Welcome to our institutional newsletter, Crypto Long & Short. This week:

• Ryan Kirkley on how crypto prediction markets can risk incentivizing manipulation and amplify misinformation at scale.
• Top headlines institutions should pay attention to by Francisco Rodrigues.
• Geodnet decoupling suggests fundamental re-rating in Chart of the Week.

Thanks for joining us!

-Alexandra Levis

Expert Insights

Prediction Markets Don’t Just Forecast Power - They Reshape It

By Ryan Kirkley, Co-Founder and CEO of Global Settlement Network

Prediction markets are often pitched as neutral forecasting tools: efficient ways to aggregate information and convert collective belief into a price. That case is not entirely wrong. The academic literature has long found that prediction markets can produce forecasts that outperform many conventional benchmarks. But as someone who believes in crypto’s role in modernizing market infrastructure, I think we should be honest about what the sector is building here. The crypto version of prediction markets is no longer just about forecasting. It is about financializing real-world instability.

That distinction matters. On Polymarket, for example, users can bridge assets from Ethereum, Solana, Bitcoin and other chains; those deposits are converted into USDC.e on Polygon, where fully backed yes/no positions trade and settle on-chain as tokenized claims. In other words, crypto does not merely host these markets. It gives them global reach, cross-chain funding and low-friction settlement. That is impressive market design. It is also exactly what makes the social risk larger.

Once you turn war, political violence, public disorder or institutional breakdown into tradable crypto instruments, you create new incentives for bad actors. The first is obvious: people with privileged information can try to monetize it. U.S. regulators have long recognized that not every event belongs inside a financial market. CFTC Regulation 40.11 bars event contracts involving terrorism, assassination and war, among other categories deemed contrary to the public interest. That is not anti-market moralizing. It is recognition that some contracts do more than reveal information; they can distort behavior around the underlying event.

The second problem is even more serious: prediction markets can reward people who are not just informed about an outcome, but capable of influencing it. Academic research has warned that when traders have outside incentives, or can take actions that affect the underlying event, information aggregation can break down. A market is supposed to measure probability. But when the market itself becomes a source of incentive, it starts to reshape the probability it claims to observe.

That concern is no longer theoretical. Reuters reported this month that markets on Iran strikes and Ayatollah Ali Khamenei’s ouster drew ethics and insider-trading scrutiny after unusually well-timed bets were flagged; in a separate report, Reuters noted that Polymarket removed bets on a nuclear explosion after public backlash. Even if only a small number of traders are acting on nonpublic information, the message to everyone else is corrosive: access, not insight, may be what gets rewarded.

There is a third risk, and it is deeply crypto-native: these platforms increasingly function as media engines as much as markets. Axios reported in February that prediction-market accounts were spreading false, misleading or context-free claims to millions on social media, turning market odds into viral narratives before facts were established. When screenshots of thin or sensational markets circulate as “truth,” bad actors do not need to influence the event itself. They only need to influence the information environment around it.

For advisors and allocators, the mistake is to treat every liquid market as legitimate simply because price discovery exists. Crypto has real work to do: modernizing settlement, improving transparency and making capital markets more programmable. But building the most efficient rails for speculating on war, regime change or civic breakdown is not financial innovation. It is moral hazard at internet scale. Prediction markets do not just forecast power. In their current crypto form, they reshape it by rewarding those most willing to exploit instability.

Headlines of the Week

Francisco Rodrigues

While this week has shown clear progress on the regulatory front, market anxiety coupled with AI disruption has started to affect the crypto industry.

• SEC approves Nasdaq's move to support tokenized securities trading: The U.S. Securities and Exchange Commission (SEC) has approved Nasdaq’s plan to let certain securities trade in tokenized form after the firm filed for regulatory permission in September.
• Senators say they've reached compromise on yield to advance crypto market bill: Potentially clearing a path for the crypto Clarity Act to be approved, two key senators have said they have agreed on a compromise that could advance the bill to its next stage.
• U.S. SEC issues first-ever definitions for what crypto assets are securities: The guidance doesn’t yet carry the weight of a formal new rule, and was issued in partnership with the Commodity Futures Trading Commission.
• Bitcoin options signal extreme fear as downside protection premium hits new all-time high, says VanEck: Traders are paying record prices for downside protection, with the put/call open interest ratio reaching its highest level since June 2021 and put premiums hitting a new record relative to spot volume.
• Crypto.com cuts 12% of staff as it integrates AI across the business for efficiency: While Crypto.com’s layoffs were the largest in the crypto space over the past week, the Algorand Foundation also cut 25% of staff. Last week, OP Labs laid off 20 employees to narrow its focus, while the team behind Story Protocol let go 10% of its workforce.

Chart of the Week

Geodnet decoupling suggests potential fundamental re-rerating

Geodnet, a Decentralized Physical Infrastructure Network (DePIN) protocol providing high-precision positioning for Robotics and Physical AI, shows a clear fundamental decoupling. While its price has trended sideways alongside an underperforming DePIN index (down 3% relative to BTC, as per CoinDesk Data), monthly token burns have reached $500,000, currently neutralizing roughly 60–80% of new emissions. This divergence is driven by the growing data revenue from autonomous drone fleets and humanoid robot developers. As the network pivots from infrastructure build-out to a high-margin data layer for the machine economy, the current supply-demand imbalance suggests a potential fundamental re-rating.

Listen. Read. Watch. Engage.

• Listen: Did you hear? Wealth Management Day is returning to Consensus Miami! If you’re a qualified advisor, join us for a closed-door, one-day forum designed to deliver everything you need to know about digital assets.
• Read: In Crypto for Advisors, Dumpling Bullish, independent digital asset commentator, writes about the growing influence of bitcoin’s derivatives stack on its price. Then, Leo Mindyuk from ML Tech answers questions about the evolution of bitcoin investment products in Ask an Expert.
• Watch: Why Circle (CRCL) is up 100% and what Middle East tension means for risk assets on CoinDesk’s Public Keys from the floor of the NYSE. Leif Abraham, Richard Shorten and Ryan Rasmussen join Jennifer Sanasie to talk crypto and more.
• Engage: Have you bought tickets to Consensus Miami yet? Early bird pricing ends Friday at 4 p.m. ET. View the agenda and register today!

Looking for more? Receive the latest crypto news from coindesk.com and market updates from coindesk.com/institutions.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc., CoinDesk Indices or its owners and affiliates.