Morgan Stanley: Finance Interns Embracing Betting, Prediction Markets
It should come as no surprise that aspiring financiers enjoy betting and prediction markets, even though their adoption rates are largely consistent with those of larger youth demographics.
More than a quarter of the investment bank's more than 500 summer interns in North America—many of whom are 21 years of age or younger—used a betting or prediction market mobile application during the previous year, according to Morgan Stanley's annual survey of summer interns.
This year's edition of the annual Morgan Stanley intern poll is the first to include questions about betting patterns and prediction market usage. The data shows that the interns heavily favor the two market leaders, including Polymarket, with 55% of the surveyed interns using multiple betting or prediction market apps.
Policies regarding employee involvement in prediction markets are being implemented by a few large Wall Street institutions. It was reported last month that Goldman Sachs and Morgan Stanley are limiting the trading of event contracts by their employees, with the former forbidding the trade of political and financial event contracts provided via yes/no exchanges. According to reports, Morgan Stanley has added wording on prediction market trading to its employee code of conduct.
Percentages Are Not Out of the Ordinary
The 25% of Morgan Stanley interns who claim they have wagered or traded on an all-or-nothing exchange during the previous 12 months is not out of the ordinary, given growing concerns about the impact sports betting and prediction markets are having on young people, especially young men.
According to recent data from the National Council on Problem Gambling (NCPG), 37% of people between the ages of 18 and 34 have utilized a prediction market. Some yes/no exchanges have more lenient age criteria than their equivalents in sports betting, which has alarmed the council. Although some prediction markets allow account holders as young as 18, the minimum age to bet on sports in the United States is 21.
One of the first event contract platforms to adopt a 21+ age policy was Novig, which runs a peer-to-peer market only for sports.
To what extent does the crowd possess wisdom?
One of the supposed pillars of prediction markets, the "wisdom of the crowd," was the subject of another Morgan Stanley study. To put it simply, there is a concept that collective knowledge can provide accurate signals, but in the dynamic, fast-paced world of yes/no exchanges, such accuracy is put to the test and may be more limited in some parts than others.
One popular prediction market category where accuracy is not a given is the growing competition between traditional political polls and prediction markets, according to Morgan Stanley.
“However, the case for the superiority of prediction markets over polls or pundits is not totally clear-cut,” observes the bank. “Adjustments to raw polls, such as sophisticated aggregation methods, can match or exceed the predictions of markets. How questions are asked can also affect accuracy. Further, ‘superforecasters,’ individuals who demonstrate the ability to consistently make accurate predictions, outperformed prediction markets when working in teams and when their forecasts were aggregated using statistical algorithms.”
