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> The irony of prediction markets is that they are supposed to be a more trustworthy way of gleaning the future than internet clickbait and half-baked punditry,

by smeej 9mo ago

> The irony of prediction markets is that they are supposed to be a more trustworthy way of gleaning the future than internet clickbait and half-baked punditry, but they risk shredding whatever shared trust we still have left. The suspiciously well-timed bets that one Polymarket user placed right before the capture of Nicolás Maduro may have been just a stroke of phenomenal luck that netted a roughly $400,000 payout. Or maybe someone with inside information was looking for easy money. I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. I thought the whole point was that yes, people with inside knowledge will bet large sums of money on things they expect to happen, and that's what makes the prediction useful. The market is meant to incentivize people who know things to act on them in a way that makes them known. If I knew someone wanted me dead, of course I would want a prediction market on it, and if the odds suddenly shifted dramatically in favor of my death, I would use that as a trigger for whatever defense strategies I had in place. Someone has really good reason to bet a lot of money on the prospect that I'm about to die. It's probably someone who knows of an active plot in motion to try to kill me! The sooner I can find out about that, the better. I would much rather give them an incentive to make that known somewhat earlier than wait. I feel like there must be some big piece of this puzzle that I'm missing that makes it so these cannot operate the way I imagine them, but I haven't heard anyone explaining what it is. Someone fill me in on what I'm missing here?

