Tag Archive for: FIA

The Future of Capital Markets: Prediction Markets, AI Compute and the Next Evolution of Derivatives

Futures Industry Association Expo 2026By Jessica Darmoni

The global derivatives industry gathered in Chicago last week for the Futures Industry Association (FIA) Expo conference, where it is clear that capital markets are undergoing a significant transformation.

What began with the emergence of distributed ledger technology (DLT) and cryptocurrencies has evolved into a new generation of financial markets. Today, innovation extends well beyond digital assets, with prediction markets, perpetual futures and even artificial intelligence (AI) compute emerging as new opportunities for market participants.

As these markets develop, they are attracting new participants, creating new products and challenging traditional approaches to trading, investing and risk management.

Recognizing this evolution, FIA introduced two educational tracks at this year’s conference. The Evolution of the Futures Markets track was designed for investors beginning their journey into derivatives, while the Prediction Markets track explored how market structure and product design differ from traditional futures contracts.

Prediction Markets: Turning Information Into Opportunity

Prediction markets allow participants to trade on the outcomes of real-world events.

During a discussion with FIA’s Global Head of Market Intelligence Will Acworth, independent prediction market trader Bethany Vodicka shared how she first became interested in the space around President Donald Trump’s re-election in 2024.

She observed that in the run-up to the elections, Kalshi priced Trump’s chances of winning at approximately 53%, while Polymarket had him at 47%. That difference seemed like a trading opportunity, and it sparked her interest in prediction markets.

Rather than simply wagering on an outcome, Vodicka explained that she focuses on opportunities for arbitrage across similar contracts with slightly different prices. In some cases, differences in how outcomes are defined are not fully priced into the market, creating opportunities for people who examine the fine print.

Vodicka does most of her trading in sports-related markets, but one of her recent interests has been entertainment-related trading, including the Country Music Awards scheduled to air on November 18.

The conversation also highlighted an important question facing the industry, which is how should these emerging markets be regulated?

During his opening remarks at the conference, FIA President Walt Lukken echoed the need for thoughtful market development and responsible innovation. He acknowledged the conference’s growing focus on emerging markets and emphasized that clear rules and strong market structures are essential to building trust.

“Market structure is relevant and rules need to be clear,” Lukken said. “If people don’t trust the markets, they are not going to come.”

One of the more interesting discussions centered on the economic purpose of prediction market contracts.

Traditional derivatives have long served as tools for managing financial risk. For example, a weather futures contract could help a business protect itself against the financial impact of a storm, potentially offering a more cost-effective alternative to traditional insurance.

But what happens when the contract is tied to something like Taylor Swift’s next tour date?

“When you get into specifics, for economic activity, it will look like a futures contract,” Lukken said. “For things that are not economic activity, will additional customer protections be needed?”

As prediction markets continue to expand into politics, entertainment, sports and other areas of everyday life, the industry will need to balance innovation with appropriate customer protections and regulatory clarity.

The Emergence of AI Compute as an Asset Class

The second day of the FIA conference turned its attention to another emerging opportunity in AI compute markets.
AI compute refers to the processing power, hardware and/or infrastructure required to develop and operate artificial intelligence models. As demand for AI accelerates, the cost and availability of this computing capacity are becoming increasingly important considerations for businesses.

Data centers, hyperscalers and neocloud providers are among the companies that could benefit from futures contracts and other derivatives designed to manage their exposure to AI compute prices.

FIA featured a panel of compute index providers, including Compute Desk, Silicon Data, Ornn and NativX. These companies are developing pricing benchmarks and partnering with traditional financial exchanges to bring AI compute derivatives into both listed and over-the-counter (OTC) markets.

While the panel reminded everyone that big numbers don’t mean a liquid market, the opportunity is big. According to Goldman Sachs, global investment in AI infrastructure is forecasted to exceed $1 trillion in 2026, with approximately $581 billion coming from the United States alone.

The scale of the opportunity was further illustrated by Andrawes Bahou, Chief Executive Officer of Compute Desk.

“To put things in perspective, there were about 5 hyperscalers trading physical compute about 5 years ago,” Bahou said. “That number has grown to about 500 companies with a proliferation of natural buyers, sellers, brokers and people in the market.”

As the market expands, companies will increasingly need tools to manage the financial risks associated with computing costs. This is where derivatives can play an important role.

Much like energy companies use futures contracts to manage exposure to fluctuating electricity and natural gas prices, businesses that depend on AI infrastructure could use derivatives to hedge against changes in compute pricing.

Education will be critical to making this market accessible. The panelists emphasized the importance of helping new market participants understand how these products work and, more importantly, how to use them to manage their business exposure.

Several index providers are already working with established exchange operators to develop new products. Silicon Data has partnered with CME Group, Ornn has partnered with ICE, and Compute Desk is working with Nodal Exchange and Architect Exchange Group.

Following the index providers’ discussion, representatives from the exchanges took the stage to explore how the broader AI compute ecosystem could transition into the futures markets. Greater price transparency, standardized benchmarks and more sophisticated risk management tools could help support the development of this emerging asset class.

