Keynote: Danny Moses on Prediction Markets, Risk and the Next Wall Street Cycle
Prediction markets have evolved from emerging product category to institutional market structure challenge. That shift took centerstage at FORWARD, where Danny Moses delivered the keynote presentation.
Moses is the founder of Moses Ventures and a Wall Street veteran best known for his role at FrontPoint Partners, where he was part of the team that identified and acted on the risks building in the U.S. housing market ahead of the 2008 financial crisis (as highlighted in The Big Short by Michael Lewis). For an audience focused on the future of prediction markets, Moses brought a perspective shaped by decades spent studying market dislocations, leverage, behavioral cycles and the uncomfortable question that defined the day: What are we missing?
His keynote was less a technical discussion of prediction market structure than a warning and a framework. Prediction markets, in Moses’ view, are already proving useful as information tools, trading venues and indicators of regulatory and political risk. But as the sector attracts more institutional capital, more market structure complexity and more Wall Street participation, the same forces that have shaped previous financial cycles may begin to emerge here as well.
Prediction Markets Are Becoming Information Markets
Moses’ entry point into event contracts, he explained, came through sports betting. As an investor and market participant familiar with the online sportsbook sector, Moses began looking at how event contracts compared with traditional in-game wagering and sportsbook cash-out products. What caught his attention was the ability to trade continuously, with market-driven pricing and limits, in a dynamic environment.
“My first foray into event contracts came through the sports gambling side, not through economic events or anything else,” Moses said. But after following election markets, the Super Bowl, March Madness and new partnerships between prediction market platforms and major financial brands, he quickly concluded the opportunity was broader than sports. “I started to say, ‘This is going to be much bigger.’”
Specifically, Moses does not view prediction markets only as products to trade. He also views them as information sources. He pointed to contracts tied to the 2026 midterms, the S&P 500 and Jerome Powell’s future as Fed governor as examples of how event markets can help participants understand the probability of future outcomes, even when they do not take a position.
“You don’t have to trade it,” he said. “But you should be tracking it.”
The Market Opportunity Comes with Familiar Risks
Moses’ central warning was that prediction markets are entering the phase where Wall Street’s product ingenuity, capital and competitive energy begin to accelerate market development. That can bring liquidity, adoption and institutional credibility. But it can also introduce familiar questions around leverage, counterparty exposure and market incentives – the same issues that have created problems in prior cycles when fast-growing markets became more institutionalized.
He returned throughout the keynote to lessons from his earlier career. At MBIA, he saw how Orange County’s leveraged portfolio created major losses and market stress. At FrontPoint, he and his team saw how the subprime mortgage market depended on assumptions about housing prices that ultimately proved false. In both cases, he argued, leverage and greed played central roles.
“What Wall Street loves to do is come up with acronyms, obviously, CDOs, CDS, whatever it might be, and just leverage it to the hilt,” Moses said. “Produce and produce until they can make a lot of money. And then they’ll worry about what’s going to happen at the end.”
While a similar crisis in prediction markets is by no means inevitable, Moses’ point was that rapid growth often brings familiar patterns. More market makers, DCMs, FCMs, clearing relationships and institutional capital may make the sector more durable, but they can also increase the importance of surveillance, controls, margin discipline and market integrity.
“Leverage is the one thing throughout time that always brings something down,” he said.
Moses later clarified that his concern was not that prediction market exchanges or DCMs would necessarily be left holding the risk. Drawing a comparison to Archegos, he said the more specific issue is whether intermediaries have sufficient visibility into KYC – who their customers are, how they are representing themselves and where exposure may ultimately reside.
Institutionalization Is Already Underway
Moses also emphasized that prediction markets are no longer operating at the margins of the financial ecosystem. He pointed to a series of media, exchange, sports and financial partnerships as signs that major institutions now see the sector as commercially meaningful.
“We’ve already seen a ton of deals in the media between financial firms,” Moses said, citing activity involving major exchanges, sports leagues, market platforms and financial infrastructure providers. His conclusion was that institutional participation is likely to reinforce the industry’s continued growth. “We have real money coming in from Wall Street,” he said. “I think it’s self-fulfilling that this industry is going to keep evolving.”
That evolution creates opportunity for firms building in the space, but it also raises the stakes. As prediction markets become more connected to traditional finance, sports, media and retail trading, misconduct or market failures may have broader consequences. For Moses, this makes core compliance functions – including know-your-customer controls, anti-money laundering programs, surveillance and self-policing – essential to the market’s credibility.
Conclusion: The Industry Needs to Self-Police Before Others Do It for Them
Moses closed with a direct message to the room: market participants should take responsibility for identifying problems early, calling out bad actors and building controls before regulators, prosecutors or the next market cycle force the issue.
“Call out the bad actors when you see them, self-police,” he said.
That message aligned closely with the broader purpose of FORWARD. Moses’ keynote framed the day’s discussions by reminding attendees that innovation and risk often advance together, and that the most successful markets are those that build the infrastructure to support trust before stress arrives.
His closing warning was memorable: no one in the room should want to become “an antagonist in the next Michael Lewis book.” For an industry now attracting serious capital, public attention and regulatory scrutiny, the point was clear. Prediction markets may be new, but the lessons of past market cycles are not.