5 ms·

We thought betting markets would bring out our best predictions. Instead they’re exposing our inherent corruption.

alephnerd 8mo ago
Anyone who's followed the news since the 2000s would have realized a strike on Iran would have happened around now. Notice how the bettor hedged and bet on multiple days and hedged each of their bets with a "by" clause. This is a bog standard hedging strategy that anyone who's been to a racetrack would know. On a separate note, gamified prediction markets should not exist - they create perverse incentives and are basically a gamification of futures contracts (which requires a degree of risk management and hedging experience the median individual simply lacks), but this specific example doesn't seem like insider trading, just a seasoned gambler who knows basic hedging strategy.
- csense 8mo ago
  > prediction markets should not exist If you don't like prediction markets, you don't have to use them. Why do you think other people shouldn't be allowed to use prediction markets if they want to?
  - alephnerd 8mo ago
    To quote golden age Simpsons - "Gambling is the finest thing a person can do IF he's good at it" [0]. In aggregate, most participants lack the background and experience needed to hedge against risk and bet intelligently. Gamifying a financial instrument (futures) that is supposed to be used as an risk management device and advertising it to the lowest common denominator without providing the right checks and balances will leave a large portion of bettors worse off. Heck, I'm decently good at blackjack, poker, and backgammon because it's fun to apply probability theory principles, but I would never dare put my personal money on such an investment when I would do significantly better in aggregate with other more diversified personal investments. [0] - https://m.youtube.com/watch?v=Viz_cr8PCkk https://m.youtube.com/watch?v=Viz_cr8PCkk
  - collinmcnulty 8mo ago
    1. It gives people a reason to influence events toward outcomes that they can make money on rather than the best outcome. The geopolitical equivalent of going down in the fourth on purpose. 2. It encourages the leaking of classified information.
  - gmd63 8mo ago
    Because we don't want people whose profession is maximally exploiting perverse incentive structures to flourish. A society that grants outsized rewards to bad faith citizens is bad for everyone. The more influence those cheaters have over the economy the worse off we all are. You should not be able to get rich to the tune of a 600% daily return just because you're insider trading. That doesn't incentivize sharing your information with the market. On the contrary that incentivizes delaying communicating your secret information until the last second to maximize the return on your unexpected information.
- dylan604 8mo ago
  > this specific example doesn't seem like insider trading, just a seasoned gambler who knows basic hedging strategy. why can't it be both? you think degenerate gamblers have never had a government job?
  - alephnerd 8mo ago
    There are other much more lucrative, obfuscated, and legally defensible methods someone with insider information could take to monetize on insider information. Using a public betting platform with KYC vetting is not that.
- yieldcrv 8mo ago
  No they were not hedging they were seeking liquidity because they couldnt get a total fill and ROI in the lowest probability market
  - alephnerd 8mo ago
    What I mean is they placed multiples bets saying "US strikes Iran by $DATE" and set a window of various dates with each overlapping over the other in order to help hedge against earlier bets failing. Betting a strike would be on Friday also tracks - anyone who's been outside the West knows they have Friday/Saturday off in Muslim and Jewish countries. It's the same way we in the West tend to conduct strikes on Saturday. Edit: Ah I get what you are saying now.
    - yieldcrv 8mo ago
      I responded to exactly what you mean. The lowest probability date was the Friday because Friday was almost over, it had the highest ROI. It didn't have liquidity for their full amount capital without adversely altering their potential ROI. They searched for liquidity in other markets that would resolve "yes" to the same event. It wasn't a hedge, it wasn't uncertainty, it was liquidity seeking.
markus_zhang 8mo ago
Insider gambling has been common since the invention of gambling I think.
- estearum 8mo ago
  Most gambling "games" are quite a lot harder to acquire and use insider knowledge on though. People don't play in corrupt markets for very long.
  - mountainriver 8mo ago
    Sports betting has been around forever, and it has been gamed forever. Gambling is often an addiction and some cheating doesn’t stop people from doing it
    - estearum 8mo ago
