The original text is from Jarrod Watts

Compiled by｜Odaily Planet Daily Golem (@web 3_golem)

Prediction markets could have ended the era of "the house always wins," but unfortunately, most prediction markets are still profiting for themselves.

In this article, I will explain why prediction markets currently cannot serve users and why I believe the next phase of prediction markets is to achieve a creator economy through user-generated markets.

The key points I will cover include:

• Exploring the shift from negative-sum games to near-zero-sum games in prediction markets;
• How introducing creator economy and revenue sharing will drive explosive growth in prediction markets;
• Live opportunities in prediction markets.

The House is Dead

Most forms of gambling, including sports betting, are negative-sum games where players lose money to the house. The expected return to player (RTP) is set below 100% at various levels to systematically extract funds from players. Most people understand this, yet they are still willing to gamble, trading money for the dopamine we get from expectations.

Prediction markets can eliminate the house to change this situation by allowing players to PvP in an open market. Prediction markets are zero-sum games, where winners take money from losers, similar to trading.

This is objectively better than traditional gambling/sports betting, although your moral compass may disagree; these products clearly have a huge market demand—fairness is always better than profit extraction.

However, this argument falls apart when prediction markets start charging fees. Most platforms (except Polymarket) typically take about 2-3% from players' entry amounts or expected profits.

Prediction market fees turn it from a zero-sum game into a negative-sum game

The result of prediction markets charging fees is that they reintroduce the negative-sum game of gambling, meaning players will lose funds to the casino/platform over time.

However, I believe there is a strong alternative that can leverage these fees to increase user engagement, which is to create user-generated markets.

Prediction Markets as a Vehicle for the Creator Economy

I believe prediction markets should:

• Allow users to create markets without permission;
• Introduce a revenue-sharing mechanism that allows market creators to earn a certain percentage of commissions.

Introducing a revenue-sharing mechanism for market creators

Doing so can transform users into co-creators, allowing them to create new markets (and UGC around these markets), thus driving platform growth without the team directly bearing production costs. Roblox and Fortnite are typical examples of this model—they both allocate a portion of their revenue to pay community map creators.

In prediction markets, creators can establish markets related to their community/niche, providing users with new ways to engage and earn from it. Since the application scenarios for prediction markets are nearly limitless, it means they can be applicable to countless creators.

While there are technical limitations, during my research for this article, I found a GitHub repository containing smart contracts for creating user-generated prediction markets. It also includes an AMM variant to address some liquidity issues brought by user-generated markets.

Streamer-Generated Prediction Markets

User-generated prediction markets will naturally evolve into real-time, fast markets created by streamers for their audiences. In these prediction markets, streamers can initiate polls, and viewers can participate and watch the results in real-time.

This allows creators to establish short-term prediction markets where viewers can vote on questions like "Will I win this match?" Twitch has already implemented this feature, but it uses its native channel points instead of USDC.

Example of Twitch Live Prediction Market

This type of activation is a win-win—streamers are rewarded through revenue sharing, while viewers become more engaged in the live stream. I believe this presents a huge opportunity for future streamers and content creators.

Conclusion

Prediction markets have achieved incredible success, but scaling user-generated prediction markets remains a significant opportunity (and may also present technical challenges). The subsequent effects of users becoming ambassadors and creating content that directly promotes prediction market platforms are evident, and we look forward to the emergence of products based on this concept.

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