gpm 9mo ago
If the prediction market is for a non-trivial amount, it's likely someone is going to kill you in exchange for the money the prediction market offered them. The prediction market isn't acting as a prophet here, it's acting as a plausibly deniable murder for hire service and you are its victim. The people "betting against" you dying just paid to have you killed.
- echoangle 9mo ago
  Yes, OOP might have chosen a suboptimal example here. But for general newsworthy events, people aren’t going to be in positions to manually make them happen. And no person in a position to start a war would do it to affect a Polymarket bet.
  - gpm 9mo ago
    The prediction markets aren't yet at sufficient scale to purchase a war, you mean. People start wars for money all the time though. If they become of sufficient scale, people will purchase wars on them. There's already lots of examples where they are of sufficient scale, like paying the press secretary to shut up after 64 minutes. Or paying someone to falsify ISWs map of the front line in Ukraine.
  - CPLX 9mo ago
    > And no person in a position to start a war would do it to affect a Polymarket bet. Are you fucking kidding? Based just on current events, that is absolutely not a statement you can make without at least trying to prove it. If you do try to prove that you will fail as the idea that people would start wars for profit is as old as wars. Just evaluate the sentence you've just created. How many people exist who have the capability to start wars or influence the start of wars? It's a lot. What else do you know about these people and their motivations?
    - aurareturn 9mo ago
      It isn’t just the people who can start a war. It’s also normal people who can. Imagine if 10 million people bet on starting a war vs 5 million who say no war. Those net 5 million people are going on social media saying why the war is justified. They’ll vote in war mongers. They’ll support the military. The bet literally influences the result. It’s a self fulfilling prophecy.
  - kbos87 9mo ago
    ...but many people in positions where they can start a war or cause some other highly visible event of any sort probably will start turning to Polymarket to make money in the course of their work
    - fartfeatures 9mo ago
      Which makes the prediction market more accurate.
- layoric 9mo ago
  Exactly, these markets exist in the real world, so as their size and use increases, the more likely the odds will influence real world events. Look at sports betting for a much smaller example. Match fixing is known. Electricity markets are gamed for individual profits at the detriment to everyone and the stability of the system, even with regulators trying to keep things stable. Enough "Market for all the things" already..
  - Joker_vD 9mo ago
    > Enough "Market for all the things" already.. See, there are two major flavours of pro-market attitudes. The first one is "if we allow many independent individuals to try their own approaches to a problem and let the people with "better" approach to personally profit from it handsomely and make them compete against each other in an environment with objective-ish judgement of "what is better" instead of "impress the (inevitably corruptible) officials to be judged victorious and awarded the fortunes", and also manually guard and regulate against several universally known ways to sabotage such competition, then we'll be able to channel human ingenuity into solving difficult to solve technical problems while also rewarding those who are able to come up with (and implement) such solutions with low overseeing overhead". Of course, such an attitude isn't strictly speaking "pro-market", it's been around since ancient times; hell, the USSR of all places had this attitude in spades until about the 70s or so. The second one is "Nah, we don't have to try and think about anything ourselves, just let people fend for themselves, they'll figure it out, and it won't have any unforeseen bad side effects, why would it; markets are magical like that!" Yeah, about that...
    - layoric 9mo ago
      Right, a market is a small tool of larger systems. That’s fine, hard to get right but can make systems better. Type two just seems to be the cargo culted everywhere..
      - Ajedi32 9mo ago
        I think it's actually not that hard to get right (or at least "right enough"), as evidenced by the fact that markets have successfully run the entire global economy for thousands of years with no central oversight and almost no regulation. Markets failures do happen, and when they do it can be helpful to have an external force step in to nudge the market back onto the rails. But even without such interventions they work remarkably well on balance.
- latency-guy2 9mo ago
  Why would the opposing side of that exact same bet allow themselves to be fleeced of all that money for free?
  - dragonwriter 9mo ago
    The opposing side is getting paid, not getting fleeced.
  - gpm 9mo ago
    You're asking why someone hiring a hitman would be willing to part with their money? Because that's what money is for, to purchase things, like hitmen (apparently).
    - latency-guy2 9mo ago
      OK so its much a shallower thought than I anticipated. Why go through the "prediction market" at all then? The hitman still killed someone, payments are not anonymous in this market, and its certainly not clean. Further, you share the pot with however many are involved, proportional to the allotted bets on each side and presuming binary prediction. And if the winds change on the market for the bet proportional to the "hitman's" side, you lose out on dollars that would otherwise be paid to you (the hitman). And it'd be so easy to stiff the hitman just by equalizing the positions by timing it. All that risk for something that's far simpler to just pay directly?
      - gpm 9mo ago