      To corrupt a Polymarket bet, there needs to be only one person with inside knowledge of a planned event's timing, outcome, duration, etc in order to destroy the other side. The vast majority of Polymarket-bettable events have at least a few dozen if not hundreds or thousands of people with prior knowledge. Polymarket is now a known market where they can (conveniently through crypto) participate. It is basically a billboard saying "do you have interesting inside knowledge? Come here and make some money!" To corrupt a sport bet, there needs to be an actual manipulation of events perpetrated by a very small, very closely watched and analyzed group of people (athletes or officials). In my view, it seems immediately obvious that as prediction markets become even more mainstream (and so the billboard effect gets stronger), Polymarket bets will have a significantly higher rate of corruption than sports bets.
      - mountainriver 8mo ago
        We'll see if people stop using it
  - yndoendo 8mo ago
    The movie _Casino_ highlights how insider information was and is used to improve the house odds [0]. Information about a players wellbeing and their life goes a long way. Example, they would pay paper boys to talk to coaches to find out non public information. Such as if a player of the team is going through relationship problems. [0] https://www.themoviedb.org/movie/524-casino https://www.themoviedb.org/movie/524-casino
hn_throwaway_99 8mo ago
Only for very narrow definitions of "we". I think it's pretty obvious when betting on events that are inherently just decisions by one or a few people (e.g. when will Trump launch an attack on Iran, when will a company launch a new product, will some company acquire another one, etc.) that they will attract insider trading and corruption by their very nature - all that's necessary is to have information about the decision maker. This is fundamentally different than events that are subject to forces that no single individual controls - e.g. who will win an election, where will a crypto price be in a year, movie box office results, etc. I think betting on "single decision maker" events is just a "sucker is born every minute"-type bet.
deadbabe 8mo ago
Isn't exposing corruption a good thing? If betting markets are giving the masses access to knowledge about events that would normally be restricted from them, what is wrong with that? Information wants to be free. You can make use of metrics from betting markets without actively participating in them.
dylan604 8mo ago
Who thought this? Be careful with your wild use of we here. I'm not part of your we. Opening betting markets has only one ultimate ending where everything is done for the betting.
- butterbomb 8mo ago
  [dead]
- avaer 8mo ago
  Prediction was certainly the pitch. I don't know how many people genuinely believed it, beyond the level required to extract a profit. It's hard to measure what anyone actually believes in the current social landscape, where nobody tells the truth. Maybe that's the real purpose of prediction markets.
  - godelski 8mo ago
    I remember people claiming that it would capture the wisdom of the crowds[0]. Seemed silly as wisdom of the crowds depends on independent decisions. As soon as you reveal other people's guesses you bias the results. [0] https://en.wikipedia.org/wiki/Wisdom_of_the_crowd https://en.wikipedia.org/wiki/Wisdom_of_the_crowd Edit: Actually, turns out "people claiming" includes Polymarket lol # What is Polymarket ... Our markets reflect accurate, unbiased, and real-time probabilities for the events that matter most to you. Markets seek truth. # How accurate are Polymarket odds? Research shows prediction markets are often more accurate than experts, polls, and pundits. .... Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join. This makes prediction markets the best source of real-time event probabilities. People use Polymarket for the most accurate odds, gaining the ability to make informed decisions about the future. What a load of BS. "Research shows"? Bull! https://help.polymarket.com/en/articles/13364060-what-is-polymarket https://help.polymarket.com/en/articles/13364060-what-is-pol...
- sigwinch 8mo ago
  Donald Jr, on the Polymarket board, might have tried that.
nkrisc 8mo ago
Did anyone really think that? The corruption is inherently far, far easier than accurate predictions.
- blazespin 8mo ago
  Yeah, trying to beat the market on actually predicting will get you pretty lame returns. Probably do better in non zero sum games like the stock market. At least there you get the benefit of the market always going up eventually. No, the best way to win on Polymarket is purely by insider trading. Which is why it's a useful thing to watch. Insider news.. That said, the definition of 'insider trading' is always tricky. At what point does it become insider? Some things people call insider others just call clever detective work.
  - streetfighter64 8mo ago
    It's not useful to watch, almost by definition. If you're an insider obviously you want to sit on the information as long as possible and make a big bet just before it will be revealed. For example: the account in TFA whose bet was 71 minutes before the first news article about the attacks. So how useful is it really to see a big bet and know that probably the thing in question will happen in the next hour? The only kind of use case I can see for these markets is what another commenter mentioned, as a kind of strange insurance by betting against what you hope will happen. But even then, the finicky rules and untrustworthiness of the Polymarket admins make them much less reliable than a traditional insurance policy...
