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this was kind of inevitable once prediction markets got large enough. when traders have millions in open positions on geopolitical events, they have direct fina
by sharp_runner_84 7mo ago
this was kind of inevitable once prediction markets got large enough. when traders have millions in open positions on geopolitical events, they have direct financial incentive to suppress or promote specific narratives. same dynamic as short sellers attacking companies, but applied to real-world events instead of stocks. the whole prediction market thesis assumes information flows freely into prices — breaks down when participants start trying to influence the information itself
- jacquesm 7mo ago> the whole prediction market thesis assumes information flows freely into prices — breaks down when participants start trying to influence the information itself How naive can you possibly be...
- sharp_runner_84 7mo agolol fair enough, naive is a strong word but yeah i get your point. i didnt mean nobody tries to manipulate markets — obviously they do. my point was more that the original thesis behind prediction markets assumed this would be a minor problem because the financial incentive to correct misinformation would outweigh the incentive to create it. turns out thats not always true when you can make more money threatening a journalist than trading the actual contract
- jacquesm 7mo agoI think it is much stronger than that: I think the whole reason these exist is to create a way for parties to profit off insider information that side-steps the stock market. Any other effects are a happy coincidence.
- sharp_runner_84 7mo agothats a pretty cynical take but i can see the argument. the counter tho is that most of the volume on kalshi is sports contracts now where insider info barely applies - like you dont need a mole at the NBA to know lebron is probably scoring over 25 tonight. the geopolitical stuff is where the insider trading concern is legit