        > Why go through the "prediction market" at all then It's there. It's not actually easy to find hitman for hire. This is a publicly advertised market for it. Plausible deniability. We weren't paying for the witness to be murdered, we were expressing our confidence that no one would murder the witness. Price discovery. The market tells you how much you need to pay a hitman (if you overpay hedge funds swoop in and take the difference, telling you for next time. If the hedge funds underestimate the cost they end up paying a significant penalty to the people who they prevented from hiring a hitman). Crowd funding. The market means that every can chip in however much they want towards paying the hitman, and they only end up paying if its enough. In fact the middlemen who accepted the bets in the meantime may promise to pay some small amount of damages if enough isn't collected. It is impossible to stiff the hitman, and there is no risk for the hitman that the "winds change". The hitman takes out the entire "yes" position before committing the murder. If it's not enough, they don't commit the murder.
- smeej 9mo ago
  It's not a bounty, though, right? It operates like other trading markets? So unless they have big money to wager, they don't have big money to gain. If it's hovering at, say, 10% odds, it's not like they can automatically 10x their money because other people have to take the opposite side. There would have to be a lot of liquidity in the market for their large bet not to move the odds, and as the odds move, they make less money.
  - gpm 9mo ago
    > So unless they have big money to wager, they don't have big money to gain. It requires that they put down collateral (the purchase of the the yes bets) that they lose if they don't meet the contract, so they do have to have starting capital. > because other people have to take the opposite side. That is to say that there must be people offering the bounty. The size of the bounty isn't defined by the price of the contract, but the total upside available in the order book. > and as the odds move, they make less money. They have to put up more collateral for the remainder of the contract if they want that upside - but they make all the money that they already put up collateral for.
    - smeej 9mo ago
      > The size of the bounty isn't defined by the price of the contract, but the total upside available in the order book. But one person doesn't get the whole thing. ALL the people holding that side of the contract split the payout, in proportion to the size of their holdings in that side of the market. I think if I use hypothetical numbers, it will help me explain how I think it works, and maybe this will help someone figure out where my error is. Let's imagine the market is about whether I will die by the end of the day. So far, there are $500,000 in total bets in the market, and there are 5,000 shares in this market. Let's say it's currently sitting at only 10% odds that I'm going to die. I think that means 4,500 shares, or $450,000, is on the "No" side and 500 shares, or $50,000 is on the "Yes" side. Do I have that right so far? If nothing changes about the market and I'm still alive at the end of the day, everyone who holds a "No" share splits the $500,000 pot, correct? There are 4,500 of them, so they each get $111.11 per share. But suppose someone has a solid plan to kill me by the end of the day. They decide they want to dump $50,000 in on the "Yes" side. That's not going to buy them 500 shares, because they would need someone willing to sell 500 shares at the current price. They'll actually get well under 500 shares, and probably not even half that many, and they'll still be splitting the pot among the other people who already have the 500 shares on the "Yes" side. So they're still at not even half the "Yes" side of the market. They can probably double or triple their money, but we're talking about making another $50-100k on top of getting their own $50k back. It's not like they get the whole $500k. That's what I mean when I say it's "not a bounty." A "bounty" makes it sound like, "If you're the one who kills smeej, you get $500k," but that's not what's happening here. Lots of people might be willing to try to kill me for $500k. A heck of a lot fewer are going to be willing to try to kill me for 2-3x whatever capital they can come up with right before the hit. Am I at least understanding this part of it correctly, how the payouts actually work? If I'm not, that would go a long way toward helping me figure out what I'm missing.
- hpdigidrifter 9mo ago
  This was discussed on polymarket with the Galve Goat burning bet and assume it's why Essentially it's a big straw goat in Sweden that vandals sometime set on fire. Right towards the end as the probability approaches zero there's a huge profit incentive, "done deals" usually go under well under 1¢ meaning 100-200x returns. A US man once traveled to Sweden to set the goat on fire, he was caught, fined $20k(?) and then fled the country before paying the fine. Risk reward in a situation like this absolutely creates a situation for prediction markets similar to the observer effect in physics, it's no longer predicting the future and instead altering it.
  - TZubiri 9mo ago
    I think as this becomes a reality, in general people will stop trading so close near the deadline for so little gain.
    - mminer237 9mo ago
      As it gets closer to the deadline, the timeframe shortens, so the gain does increase. A 1% return which you're paid on tomorrow is a 3,778% annualized return.
      - TZubiri 9mo ago
        Ok, but the risk of manipulation increases as well, since the payoff for event manipulators is the highest near the deadline.
      - flyandscryaway 9mo ago
        There’s still limited liquidity. You need to find someone willing to put up a very large amount of money for almost no gain. I also doubt these websites have enough activity to well calibrate near 1 dollar bets, so it’s not clear the market is giving you accurate predictive power with very expensive bets, which means you’re risking a lot (again, for almost no gain).
CPLX 9mo ago