  - dylan604 8mo ago
    > Yeah, trying to beat the market on actually predicting will get you pretty lame returns That maybe true in a normal world, but we left normalcy in this world a couple of administrations ago. I absolutely would not put it past a member of this admin to be keeping an eye on things like this to suggest it would be better to start the attack on specific day just to pad the coffers. Any other admin, and I'd say that would be an insane line of thought, but it is this admin.
seydor 8mo ago
We knew that already from every betting market in the history of betting markets
yieldcrv 8mo ago
This is exactly what I wanted prediction markets for Looks like “we” need to update our relationships with markets Price discovery is a visualization of the collective conscious, and the evolution of markets gets closer and closer to direct exposure to an event. Share and derisk a transaction, cleanly, quickly Reduce all frictions towards doing so Frictions include finding the person making the transaction, negotiating with them, trusting them to perform, disputing resolution, insurance. These hamper anything from occurring, or occurring quickly, and the pricing is too variable. Prediction markets are an example of all of those frictions being reduced to almost non-existent. And dispute resolution will improve further and attract more liquidity.
- streetfighter64 8mo ago
  They certainly could reduce friction in bribery, just make a public bet like "The court will decide in favor of XYZ Evil Corp v. United States", then buy "No" shares for a million dollars, and hope the judge in the case picks up a bunch of "Yes" shares. Quick, simple, effective bribery via cryptocurrencies.
  - yieldcrv 8mo ago
    they could, slightly suboptimal way of doing it but its there crypto anarchist papers described prediction markets to be used for something like this in the 90s, but there are several levels of infrastructure that didn't exist then if you are predicting such things are occurring then you could also buy the no shares, making it the most egalitarian social mobility opportunity out there. I think the focus on bribery and corruption is distracting because people are imagining exclusion, but its the opposite at this point. Imagine when the soviet union fell and only people that built relationships got dibs on all the assets and revenue streams to become "the oligarchs" almost overnight, but instead of only them, everyone paying attention could take part in it. That's what is happening now and the markets will continue existing autonomously
    - streetfighter64 8mo ago
      I'm not putting my money in these markets for many reasons, ethical objections being one of them. Why'd I buy specifically "No" shares though? From my non-insider POV it's just a bet on the honesty of the judge, mixed with the actual facts of the case. What's the incentive of betting if you're not an insider? You're better off putting you money on a fair coin toss, instead of hoping you'll somehow beat an openly rigged market. How much have you yourself made in these sorts of markets?
ekjhgkejhgk 8mo ago
The best predictions are made when you already know the answer.
- livestories 8mo ago
  And even better when others wrongfully think they know a better answer...
softwaredoug 8mo ago
They actually encourage insider trading as to influence the prediction and make it more accurate. Some insider selling changes the prediction downwards The WANT the information
watwut 8mo ago
I definitely never thought so. It seemed primary as an unregulated casino to me - which usually implies criminality and frauds. I dont think I was special or unusual.
- dylan604 8mo ago
  People have been saying the same about crypto in general, yet, here we are. Another level of the scam built on top of a scam.
bawolff 8mo ago
Those aren't mutually exclusive. The best predictions are going to be those based on non public information.
cortesoft 8mo ago
The traditional espoused financial market purpose of these prediction markets is based on the premise that actors on it will have inside information. The point is for business with vested interests (and therefore often inside information) to use these markets to hedge for things that will materially affect their profitability. For example, in this case, suppose you ran a company that was shipping goods through the Middle East, and a war would disrupt your business. You would then place bets on there being a war, so that if it does happen you will recover some of your losses. You might know inside information because your work in the region, but that is expected.
bdangubic 8mo ago
if it is not regulated, you can always safely assume that it is a scam / corruption :) almost universally applicable

