TheChek News Flow

Google DeepMind and Fei-Fei Li’s World Labs target gaming with AI-generated 3D environments

The global video games industry is set to be disrupted by the advent of artificial intelligence models that generate interactive 3D environments.

Google DeepMind and Fei-Fei Li’s $1bn start-up World Labs are among the leading AI groups arguing that so-called “world models” — systems designed to navigate and recreate the physical world — could reshape the multibillion-dollar gaming sector.

“Creating software and games in particular is changing a lot, and I expect it to change, maybe entirely, over the next few years,” said Shlomi Fruchter, co-lead of Genie 3, DeepMind’s world model.

“This will go and empower creators and developers to build things faster, better and in ways that weren’t done before . . . I don’t think it [will] replace the existing experience [but we will see] more types of experiences that are not available today.”

AI companies such as Elon Musk’s xAI and Nvidia are also seeking to embed world models into robots and autonomous vehicles. But more immediate gains could emerge through the gaming sector, which is expected to generate almost $190bn in revenues this year according to industry research group Newzoo.

Existing generative AI tools are already being used to create visual assets for games, such as unique landscapes, and characters. 

In May, Epic Games and Disney introduced an AI-powered Darth Vader — a version of the Star Wars character built with Google and ElevenLabs — as an interactive non-player character in Fortnite.

Meanwhile, Alexander Vaschenko, chief executive of Game Gears, says AI has quadrupled the speed of developing titles such as the studio’s Aliens vs Zombies: Invasion.

“Based on my professional experience, I firmly believe that both the video game and film industries will soon be unable to function without AI,” he added.

AI companies are betting that the release of new and more powerful world models — which generate 3D, interactive environments from text prompts — will further accelerate AI adoption within games companies.

World Labs, founded by the AI pioneer Fei-Fei Li, launched a world model called Marble last month. Another AI group, Runway, which works with games studios, launched its first world model in December.

Li said the technology will affect game engines such as Unity and Epic’s Unreal. “This is all up for disruption,” she added. “Simulation gaming engines are due for improvements.”

In future, AI experts said players will be able to create new gaming worlds themselves, while developers can reduce the need for expensive software or specialised skills to generate content.

“Now a gamer in front of this world model can put themselves into a virtual world,” said Eric Xing, president of the Mohamed bin Zayed University for Artificial Intelligence in Abu Dhabi. “That makes the game industry very different from today, because producing a personalised game is now a straightforward process.”

Critics argue that increased use of AI will lead to developers and artists being replaced, with game visuals being overwhelmed by “slop” or low-quality AI-generated material.

Six European video games unions condemned the growing use of AI in their industry this month, saying the tools . . . were “being forced upon us, even though they degrade our working conditions.”

Optimists, however, say it may alleviate costs, increase creativity, and avoid burnout among developer staff. That would be a boon in an industry where leading games — known as triple-A titles — can take several years and cost more than $1bn to develop.

DeepMind’s Alexandre Moufarek, formerly an associate producer at French games maker Ubisoft, said he hoped that world models would help give developers space to “find the fun” and “try new ideas and take risks again”.

“Often, that’s the time that’s missing at the end of the production. Christmas is coming, and you need to release the game, and you just don’t have time to polish the things that you wanted [or] debug things correctly,” he added.

“The more we put those models in the hands of creatives, I’m sure we are going to discover new ways of working that we haven’t even anticipated yet.”

- Hope US will earnestly fulfill its commitments and provide fair, open, transparent and non-discriminatory business environment for Chinese companies.

On chip tariffs:

- China has lodged representation with the us through the China-US consultation mechanism

- China does not agree with conclusions of US section 301 investigation

- Urges the US to correct 'erroneous practices' as soon as possible and cancel relevant measures

On US Defence report:

- US Report distorts china's defence policy, China firmly opposes this

- China views and deals with ties with India from strategic and long term perspective

On rare earth exports to the US:

- Fluctuations in trade data are normal

- China is committed to the security and stability of the global supply chain

On Japan:

- Urge the Japanese side to put an end to its 'false' narratives, and halt 'targeted' deployment against China

On US arms sales to Taiwan:

- Urges US to correct 'wrong doing'

- US actions 'speeding up the threat of war in the Taiwan Strait'

- The Splits consist of (i) an absorption-type split in which the Company will succeed the data center business of IDC Frontier Inc. (hereinafter “IDCF”), a wholly owned subsidiary of the Company, as well as customer contracts related to its cloud and network services (hereinafter “Split (i)”), and (ii) an absorption-type split in which IDCF will succeed the Company’s cloud services “White Cloud ASPIRE” and “White Cloud Desktop Service Standard” (hereinafter “Split (ii)”).