> I'm trying to understand what the criticism is here > If I knew someone wanted me dead, of course I would want a prediction market on it, and if the odds suddenly shifted dramatically in favor of my death No, you definitely would not want that. You don't want to live in the world like this. That's the point. It's fucking horrible and dystopian, people betting on extra-legal invasions of countries, murders, things that could hurt or harm people where they have incentives to do something else that you've just distorted. Gambling has been illegal, immoral, and proscribed by religions for literally thousands of years, in all sorts of different forms and iterations, for a reason. Because it's incredibly toxic to society. You can make some arguments that pure games of chance, like casino games, and even maybe sports betting (since sports is a spectacle) aren't that bad. Based on what we've seen recently, I tend to disagree, but at least it's an argument. But now we're talking about betting on all sorts of political issues, things that are illegal, things where people are acting in an official capacity and shouldn't be given incentives to subvert that. And all these other examples are just bad. There's not really any upside to this at all. It's just bad for society and it shouldn't happen. It's horrible. If you feel like you're missing a big piece of the puzzle you should take a couple of steps back and think about the consequences of a world where this is common.
- Alive-in-2025 9mo ago
  I think easy gambling over the internet is terrible, tons of young people are getting stuck in it. People get addicted to it throughout history and ruin their lives, vulnerable people get in trouble with huge losses. But I don't think we should do anything because religion doesn't like it - that's a foolish thing to use to make your crucial choices or world view. A key reason is pretty much every terrible thing ever was excused as requirement of some religion or forever. Separate from the hurtful things in religious books at times, it's too easy for leaders or authorities to somehow justify actions. Let's instead use a goal of treating each other respectfully, stop hating and killing each other. Yeah, that's all naive stuff, we aren't there, maybe we'll never be there. Still a good goal, treat each other with kindness. And yeah, I'm an optimistic sort.
  - CPLX 9mo ago
perfmode 9mo ago
The missing piece is the distinction between a market that observes reality and a market that instigates it. The criticism is about the systemic risk of converting prediction markets into "Assassination Markets"—mechanisms where the payout is not a reward for foresight, but a bounty for action. In the case of Maduro, the operation cost around $300 million so a $400,000 payout isn’t providing a financial incentive. But in the case of assassination, a $400,000 payout is sufficient motivation.
- WolfCop 9mo ago
  > In the case of Maduro, the operation cost around $300 million so a $400,000 payout isn’t providing a financial incentive. It is if you are spending someone else’s $300 million, and getting the $400,000 yourself.
  - gpm 9mo ago
    Or if you're the military commander with the option to disobey the illegal order (to go to war without congressional authorization) or take the bribe and execute the order. "Unmarked cash" (which this is) has pretty different purposes from official funds. I think there's a pretty good chance the person who took that money was opportunistic, this time, but $400k isn't a trivial sum of money, it's not impossible it was the difference between this happening and not.
- smeej 9mo ago
  But it's not a bounty. It's a market, right? So the payout is split among everyone on your side? And the if you try to dump a ton (measured relative to the size of the market) into the market, the price tanks because there aren't enough people coming in on the other side. You get a big wick in the trading candle, so you scoop up the much less favorable terms of the bet at higher cost.
kelnos 9mo ago
> I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. Indeed. Insider trading is a feature of prediction markets, not a bug. There are two kinds of people who participate in prediction markets: 1. People who have insider information, or at least more sophisticated predictive capability than your average person. 2. Gamblers. In effect, prediction markets are a way to move wealth from the second group to the first. If you understand that and still want to participate, cool. It's your money, and you're allowed to gamble it away if you find that entertaining. At any rate, given the relatively small-potatoes level of bets going on at Polymarket and Kalshi, the article author's breathless anxiety about this is a bit overblown.
- pixl97 9mo ago
  >1. People who have insider information, I mean, most stock trading prevents insider trading, unless of course you're a in congress. Seemingly regulators consider this a bug in every other market type, but suddenly this gambling market allows it? > breathless anxiety about this All fun and games until people start dying from it.
  - valkmit 9mo ago
    Insider trading in stocks are prohibited but not for the reason most people think. It has nothing to do with someone having an unfair advantage in an informational sense, and everything to do with fiduciary responsibility. The CEO and executive team has fiduciary responsibility to act in the financial best interest of the shareholders. Your broker too. If you have insider info (Obtained legally) but no fiduciary responsibility you can act on it. That’s why congress members trading US equities based on decisions they’re privy to is not, from a legal perspective, insider trading. They don’t have a fiduciary responsibility to their constituents
    - derf_ 9mo ago
      "Insider trading is not about fairness, it is about theft" is a uniquely American approach that is not shared by other jurisdictions.
kajaktum 9mo ago
> I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. I thought the whole point was that yes, people with inside knowledge will bet large sums of money on things they expect to happen, and that's what makes the prediction useful. The market is meant to incentivize people who know things to act on them in a way that makes them known. Except the paragraph you quoted nullify this benefit > The suspiciously well-timed bets that one Polymarket user placed right before the capture of Nicolás Maduro So we learnt nothing. For the entire duration the stock is online, its pretty much 50/50 then suddenly 1 day before, the ticker spikes to yes.