Anyone who's followed the news since the 2000s would have realized a strike on Iran would have happened around now. Notice how the bettor hedged and bet on multiple days and hedged each of their bets with a "by" clause. This is a bog standard hedging strategy that anyone who's been to a racetrack would know. On a separate note, gamified prediction markets should not exist - they create perverse incentives and are basically a gamification of futures contracts (which requires a degree of risk management and hedging experience the median individual simply lacks), but this specific example doesn't seem like insider trading, just a seasoned gambler who knows basic hedging strategy.

csense 8mo ago
> prediction markets should not exist If you don't like prediction markets, you don't have to use them. Why do you think other people shouldn't be allowed to use prediction markets if they want to?
- alephnerd 8mo ago
  To quote golden age Simpsons - "Gambling is the finest thing a person can do IF he's good at it" [0]. In aggregate, most participants lack the background and experience needed to hedge against risk and bet intelligently. Gamifying a financial instrument (futures) that is supposed to be used as an risk management device and advertising it to the lowest common denominator without providing the right checks and balances will leave a large portion of bettors worse off. Heck, I'm decently good at blackjack, poker, and backgammon because it's fun to apply probability theory principles, but I would never dare put my personal money on such an investment when I would do significantly better in aggregate with other more diversified personal investments. [0] - https://m.youtube.com/watch?v=Viz_cr8PCkk https://m.youtube.com/watch?v=Viz_cr8PCkk
- collinmcnulty 8mo ago
  1. It gives people a reason to influence events toward outcomes that they can make money on rather than the best outcome. The geopolitical equivalent of going down in the fourth on purpose. 2. It encourages the leaking of classified information.
- gmd63 8mo ago
  Because we don't want people whose profession is maximally exploiting perverse incentive structures to flourish. A society that grants outsized rewards to bad faith citizens is bad for everyone. The more influence those cheaters have over the economy the worse off we all are. You should not be able to get rich to the tune of a 600% daily return just because you're insider trading. That doesn't incentivize sharing your information with the market. On the contrary that incentivizes delaying communicating your secret information until the last second to maximize the return on your unexpected information.
dylan604 8mo ago
> this specific example doesn't seem like insider trading, just a seasoned gambler who knows basic hedging strategy. why can't it be both? you think degenerate gamblers have never had a government job?
- alephnerd 8mo ago
  There are other much more lucrative, obfuscated, and legally defensible methods someone with insider information could take to monetize on insider information. Using a public betting platform with KYC vetting is not that.
yieldcrv 8mo ago
No they were not hedging they were seeking liquidity because they couldnt get a total fill and ROI in the lowest probability market
- alephnerd 8mo ago
  What I mean is they placed multiples bets saying "US strikes Iran by $DATE" and set a window of various dates with each overlapping over the other in order to help hedge against earlier bets failing. Betting a strike would be on Friday also tracks - anyone who's been outside the West knows they have Friday/Saturday off in Muslim and Jewish countries. It's the same way we in the West tend to conduct strikes on Saturday. Edit: Ah I get what you are saying now.
  - yieldcrv 8mo ago
    I responded to exactly what you mean. The lowest probability date was the Friday because Friday was almost over, it had the highest ROI. It didn't have liquidity for their full amount capital without adversely altering their potential ROI. They searched for liquidity in other markets that would resolve "yes" to the same event. It wasn't a hedge, it wasn't uncertainty, it was liquidity seeking.

markus_zhang 8mo ago

Insider gambling has been common since the invention of gambling I think.