- With respect to the data center business, its importance as core infrastructure supporting an AI-driven society is increasing. Accordingly, pursuant to the Split (i), this business will be succeeded by the Company and enhanced and advanced as a next-generation business.

- The Split (i) will be an absorption-type split with the Company as the successor company and IDCF as the splitting company. Split (ii) will be an absorption-type split with the Company as the splitting company and IDCF as the successor company.

- Results of operations of the department to be succeeded due to the Split (i) (Fiscal year ended March 31, 2025) Revenue: JPY 16,552 million (excluding sales to the Company)

- Since these are splits between the Company and a wholly owned subsidiary of the Company, the effect of the Splits on the Company's consolidated results of operations is immaterial.

The best prediction for 2025 would have been predicting the soaring growth of prediction markets. My prediction for 2026 is it will be a tough year for prediction markets.

My colleagues Sara Germano and Yueqi Yang chronicled the stunning rise of these markets last weekend. They focused on the dramatic growth in sports betting and the tumult this has caused in college and professional sports. That’s one piece of the story—there are plenty more.

Until this year, prediction markets mostly drew attention during big elections as an alternative to voter polls. The markets are dominated by Kalshi and Polymarket, which got the usual spikes in trading last fall followed by the usual post-election slowdown.

Prediction markets let people bet against each on everything from economic statistics to celebrity wedding dates. Whoever bets right gets the money.

This year, the prediction markets embraced sports betting. Instead of fading into the background, they boomed again. In one recent week, the two exchanges did more than $2.5 billion in sports trading volume, topping last year’s election. Now sports betting accounts for two-thirds of Kalshi’s spot trading and 40% of Polymarket’s.

However, sports betting put Kalshi and Polymarket in conflict with three powerful entities: state governments, which regulate sports betting and take in billions in tax revenue from it; the sports leagues, which are already facing several betting-related scandals, and the major sports betting companies themselves, FanDuel and DraftKings.

The business is growing fast. Last month Kalshi told investors it was on an annualized pace for between $600 million and $700 million in net revenue. That has attracted a range of new competitors, including Coinbase, digital brokerage Robinhood, President Donald Trump’s social media company, and the sports-betting companies themselves. Many of these are partnering with Kalshi and Polymarket to get going.

While the companies are excited about sports betting, Americans are not.

A Pew Research Center poll over the summer showed that 43% of Americans said sports betting is bad for society, up from 34% three years ago. Just 7% think sports betting is a good thing, while the remainder say it’s neither good nor bad. The biggest shifts against sports betting came in the industry’s two biggest demographics: men overall and people under 29. Democrats and Republicans actually agree on the issue, with 43% of each party’s supporters saying it’s a bad thing.

Now, let me say a little more about the prediction I mentioned at the beginning—because next year, the hottest market for predictions could be the fate of prediction markets themselves. States, which won the right to regulate sports betting in a 2018 Supreme Court decision, are already fighting against these markets. The markets say they are federally regulated, so they can take wagers even in states where sports betting is illegal. They also argue that what happens on their sites isn’t sports betting—rather, they’ve created markets for contracts tied to the outcome of events.

State regulators are not buying that argument. That’s not a surprise, given they take in billions in tax revenue from sports betting—and New York state alone does $1 billion a year. Prediction markets don’t pay state gambling taxes, so any shift from state-regulated betting to the prediction markets means lost revenue for the states.

The states also argue they have built serious regulatory structures around sports betting, including efforts to help problem gamblers. The federal markets regulator that oversees prediction markets hasn’t done any of that.

Another powerful force is states like California and Utah where sports betting is illegal, yet have been flooded by prediction markets offering just that.

