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Are prediction markets essentially zero sum where every outcome is fully covered by all the bets? Minus fees I’m guessing.
by Waterluvian 2y ago
Are prediction markets essentially zero sum where every outcome is fully covered by all the bets?
Minus fees I’m guessing.
- maxbond 2y agoYep. For the ones I've looked into, orders match when they sum to $1. Eg, I bid $0.75 on yes and you bid $0.25 on no. The contracts are very carefully written such that they are mutually exclusive, only one of us gets $1 when the contract resolves. And like you suggest, you pay a fee on the way out.
- zarmin 2y agoIf this is the case, it kills me that online poker is still illegal federally. Zero sum skill game minus fees.
- zahlman 2y agoThe issue here is that "skill game" is something that lawyers would have to prove to judges.
- Waterluvian 2y agoIs it technically possible to encode a whole game of hold’em using one of these markets?
- snthpy 2y agoThat's called parimutuel being and the broker just takes a vig (vigorish). It's analogous to agency based trading in finance. The broker can also set the odds and act as a market maker, like principal based trading in finance.