TABLE 1: Markets v. Benefits
\ Benefit | Pool Hedge Express Promote
Market \ | Capital Risks Prices Discovery
Prediction none possible primary secondary
Futures none primary secondary possible
Securities primary possible secondary possible
Market tertiary tertiary
TABLE 2: Markets v. Structural Features
\ Feature | Zero-sum Spot Underlying
Market \ | Trading Trades Assets
Prediction yes yes no
Futures yes no usually
Securities no yes yes
Please let me know if, on your browser, those tables appear out-of-line. And, of course, please share your comments. Some of mine follow.
You might note that these tables, in contrast to the prior chart, do not offer the prospect of a Nolan Chart for classifying financial institutions. I have not, in other words, described axes.
I won't bother to here explain the label in each category, as I think you readers will perceive my reasoning.
A quick survey of these charts hints at why prediction markets resemble futures markets more than they do securities markets. Assign numbers to the ordinal rankings in Table 1 like this: primary = 1, secondary = 2, tertiary = 3, none = 4. Now compare the differences between the categories. PM-FM=0, whereas PM-SM=1. A similar exercise with Table 2 gets these results: PM-FM=1.5; PM-SM=2. Prediction markets, by that reckoning, have fewer differences with futures markets than with securities markets.
Where are gambling markets? I haven't dignified them with inclusion because they really do seem very different and, at the least, present some ugly classification problems. If pressed, I suppose I'd say that gambling markets offer a primary benefit of entertainment and a possible secondary benefit of pooling capital (see, e.g., lotteries). That would force me to add a new column to Table 1.
With regard to Table 2, I think I'd say that gambling markets offer zero-sum trading, that they may or may not offer spot trades (compare roulette to a lottery), and that they probably do not deal in underlying assets (though it depends on how you view the jackpot).
(By the way, Chris, I didn't here follow your suggestion, made in the comments to my prior post, to use time limits a distinguishing feature, because "securities," as used in federal law, includes time-limited bonds and notes. But I did adopt your "underlying asset" suggestion.)