One of the ur-themes of 2025 was the growing volume of dollars wagered on prediction markets like Polymarket and Kalshi. In 2026, the scale is set to expand. Yesterday, Dow Jones, which owns The Wall Street Journal, Barron’s and a slew of other properties, signed a deal with Polymarket to secure access to market data to include in news stories. Now you can read about the potential overthrow of a government and see how bettors are pricing it all at the same time.
Prediction markets may be focused on conquering traditional sports betting powerhouses like DraftKings and FanDuel, but their viral hits so far are political and cultural. For instance, will Jesus Christ return before the end of 2025? As Bloomberg reported, that Polymarket bet paid out at a rate of 5.5% — better than a high-yield savings account.
Yet defining events and whether they take place or not is a complicated art. Controversy brewed at Polymarket this week after it announced it would not pay out bets on a U.S. invasion of Venezuela, contending that only control of territory would trigger the payout. Thus, Nicolas Maduro’s abduction is not classified as an invasion.
Here’s the challenge: the squishiness around words like “invasion” or “war” is intentional. Adversarial ambiguity is used by nation-states, corporations and even individuals to take action while avoiding some or all of their consequences.
With adversarial ambiguity, it’s entirely possible for the United States to take Greenland and announce it while Denmark never acknowledges the loss but rather acquiesces to the reality of it.
When did Russia invade Ukraine? Was it when the so-called little green men started maneuvering in Crimea and the Donbas in 2014? For Moscow, these unidentified Russian soldiers masquerading as an insurgency force offered plausible deniability in its diplomatic negotiations. For Washington, war is technically only official when Congress passes a declaration, which hasn’t happened since World War II.
Given the high potential costs of war — up to and including nuclear strikes — nearly all of today’s great power conflicts are hybrid or use some form of gray-zone tactics. For instance, in 2017, Russia was widely reported to be seizing Georgian territory by simply moving the border sign and fence between the two countries a few inches to a few feet at a time, day after day. Does that inch count as an “invasion” since it involves control of territory? It’s precisely the ambiguity that allows Russia to avoid a wider conflict.
Over in the private sector, we see adversarial ambiguity in the insurance industry. Homeowners who survive hurricanes quickly learn that there can be a massive disparity in benefits between wind damage and water damage, the latter covered by the federal flood insurance program while the former is often covered under a private policy. What caused the damage to a home?
Insurance attorneys can spend years arguing over definitions and evidence in an attempt to transfer future payouts to the government or another carrier. We’ve seen a similar pattern in the aftermath of last year’s wildfires in Los Angeles, where lawyers continue to argue over what caused the damage to specific properties, just one of many reasons rebuilding efforts in the region have stalled.
Insurance companies repeatedly fight each other from different sides of the table, so there is an economic incentive to resolve adversarial ambiguity and make the industry more efficient and therefore lucrative. In response to high legal costs and legions of frustrated policyholders who may wait years to get their lives back on track, insurers have become increasingly receptive to the idea of parametric insurance. Instead of arguing endlessly over the cause of particular damage, parametric insurance pays out based on objective factors. For instance, a policyholder could buy a policy for wind speeds exceeding 120 miles per hour for over 15 minutes and would get paid even if their property had no damage. On the other hand, they would also not be paid if their house was destroyed but wind speeds were 119 miles per hour.
Such objectivity is elusive in politics, nor are there incentives for nations to cooperatively resolve ambiguity. Take “Will Trump acquire Greenland before 2027?,” which is currently trading at a 15% chance with a market volume of $3.3 million and is one of the bets the Polymarket homepage is pushing to me. There are four paragraphs of rules attached to the bet. The first is relatively simple:
This market will resolve to “Yes” if the United States officially announces that Greenland will come under US sovereignty by December 31, 2026, 11:59 PM ET. Otherwise this market will resolve to “No”.
The second paragraph is much more complicated:
Sovereignty is defined as the transfer of the majority of the territory of Greenland from its current status as an autonomous territory within the Kingdom of Denmark to being under the formal governance or jurisdiction of the United States, either as a state, territory, or other classification within the US system.
Territory here is interesting. Is it the physical land of Greenland, or does territory include Greenland’s territorial sea and exclusive economic zone? Since the bet pays out if President Donald Trump acquires “the majority of the territory,” figuring out the denominator is crucial. Jurisdiction is another open-ended and ambiguous component, but let’s move on to the third paragraph:
An official announcement made by the United States and Denmark that Greenland will come under US sovereignty will qualify, even if the actual transfer of sovereignty is yet to occur. Only announcements of official agreements or actions (e.g. executive order, signed legislation, etc.) will count - mere posts on Social Media will not.
Did you notice what just happened? We started the rules with “if the United States officially announces” and now we have “an official announcement made by the United States and Denmark” (emphasis added). Which is it? With adversarial ambiguity, it’s entirely possible for the United States to take Greenland and announce it while Denmark never acknowledges the loss but rather acquiesces to the reality of American military might in order to partially assuage popular anger. Practically every diplomatic negotiation will include such ambiguity as a way to usher parties toward an agreement. Let’s move on the fourth and final paragraph of rules:
The resolution source for this market will be official information from the governments of the US, Greenland, and Denmark, however a consensus of credible reporting confirming that Greenland has come under U.S. sovereignty will also qualify.
Oh my. “A consensus of credible reporting” is one of those beautiful phrases that harkens back to a halcyon era when adversarial ambiguity and weaponized truth were mere figments in the imaginations of the most inventive sci-fi authors. It reminds me of my article “Consensus Functions” from a few years ago, in which I describe why it’s become impossible to reach any form of democratic consensus in any context, and what we should do to push forward institutions like science.
Once again, we see a contradiction in the rules. “Has come under U.S. sovereignty” is not the same as “under the formal governance or jurisdiction of the United States.” Greenland could be under U.S. sovereignty but not formally under the jurisdiction of the United States.
The premium for Jesus’s arrival is not a commentary on religious belief, but rather the market pricing in the complication of determining that bet’s outcome and Polymarket’s fidelity in doing so.
I can point out half a dozen other asinine, pedantic problems. I realize I am closely reading what is otherwise a gamified gambling experience that’s meant more as entertainment than professional investing. Ultimately, Polymarket can cancel a bet and just refund every investor’s wager, and outside some aggrieved would-be winners, everyone can move on. Indeed, as a market, prices can include our relative beliefs about Polymarket’s judgment in resolving these bets. The premium for Jesus’s arrival is not a commentary on religious belief, but rather the market pricing in the complication of determining that bet’s outcome and Polymarket’s fidelity in doing so. The potential ambiguity of resolution raises the cost.
Prediction markets and sports gambling have massive negative repercussions for society as Charles Fain Lehman noted in The Atlantic and I pointed out in “America’s Gambling Fetish.” But one upshot is that more people will be exposed to the elite battles over words, terms and definitions that have made adversarial ambiguity a hallmark of great power politics. It’s not just about reading the rules, it’s about realizing that the whole point of many actions is to be able to ignore the rules entirely.