estearum 8mo ago
Most gambling "games" are quite a lot harder to acquire and use insider knowledge on though. People don't play in corrupt markets for very long.
- mountainriver 8mo ago
  Sports betting has been around forever, and it has been gamed forever. Gambling is often an addiction and some cheating doesn’t stop people from doing it
  - estearum 8mo ago
    To corrupt a Polymarket bet, there needs to be only one person with inside knowledge of a planned event's timing, outcome, duration, etc in order to destroy the other side. The vast majority of Polymarket-bettable events have at least a few dozen if not hundreds or thousands of people with prior knowledge. Polymarket is now a known market where they can (conveniently through crypto) participate. It is basically a billboard saying "do you have interesting inside knowledge? Come here and make some money!" To corrupt a sport bet, there needs to be an actual manipulation of events perpetrated by a very small, very closely watched and analyzed group of people (athletes or officials). In my view, it seems immediately obvious that as prediction markets become even more mainstream (and so the billboard effect gets stronger), Polymarket bets will have a significantly higher rate of corruption than sports bets.
    - mountainriver 8mo ago
      We'll see if people stop using it
- yndoendo 8mo ago
  The movie _Casino_ highlights how insider information was and is used to improve the house odds [0]. Information about a players wellbeing and their life goes a long way. Example, they would pay paper boys to talk to coaches to find out non public information. Such as if a player of the team is going through relationship problems. [0] https://www.themoviedb.org/movie/524-casino https://www.themoviedb.org/movie/524-casino

hn_throwaway_99 8mo ago

Only for very narrow definitions of "we". I think it's pretty obvious when betting on events that are inherently just decisions by one or a few people (e.g. when will Trump launch an attack on Iran, when will a company launch a new product, will some company acquire another one, etc.) that they will attract insider trading and corruption by their very nature - all that's necessary is to have information about the decision maker. This is fundamentally different than events that are subject to forces that no single individual controls - e.g. who will win an election, where will a crypto price be in a year, movie box office results, etc. I think betting on "single decision maker" events is just a "sucker is born every minute"-type bet.

deadbabe 8mo ago

Isn't exposing corruption a good thing? If betting markets are giving the masses access to knowledge about events that would normally be restricted from them, what is wrong with that? Information wants to be free. You can make use of metrics from betting markets without actively participating in them.

dylan604 8mo ago

Who thought this? Be careful with your wild use of we here. I'm not part of your we. Opening betting markets has only one ultimate ending where everything is done for the betting.

butterbomb 8mo ago
[dead]
avaer 8mo ago
Prediction was certainly the pitch. I don't know how many people genuinely believed it, beyond the level required to extract a profit. It's hard to measure what anyone actually believes in the current social landscape, where nobody tells the truth. Maybe that's the real purpose of prediction markets.
- godelski 8mo ago
  I remember people claiming that it would capture the wisdom of the crowds[0]. Seemed silly as wisdom of the crowds depends on independent decisions. As soon as you reveal other people's guesses you bias the results. [0] https://en.wikipedia.org/wiki/Wisdom_of_the_crowd https://en.wikipedia.org/wiki/Wisdom_of_the_crowd Edit: Actually, turns out "people claiming" includes Polymarket lol # What is Polymarket ... Our markets reflect accurate, unbiased, and real-time probabilities for the events that matter most to you. Markets seek truth. # How accurate are Polymarket odds? Research shows prediction markets are often more accurate than experts, polls, and pundits. .... Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join. This makes prediction markets the best source of real-time event probabilities. People use Polymarket for the most accurate odds, gaining the ability to make informed decisions about the future. What a load of BS. "Research shows"? Bull! https://help.polymarket.com/en/articles/13364060-what-is-polymarket https://help.polymarket.com/en/articles/13364060-what-is-pol...
sigwinch 8mo ago
Donald Jr, on the Polymarket board, might have tried that.

nkrisc 8mo ago

Did anyone really think that? The corruption is inherently far, far easier than accurate predictions.

