How global crises are turning into financial assets

Prediction markets are facing a new kind of scrutiny — and this time it’s not about sports or elections. It’s about war and diplomacy. Platforms like Polymarket have turned nearly every headline into a tradable event, with daily trading volumes topping USD 100 mn. The business is booming: the total positions taken on these platforms surpassed USD 8.3 bn in December, The Guardian reports. But as bns flow into transactions tied to geopolitical flashpoints, national security experts and lawmakers are raising concerns about what happens when global crises become financial instruments.

At the heart of the debate is the incentive structure itself. Polymarket CEO Shayne Coplan has openly praised the model, saying “it creates this financial incentive for people to go and divulge the information to the market.” Critics argue that this very feature rewards those with material, non-public information. Blockchain analyst Andrew 10 Gwei described insider trading as “a core feature of the system,” claiming it is what makes prediction markets so fast and often so accurate. This advantage concentrated wealth by granting fewer than 0.04% of accounts more than 70% of the total realized gains, accumulating USD 3.7 bn.

Broadcasting secrets: Highly accurate positions have appeared shortly before major global events, such as when one user placed tens of thousands of USD on contracts just 24 hours before 200 Israeli fighter jets bombed Iran, earning USD 128k in the process. Former White House ethics lawyer Richard Painter warned that such dynamics could have serious consequences on US national security. “If you know we’re going to bomb Iran in the next week and you start placing [wagers], then the prediction market tells the Iranians they’re about to get bombed,” he said.

A weapon for foreign influence: The Atlantic Council has described prediction markets as “dual-use infrastructure.” Unlike traditional markets, these platforms often operate with thinner liquidity, making them more vulnerable to coordinated actors’ trading activity. In theory, state or non-state actors could take strategic positions to move odds, shape narratives, or amplify misinformation. During volatile geopolitical moments, even small shifts in pricing could feed back into online discourse, reinforcing speculation or panic.

Governing for gains: The scale of money involved raises the specter of officials influencing real-world decisions to protect personal trading positions. A bill has already been introduced in the US Congress that would bar political insiders from participating in these markets.

However, supporters argue that these markets improve price discovery and democratize forecasting. Critics counter that transforming war and diplomacy into tradable contracts risks creating incentives that thrive on instability itself.

MARKETS THIS MORNING-

It is shaping up to be a volatile week of trading as markets react to US President Donald Trump’s latest tariff announcement and brace for Nvidia’s earnings out later this week. Wall Street futures are in the red this morning. Looking at Asia-Pacific markets, the Kospi and Hang Seng are starting the week in the green, while Japan’s Nikkei is closed for the Emperor’s Birthday.

THE CLOSING BELL-

The EGX30 fell 2.2% at yesterday’s close on turnover of EGP 4.6 bn (26.4% below the 90-day average). Local investors were the sole net buyers. The index is up 18.5% YTD.

In the green: Misr Cement (+2.1%), Edita (+0.8%), and Kima (+0.4%).

In the red: Rameda (-5.7%), Fawry (-5.3%), and GB Corp (-4.7%).