In This Newsletter
Prediction Markets Go Beyond Gaming
Privacy Tech Positions for Institutional Demand
The Ratings Agencies Wrestle with Stablecoin
Prediction Markets Go Beyond Gaming
Over the past year, prediction markets have become a gravitational center of retail activity, with 90 percent of volume on popular platforms driven by sports betting, taking market leaders such as Kalshi and Polymarket to valuations in excess of $20 billion. While sports betting has ignited a rivalry with the traditional and online sports gaming sector, prediction markets are gaining recognition for their utility in macroeconomic and hedging contexts.
In Kalshi and the Rise of Macro Markets, Federal Reserve researchers conclude that Kalshi markets provide a “high-frequency, continuously updated, distributionally rich benchmark” valuable to macroeconomic researchers and monetary policymakers. We discussed some of these potential applications in our own Future of Finance panel on prediction markets, asking whether these venues represent a new asset class, a price-discovery mechanism, or a repackaging of betting.
The policy fight is sharpening as market activity continues to grow. In February, the Commodity Futures Trading Commission formally reaffirmed its exclusive jurisdiction over prediction markets and, in March, opened a new rulemaking process on event contracts. At the same time, state-level pushback is increasing, alongside concerns about insider trading and proposed federal legislation targeting sports-related event contracts, as reported by Reuters. The core dispute is whether these markets should be treated primarily as financial derivatives under federal commodities law or as gambling products that fall under state and tribal gaming regimes. That debate will shape whether prediction markets remain a niche corner of finance or evolve into a broader retail and institutional venue for trading macroeconomic, weather, and real-world business risk.
Privacy Tech Positions for Institutional Demand
This winter, Tyler Winklevoss announced that he was establishing a $100-million digital-asset treasury company, Cypherpunk, focused on acquiring Zcash, one of the original privacy layers in digital assets. At the same time, Grayscale announced its Zcash exchange-traded fund. The announcements brought renewed focus and investment into the privacy tech space going into this year.
For early adopters in crypto, the transparent design of public blockchain ledgers is a feature, not a bug. However, as institutions engage more seriously with the technology, they are increasingly looking for privacy solutions. Public blockchains make balances, transaction flows, and sometimes strategy legible to competitors, counterparties, and bots. While that design may be acceptable for retail and some payments activity, it is less desirable for treasury operations, payroll, collateral, and fund activities. Institutional momentum toward tokenization is only growing.
State Street’s 2025 survey found that nearly 60 percent of institutional investors plan to increase digital-asset allocations in the coming year and that a majority expect 10 to 24 percent of investments to be tokenized by 2030. The same survey found that safety and soundness, as well as regulatory clarity, remain leading barriers. Institutions will remain hesitant to move meaningful activity on-chain if doing so exposes trading intent, counterparties, treasury balances, or sensitive client information by default.
A wave of privacy infrastructure providers is reshaping the competitive landscape. While the privacy-tech space has long been home to players like Zcash and Monero, new entrants are making an enterprise pitch. Dedicated L1s like Aleo and Cardano’s Midnight are competing with Ethereum L2s like Nightfall and Aztec. These providers are anticipating a market shift toward privacy as programmable, where data can stay shielded by default but be disclosed selectively for audit, KYC, legal purposes, or supervisory review.
The Ratings Agencies Wrestle with Stablecoin
As stablecoins increasingly become financial infrastructure, market participants want a formal and transparent risk assessment of the asset class. Formal reserve analysis is becoming increasingly important as stablecoins scale; Moody’s found that large, fiat-backed stablecoins experienced more than 600 depegs in 2023. A depeg is a stablecoin trading more than 3 percent away from its intended fiat peg—typically $1—within a single day. In March, Moody’s introduced its first stablecoin rating methodology, which considered fiat-backed stablecoins through a reserve-quality and redemption-risk lens.
That move builds on S&P Global Ratings’ Stablecoin Stability Assessment, which is designed to provide markets with greater transparency into depegging risk. S&P has already applied this framework to stablecoin issuers like Tether, Reuters reports. Institutional actors would benefit from having credit- and derivatives-market standards for digital dollars that consider whether a token trades near par and whether backing, segregation, liquidity, and operational safeguards would hold up under stress. That same logic is increasingly relevant beyond payments, especially as tokenized bonds and other digitally native liabilities seek institutional applications.
The rating conversation is also part of a broader convergence between digital asset markets and rated capital-market products. New Hampshire’s Business Finance Authority approved the world’s first bitcoin-backed municipal bond. As digital assets move into public finance and fixed-income structures, ratings agencies will increasingly be asked to evaluate crypto-adjacent collateral and on-chain financial wrappers.