Barry Bernstein is the managing director and COO of technology services at ViewTrade.gettyPrediction markets are attracting attention across trading and infrastructure teams because these novel markets introduce the ability to trade directly on specific events driven by user input. Traditional markets trade on events indirectly. For example, earnings affect equity prices, interest rate expectations influence bonds and macro developments move currencies. Traditional markets react after participants process the news and other information. Prediction markets are driven by contracts and event outcomes, which is a change from the norm. Prediction markets enable the event itself to become the trade.From a trading perspective, macro and micro, the prediction markets indicate a trading signal that does not align with traditional markets. Capital formation as we know it today has developed over the past 200-plus years, and we are comfortable in this area. But today we find ourselves in a new era with prediction markets, where traditional capital formation and market infrastructure intersect. The question becomes how the prediction markets and signals will begin influencing how investors think about market inputs.Event Outcomes Become Market SignalsThe infrastructure supporting the prediction markets asset class needs to shorten the distance between the expectation of an event, the sentiment around an event leading up to the event and the event itself. Instead of waiting for traditional instruments to absorb information, participants express probability directly through event-based trading. Event-driven signals create a unique form of price discovery for traditional markets and, at times, a faster signal than traditional markets. When participants engage or have momentum around a defined event, the market itself becomes a visible expression of human behavior. These signals do not replace traditional market analysis or sentiment but instead become inputs broad enough to create additional insights. This means future event data may sit beside traditional research and analysis.Why We Should Not Treat The Prediction Markets Like Standard MarketsTraditional market analysis and infrastructure are not designed for event-based trading. Equities, options and futures fit within long-established system logic with continuous price movements, exposure and operational workflows that are familiar. Event contracts behave differently because they revolve around outcomes rather than traditional price movements and expectations. The plan is not to rebuild the system; rather, it's to take a practical approach by including new capabilities alongside existing infrastructure. An easy way to achieve this is to add data handling layers, event-driven price feeds, API-based integration across event and pricing systems, modify risk workstreams and add a middle layer providing Interoperability with traditional systems built on legacy asset classes the novel prediction markets. Adapting the infrastructure rather than replacing it will create an effective and efficient approach.A major operational difference may be in risk management. Traditional risk analysis systems are built around market volatility, exposure, liquidity and price movement. Prediction markets introduce exposure tied to sentiment and event outcome. This shifts risk from continuous movement to the event itself. These products require systems to interpret probability differently than traditional markets.API InfrastructurePrediction markets drive firms toward API architecture. This is mainly because it is a more natural fit into existing technology. There are also broader trends that continue to point to API-driven infrastructure. With event-based trading entering the mainstream and volumes continuing to increase, the infrastructure needs to process event-based signals, probabilities and sentiment influence.​Event-based signals are becoming as important as price. Signals directly affect how systems calculate risk, and this will continue to evolve as the prediction markets matures. This will change how the industry looks at the infrastructure, events-based trading and risk.Legacy SystemsLegacy systems need to offer interoperable architecture utilizing legacy order management systems designed for equities, options and traditional assets to adapt to the novel prediction markets. This maintains a central location to manage orders, compliance and risk within a unified risk management framework. While legacy systems may process in batch files overnight, prediction markets may utilize blockchain, smart contract technologies, straight through processing or atomic settlement. These emerging technologies enable near real-time execution, faster reconciliation and reduced counterparty risk.​The firms that can bridge these two worlds will hold the competitive advantage as prediction markets become more widely adopted. This interoperable architecture maintains the governance, compliance and risk controls of established financial infrastructure while embracing the speed, automation and interoperability of next-generation market technologies.​​​Regulatory EnvironmentPrediction markets seem to be a pioneer in the regulatory environment and framework. The asset class sits near multiple regulatory categories depending on the jurisdiction. While agencies and states battle it out with legal red tape, the asset class continues to grow quickly. Along this line of regulatory oversight and licensing comes consumer protection and suitability. Both of which come with certain legal and regulatory obligations where the prediction markets have started as pioneers will soon be expected to settle into an existing framework.Predicting The Future Of The Prediction MarketsAs adoption in prediction markets continues to grow, I believe traditional markets and these novel markets will converge. Prediction markets indicators will become inputs for traditional markets, and event-driven pricing will provide institutions another way to observe collective expectation. This data will eventually sit alongside traditional markets research. The long-term opportunity may not be direct product adoption. Instead, it may be the ability to treat event-generated probability as another usable market signal for traditional infrastructure. This is why infrastructure teams are paying attention now.Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?