Retail traders fuel surge in U.S. prediction markets

Adam Bjorn says aggressive American retail traders are driving rapid growth in U.S. prediction markets. High-volume, buy/sell style trading attracts recreational investors who want short-term contracts that trade outside stock market hours.

Bjorn runs Plannatech Enterprises, which supplies the platform for Prime Sports in Kentucky, New Jersey and Ohio and operates as Betcris in Arizona. Plannatech is in the process of acquiring Prime Sports as the sportsbook emerges from bankruptcy.

He pointed to traders who use mobile brokerage apps and then look for similar trading opportunities when traditional stock markets are closed. Many retail accounts have little to trade at night or on weekends, and those users are increasingly active in prediction platforms.

Bjorn described prediction markets as similar to traditional exchanges, with liquidity provided by market makers and small margins captured by professional traders. He added that seeing heavy trading volume has moved him from skepticism to cautious acceptance.

Contracts on these platforms typically resolve to full value or zero and can be traded or cashed out at any time. That simple buy-or-sell format draws recreational money and some more experienced traders who treat short-term sports contracts like other financial products.

He noted that hedge funds and proprietary trading firms have begun small sports trading operations, but those account for a small share of overall volume.

On regulation, Bjorn called the U.S. system fragmented across states and warned that punitive taxes could eliminate the product. He warned that ‘If they put excise tax on prediction markets, then it’s a dead product.’ He urged regulators to consider how taxation and classification would affect liquidity and consumer access.

Bjorn argued that large licensed sportsbooks have not fully grasped the different business models and consumer behaviors behind prediction markets. He said some incumbent firms are exploring entry into the space in response to capital flows and sector valuations.

Plannatech has held talks with market makers about supplying liquidity, back-end pricing and risk management, and could plug its platform into exchanges. The company has not committed to launching its own exchange while it focuses on the Prime Sports acquisition.

Bjorn suggested prediction platforms concentrate on simple tradeable contracts while state-licensed sportsbooks offer parlays and other complex bets. He called for industry efforts to educate consumers and regulators about the distinctions between those product types.