Hard Boiled Prediction Markets and the End of the World

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Hard Boiled Prediction Markets and the End of the World

Shmuel Berman<br>Jun 26, 2026

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“She was beautiful and seemingly quite intelligent, what with her pentameter search system. There wasn’t a reason in the world not to find her appealing.”

— Haruki Murakami, Hard-Boiled Wonderland and the End of the World<br>Right now, two big shifts are co-occurring in society, and I don’t think their intersection has been adequately explored. The first is the expansion of gambling in the form of prediction markets that allow you to bet onarbitrary events, not just a tightly restricted subset. The second, of course, is the rise of Large Language Models and the chatbots that are now woven into everyday life.<br>Together, they could trigger a dangerous and chaotic breakdown of society.

Perverse incentives and how unprepared we are

Everyone, at all times, is incentivized to affect future events to their benefit, and to avoid eventualities that will cause them harm. For example, if someone is being annoying, their peers start spending less time around them. Similarly, a worker who wants to be promoted will attempt to be more productive, or at least will strive to be perceived as such by their boss or superior.<br>The rise of prediction markets changes this calculus significantly because suddenly there’s a direct payoff to changing almost anything. In 2020, there was no incentive for anyone to tamper with weather stations, because what benefit could there be in fudging the daily high? That changed in 2026, when Polymarket created a market on what the daily high in Paris would be. Someone put down a small $120 bet that it would pass 22°C, even though the market gave that outcome less than a 1% chance. Minutes later, the temperature reading suddenly jumped above the line. The spike came from a single sensor. Experts later suggested the culprit may have been a hairdryer pointed at the official airport thermometer.<br>Generalized prediction markets alone are an enormous shift that society is utterly unprepared for. Our legal system is designed to protect us from the excesses of human nature and is specifically designed to punish crimes that people are likely to commit. There are so many bad actions a person could take that the law does not adequately punish simply because it is not in human nature to do those things. For example, car theft usually carries a stricter penalty than tampering with a weather sensor, and not because stealing a car does more harm than sabotaging government equipment. Changing the weather data for a whole city has the potential to cause catastrophic damage that far exceeds, in aggregate, the harm a single person suffers after losing their car. Of the two crimes, though, only stealing a car provides a clear personal benefit. Until now.<br>The arbitrariness of these markets is the reason the perverse incentives they create are so destructive. Prediction market fraud is just insurance fraud by another name, and various societies dealt with that successfully for hundreds of years. However, insurance is usually personalized to events in an individual’s life, like property damage and death, and not global happenings. There are exceptions, but they are often natural disasters or geopolitical events that are difficult to influence.<br>These limits keep the damage contained and make insurance fraud relatively easy to detect and legislate against. Instead of investigating everything, which is impractical, we can tell the police to investigate mysterious occurrences that are unlikely, controllable, and provide direct material benefit, like an insured barn mysteriously burning down. Forcing—making a bet pay off by causing the outcome yourself—was not impossible before, but the opportunities for it were rare and legible, so we could watch the few that mattered. To draw an analogy, most crime is committed by someone close to the victim, with an obvious motive, which makes it easier to solve. The random act, with no connection and no reason behind it, is the one that goes cold.<br>Other people have spelled out the danger here better than I can, so I won’t dwell further on these risks. If Polymarket or Kalshi truly becomes an everything prediction market, the results will be immediately catastrophic. To stop that, our legal system will have to adapt drastically, to a more punitive, observable version of current restrictions on insurance fraud and insider trading. Maybe some markets will become illegal. If safeguards aren’t instituted, the world will be filled with perverse incentives to manipulate real world events.<br>The More Forcible, the More Likely

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