The dispute between the states’ regulatory authority and the prediction markets seems headed for the Supreme Court, as the markets insist that federal oversight gives them latitude to take wagers nationwide.

Kalshi and Polymarket aren’t going to shrink from this fight, and they enjoy powerful allies with deep political connections too, including their venture capital backers as well as the crypto companies. (Cryptocurrencies are often used to fund bets.)

While the Trump family is creating its own prediction market, it also has close ties to the industry’s big players. Donald Trump Jr. is an adviser to both Kalshi and Polymarket. Earlier this year, 1789 Capital, an investment firm backed by the president’s family, put money into Polymarket. The prediction market in October also got an investment worth up to $2 billion from the Intercontinental Exchange, which owns the New York Stock Exchange. The wife of ICE’s chief executive is a member of the Trump administration.

There’s other excitement on tap. The NFL, the NBA and the NCAA have complained in different ways about the impact the prediction markets can have on sports and the regulation around prediction markets. The leagues are highly sensitive to sports betting, having faced some scandals tied to the incumbent sports betting companies. Both prediction markets say they don’t offer some of the bets that led to the sports scandals.

Not all leagues are fighting the prediction markets. The NHL has signed commercial partnerships with both Kalshi and Polymarket, saying the deals help it “promote consumer protection and integrity.”

There’s a bigger integrity issue facing prediction markets than sports scandals. These markets are vulnerable to manipulation by people who know the outcome of events that are being traded, or by people trying to drive up prices to make a profit or influence the outcome of events like elections. The creation of new prediction markets could spread out trading, potentially meaning fewer bets on each prediction. That will make it easier still to manipulate the markets.

Coinbase CEO Brian Armstrong effectively manipulated one market during his company’s earnings call in October. Before the call, bettors were predicting whether Armstrong would say words such as bitcoin, ethereum, blockchain, staking and web3. At the end of the call, Armstrong read out a list of all of the words, creating immediate winners and losers in that market. He said he had been watching the prediction markets during the call.

Earlier this month, Coinbase partnered with Kalshi to let its clients bet on sports and other events, potentially including what chief executives say on their earnings calls. Armstrong could have some fun on the next call.

Good luck predicting that outcome.

The best prediction for 2025 would have been predicting the soaring growth of prediction markets. My prediction for 2026 is it will be a tough year for prediction markets.

My colleagues Sara Germano and Yueqi Yang chronicled the stunning rise of these markets last weekend. They focused on the dramatic growth in sports betting and the tumult this has caused in college and professional sports. That’s one piece of the story—there are plenty more.

Until this year, prediction markets mostly drew attention during big elections as an alternative to voter polls. The markets are dominated by Kalshi and Polymarket, which got the usual spikes in trading last fall followed by the usual post-election slowdown.

Prediction markets let people bet against each on everything from economic statistics to celebrity wedding dates. Whoever bets right gets the money.

This year, the prediction markets embraced sports betting. Instead of fading into the background, they boomed again. In one recent week, the two exchanges did more than $2.5 billion in sports trading volume, topping last year’s election. Now sports betting accounts for two-thirds of Kalshi’s spot trading and 40% of Polymarket’s.

However, sports betting put Kalshi and Polymarket in conflict with three powerful entities: state governments, which regulate sports betting and take in billions in tax revenue from it; the sports leagues, which are already facing several betting-related scandals, and the major sports betting companies themselves, FanDuel and DraftKings.

The business is growing fast. Last month Kalshi told investors it was on an annualized pace for between $600 million and $700 million in net revenue. That has attracted a range of new competitors, including Coinbase, digital brokerage Robinhood, President Donald Trump’s social media company, and the sports-betting companies themselves. Many of these are partnering with Kalshi and Polymarket to get going.

While the companies are excited about sports betting, Americans are not.

A Pew Research Center poll over the summer showed that 43% of Americans said sports betting is bad for society, up from 34% three years ago. Just 7% think sports betting is a good thing, while the remainder say it’s neither good nor bad. The biggest shifts against sports betting came in the industry’s two biggest demographics: men overall and people under 29. Democrats and Republicans actually agree on the issue, with 43% of each party’s supporters saying it’s a bad thing.