- smeej 9mo ago
  Yes, but it spikes BEFORE the attack begins, which means we learnt someone thought there was a string reason to believe things were about to change earlier than we otherwise would have. That's the whole point, isn't it? And if you're going to tell me the paragraph I quoted nullifies what I've said, would you please explain how? Obviously I don't currently understand it the same way you do, and I have asked for help understanding what I'm missing. Saying, "You're missing it," isn't helpful.
hackable_sand 9mo ago
It appears you are missing any cursory philosophy, ethics, logic, etc. courses.
- porksoda 9mo ago
  Me too, and I wish you would have answered the clear request for enlightenment instead of pointing out the obvious fact that we weren't in your class.
  - pcchristie 9mo ago
    I thought the reason prediction markets were useful was not that people with inside information participate in them which can provide an indicator to the rest of us, but that by providing a sense of consensus at scale we can more accurately predict things. e.g. two sports teams participating in a fair match tomorrow, someone runs a book and after 200,000 punters bet, the odds are 90/10 in favour of Team A indicates that 90% of the time Team A is going to win that game. This assumes perfect and fully available information with punters availing themselves of this info (or at least an equal split of passionate/casual/informed/wreckless or even slightly "inside" punters on each side).
  - hackable_sand 9mo ago
    Then pay me and I'll enlighten you.
    - 4ggr0 9mo ago
      It appears you are missing any cursory ethics courses.
- smeej 9mo ago
  Ironically, I actually have a philosophy degree. If I'm still missing the point, I really don't think it's because I haven't learned how to think. All I can really do in this case is ask for explanation. If you're enough higher and mightier than I am that you don't care to give me one, that's fine. You don't have to. It's just kind of...unnecessarily condescending to rub my face in it without even trying?
manicennui 9mo ago
The interesting thing to me about this example is that it had to be someone lower level in or near the administration with less wealth, but who knew about a military operation. Hard to imagine any of the rich people around him risking a bet for such a small sum.
md2020 9mo ago
> I'm trying to understand what the criticism is here You're correct in your understanding of prediction markets with respect to traders using insider information. There are a couple things going on here. One is the subtext from most news media now that Technology Bad. New technologies are treated as guilty until proven innocent, because that is a more engaging narrative for readers. So in this case, those covering this stuff immediately latch onto the rich get richer, insider trading viewpoint, and that gets reported without any analysis of why that might actually be desirable. Second, prediction markets, in trying to become broadly accessible to "normal" people and desiring liquidity, need a marketing strategy that is understandable. They can't put out a Robin Hanson article as marketing material. So they market by appealing to something people do already understand, which is gambling. The public has this idea now of prediction markets as a way to make money, not as a tool for learning information. So the default perspective on insider trading is now one of unfairness: somebody used their privileged position to make money. The correct perspective is, in fact, that prediction markets are providing users with value by eliciting information from those insiders, information that the public would not otherwise have. The latter perspective is mostly foreign to degenerate gamblers, and the marketing campaigns of Kalshi and Polymarket aren't helping.
- vacuity 9mo ago
  I don't think it's so easy to get true information out of all the noise in the markets, and in any case, I don't see how this helps with the fact that corruption is bad. So what if I learn that a country will be wrongfully invaded? Can I have someone impeached for it?
concats 9mo ago
>If I knew someone wanted me dead, of course I would want a prediction market on it [...] Someone fill me in on what I'm missing here? The assassin might place the bet at roughly the same time as they place the bullet in the chamber. Making the prediction into a bounty. Not giving you any meaningful time to ponder the new information. The notification from your phone would be the distraction they'd use when taking aim.
TZubiri 9mo ago
One of the problems is that by creating a prediction market for your death, you may be creating a hit for yourself. You enable different enemies to crowdsource for your bounty, and as soon as it is deemed worthy by a hitman, they might take up on the job by placing the opposite bet. It's a very specific example but the mechanics work for most events in a similar fashion. It is for this reason that event creation is not open to the public, but rather handled by the regulated markets themselves
tech_ken 9mo ago
> I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. I thought the whole point was that yes, people with inside knowledge will bet large sums of money on things they expect to happen, and that's what makes the prediction useful. The market is meant to incentivize people who know things to act on them in a way that makes them known. You're ignoring the critical issue of timing. It's one thing to crowd-source knowledge in a steady, homogenous way. It's quite another for an actor with material knowledge of the situation to exploit this dramatic information asymmetry to turn a profit, revealing the new information at the last possible timepoint it could be used to lay a wager. Insider trading is quite different from a Hayek-style price signalling, and it's the same here. In principle (and on long time-scales) these markets can incentivize important information to come to light sure, but in infinite time we're all dead anyways. The short-time dynamics matter a lot more, from a social welfare perspective.

