Vitalik Buterin Warns Prediction Markets Risk Collapse Without Fix

Ethereum co-founder Vitalik Buterin says decentralized prediction markets need a fundamental restructuring, warning that their current drift into short-term gambling threatens long-term viability. While platforms such as Polymarket have seen significant volume and attention, he argues they suffer from an "unhealthy market fit." Buterin says these markets have over-converged on short-term cryptocurrency price bets, sports wagering and other plays that deliver dopamine but little lasting informational or societal value.

He cautioned the sector is overly reliant on "naive traders"—retail speculators he calls "money losers"—and that prioritizing revenue from such users risks collapse during bear markets. To create a sustainable model, he urges a pivot toward hedging, with markets functioning more like insurance than betting venues.

In that setup, users take positions to offset real-world risks—for example, a business owner hedging against a policy change that could hit their supply chain—rather than seeking short-term payouts.

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