21 ms·

"The best way to predict the future is to create it." I always thought the the problem with prediction markets is you have the incentive to make the prediction

"The best way to predict the future is to create it." I always thought the the problem with prediction markets is you have the incentive to make the prediction come true. And that gets ugly fast. But hell, I guess that's what all this is at the end of the day.

ahelwer 6y ago
Yep, it clearly leads into assassination markets - for example, opening a large bet that person X will die on a specific date.
- solveit 6y ago
  Yes, just like you can short Tesla and assassinate Musk. This is ridiculous, regulate prediction markets like any other financial market (in particular, your identity should be traceable) and then all your clever plan does is get your funds frozen pending a very thorough investigation.
  - lostlogin 6y ago
    > assassinate Musk. Would this cause Tesla stock to rise or fall?
    - bidirectional 6y ago
      Fall massively, I would imagine. Tesla's valuation is obviously not driven by fundamentals, Musk's personality is one of the things it is based on.
- ouid 6y ago
  Isn't that just life insurance?
  - mbg721 6y ago
    It sounds like term life for an unusually specific term. But you do typically have to have an insurable interest in order to buy insurance on someone's life.
  - m463 6y ago
    That got ugly too until they prevented people from taking out life insurance on people without their knowledge/consent
    - btilly 6y ago
      Concrete example, Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. And then were incentivized to make those conditions worse. See https://www.bankrate.com/insurance/life-insurance/dead-peasant/ https://www.bankrate.com/insurance/life-insurance/dead-peasa... for an overview of current regulations that resulted from that.
      - opo 6y ago
        >...Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. No, Walmart was doing it since they thought the policies would be tax deductible. They ended up losing money and eventually ended up bringing up a case against their insurance companies: >...Discount retailing giant WalMart cannot sue its insurers just because it gambled and lost $1.3 billion on getting a tax break from thousands of insurance policies it took out on employees, according to a brief filed by the insurers in the Delaware Supreme Court. >WalMart is contending in an appeal that it was entitled to rely on its expert insurance brokers to warn the company of the inherent dangers of buying COLI policies. WalMart has asked the high court to revive its bad-faith and breach-of-duty claims against its insurers, which the Delaware Chancery Court had dismissed. >Such policies lost their attraction for corporations long ago but disputes over liability for the tax consequences continue for companies in a position similar to WalMart’s. https://www.snopes.com/fact-check/dead-peasant-insurance/ https://www.snopes.com/fact-check/dead-peasant-insurance/
        btilly 6y ago
        My understanding was based on articles like https://workdayminnesota.org/court-slams-walmarts-use-of-dead-peasant-insurance/ https://workdayminnesota.org/court-slams-walmarts-use-of-dea.... Where Walmart was being sued specifically because there were perverse incentives and what they did was against various state laws. As to your case, Walmart thought that it could deduct the premiums. It turns out that it could not. Walmart also thought that it could create and collect them under Georgia law. It turns out that it could not. Walmart also has been forced to pay families of workers some of the payouts. None of which it expected. All of these things affect how profitable the policy is for Walmart. But they don't change the fact that once the policies are taken out, Walmart has a financial incentive to treat workers poorly. Which is why many states had banned the practice. And is why federal law currently only allows companies to take out life insurance on approximately their most highly paid third of employees. (Who also have to consent to it.) Back to the suit. Walmart sued its insurers in 2002 for fraud for failing to explain these risks. The brief quoted in Snopes is as filed by the insurers in 2005. They lost that judgement, but the case continued on. As of 2009, per http://www.contingentfeeblog.com/2009/05/articles/corporate-owned-life-insurance/walmarts-dead-peasant-suit-against-insurers-escapes-the-grave-a-third-time/ http://www.contingentfeeblog.com/2009/05/articles/corporate-..., the Delaware Supreme Court ruled for Walmart a 3rd time. I don't know the final outcome of the case. But it certainly wasn't as open and shut as the insurer's brief made it sound.
  - dragonwriter 6y ago
    Yes, insurance in general has this problem if unregulated, hence the evolution of the concept of “insurable interest”. https://en.m.wikipedia.org/wiki/Insurable_interest https://en.m.wikipedia.org/wiki/Insurable_interest
- btilly 6y ago
  Opening the bet that they die on a particular date is a problem because they know when to be careful. Opening a market on when they will die that goes to the person who is closest to the right date, now any would-be assassin can place their bet and try to win. And the target may know that people are hunting for them, but won't be forewarned of when.
