Prediction markets used to be that weird corner of finance everyone knew about but nobody took seriously. Occasionally they'd nail an election or a policy outcome, but mostly they were easy to ignore. According to Danny Moses, the "Big Short" investor who saw the housing crisis coming, ignoring them in 2026 is becoming a legitimate mistake.

In an exclusive conversation with MarketDash, Moses didn't mince words: prediction markets aren't background noise anymore. As liquidity deepens, they're transforming into actual signals that investors overlook at their peril.

Liquidity Changes Everything

The biggest shift, Moses argues, is structural rather than conceptual. "I think we will see liquidity continue to increase in prediction markets," he said. That matters because liquidity is what separates interesting ideas from tradable assets.

His view on event contracts is pragmatic: "Using event contracts to express an opinion is no different than trying to find a stock to express the same theme," Moses explained. Once traders start thinking that way, treating prediction markets as just another tool rather than a gimmick, the whole dynamic changes.

The Institutions Are Showing Up

Then there's the validation from the establishment, which is hard to dismiss.

Moses pointed to Intercontinental Exchange Inc (ICE), which owns the New York Stock Exchange, pouring billions into prediction market infrastructure. Platforms like Polymarket and Kalshi are raising capital at valuations in the billions. And CME Group Inc (CME), the world's largest commodity exchange, is partnering with FanDuel to build out prediction markets.

This isn't dipping a toe in the water. This is institutional money backing a real thesis.

How Investors Actually Use Them

The subtlest signal might be the most telling: Moses himself has changed his routine.

"I glance through event contracts now like I do the FT [Financial Times] or the WSJ [Wall Street Journal] each day," he said. He's using them as a real-time gauge of what the broader market might be missing or mispricing.

As liquidity continues building, Moses expects that behavior to spread beyond a handful of sophisticated traders. When checking prediction markets becomes as routine as scanning headlines, trading activity follows naturally.

In 2026, prediction markets aren't just forecasting what might happen. They're becoming part of how the market processes information and prices risk. For investors who remember when options and futures were considered speculative sideshows, that evolution might sound familiar.