by smeej 9mo ago

gpm 9mo ago

If the prediction market is for a non-trivial amount, it's likely someone is going to kill you in exchange for the money the prediction market offered them. The prediction market isn't acting as a prophet here, it's acting as a plausibly deniable murder for hire service and you are its victim. The people "betting against" you dying just paid to have you killed.

echoangle 9mo ago
Yes, OOP might have chosen a suboptimal example here. But for general newsworthy events, people aren’t going to be in positions to manually make them happen. And no person in a position to start a war would do it to affect a Polymarket bet.
- gpm 9mo ago
  The prediction markets aren't yet at sufficient scale to purchase a war, you mean. People start wars for money all the time though. If they become of sufficient scale, people will purchase wars on them. There's already lots of examples where they are of sufficient scale, like paying the press secretary to shut up after 64 minutes. Or paying someone to falsify ISWs map of the front line in Ukraine.
- CPLX 9mo ago
  > And no person in a position to start a war would do it to affect a Polymarket bet. Are you fucking kidding? Based just on current events, that is absolutely not a statement you can make without at least trying to prove it. If you do try to prove that you will fail as the idea that people would start wars for profit is as old as wars. Just evaluate the sentence you've just created. How many people exist who have the capability to start wars or influence the start of wars? It's a lot. What else do you know about these people and their motivations?
  - aurareturn 9mo ago
    It isn’t just the people who can start a war. It’s also normal people who can. Imagine if 10 million people bet on starting a war vs 5 million who say no war. Those net 5 million people are going on social media saying why the war is justified. They’ll vote in war mongers. They’ll support the military. The bet literally influences the result. It’s a self fulfilling prophecy.
- kbos87 9mo ago
  ...but many people in positions where they can start a war or cause some other highly visible event of any sort probably will start turning to Polymarket to make money in the course of their work
  - fartfeatures 9mo ago
    Which makes the prediction market more accurate.
layoric 9mo ago
Exactly, these markets exist in the real world, so as their size and use increases, the more likely the odds will influence real world events. Look at sports betting for a much smaller example. Match fixing is known. Electricity markets are gamed for individual profits at the detriment to everyone and the stability of the system, even with regulators trying to keep things stable. Enough "Market for all the things" already..
- Joker_vD 9mo ago
  > Enough "Market for all the things" already.. See, there are two major flavours of pro-market attitudes. The first one is "if we allow many independent individuals to try their own approaches to a problem and let the people with "better" approach to personally profit from it handsomely and make them compete against each other in an environment with objective-ish judgement of "what is better" instead of "impress the (inevitably corruptible) officials to be judged victorious and awarded the fortunes", and also manually guard and regulate against several universally known ways to sabotage such competition, then we'll be able to channel human ingenuity into solving difficult to solve technical problems while also rewarding those who are able to come up with (and implement) such solutions with low overseeing overhead". Of course, such an attitude isn't strictly speaking "pro-market", it's been around since ancient times; hell, the USSR of all places had this attitude in spades until about the 70s or so. The second one is "Nah, we don't have to try and think about anything ourselves, just let people fend for themselves, they'll figure it out, and it won't have any unforeseen bad side effects, why would it; markets are magical like that!" Yeah, about that...
  - layoric 9mo ago
    Right, a market is a small tool of larger systems. That’s fine, hard to get right but can make systems better. Type two just seems to be the cargo culted everywhere..
    - Ajedi32 9mo ago
      I think it's actually not that hard to get right (or at least "right enough"), as evidenced by the fact that markets have successfully run the entire global economy for thousands of years with no central oversight and almost no regulation. Markets failures do happen, and when they do it can be helpful to have an external force step in to nudge the market back onto the rails. But even without such interventions they work remarkably well on balance.
latency-guy2 9mo ago
Why would the opposing side of that exact same bet allow themselves to be fleeced of all that money for free?
- dragonwriter 9mo ago
  The opposing side is getting paid, not getting fleeced.
- gpm 9mo ago
  You're asking why someone hiring a hitman would be willing to part with their money? Because that's what money is for, to purchase things, like hitmen (apparently).
  - latency-guy2 9mo ago
    OK so its much a shallower thought than I anticipated. Why go through the "prediction market" at all then? The hitman still killed someone, payments are not anonymous in this market, and its certainly not clean. Further, you share the pot with however many are involved, proportional to the allotted bets on each side and presuming binary prediction. And if the winds change on the market for the bet proportional to the "hitman's" side, you lose out on dollars that would otherwise be paid to you (the hitman). And it'd be so easy to stiff the hitman just by equalizing the positions by timing it. All that risk for something that's far simpler to just pay directly?
    - gpm 9mo ago
      > Why go through the "prediction market" at all then It's there. It's not actually easy to find hitman for hire. This is a publicly advertised market for it. Plausible deniability. We weren't paying for the witness to be murdered, we were expressing our confidence that no one would murder the witness. Price discovery. The market tells you how much you need to pay a hitman (if you overpay hedge funds swoop in and take the difference, telling you for next time. If the hedge funds underestimate the cost they end up paying a significant penalty to the people who they prevented from hiring a hitman). Crowd funding. The market means that every can chip in however much they want towards paying the hitman, and they only end up paying if its enough. In fact the middlemen who accepted the bets in the meantime may promise to pay some small amount of damages if enough isn't collected. It is impossible to stiff the hitman, and there is no risk for the hitman that the "winds change". The hitman takes out the entire "yes" position before committing the murder. If it's not enough, they don't commit the murder.
smeej 9mo ago
It's not a bounty, though, right? It operates like other trading markets? So unless they have big money to wager, they don't have big money to gain. If it's hovering at, say, 10% odds, it's not like they can automatically 10x their money because other people have to take the opposite side. There would have to be a lot of liquidity in the market for their large bet not to move the odds, and as the odds move, they make less money.
- gpm 9mo ago
  > So unless they have big money to wager, they don't have big money to gain. It requires that they put down collateral (the purchase of the the yes bets) that they lose if they don't meet the contract, so they do have to have starting capital. > because other people have to take the opposite side. That is to say that there must be people offering the bounty. The size of the bounty isn't defined by the price of the contract, but the total upside available in the order book. > and as the odds move, they make less money. They have to put up more collateral for the remainder of the contract if they want that upside - but they make all the money that they already put up collateral for.
  - smeej 9mo ago
    > The size of the bounty isn't defined by the price of the contract, but the total upside available in the order book. But one person doesn't get the whole thing. ALL the people holding that side of the contract split the payout, in proportion to the size of their holdings in that side of the market. I think if I use hypothetical numbers, it will help me explain how I think it works, and maybe this will help someone figure out where my error is. Let's imagine the market is about whether I will die by the end of the day. So far, there are $500,000 in total bets in the market, and there are 5,000 shares in this market. Let's say it's currently sitting at only 10% odds that I'm going to die. I think that means 4,500 shares, or $450,000, is on the "No" side and 500 shares, or $50,000 is on the "Yes" side. Do I have that right so far? If nothing changes about the market and I'm still alive at the end of the day, everyone who holds a "No" share splits the $500,000 pot, correct? There are 4,500 of them, so they each get $111.11 per share. But suppose someone has a solid plan to kill me by the end of the day. They decide they want to dump $50,000 in on the "Yes" side. That's not going to buy them 500 shares, because they would need someone willing to sell 500 shares at the current price. They'll actually get well under 500 shares, and probably not even half that many, and they'll still be splitting the pot among the other people who already have the 500 shares on the "Yes" side. So they're still at not even half the "Yes" side of the market. They can probably double or triple their money, but we're talking about making another $50-100k on top of getting their own $50k back. It's not like they get the whole $500k. That's what I mean when I say it's "not a bounty." A "bounty" makes it sound like, "If you're the one who kills smeej, you get $500k," but that's not what's happening here. Lots of people might be willing to try to kill me for $500k. A heck of a lot fewer are going to be willing to try to kill me for 2-3x whatever capital they can come up with right before the hit. Am I at least understanding this part of it correctly, how the payouts actually work? If I'm not, that would go a long way toward helping me figure out what I'm missing.
hpdigidrifter 9mo ago
This was discussed on polymarket with the Galve Goat burning bet and assume it's why Essentially it's a big straw goat in Sweden that vandals sometime set on fire. Right towards the end as the probability approaches zero there's a huge profit incentive, "done deals" usually go under well under 1¢ meaning 100-200x returns. A US man once traveled to Sweden to set the goat on fire, he was caught, fined $20k(?) and then fled the country before paying the fine. Risk reward in a situation like this absolutely creates a situation for prediction markets similar to the observer effect in physics, it's no longer predicting the future and instead altering it.
- TZubiri 9mo ago
  I think as this becomes a reality, in general people will stop trading so close near the deadline for so little gain.
  - mminer237 9mo ago
    As it gets closer to the deadline, the timeframe shortens, so the gain does increase. A 1% return which you're paid on tomorrow is a 3,778% annualized return.
    - TZubiri 9mo ago
      Ok, but the risk of manipulation increases as well, since the payoff for event manipulators is the highest near the deadline.
    - flyandscryaway 9mo ago
      There’s still limited liquidity. You need to find someone willing to put up a very large amount of money for almost no gain. I also doubt these websites have enough activity to well calibrate near 1 dollar bets, so it’s not clear the market is giving you accurate predictive power with very expensive bets, which means you’re risking a lot (again, for almost no gain).