  - camjohnson26 6y ago
    They would need a counter party to be able to place the bet though, and those people have an equal incentive to keep the person safe. If no counter party exists then there’s no incentive. Plus this ignores risks outside the market, like the risk the would be assassin gets caught and sent to prison.
    - btilly 6y ago
      It is a winner take all market. All money placed in the market goes to the winner. So if I want Donald Trump dead and am willing to pay a million dollars, I start the market and put a million dollars in for tomorrow. Eventually he dies and someone collects. Almost certainly not me, and not necessarily an assassin. But any would-be assassin who wants can place a bet and now has a million dollars riding on whether they succeed. This is not novel, the idea has been around for a quarter century. See https://en.wikipedia.org/wiki/Assassination_market https://en.wikipedia.org/wiki/Assassination_market for more.
- spyder 6y ago
  That's why there is the invalid token too.
- TerminalWarrior 6y ago
  Or, cheap life insurance for the suicidal.
- bostik 6y ago
  Reputable prediction markets don't offer contracts where they themselves, or someone in general, could profit from human misery. Disclosure: I work for one.
pdonis 6y ago
> the problem with prediction markets is you have the incentive to make the prediction come true If players in the market have ways outside the market to significantly affect the outcome that the market is betting on, then it isn't a prediction market. The whole point of a prediction market is that there is no such feedback mechanism. For example, the article discusses prediction market bets on Trump winning the election. The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible.
- Imnimo 6y ago
  >The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible. But this is not necessarily true. In the extreme case, a bettor could be one of nine Supreme Court justices. Or a participant in some sort of fantasy vote-rigging conspiracy. Or even a political insider tanking their candidate's own chances and betting against themselves. There's a pretty wide range of people who could plausibly (or not-so-plausibly in the conspiracy example) have more than a one-vote influence over the result of the election.
  - tshaddox 6y ago
    Sure, that’s why there are rules about when and how a CEO can sell their company’s stock (they generally have to announce the sale in advance). I’m not sure about the laws around Supreme Court justices, but I’m pretty sure it’s at least well-accepted that no judge should work a case when they have a personal interest in the outcome. I hope that would be grounds for removing a justice.
  - jtxxwl2 6y ago
    >Or a participant in some sort of fantasy vote-rigging conspiracy. This is even more relevant outside of the US. In the US vote rigging conspiracies are impossible for some inexplicable reason, perhaps related to magical soil, but outside of the US they are a real concern.
hugh-avherald 6y ago
That's why you have counterfactual prediction markets. You don't have markets on an outcome; you have two markets of an outcome conditional on some action, and on an outcome conditional on that action not being taken.
- dylan604 6y ago
  did you just describe sports betting?
jetrink 6y ago
One recent example is the man who ran onto the field at the Super Bowl after having proxies place $370,000 in bets on that occurring. However, he bragged about what he had done on a radio show and those bets were invalidated.
- notahacker 6y ago
  Another example that springs to mind is a British bookmaker that ran a promotional betting offer on a fat lower division substitute goalkeeper eating a pie during a televised cup match. The fat goalkeeper ate a pasty whilst sitting on the bench, and was promptly banned for a couple of months even without any evidence of financial gain for "intentionally influencing a betting market"
  - roganartu 6y ago
    There was another example of this in Australia back in 2016 where some prediction markets offered a novelty bet on what colour tie one of the TV hosts would wear. The host got wind of it and, for fun, changed ties at least five times throughout the evening. https://twitter.com/sportsbetcomau/status/749219697359396864 https://twitter.com/sportsbetcomau/status/749219697359396864 https://www.smh.com.au/politics/federal/federal-election-2016-laurie-oakes-ties-up-bookies-with-multicoloured-offering-20160703-gpxhr0.html https://www.smh.com.au/politics/federal/federal-election-201...
rmb177 6y ago
Rumor on PredictIt was one of the reasons they shut down tweet markets was Andrew Yang's campaign received email threats in regards to him tweeting.
__s 6y ago
Just have to keep in mind that bets could be a strange gofundme & don't participate in bets that can be bought out against you
gumby 6y ago
That's similar to short sellers trying to manipulate a stock: pretty much only works in the shallows (small cap, thin coverage, moderate liquidity). You could manipulate the dogcatcher election (or, more profitably, a bond initiative) but a presidential election is probably too hard, especially in this case (amount of money you'd need to spend is much larger than the amount you could make on these markets).

