tartoranA prediction market user made $436k betting on Maduro's downfall
can i bet on when prediction markets will collapse due to rampant insider bets?
How? Then why would non-insiders bet? The classic prediction market is guessing the weight of an elephant (or some animal) at a circus. The average guess of the crowd will actually get very close. But if someone knows the actual weight, no one would play.
The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling.
Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing. The insider whales are the only ones actually using it for its intended purpose.
Well, it's confusing because you have markets on questions with very different characteristics in terms of whether they are exogenous or not (and whether they are exogenous from the perspective of particular groups), or just with different degrees of asymmetry regardless of whether there are literal "insiders".
Like, prediction markets have questions ranging from what the weather will be in a certain year, to who will win elections, to what stock prices or exchange rates will be, to whether companies will announce specific products, to whether particular people will start dating, to whether a specific person will say a specific word during a conference (some of the Manifold "prop bets" for Manifest).
These are not the same kinds of questions in terms of whether there are insiders at all or who the insiders are. Maybe we can't expect prediction markets to have the same dynamics in all of these cases.
Depending on what you want out of a prediction market, there's probably a sweet spot in terms of whom you should expect (or want) to be trading in it.
In the most exogenous events, those that are most outside of the control of individuals or groups, I think Robin Hanson hoped (in proposing "idea futures") that people would be incentivized to invest in research in order to gain a statistical edge in the market, but also assumed that there wasn't anyone who was inherently drastically better positioned to get information about the question than anyone else. E.g. "I will spend $X to get a better estimate of this probability (hopefully by otherwise ethical means?), and that will make my expected return from buying $Y worth of prediction contracts greater than $(X+Y)". Indeed not something retail investors or gamblers should probably participate in.
It's also true that in some cases where there are true insiders it can give the insiders a financial incentive to reveal confidential information. From the point of view of trying to get the most accurate possible estimate of the likelihood of future events, that would indeed also be a success, even if the process was "unfair" to non-insiders.
Yeah, I mean, they're a wretched hive of scum and villainy, I preemptively agree. I'm just saying, insider bets don't have the same ethical or legal valence on a prediction market that they do in the financial markets (even there, at least in the US, the principles underlying insider trading law are really poorly understood.)
It's funny to think that the most villainous markets might be some of the humorous prop bets where the person creating the market (or a friend of the person creating the market) literally completely controls the outcome. Like "will I say SOME_WEIRD_WORD on stage at the conference tomorrow?".
Although maybe the villainy would come in more from deceiving people about whether or not an event was under your control, more than merely encouraging people to bet on an event that was clearly and unambiguously under your control.
I agree that is funny and want to take this opportunity to say I think things like Polymarket are bad, a real corruption of the original idea. I'm not sticking up for them!
What uses or structures of prediction markets would you like to see? For things like Polymarket, are you more particularly concerned about the kinds of participants (e.g. people who really are just gambling for entertainment), or about the kinds of questions that are the subjects of contracts?
The original prediction markets were internal things at large companies, which I think are a great idea. I've flirted for a long time with doing a vulnerability prediction market. The good-faith incarnations of prediction markets aren't open to all comers; they're structured so you can't meaningfully gamble on them.