Climate prediction markets heat up

Seemingly everything is a prediction market nowadays. That includes the weather. Contracts may not be moving at the same pace as those for sports, but weather and climate are undeniably a growth sector for prediction markets.

Today’s newsletter looks at the rise of weather and climate trades — and whether there are limits to their utility. Plus, your weekend listen on the Iran War and weekend watch about — what else — prediction markets.

For all the latest weather and climate science, subscribe to Bloomberg News.

You can bet on it

By Eric Roston

Everybody talks about the weather, but nobody puts their money where their mouth is. At least, until recently.

The rapid rise in popularity of prediction markets, such as Kalshi and Polymarket, has made it so you can wager on just about anything online, at any time.

Bets on how hot Denver will be tomorrow or if 2026 will be the hottest-ever year make up a small percentage of overall prediction market volume. They’ve grown in attention proportional to the platforms themselves, particularly for short-term weather. Trading volume over a late January snowstorm in New York surpassed $6 million. The weather markets are so active that at least one startup is testing its commercial forecasting software on the markets.

Photo Illustration by Ezekiel Aquino for Bloomberg; Video Source: Getty Images (2)

Last month, Patrick Brown, head of climate analytics at Interactive Brokers, looked at how traditional weather forecasts stack up against prediction markets and found the markets outperformed the US National Weather Service.

The ability of markets to discover useful information is the motivation for lower-profile, bespoke prediction markets more in line with the vision that famous economists have long wondered about.

Mark Roulston, a PhD planetary scientist, years ago developed a passion for prediction markets as a way to help institutions extract hidden information from diverse groups of researchers, who are invited to bet on their expertise using other people’s money. He’s the operating director of a Lancaster University platform that asks experts to compete in forecasting medium-term weather and climate events, like cyclones or El Niño phases of the Pacific Ocean.

“We create markets not because we think, ‘Oh, this is something lots of people will want to bet on,‘” Roulston said. “We create a market because there’s an end user — like a reinsurance company — that says ‘We would like better predictions of this.’”

While public weather prediction markets have shown some degree of value, the same is less likely for climate change. The complexity of how rising carbon dioxide is impacting the whole planet — let alone massive natural climate patterns like El Niño — may make the topic unsuited for popular online prediction markets, said Madison Condon, an associate professor of law at Boston University, who writes about climate models and projections.

There’s definitely space for scientists to pool knowledge outside of complex Earth system models, she said, but markets may not be “the best way for synthesizing that domain knowledge or expert judgment.”

“It’s not like a basketball game,” she said. Projecting what climate change may do to hurricanes, or if the next El Niño is on its way, “is just a different type of knowledge.”

My colleagues Mary Hui, Joe Wertz and I dove into the rapid rise of weather and climate prediction markets for Bloomberg’s Weekend Edition. We hope you’ll check out our piece.

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Your weekend listen

Zero

Iran War Will Reshape the Future of Energy

Since the US and Israel launched their attacks on Iran on Feb. 28, global energy markets have been frenetic, prices swinging up and down with each new headline. Even with the prospect of the Strait of Hormuz reopening, prices of oil and gas have risen around the world, and we’re starting to see impacts on local economies, particularly in Asia. This week on Zero, Bloomberg opinion columnist David Fickling explains what those impacts are, and how they may reshape Asia’s energy systems for decades to come.

Listen now, and subscribe on Apple, Spotify or YouTube to get new episodes of Zero every Thursday.

Your weekend watch

Prediction markets like Kalshi and Polymarket are booming. They also face a widening legal battle with US states and criticism over alleged user insider trading. Here’s how they got so controversial.

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