ahelwer 6y ago

Yep, it clearly leads into assassination markets - for example, opening a large bet that person X will die on a specific date.

solveit 6y ago
Yes, just like you can short Tesla and assassinate Musk. This is ridiculous, regulate prediction markets like any other financial market (in particular, your identity should be traceable) and then all your clever plan does is get your funds frozen pending a very thorough investigation.
- lostlogin 6y ago
  > assassinate Musk. Would this cause Tesla stock to rise or fall?
  - bidirectional 6y ago
    Fall massively, I would imagine. Tesla's valuation is obviously not driven by fundamentals, Musk's personality is one of the things it is based on.
ouid 6y ago
Isn't that just life insurance?
- mbg721 6y ago
  It sounds like term life for an unusually specific term. But you do typically have to have an insurable interest in order to buy insurance on someone's life.
- m463 6y ago
  That got ugly too until they prevented people from taking out life insurance on people without their knowledge/consent
  - btilly 6y ago
    Concrete example, Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. And then were incentivized to make those conditions worse. See https://www.bankrate.com/insurance/life-insurance/dead-peasant/ https://www.bankrate.com/insurance/life-insurance/dead-peasa... for an overview of current regulations that resulted from that.
    - opo 6y ago
      >...Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. No, Walmart was doing it since they thought the policies would be tax deductible. They ended up losing money and eventually ended up bringing up a case against their insurance companies: >...Discount retailing giant WalMart cannot sue its insurers just because it gambled and lost $1.3 billion on getting a tax break from thousands of insurance policies it took out on employees, according to a brief filed by the insurers in the Delaware Supreme Court. >WalMart is contending in an appeal that it was entitled to rely on its expert insurance brokers to warn the company of the inherent dangers of buying COLI policies. WalMart has asked the high court to revive its bad-faith and breach-of-duty claims against its insurers, which the Delaware Chancery Court had dismissed. >Such policies lost their attraction for corporations long ago but disputes over liability for the tax consequences continue for companies in a position similar to WalMart’s. https://www.snopes.com/fact-check/dead-peasant-insurance/ https://www.snopes.com/fact-check/dead-peasant-insurance/
      - btilly 6y ago
        My understanding was based on articles like https://workdayminnesota.org/court-slams-walmarts-use-of-dead-peasant-insurance/ https://workdayminnesota.org/court-slams-walmarts-use-of-dea.... Where Walmart was being sued specifically because there were perverse incentives and what they did was against various state laws. As to your case, Walmart thought that it could deduct the premiums. It turns out that it could not. Walmart also thought that it could create and collect them under Georgia law. It turns out that it could not. Walmart also has been forced to pay families of workers some of the payouts. None of which it expected. All of these things affect how profitable the policy is for Walmart. But they don't change the fact that once the policies are taken out, Walmart has a financial incentive to treat workers poorly. Which is why many states had banned the practice. And is why federal law currently only allows companies to take out life insurance on approximately their most highly paid third of employees. (Who also have to consent to it.) Back to the suit. Walmart sued its insurers in 2002 for fraud for failing to explain these risks. The brief quoted in Snopes is as filed by the insurers in 2005. They lost that judgement, but the case continued on. As of 2009, per http://www.contingentfeeblog.com/2009/05/articles/corporate-owned-life-insurance/walmarts-dead-peasant-suit-against-insurers-escapes-the-grave-a-third-time/ http://www.contingentfeeblog.com/2009/05/articles/corporate-..., the Delaware Supreme Court ruled for Walmart a 3rd time. I don't know the final outcome of the case. But it certainly wasn't as open and shut as the insurer's brief made it sound.
- dragonwriter 6y ago
  Yes, insurance in general has this problem if unregulated, hence the evolution of the concept of “insurable interest”. https://en.m.wikipedia.org/wiki/Insurable_interest https://en.m.wikipedia.org/wiki/Insurable_interest
btilly 6y ago
Opening the bet that they die on a particular date is a problem because they know when to be careful. Opening a market on when they will die that goes to the person who is closest to the right date, now any would-be assassin can place their bet and try to win. And the target may know that people are hunting for them, but won't be forewarned of when.
- camjohnson26 6y ago
  They would need a counter party to be able to place the bet though, and those people have an equal incentive to keep the person safe. If no counter party exists then there’s no incentive. Plus this ignores risks outside the market, like the risk the would be assassin gets caught and sent to prison.
  - btilly 6y ago
    It is a winner take all market. All money placed in the market goes to the winner. So if I want Donald Trump dead and am willing to pay a million dollars, I start the market and put a million dollars in for tomorrow. Eventually he dies and someone collects. Almost certainly not me, and not necessarily an assassin. But any would-be assassin who wants can place a bet and now has a million dollars riding on whether they succeed. This is not novel, the idea has been around for a quarter century. See https://en.wikipedia.org/wiki/Assassination_market https://en.wikipedia.org/wiki/Assassination_market for more.
spyder 6y ago
That's why there is the invalid token too.
TerminalWarrior 6y ago
Or, cheap life insurance for the suicidal.
bostik 6y ago
Reputable prediction markets don't offer contracts where they themselves, or someone in general, could profit from human misery. Disclosure: I work for one.

