7 ms·
can i bet on when prediction markets will collapse due to rampant insider bets?
by ecommerceguy 9mo ago
can i bet on when prediction markets will collapse due to rampant insider bets?
- tptacek 9mo agoInsider bets are literally the purpose of prediction markets.
- giarc 9mo agoHow? 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.
- davidw 9mo agoBecause they are, to use a technical term, "dumb as a stump". That's why they would participate despite not having any inside knowledge.
- mothballed 9mo agoOr they are hedging their exposure to an unknown by betting in favor of an event that would be harmful/costly to them.
- tptacek 9mo agoThose people want prices to accurately track risk, which is what insiders allow.
- mothballed 9mo agoRight but they themselves are non-insiders who are rationally betting.
- tptacek 9mo agoThe 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.
- giarc 9mo agoIt's not 'predicting' when the outcome/answer is known. From the wiki entry on prediction markets "The main purpose of prediction markets are eliciting aggregating beliefs about an unknown future event."
- tptacek 9mo agoI think you should probably read more about the background of prediction markets. Robin Hanson is a useful place to start. The whole concept of a prediction market is to convert private information into prices. That only works with "insider" information.
- schoen 9mo agoAs I said in a parallel comment, Hanson was also thinking about scientific questions, where there are asymmetries in knowledge but people can often invest in research that improves their own knowledge (like by performing an experiment or a scientific expedition or something). So, Hanson believed that prediction markets could incentivize people to invest in scientific research in order to get an edge over other market participants in such questions. That doesn't exactly make them insiders, though. Interestingly, it doesn't necessarily incentivize them to publish the detailed results of their investigations. They're incentivized to reveal what they expect to happen (based on how they bet), but not necessarily incentivized to reveal why they think so, or how they know. E.g. if you became able to predict the weather more accurately than other models over some timeframe, prediction markets would incentivize you to reveal (some aspects of) your predictions, but not your method for making those predictions.
- mothballed 9mo agoOne way to use a market rationally as a non-insider is to bet big against something you want to happen. You've just set a bounty for someone to do it. Presumably for some reason this is even more in your favor outside the betting market.
- SV_BubbleTime 9mo agoIsn’t this a classic fool’s money game. The betting markets have a strong incentive to pretend it isn’t an insider’s game. Honestly, of all the vices, I think I pity gamblers a lot. It’s just so visible and understandable to see the harm. Something like being too into porn or drink, those are less visible harm. Where running out of money is comprehensible to even a child.
- thot_experiment 9mo agoDo you think people betting on things are generally rational actors?
- charcircuit 9mo agoNon insiders would be if they think the odds are in their favor or that they predict that the market's opinion will shift. >But if someone knows the actual weight, no one would play. Now what if someone in the audience knew the weight of an average elephant, giving them an advantage. Would people still bet. I would guess yes, but they wouldn't bet as much as the person who did because they have less information. While having better information may make it more likely for you to win, it is not surefire. Things can change last minute.
- paxys 9mo agoIt doesn't matter if insiders are betting as long as the end result is in your favor.
- exogeny 9mo agoThey won't collapse, but they won't reach their full potential. I would hate to be a16z sitting on their $10B post-money valuation Kalshi bags, that's for sure.
- yieldcrv 9mo agothey'll collapse due to oracle bias before anyone cares about the insider trading Polymarket needs a second and third oracle network
- jojobas 9mo agoIt could reasonably be a non-insider, just someone monitoring comms activity, ship movement, pentagon pizza and parking indexes, and other open sources.
- lxgr 9mo agoWhy would the markets collapse due to insider trading? That said, at some point it would then be more accurate to call them reality modification bounty markets.