blazespin 8mo ago
Yeah, trying to beat the market on actually predicting will get you pretty lame returns. Probably do better in non zero sum games like the stock market. At least there you get the benefit of the market always going up eventually. No, the best way to win on Polymarket is purely by insider trading. Which is why it's a useful thing to watch. Insider news.. That said, the definition of 'insider trading' is always tricky. At what point does it become insider? Some things people call insider others just call clever detective work.
- streetfighter64 8mo ago
  It's not useful to watch, almost by definition. If you're an insider obviously you want to sit on the information as long as possible and make a big bet just before it will be revealed. For example: the account in TFA whose bet was 71 minutes before the first news article about the attacks. So how useful is it really to see a big bet and know that probably the thing in question will happen in the next hour? The only kind of use case I can see for these markets is what another commenter mentioned, as a kind of strange insurance by betting against what you hope will happen. But even then, the finicky rules and untrustworthiness of the Polymarket admins make them much less reliable than a traditional insurance policy...
- dylan604 8mo ago
  > Yeah, trying to beat the market on actually predicting will get you pretty lame returns That maybe true in a normal world, but we left normalcy in this world a couple of administrations ago. I absolutely would not put it past a member of this admin to be keeping an eye on things like this to suggest it would be better to start the attack on specific day just to pad the coffers. Any other admin, and I'd say that would be an insane line of thought, but it is this admin.

seydor 8mo ago

We knew that already from every betting market in the history of betting markets

yieldcrv 8mo ago

This is exactly what I wanted prediction markets for Looks like “we” need to update our relationships with markets Price discovery is a visualization of the collective conscious, and the evolution of markets gets closer and closer to direct exposure to an event. Share and derisk a transaction, cleanly, quickly Reduce all frictions towards doing so Frictions include finding the person making the transaction, negotiating with them, trusting them to perform, disputing resolution, insurance. These hamper anything from occurring, or occurring quickly, and the pricing is too variable. Prediction markets are an example of all of those frictions being reduced to almost non-existent. And dispute resolution will improve further and attract more liquidity.

streetfighter64 8mo ago
They certainly could reduce friction in bribery, just make a public bet like "The court will decide in favor of XYZ Evil Corp v. United States", then buy "No" shares for a million dollars, and hope the judge in the case picks up a bunch of "Yes" shares. Quick, simple, effective bribery via cryptocurrencies.
- yieldcrv 8mo ago
  they could, slightly suboptimal way of doing it but its there crypto anarchist papers described prediction markets to be used for something like this in the 90s, but there are several levels of infrastructure that didn't exist then if you are predicting such things are occurring then you could also buy the no shares, making it the most egalitarian social mobility opportunity out there. I think the focus on bribery and corruption is distracting because people are imagining exclusion, but its the opposite at this point. Imagine when the soviet union fell and only people that built relationships got dibs on all the assets and revenue streams to become "the oligarchs" almost overnight, but instead of only them, everyone paying attention could take part in it. That's what is happening now and the markets will continue existing autonomously
  - streetfighter64 8mo ago
    I'm not putting my money in these markets for many reasons, ethical objections being one of them. Why'd I buy specifically "No" shares though? From my non-insider POV it's just a bet on the honesty of the judge, mixed with the actual facts of the case. What's the incentive of betting if you're not an insider? You're better off putting you money on a fair coin toss, instead of hoping you'll somehow beat an openly rigged market. How much have you yourself made in these sorts of markets?

ekjhgkejhgk 8mo ago

The best predictions are made when you already know the answer.

livestories 8mo ago
And even better when others wrongfully think they know a better answer...

softwaredoug 8mo ago

They actually encourage insider trading as to influence the prediction and make it more accurate. Some insider selling changes the prediction downwards The WANT the information

watwut 8mo ago

I definitely never thought so. It seemed primary as an unregulated casino to me - which usually implies criminality and frauds. I dont think I was special or unusual.

dylan604 8mo ago
People have been saying the same about crypto in general, yet, here we are. Another level of the scam built on top of a scam.

bawolff 8mo ago

Those aren't mutually exclusive. The best predictions are going to be those based on non public information.

cortesoft 8mo ago

The traditional espoused financial market purpose of these prediction markets is based on the premise that actors on it will have inside information. The point is for business with vested interests (and therefore often inside information) to use these markets to hedge for things that will materially affect their profitability. For example, in this case, suppose you ran a company that was shipping goods through the Middle East, and a war would disrupt your business. You would then place bets on there being a war, so that if it does happen you will recover some of your losses. You might know inside information because your work in the region, but that is expected.

bdangubic 8mo ago

if it is not regulated, you can always safely assume that it is a scam / corruption :) almost universally applicable