This article offers a systematic account of the ethics of prediction markets: markets for the trade of financial claims conditional on the occurrence of specified events. Having recently gained prominence, prediction markets remain controversial and their regulation constitutes an urgent policy question. As derivative markets, they also raise systematic questions: can existing moral-limits-to-markets-frameworks account for them? 

This article begins by briefly surveying the mechanics of prediction markets and the existing literature on their promise and peril. It then puts forward four novel objections: that prediction markets can be coercive by forcing persons to be the referent of prediction contracts; that they can, in an indirect way, result in the corruption of the goods of which the prediction contracts are derivative; that they raise concerns about benefiting from extreme harm occurring to others; that they can pose a threat to the value of political community. Each concern, the article argues, necessitates an expansion of existing moral-limits-to-markets-frameworks. The article’s aspiration is thus two-fold. First, to offer a comprehensive account of potential ethical objections to prediction markets (of various types). Second, to amend our frameworks for thinking about the moral limits to markets to account for the special concerns raised by derivative markets. 

Dr Huub Brouwer is an Assistant Professor of Ethics and Political Philosophy at Tilburg University.

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