Bitwise CIO Says Prediction Markets Are Reg FD For The Crypto Era

"Top-tier L1s built more bandwidth than the market can use at the moment, so fees are rock-bottom," Hougan said.

That surplus may not last. "The real question is what happens when demand scales as stablecoins/tokenization/DeFi grow into the trillions," he added. "I'm not sure we know the answer yet."

Why It Matters: Power Distribution Shifts

Hougan also addressed insider trading concerns around prediction markets, framing them as the opposite of what critics suggest. "Prediction markets are a markets-based extension of Reg FD, putting us all on a level playing field," he wrote, referencing Regulation Fair Disclosure, the rule designed to prevent selective disclosure of material information to favored investors.

He noted that hedge funds have long extracted advantages during pivotal legislative moments by hiring lobbyists and consultants to gather private intelligence from Capitol Hill.

Platforms like Polymarket now let retail investors track live odds on events such as the potential passage of the Clarity Act.

"For liquid markets, those odds are probably as good or better than anything the lobbying complex can provide," Hougan said. He acknowledged that aggressive policing of insider trading in prediction markets remains necessary but emphasized the overall impact is "dramatically positive and egalitarian."

Alexey Bondarev is the Head of Content at Yellow.com, having reported on crypto for the last 10 years. He specializes in in-depth Research and Learn pieces, with a focus on analytical reporting, industry context, and the bigger forces shaping crypto, from the AI era and security technologies to fintech innovation. He believes that everything digital will imminently overcome everything analogue and is working hard to make that come true.