CPLX 9mo ago

> I'm trying to understand what the criticism is here > If I knew someone wanted me dead, of course I would want a prediction market on it, and if the odds suddenly shifted dramatically in favor of my death No, you definitely would not want that. You don't want to live in the world like this. That's the point. It's fucking horrible and dystopian, people betting on extra-legal invasions of countries, murders, things that could hurt or harm people where they have incentives to do something else that you've just distorted. Gambling has been illegal, immoral, and proscribed by religions for literally thousands of years, in all sorts of different forms and iterations, for a reason. Because it's incredibly toxic to society. You can make some arguments that pure games of chance, like casino games, and even maybe sports betting (since sports is a spectacle) aren't that bad. Based on what we've seen recently, I tend to disagree, but at least it's an argument. But now we're talking about betting on all sorts of political issues, things that are illegal, things where people are acting in an official capacity and shouldn't be given incentives to subvert that. And all these other examples are just bad. There's not really any upside to this at all. It's just bad for society and it shouldn't happen. It's horrible. If you feel like you're missing a big piece of the puzzle you should take a couple of steps back and think about the consequences of a world where this is common.

Alive-in-2025 9mo ago
I think easy gambling over the internet is terrible, tons of young people are getting stuck in it. People get addicted to it throughout history and ruin their lives, vulnerable people get in trouble with huge losses. But I don't think we should do anything because religion doesn't like it - that's a foolish thing to use to make your crucial choices or world view. A key reason is pretty much every terrible thing ever was excused as requirement of some religion or forever. Separate from the hurtful things in religious books at times, it's too easy for leaders or authorities to somehow justify actions. Let's instead use a goal of treating each other respectfully, stop hating and killing each other. Yeah, that's all naive stuff, we aren't there, maybe we'll never be there. Still a good goal, treat each other with kindness. And yeah, I'm an optimistic sort.
- CPLX 9mo ago

perfmode 9mo ago

The missing piece is the distinction between a market that observes reality and a market that instigates it. The criticism is about the systemic risk of converting prediction markets into "Assassination Markets"—mechanisms where the payout is not a reward for foresight, but a bounty for action. In the case of Maduro, the operation cost around $300 million so a $400,000 payout isn’t providing a financial incentive. But in the case of assassination, a $400,000 payout is sufficient motivation.

WolfCop 9mo ago
> In the case of Maduro, the operation cost around $300 million so a $400,000 payout isn’t providing a financial incentive. It is if you are spending someone else’s $300 million, and getting the $400,000 yourself.
- gpm 9mo ago
  Or if you're the military commander with the option to disobey the illegal order (to go to war without congressional authorization) or take the bribe and execute the order. "Unmarked cash" (which this is) has pretty different purposes from official funds. I think there's a pretty good chance the person who took that money was opportunistic, this time, but $400k isn't a trivial sum of money, it's not impossible it was the difference between this happening and not.
smeej 9mo ago
But it's not a bounty. It's a market, right? So the payout is split among everyone on your side? And the if you try to dump a ton (measured relative to the size of the market) into the market, the price tanks because there aren't enough people coming in on the other side. You get a big wick in the trading candle, so you scoop up the much less favorable terms of the bet at higher cost.

kelnos 9mo ago

> I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. Indeed. Insider trading is a feature of prediction markets, not a bug. There are two kinds of people who participate in prediction markets: 1. People who have insider information, or at least more sophisticated predictive capability than your average person. 2. Gamblers. In effect, prediction markets are a way to move wealth from the second group to the first. If you understand that and still want to participate, cool. It's your money, and you're allowed to gamble it away if you find that entertaining. At any rate, given the relatively small-potatoes level of bets going on at Polymarket and Kalshi, the article author's breathless anxiety about this is a bit overblown.

pixl97 9mo ago
>1. People who have insider information, I mean, most stock trading prevents insider trading, unless of course you're a in congress. Seemingly regulators consider this a bug in every other market type, but suddenly this gambling market allows it? > breathless anxiety about this All fun and games until people start dying from it.
- valkmit 9mo ago
  Insider trading in stocks are prohibited but not for the reason most people think. It has nothing to do with someone having an unfair advantage in an informational sense, and everything to do with fiduciary responsibility. The CEO and executive team has fiduciary responsibility to act in the financial best interest of the shareholders. Your broker too. If you have insider info (Obtained legally) but no fiduciary responsibility you can act on it. That’s why congress members trading US equities based on decisions they’re privy to is not, from a legal perspective, insider trading. They don’t have a fiduciary responsibility to their constituents
  - derf_ 9mo ago
    "Insider trading is not about fairness, it is about theft" is a uniquely American approach that is not shared by other jurisdictions.

