You can now add this to the list of ethically questionable things associated with prediction markets: People may use them to wager on whether the Food and Drug Administration will approve certain new drugs for the treatment of cancers.
If you’re wondering what’s wrong with this, listen to a few patients who were interviewed by The New York Times:
“We’re literally trying to stay alive. It’s not a game,” said Walter Ingaharro Jr., 43, of Evington, Virginia. He has metastatic pancreatic cancer and is looking for new drugs currently under clinical trial.
“This feels like pure gambling for the sake of the game. This is about who will live and who will die,” said 37-year-old Kristin Ruben of Northampton, Massachusetts. She has lung cancer.
A moment
Prediction markets are currently having a moment in the United States. They are governed by the Commodities Futures Trading Commission because they are classified as exchange-traded markets used for trading contract bets on a variety of future events. That classification makes them immune to state laws and regulations, including Utah’s prohibition on gambling.
In recent months, these markets have come under scrutiny for some bets allegedly made with insider information, including one involving the man responsible for President Donald Trump’s teleprompter reportedly making almost $100,000 off bets on the prediction market company Kalshi concerning how often certain words would be mentioned in Trump’s speeches.
They also have come under criticism for offering bets on things such as the time and location of U.S. military strikes, the severity and location of wildfires and, now, whether possibly life-saving drugs will be approved.
A benefit to investors?
Concerning those drugs, prediction market officials try to brush off concerns by focusing on the supposed virtues of their forms of gambling. Prediction markets cut through the hype and give markets a clear signal about the value of new drugs for investors, they say.
But, in order to avoid insider trading, the markets have a long list of people they say they will prohibit from getting in on the life-saving-drug game. This, the Times said, includes anyone involved in the development of the drugs, from employees to trial staff, data monitors, FDA regulators, patients enrolled in clinical trials and employees of rival drugmakers. In other words, all the people who actually have the kind of information that would provide educated responses to give the private market reliable signals.
The ideal bettor for these wagers, prediction market company Kalshi’s spokesman told the Times, would be a retired doctor, a medical student or someone else who possesses sophisticated scientific knowledge without also possessing insider knowledge.
But of course the company can’t limit those who wager to such a narrow demographic. Bets on drugs will attract a wide range of gamblers who have no medical or scientific knowledge, and who provide little at all to signal markets meaningfully.
Prediction markets do differ from conventional casinos and sportsbooks. For instance, the markets make money off fees charged for each bet. They do not profit from the losses of their customers. They also consider their bets to be contract swaps or exchange trades.
Health problems
But researchers are finding that those who bet through these markets are just as vulnerable to compulsive behavior disorders as those who gamble through more conventional ways.
A paper published by Tulip Hill Healthcare noted: “Prediction markets contain many of the ingredients that addiction specialists associate with problematic gambling behaviors.
“Participants experience uncertainty, risk, reward anticipation, financial gains and losses, and continuous opportunities for engagement. The possibility of a payout activates many of the same reward pathways involved in sports betting and casino gambling.”
Trump strongly supports prediction markets and their governance by the Commodities Futures Commission. However, states like Utah, whose elected representatives have wisely outlawed gambling, need to be able to enforce those laws under all circumstances. Even Nevada has objected to these markets because they sidestep that state’s gambling regulations and oversight.
It’s time for Congress to recognize the desires of states and make prediction markets subject to state laws. A better solution would be to outlaw them, along with all conventional gambling operations, for the health and general welfare of all Americans.