Some betting markets don't just predict the future—they force it to happen.
April 17, 2026
Original Paper
Prediction Markets in Brazil: Regulatory Typology and Normative Proposal
SSRN · 6475260
The Takeaway
We think of prediction markets (like betting on elections) as neutral tools for finding the truth. But this paper argues that some markets are 'Class II,' meaning the market price itself creates an incentive that changes the outcome. For example, if a market says a CEO is going to be fired, that 'prediction' might lower the stock price and cause the CEO to be fired. It’s a legal paradox where a bet becomes a self-fulfilling prophecy. This means that instead of giving us a glimpse of the future, these markets can be used as a weapon to manipulate it.
From the abstract
This paper demonstrates that Brazilian law commits an ontological error by treating prediction markets as a unitary category. It proposes the distinction between Class I markets (whose contract object has no direct causal channel over the agents who produce the event, ontologically indifferent to the contract price, non-reflexive in the terminal sense) and Class II markets (whose contract object has a direct causal channel over the agents who produce the event, where the contract price creates a