Brett Harrison, Chief Executive Officer of Architect, also highlighted a unique challenge that AI compute markets may face, which is the pace of technological innovation.

“AI moves a lot faster than derivatives and it’s a possibility that the underlying instrument may be updated or replaced as the standard, before a listed futures contract can be launched,” he said.

This raises an important question for exchanges and market participants. How do you create standardized financial contracts around an industry where the underlying technology is constantly changing?

The Next Chapter of Capital Markets

The derivatives industry is evolving rapidly, with new technologies, new participants and entirely new asset classes reshaping the financial landscape.

Prediction markets are changing how people interact with information and trade on future outcomes. AI compute is creating demand for new financial products that can help businesses manage the costs of an increasingly essential resource. The continued development of digital assets and blockchain technology is providing the foundation for even more innovation.

For investors and market participants, these developments represent more than just new trading opportunities. They signal a broader shift in how financial markets are structured, how risk is managed and where the next generation of market opportunities may emerge.

One thing is certain that the future of capital markets will look very different from the past.

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Futures Industry Gathers in Boca to Discuss Where Risk Management Ends and Gaming Begins

Futures Industry Boca prediction marketsBy Jessica Darmoni

The Futures Industry Association (FIA) held their annual FIA Boca conference in Boca Raton, Florida March 8-11, 2026. The annual gathering brings together institutional investors and professionals in the listed and over-the-counter derivatives markets with an emergence of digital asset firms and retail brokers joining in the past few years.

One of the hot topics this year was the rise of prediction markets, which can be a useful risk management tool enabling participants to hedge against uncertain future events. However as these markets evolve, there is growing concern about when they cross the line from risk management tools to gaming and speculation?

A Repackaged Product

From a structural perspective, prediction market contracts are not new. Many of them are variations of instruments the financial industry has traded for decades. Most operate as fully collateralized products known as binary options. Binary options are contracts that only pay out a fixed amount if a specific event occurs. The buyer will only lose what he spent to buy the option if the event does not occur.

“Everyone is looking for what is next,” says Jim Kharouf, Chief Marketing Officer at IncubEx, which designs and develops environmental derivatives. “We have seen the evolution from the institutional derivatives to e-minis, and options to zero-day contracts and so on. Prediction markets, and even crypto, are more examples of the next layers of innovation.”

While versions of these contracts have existed since the late 1990s, new players have brought a wave of excitement, and potential for scale and scope. Last year, the CME Group announced a partnership with Fanduel (they hired former Chicago Bulls player Scottie Pippen to promote the products at this year’s FIA Boca conference.) Another recent partnership between InterContinental Exchange and Polymarket has brought additional buzz to the prediction market space. Other notable names include Robinhood and Draftkings.

The collaborations represent a shift in the derivatives markets. These exchanges, which traditionally service institutional and professional traders, are introducing event-based trading to a much broader audience with consumer facing platforms. While the foundation of the product has stayed the same, it is the entrance of new participants and the events in which they are trading on, which has brought up these pressing questions.

A Natural Progression

Christopher Hehmeyer, a derivatives industry veteran who was most recently CEO of Warwick Capital, says that we must reframe the issue in terms of public perception. He wonders whether the American public sees a meaningful difference between trading a contract on the next Taylor Swift concert and taking a position in gold.

“It’s gaming on U.S. entertainment versus risk management,” he says, explaining that betting on pop culture events may feel closer to traditional gambling than financial trading.

However, Hehmeyer also points to prediction instruments that serve a clearer economic purpose. Weather contracts, for example, allow businesses and individuals to hedge against environmental risks that can be difficult or expensive to insure.

Contracts tied to weather outcomes are traded on platforms such as Kalshi, a regulated U.S. exchange that offers event-based contracts on topics ranging from economic indicators to climate data.

“If insurance is too expensive, the option to buy a weather contract hedging against a hurricane is a type of risk management,” he says. “That’s not gaming.”

In that scenario, a business located in a hurricane-prone region might buy a contract that pays out if a storm strikes its area. The payout could offset revenue losses caused by the disruption, functioning similarly to an insurance policy.

This illustrates the central challenge regulators face. The same financial instrument can be used in very different ways. A coastal business might use a hurricane contract to hedge real financial exposure, while a retail trader in another state might simply be speculating on the outcome.

The debate therefore often centers less on the structure of the contract and more on the underlying event being traded. As prediction markets expand, this distinction is becoming increasingly important.

A Regulatory Impact

Finally, another complication is the regulatory framework itself. In the United States, prediction markets exist in a complex environment overlapping financial regulation and state gambling laws. Some contracts are treated as derivatives, while others may be restricted depending on how regulators interpret their purpose. Also, states may lose out on potential tax revenue, if there isn’t regulatory certainty and federal legislation, as trading activity shifts to platforms that operate outside of traditional gaming structures.

While prediction markets may be part financial innovation and part speculative entertainment, it is clear that the underlying idea is gaining momentum. As technology makes it easier for individuals to trade on real-world outcomes, prediction markets may become an increasingly visible part of the financial landscape. It is now up to the regulators and policymakers to decide where the line is drawn between real-world risks and betting on the unpredictable.

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