kajaktum 9mo ago

smeej 9mo ago
Yes, but it spikes BEFORE the attack begins, which means we learnt someone thought there was a string reason to believe things were about to change earlier than we otherwise would have. That's the whole point, isn't it? And if you're going to tell me the paragraph I quoted nullifies what I've said, would you please explain how? Obviously I don't currently understand it the same way you do, and I have asked for help understanding what I'm missing. Saying, "You're missing it," isn't helpful.

hackable_sand 9mo ago

It appears you are missing any cursory philosophy, ethics, logic, etc. courses.

porksoda 9mo ago
Me too, and I wish you would have answered the clear request for enlightenment instead of pointing out the obvious fact that we weren't in your class.
- pcchristie 9mo ago
  I thought the reason prediction markets were useful was not that people with inside information participate in them which can provide an indicator to the rest of us, but that by providing a sense of consensus at scale we can more accurately predict things. e.g. two sports teams participating in a fair match tomorrow, someone runs a book and after 200,000 punters bet, the odds are 90/10 in favour of Team A indicates that 90% of the time Team A is going to win that game. This assumes perfect and fully available information with punters availing themselves of this info (or at least an equal split of passionate/casual/informed/wreckless or even slightly "inside" punters on each side).
- hackable_sand 9mo ago
  Then pay me and I'll enlighten you.
  - 4ggr0 9mo ago
    It appears you are missing any cursory ethics courses.
smeej 9mo ago
Ironically, I actually have a philosophy degree. If I'm still missing the point, I really don't think it's because I haven't learned how to think. All I can really do in this case is ask for explanation. If you're enough higher and mightier than I am that you don't care to give me one, that's fine. You don't have to. It's just kind of...unnecessarily condescending to rub my face in it without even trying?

manicennui 9mo ago

The interesting thing to me about this example is that it had to be someone lower level in or near the administration with less wealth, but who knew about a military operation. Hard to imagine any of the rich people around him risking a bet for such a small sum.

md2020 9mo ago

> I'm trying to understand what the criticism is here You're correct in your understanding of prediction markets with respect to traders using insider information. There are a couple things going on here. One is the subtext from most news media now that Technology Bad. New technologies are treated as guilty until proven innocent, because that is a more engaging narrative for readers. So in this case, those covering this stuff immediately latch onto the rich get richer, insider trading viewpoint, and that gets reported without any analysis of why that might actually be desirable. Second, prediction markets, in trying to become broadly accessible to "normal" people and desiring liquidity, need a marketing strategy that is understandable. They can't put out a Robin Hanson article as marketing material. So they market by appealing to something people do already understand, which is gambling. The public has this idea now of prediction markets as a way to make money, not as a tool for learning information. So the default perspective on insider trading is now one of unfairness: somebody used their privileged position to make money. The correct perspective is, in fact, that prediction markets are providing users with value by eliciting information from those insiders, information that the public would not otherwise have. The latter perspective is mostly foreign to degenerate gamblers, and the marketing campaigns of Kalshi and Polymarket aren't helping.

vacuity 9mo ago
I don't think it's so easy to get true information out of all the noise in the markets, and in any case, I don't see how this helps with the fact that corruption is bad. So what if I learn that a country will be wrongfully invaded? Can I have someone impeached for it?

concats 9mo ago

>If I knew someone wanted me dead, of course I would want a prediction market on it [...] Someone fill me in on what I'm missing here? The assassin might place the bet at roughly the same time as they place the bullet in the chamber. Making the prediction into a bounty. Not giving you any meaningful time to ponder the new information. The notification from your phone would be the distraction they'd use when taking aim.

TZubiri 9mo ago

One of the problems is that by creating a prediction market for your death, you may be creating a hit for yourself. You enable different enemies to crowdsource for your bounty, and as soon as it is deemed worthy by a hitman, they might take up on the job by placing the opposite bet. It's a very specific example but the mechanics work for most events in a similar fashion. It is for this reason that event creation is not open to the public, but rather handled by the regulated markets themselves

tech_ken 9mo ago

> I'm trying to understand what the criticism is here, because the example seems to support the point that these are meant to be a way of learning the future, not oppose it. I thought the whole point was that yes, people with inside knowledge will bet large sums of money on things they expect to happen, and that's what makes the prediction useful. The market is meant to incentivize people who know things to act on them in a way that makes them known. You're ignoring the critical issue of timing. It's one thing to crowd-source knowledge in a steady, homogenous way. It's quite another for an actor with material knowledge of the situation to exploit this dramatic information asymmetry to turn a profit, revealing the new information at the last possible timepoint it could be used to lay a wager. Insider trading is quite different from a Hayek-style price signalling, and it's the same here. In principle (and on long time-scales) these markets can incentivize important information to come to light sure, but in infinite time we're all dead anyways. The short-time dynamics matter a lot more, from a social welfare perspective.