Will the US government confirm Aliens exist?
This isn't an alient tech teaser, but rather a $40 million bet placed on something called a private prediction market. InvestorPlace's senior tech expert Luke Lango says we can get a huge amount of money flowing directly into our pockets from crazy bets with a few “Prediction Market” Stocks, without needing to place a single bet.
The Teaser
$64 billion to $1 trillion by 2030. This is the estimated growth of the prediction market.
Luke Lango's tech analyst background and past experience co-founding an analytics startup that used advanced quantitative models to forecast risk makes him tailor-made for this teaser.
We have covered his most recent work, including The Best Way to Play the Biggest IPOs Ever and White House Target Stocks.
Luke starts this teaser off with a familar pattern, he rattles off the names of companies that dominate their respective industry, such as eBay, Google, and Netflix, before saying that he's bringing us the same type of opportunity now.
He also gives us a nondescript date, Tuesday, October 13th, to circle in our calendars.
Classic investment newsletter teaser fodder.
But before we delve any further, what exactly are prediction markets and why should be we care?
In many ways, prediction markets are the ultimate bookies.
In the past, bookies or bookrunners, as they were formally known, were informal local establishments that accepted bets, set odds, and paid out winnings, or more often, chased down debts. Like a classic middleman, they made their money by keeping a percentage of the total bets placed.
This all changed in 2018 when the federal ban on sports betting was struck down and more and more states began legalizing gambling.
The local bookies business declined, while online gambling sites like DraftKings and FanDuel thrived.
Prediction markets are an outgrowth of this, while taking the logical next step, beyond sports wagers.
Like a sophisticated, digital Madame Cleo, prediction markets let anyone trade future events, from central bank interest rate decisions to the odds of commercial flight cancelations, and they are the fastest growing market in the U.S.
Similar to eBay's dominance of the online auction market and Google's peak 90% share of search, Luke foresees one clear winner in the prediction market space, and it could return 10x or more.
The Pitch
It's name and ticker symbol are only revealed inside a report called 10X Profits in the World’s Fastest Growing Market.
The report, along with several bonuses and perks are only available with a one-year subscription to Luke's Innovation Investor newsletter.
It costs $129 upfront for a limited time (normally $399) and also comes with a 90-day money-back guarantee.
The Structural Forces Behind Prediction Markets
1970s Las Vegas.
Neon lights, desert heat, oil shocks, runaway inflation, political scandal, and economic stagnation of the middle class.
Sound familiar?
We're currently living through the same macro economic environment, with less neon lights and more debt, that caused Nevada gaming revenue to double and casino stocks to outperform the S&P 500.
According to Luke, economic stress paired with a newly accessible form of high-upside speculation is one of several structural forces that make prediction market growth durable.
He has a few others as well…
Soft Regulatory Environment
Not only are more states legalizing gambling, but a recent landmark court ruling virtually cleared the path for prediction markets.
In 2024, Kalshi, the largest prediction market platform, won a nearly year-long court battle against the Commodity Futures Trading Commission (CFTC) to be able to offer commercial election markets or betting on election results.
As the Stanford Review noted, it's a turning point in favor of legalized non-sports betting.
A Better Product
Why go to a shady local bookie, fly to Vegas or download a sports betting app, when you can trade outcomes across politics, economics, and corporate events all in one place?
Prediction markets are the equivalent of the automobile and the alternatives are the horsebuggy.
A Real-Time Forecasting Engine
Besides being a more convenient way to bet, prediction markets are also more engaging and informative.
Broadcasters and professional analysts are starting to use them to determine odds/risk across a multitude of events, embedding them in the very fabric of media like an Associated Press or Reuters headline.
Institutional Investing Wave
In 2021 a leaked internal memo revealed Goldman Sachs’ new crypto trading desk.
The wave of institutional investment that followed sent crypto to all-time highs.
Luke's research shows that Goldman Sachs now has a team analyzing the best way to get into prediction markets and it could launch a dedicated trading desk as soon as October 13th.
Put all of this together and prediction markets look less like a trend, and more like the early stages of a new financial category.
Now, the two largest prediction markets, Kalshi and Polymarket, aren't public. But one name that Luke says has all the hallmarks of the biggest winners he's ever recommended is.
Revealing Luke Lango's Prediction Market Stocks
Like online auctions, search, and streaming in the past, one company looks poised to become the main player in prediction markets.
Here is what we know about it:
- It's recently partnered with Susquehanna to provide prediction markets service to their 27 million users.
- The company offers premium users 3x less fees than Kalshi.
Luke's 10x prediction markets stock is Robinhood Markets Inc. (Nasdaq: HOOD).
- Robinhood partnered with quantitative trading firm Susquehanna to offer prediction markets services to it's 27 million user base.
- Robinhood only charges a flat fee of $0.01 per contract whereas Kalshi uses a variable fee structure.
Besides this main pick, Luke also teased two side bets:
First Side Bet
- This company owns the rails every single Polymarket trade rides on.
- It's quietly rolling out prediction markets to its own user base.
Polymarket runs on Polygon and settles in USDC, which in turn is tied to Coinbase Global Inc. (Nasdaq: COIN).
As of this past December, Coinbase has also begun to roll out stock trading and prediction markets to its U.S. users.
As far as the second set bet…nothing about it is ever mentioned in Luke's teaser, ending things on a flat note like a stack of pancakes.
Real 10X Potential?
Countering risk.
This is how Luke views prediction markets, which have grown by nearly 400% in terms of trading volume over the past few quarters.
The counter view is that they remain a legal grey area that finacializes everything.
I lean more towards the latter view, but I fear that Luke is right.
The worse the real economy becomes, the more people will turn to ways that appear like a means to make a quick buck, and the more people use prediction markets, the more institutions will look for a way to skim profits, similar to stock, options, and commodity markets.
Robinhood is well-positioned to capture a share of the market given its trading oriented user base, with Gen Z and Millennials making up over 70% of the platform's funded accounts. Looking under the HOOD, it's not a bad business.
It has $19 billion in cash against $13 billion in total debt, a 40% profit margin, and 21% Return on Equity (ROE).
The bad news is that it's valued at nearly 20x sales and 46x current earnings. So it would have to continue growing aggresively to justify the current price.
As for the side bet, I like the prediction market infrastructure angle, but Coinbase's numbers are decidedly not good.
$10 billion in cash against total debt of $8 billion, a 13% profit margin, single digit ROE, and a price/earnings of 62x.
Robinhood is worth a second look at a lower price, but I don't see the 10x potential, which would take its market cap to $1 trillion, equaling the estimated size of the entire prediction market in 2030.
Quick Recap & Conclusion
- InvestorPlace's senior tech expert Luke Lango says we can make a huge amount of money with his “Prediction Market” Stocks, without ever needing to place a single bet ourselves.
- Prediction markets are online platforms that facilitate wagers on specific outcomes using financial incentives. They're a new way to gamble, forecast, and hedge risk all at the same time, and they're growing fast.
- Luke foresees one clear winner in the prediction market space and it's name is revealed inside a report called 10X Profits in the World’s Fastest Growing Market. It's only available to subscribers of Luke's Innovation Investor newsletter, which costs $129 for the first year (normally $399).
- Fortunately, you can put away your wallet, as we were able to reveal Luke's main 10x prediction market stock for free: Robinhood Markets Inc. (Nasdaq: HOOD) and one of two side bet stocks: Coinbase Global Inc. (Nasdaq: COIN).
- Robinhood makes sense at a lower entry price, but it's not 10x'ing on the back of prediction markets alone.
How do you view prediction markets? Let us know in the comments.