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It's in the name: Prediction market. The point is to predict an outcome, insiders will naturally be better at that than non-insiders. Though I think where thin

by Ajedi32 7mo ago

It's in the name: Prediction market. The point is to predict an outcome, insiders will naturally be better at that than non-insiders. Though I think where things start to get a bit more insidious is when the "insiders" have access not merely to inside information, but the ability to change the outcome. That type of insider trading should be banned IMO because it works against the purpose of prediction markets as a tool. (Though the extent to which banning that is possible is debatable.)

hrimfaxi 7mo ago
Who cares what they call themselves? They're not prediction markets, they are just gambling on events. The "point" of prediction markets is not an accurate prediction in the same sense that the "point" of sports betting isn't that your bet means the team will win.
- Ajedi32 7mo ago
  Betting markets are actually pretty good at predicting the outcomes of sports games. But you're correct that that's not the point of those markets; accurately predicting the outcome of a sports game has no real-world value, people are just placing bets for their personal entertainment. Accurately predicting the outcome of a war, election, or other nationally important event though can potentially have immense value.
  - hrimfaxi 7mo ago
    > Accurately predicting the outcome of a war, election, or other nationally important event though can potentially have immense value. I don't contest that, but again, you haven't explained why "predictions" is the point of prediction markets. People place bets on things they want to be true as much as things they believe to be true. They can market themselves as whatever they like but no one has made a case that this is any different from sports betting.
    - mr_00ff00 7mo ago
      It’s different because the prediction markets companies don’t make money on spreads. You aren’t betting against the house. Sports betting, every bet you take has a house edge. Polymarket, for example, makes money on the data. So it must be worth something because people are paying for that predication data. They don’t take a slice of the winnings.
      - hrimfaxi 7mo ago
        Platforms like polymarket can be used to bet on the outcome of sporting events. Does the fact that you are betting against another bettor change that from sports betting to a prediction market? If I am playing poker am I still gambling even if the house is just another player in the hand?
        mr_00ff00 7mo ago
        Yeah I guess that’s fair, but I wouldn’t say that predictions aren’t the point of the market. My point was more that the predictions must be the point, because people are paying polymarket to get that data. They don’t make money by taking a spread, they make it by providing information. And people bet on emotion for sure, but “wisdom of crowds” suggests that generally that will balance out to somewhat accurate odds.
atmavatar 7mo ago
That isn't very convincing, as the stock market itself is largely a prediction market. People buy stock to bet on future success, whether that manifest in the form of stock price increases, splits, and/or dividends. It's merely a much more narrowly-focused prediction market. For that very reason, insider knowledge, and especially the ability to influence future outcomes, become the subject of heavy regulation. And, the lack of such regulation for congressional members is also why their net worth tends to skyrocket once entering office.
- Ajedi32 7mo ago
  That's fair. Insofar as the purpose of the stock market is to allocate capital to companies the market predicts are most likely to succeed, you could argue that trading stocks based on insider information should be legal (though not insider trading by those with the ability to influence outcomes). But I think the way our current system solves this is by forcing companies to disclose important insider information to shareholders all at once, rather than by letting insiders profit by leaking the information through their market transactions. (The one possibly being related to the other, because insiders who could legally profit by keeping information secret rather than disclose it would be incentivised to do so.) I don't think a similar restriction is feasible for prediction markets, because often the thing you're trying to predict is not something that can be legally cajoled into giving up its secrets.
  - jpfromlondon 7mo ago
    >you could argue that trading stocks based on insider information should be legal Before Salman vs US (2016) it basically was, how do you think the oracle made bank?
- TimPC 7mo ago
  It's easier to define safeguards and the definition of inside information for stock markets than for prediction markets though. There is plenty of information that should ban someone from prediction markets that also wouldn't meet the definition of material non-public information.
- 7mo ago

by Ajedi32 7mo ago

hrimfaxi 7mo ago

Who cares what they call themselves? They're not prediction markets, they are just gambling on events. The "point" of prediction markets is not an accurate prediction in the same sense that the "point" of sports betting isn't that your bet means the team will win.

Ajedi32 7mo ago
Betting markets are actually pretty good at predicting the outcomes of sports games. But you're correct that that's not the point of those markets; accurately predicting the outcome of a sports game has no real-world value, people are just placing bets for their personal entertainment. Accurately predicting the outcome of a war, election, or other nationally important event though can potentially have immense value.
- hrimfaxi 7mo ago
  > Accurately predicting the outcome of a war, election, or other nationally important event though can potentially have immense value. I don't contest that, but again, you haven't explained why "predictions" is the point of prediction markets. People place bets on things they want to be true as much as things they believe to be true. They can market themselves as whatever they like but no one has made a case that this is any different from sports betting.
  - mr_00ff00 7mo ago
    It’s different because the prediction markets companies don’t make money on spreads. You aren’t betting against the house. Sports betting, every bet you take has a house edge. Polymarket, for example, makes money on the data. So it must be worth something because people are paying for that predication data. They don’t take a slice of the winnings.
    - hrimfaxi 7mo ago
      Platforms like polymarket can be used to bet on the outcome of sporting events. Does the fact that you are betting against another bettor change that from sports betting to a prediction market? If I am playing poker am I still gambling even if the house is just another player in the hand?
      - mr_00ff00 7mo ago
        Yeah I guess that’s fair, but I wouldn’t say that predictions aren’t the point of the market. My point was more that the predictions must be the point, because people are paying polymarket to get that data. They don’t make money by taking a spread, they make it by providing information. And people bet on emotion for sure, but “wisdom of crowds” suggests that generally that will balance out to somewhat accurate odds.

atmavatar 7mo ago

That isn't very convincing, as the stock market itself is largely a prediction market. People buy stock to bet on future success, whether that manifest in the form of stock price increases, splits, and/or dividends. It's merely a much more narrowly-focused prediction market. For that very reason, insider knowledge, and especially the ability to influence future outcomes, become the subject of heavy regulation. And, the lack of such regulation for congressional members is also why their net worth tends to skyrocket once entering office.

Ajedi32 7mo ago
That's fair. Insofar as the purpose of the stock market is to allocate capital to companies the market predicts are most likely to succeed, you could argue that trading stocks based on insider information should be legal (though not insider trading by those with the ability to influence outcomes). But I think the way our current system solves this is by forcing companies to disclose important insider information to shareholders all at once, rather than by letting insiders profit by leaking the information through their market transactions. (The one possibly being related to the other, because insiders who could legally profit by keeping information secret rather than disclose it would be incentivised to do so.) I don't think a similar restriction is feasible for prediction markets, because often the thing you're trying to predict is not something that can be legally cajoled into giving up its secrets.
- jpfromlondon 7mo ago
  >you could argue that trading stocks based on insider information should be legal Before Salman vs US (2016) it basically was, how do you think the oracle made bank?
TimPC 7mo ago
It's easier to define safeguards and the definition of inside information for stock markets than for prediction markets though. There is plenty of information that should ban someone from prediction markets that also wouldn't meet the definition of material non-public information.
7mo ago