pdonis 6y ago

> the problem with prediction markets is you have the incentive to make the prediction come true If players in the market have ways outside the market to significantly affect the outcome that the market is betting on, then it isn't a prediction market. The whole point of a prediction market is that there is no such feedback mechanism. For example, the article discusses prediction market bets on Trump winning the election. The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible.

Imnimo 6y ago
>The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible. But this is not necessarily true. In the extreme case, a bettor could be one of nine Supreme Court justices. Or a participant in some sort of fantasy vote-rigging conspiracy. Or even a political insider tanking their candidate's own chances and betting against themselves. There's a pretty wide range of people who could plausibly (or not-so-plausibly in the conspiracy example) have more than a one-vote influence over the result of the election.
- tshaddox 6y ago
  Sure, that’s why there are rules about when and how a CEO can sell their company’s stock (they generally have to announce the sale in advance). I’m not sure about the laws around Supreme Court justices, but I’m pretty sure it’s at least well-accepted that no judge should work a case when they have a personal interest in the outcome. I hope that would be grounds for removing a justice.
- jtxxwl2 6y ago
  >Or a participant in some sort of fantasy vote-rigging conspiracy. This is even more relevant outside of the US. In the US vote rigging conspiracies are impossible for some inexplicable reason, perhaps related to magical soil, but outside of the US they are a real concern.

hugh-avherald 6y ago

That's why you have counterfactual prediction markets. You don't have markets on an outcome; you have two markets of an outcome conditional on some action, and on an outcome conditional on that action not being taken.

dylan604 6y ago
did you just describe sports betting?

jetrink 6y ago

One recent example is the man who ran onto the field at the Super Bowl after having proxies place $370,000 in bets on that occurring. However, he bragged about what he had done on a radio show and those bets were invalidated.

notahacker 6y ago
Another example that springs to mind is a British bookmaker that ran a promotional betting offer on a fat lower division substitute goalkeeper eating a pie during a televised cup match. The fat goalkeeper ate a pasty whilst sitting on the bench, and was promptly banned for a couple of months even without any evidence of financial gain for "intentionally influencing a betting market"
- roganartu 6y ago
  There was another example of this in Australia back in 2016 where some prediction markets offered a novelty bet on what colour tie one of the TV hosts would wear. The host got wind of it and, for fun, changed ties at least five times throughout the evening. https://twitter.com/sportsbetcomau/status/749219697359396864 https://twitter.com/sportsbetcomau/status/749219697359396864 https://www.smh.com.au/politics/federal/federal-election-2016-laurie-oakes-ties-up-bookies-with-multicoloured-offering-20160703-gpxhr0.html https://www.smh.com.au/politics/federal/federal-election-201...

rmb177 6y ago

Rumor on PredictIt was one of the reasons they shut down tweet markets was Andrew Yang's campaign received email threats in regards to him tweeting.

__s 6y ago

Just have to keep in mind that bets could be a strange gofundme & don't participate in bets that can be bought out against you

gumby 6y ago

That's similar to short sellers trying to manipulate a stock: pretty much only works in the shallows (small cap, thin coverage, moderate liquidity). You could manipulate the dogcatcher election (or, more profitably, a bond initiative) but a presidential election is probably too hard, especially in this case (amount of money you'd need to spend is much larger than the amount you could make on these markets).