Now, let me say a little more about the prediction I mentioned at the beginning—because next year, the hottest market for predictions could be the fate of prediction markets themselves. States, which won the right to regulate sports betting in a 2018 Supreme Court decision, are already fighting against these markets. The markets say they are federally regulated, so they can take wagers even in states where sports betting is illegal. They also argue that what happens on their sites isn’t sports betting—rather, they’ve created markets for contracts tied to the outcome of events.

State regulators are not buying that argument. That’s not a surprise, given they take in billions in tax revenue from sports betting—and New York state alone does $1 billion a year. Prediction markets don’t pay state gambling taxes, so any shift from state-regulated betting to the prediction markets means lost revenue for the states.

The states also argue they have built serious regulatory structures around sports betting, including efforts to help problem gamblers. The federal markets regulator that oversees prediction markets hasn’t done any of that.

Another powerful force is states like California and Utah where sports betting is illegal, yet have been flooded by prediction markets offering just that.

The dispute between the states’ regulatory authority and the prediction markets seems headed for the Supreme Court, as the markets insist that federal oversight gives them latitude to take wagers nationwide.

Kalshi and Polymarket aren’t going to shrink from this fight, and they enjoy powerful allies with deep political connections too, including their venture capital backers as well as the crypto companies. (Cryptocurrencies are often used to fund bets.)

While the Trump family is creating its own prediction market, it also has close ties to the industry’s big players. Donald Trump Jr. is an adviser to both Kalshi and Polymarket. Earlier this year, 1789 Capital, an investment firm backed by the president’s family, put money into Polymarket. The prediction market in October also got an investment worth up to $2 billion from the Intercontinental Exchange, which owns the New York Stock Exchange. The wife of ICE’s chief executive is a member of the Trump administration.

There’s other excitement on tap. The NFL, the NBA and the NCAA have complained in different ways about the impact the prediction markets can have on sports and the regulation around prediction markets. The leagues are highly sensitive to sports betting, having faced some scandals tied to the incumbent sports betting companies. Both prediction markets say they don’t offer some of the bets that led to the sports scandals.

Not all leagues are fighting the prediction markets. The NHL has signed commercial partnerships with both Kalshi and Polymarket, saying the deals help it “promote consumer protection and integrity.”

There’s a bigger integrity issue facing prediction markets than sports scandals. These markets are vulnerable to manipulation by people who know the outcome of events that are being traded, or by people trying to drive up prices to make a profit or influence the outcome of events like elections. The creation of new prediction markets could spread out trading, potentially meaning fewer bets on each prediction. That will make it easier still to manipulate the markets.

Coinbase CEO Brian Armstrong effectively manipulated one market during his company’s earnings call in October. Before the call, bettors were predicting whether Armstrong would say words such as bitcoin, ethereum, blockchain, staking and web3. At the end of the call, Armstrong read out a list of all of the words, creating immediate winners and losers in that market. He said he had been watching the prediction markets during the call.

Earlier this month, Coinbase partnered with Kalshi to let its clients bet on sports and other events, potentially including what chief executives say on their earnings calls. Armstrong could have some fun on the next call.

Good luck predicting that outcome.

Binance, the world’s largest crypto exchange, said it will start offering users up to 20% annualized yield on USD1, the stablecoin issued by President Donald Trump’s family crypto venture World Liberty Financial.

The promotion on Binance, set to last for a month, is designed to help drive usage of USD1. The market circulation of USD1 jumped to $2.9 billion on Wednesday from $2.7 billion on Tuesday, making it the 6th largest stablecoin in the world.

“Nothing says Christmas like real-world adoption. USD1 running a massive holiday campaign on Binance is just the beginning,” Donald Trump Jr., co-founder of World Liberty, said in a tweet.

Stablecoins are supposed to invest in safe assets to maintain their 1 to 1 peg against the dollar. Those assets pay roughly 3.6% today, meaning Binance or World Liberty Financial or both are losing money on the promotion.

So far, most of USD1’s growth was driven by Abu Dhabi sovereign wealth fund MGX’s decision in May to use the stablecoin to pay for its $2 billion investment in Binance. The move has led to criticisms, such as by Senator Elizabeth Warren, that it boosted the fortune of Trump’s family business as Binance founder Changpeng Zhao successfully lobbied for a pardon. Binance has denied such claims