper with a thermometer at a major metro airport, or for an insider at the National Oceanic and Atmospheric Administration. But somehow none of them fit the needs of a company whose revenue hinges on whether it’s going to snow next winter.

The question that captured the shortcomings of 20th-century finance was “where are the customers’ yachts?” Today’s is: “who is this for?”