We like to assume that markets are efficient because if not, there's an opportunity for arbitrage, but for betting markets, this just isn't true. Predictit, the

We like to assume that markets are efficient because if not, there's an opportunity for arbitrage, but for betting markets, this just isn't true. Predictit, the most often referenced one, has a fee structure that makes it horribly inefficient: they take 10% of all winnings on a given bet and 5% of all withdrawals from the site. The latter actually isn't as big of a deal, but the 10% on winnings means that I can't make any money off of the spread when you have, for example, a market where Biden has a 88% chance of winning and Trump a 15% chance (which are the odds on the site as of right now). In a market without fees, I'd buy a Trump NO for 85 cents and a Biden NO for 12 cents. If Biden wins, I make 15 cents on the first bet and lose 12 cents on the second. If Trump wins, I lose 85 cents on the first bet and make 88 on the second. Either way, I'm up 3 cents. But with a 10% fee on winnings, I make 1.5 cents if Biden wins and I actually lose 5 cets if Trump wins. Then I pay another 5% when I try to withdraw my money (which isn't as bad of a fee, because in theory, I would just do a bunch of arbitrage to grow my pile fee-free and then withdraw at the end). What ends up happening is that people on these sites don't get any value from betting on events that are 90%+ likely. Which is why the Trump/Biden market even puts Trump's chances as high as they are. I personally think Trump's chances of winning are less than 1%, but I'd lose money if I bet against him. Meanwhile, some of his biggest fans may not actually think that he has as high as a 15% chance winning, but if they win, they get a 600% return, so what's the difference.