Ethereum co-founder Vitalik Buterin called prediction markets a healthier alternative to traditional investing and social media discourse on emotionally charged topics.

Writing on Farcaster, Buterin argued that prediction markets tie opinions to financial consequences. This creates an accountability absent from platforms where users gain clout without repercussions for incorrect predictions.

Buterin dismissed concerns that prediction markets incentivize harmful behavior. He noted that “small-scale markets over large-scale events are not like this.”

The co-founder contrasted prediction markets with social media, where people declare “THIS WAR WILL DEFINITELY HAPPEN” without facing accountability when events unfold differently.

Bounded prices reduce pump-and-dump dynamics

Buterin highlighted a structural advantage prediction markets hold over traditional equity markets. “I actually find prediction markets to be healthier to participate in than regular markets. A key reason why is that prices are bounded between 0 and 1,” he wrote.

The bounded pricing structure reduces reflexivity effects, “greater fool theory,” and pump-and-dump schemes that plague traditional markets.

Prediction market contracts settle at either 0 or 1. This removes the speculative mania that drives assets to irrational valuations.

Buterin acknowledged theoretical risks around creating harm incentives. A political actor with access to a “CAUSE DISASTER” button could profit by betting on catastrophe.

He countered that regular stock markets present identical risks at far higher volumes.

The Ethereum founder shared personal experiences using prediction markets to calibrate emotional responses to news.

“I can personally report a few times reading a news headline, feeling scared, then checking polymarket prices and feeling calmer,” he wrote.

Polymarket returns to US market after three-year ban

Polymarket, the world’s largest prediction market platform, launched in the United States in early December 2025 after nearly three years of regulatory prohibition.

The platform began phased rollout with sports prediction contracts distributed through rolling invitations.

The comeback follows Polymarket’s 2022 settlement with the Commodity Futures Trading Commission. The platform paid a $1.4 million fine and ceased US operations after CFTC charges.

Buterin contrasted prediction markets with mainstream media, which “drive you to believe sensational conclusions” through headline writing.

Social media offers even less accountability, where users monetize clout gained from making bold predictions that never face verification.

“With prediction markets, if you make a dumb bet, you lose, and the system (i) over time becomes more truth-seeking, and (ii) shows probabilities that reflect genuine uncertainty in the world much more faithfully than these other systems,” Buterin wrote.