Prediction market operators are brainstorming their next hit product as competition intensifies. Some experts believe this will lead them to launch sports-themed perpetual futures contracts, a betting structure popularized by cryptocurrency backers.
So-called “perps” track the value of commodities like Bitcoin, with users waging on whether the price of the underlying asset goes up or down. Perps do not have expiration dates—hence the name “perpetual.” While offshore entities list perps on a variety of topics, the U.S. for now only allows crypto-related perps.
Their high-risk nature appeals to retail bettors.
Unlike federally regulated prediction markets, perps let anyone trade with leverage (also known as borrowed money). With 5x leverage, for example, a user can pay $100 upfront for a perps contract worth $500. This multiplies potential winnings, but if the market value of the tracked commodity goes down, then the user could owe significantly more than their upfront payment. While the markets are “perpetual,” exchanges automatically liquidate positions once the bet’s value has dropped by a specified percentage.
Given how popular sports are among prediction market users, a handful of industry insiders told Sportico it’s only a matter of time before a company tries to offer the first sports perp. There are major hurdles, however, including fitting sports cleanly into the perp market structure and gaining regulatory approval.
