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Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets
- ramon156 6mo agohttps://archive.is/7DSiy https://archive.is/7DSiy
- fortran77 6mo ago> "John Pederson outside the homeless shelter in Detroit where he has been living since losing money on Kalshi...Pederson lost $41,000 on a mention-market bet related to hip-hop artist A$AP Rocky in January"
- dvh 6mo ago> At first, it worked. Pederson turned about $2,000 into close to $8,000 by betting on daily snowfall totals in Detroit
- techdmn 6mo agoI'm not a gambler, but when I consider it I think the worst thing that could happen to me would be to win a substantial but not life-changing amount of money. I think that's where most people get hooked. They get lucky once (or a few times), then get completely sucked in trying to replicate that success.
- skinfaxi 6mo agoThat particular set of circumstances is the ruin of many a lottery winner.
- dist-epoch 6mo ago> On Kalshi, too, losers vastly outnumber winners. Spokeswoman Elisabeth Diana said there are 2.9 unprofitable users for each profitable one based on data from the past month So 25% of users are profitable? That's vastly more than on financial sites - stocks/futures/forex/options trading where only 5% of bettors are profitable.
- hiddencost 6mo agoUhm, I'd like to introduce you to our Lord and Savior index funds. Simply buy vtsax and forget for 30 years.
- lenerdenator 6mo ago[flagged]
- hnthrow0287345 6mo agoMaybe switch to European markets? Significantly more uncertainty and less stability around the US.
- boh 6mo agoAll those other markets are vastly bigger in scale and trade in trillions on a daily basis so it's an irrelevant comparison. Also the expectation is that the majority of that 25% are insiders. So you're comparing catching fish in a barrel where 25% of the participants hooked the fish prior to you getting a turn vs fishing in the open ocean (so 5% is pretty good with additional voting rights/tax benefits).
- JumpCrisscross 6mo ago> vastly more than on financial sites - stocks/futures/forex/options trading where only 5% of bettors are profitable Source? I'm not doubting that there are products and forums where 95% of traders lose money. But that's far from representative for most financial-market participants.
- dist-epoch 6mo ago10 year old paper on forex trading. 85% of losers here. > The average trader is in the dataset for almost exactly six months (181 days). This is the amount of time between a trader’s first and last trade. About 25% of traders leave the sample within the first 46 days, while 50% of traders exit the sample within 155 days. Of the 181 days on average between open and close, traders are actively trading on an average of 50 of those days. The average trader has an equal-weighted return per trade of -0.035%, and very few traders quit while ahead. That traders have such small average returns per trade is not surprising given that the median trade is open for only 16 minutes, as can be seen from Panel B. Only 16.2% of traders are profitable upon exiting the sample. https://www.nber.org/system/files/working_papers/w22146/w22146.pdf https://www.nber.org/system/files/working_papers/w22146/w221... It's well known in the industry that about 90% of traders drop before 1 year. > But that's far from representative for most financial-market participants. I specifically mentioned "bettors" - day traders/speculators, not long time investors. Two different segments.
- ceejayoz 6mo agoOn a related note: "Someone allegedly used a hairdryer to rig Polymarket weather bets" https://www.engadget.com/big-tech/someone-allegedly-used-a-hairdryer-to-rig-polymarket-weather-bets-155312411.html https://www.engadget.com/big-tech/someone-allegedly-used-a-h...
- hoppyhoppy2 6mo agohttps://news.ycombinator.com/item?id=48008326 https://news.ycombinator.com/item?id=48008326
- Jtarii 6mo agoPrediction markets are astrology for the boys.
- hx8 6mo agoI had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. * The most consistent Polymarket winner I saw was placing 95%+ odds many, many times a day. * Most markets will have a surprisingly small liquidity, so if your edge is just 5% you won't make as much as a 5% edge in the stock market could make you. This is good in that it keeps the biggest fish out, but some big players seem to be using strategies based on holding the most chips. * Paper trading in Polymarket/Kalshi is very different than paper trading in the stock market, because even a few grand in Polymarket/Kalshi can have a big impact in how other "traders" interact with you. The traditional paper trade validation -> unleash the bot strategy doesn't work. You need to real trade with real money and scale up while watching how the market responds. EDIT: Bonus learning -- yes the market runs by getting fish into the system. That's why Kalshi is advertising so much, it attracts suckers for the professional to win from, all while Kalshi takes a percentage.
- PaulHoule 6mo agoI used to play penny stocks for fun and it was a blast to be doing $3000 trades and be responsible for 30% of the volume for the day. You can learn a lot about how markets work if you adopt a penny stock, particularly the kind that trades in a wide range where you can buy in at 0.03 and figure "I'll sell when it hits 0.12" and sooner or later it does... then falls back down to 0.02.
- roflyear 6mo agoYou can "trade the news" with penny stocks (this is basically just buying when people first start talking about it then selling when more people are talking about it), but like you say, the liquidity is soooooo low that you have to be really careful if you plan to sell more than a few hundred dollars. Generally, you're going to lose money - so don't do it.
- freejazz 6mo agoPeople keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...
- dd8601fn 6mo agoThe answer is pretty obvious, right? It doesn’t reliably deliver on that promise, and in the meantime they rake billions on unregulated gambling with near zero institutional exposure.
- freejazz 6mo agoFor sure I agree, but was of course severely downvoted every time I asked how anyone besides the inside trader benefit. Aaaand now I'm being downvoted again.
- ApolloFortyNine 6mo agoIt's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election. But for so many things, there's just too many sources of insider info. Reality television especially, the last couple seasons of Survivor have been clearly leaked if you look at a prediction market. And since all of production knows, and obviously all the players know, someone tells their family members, and all of a sudden you have a few hundred people who know for sure who will win.
- luisln 6mo agoThe 2024 prediction market had like several large bettors on the Trump side https://www.bloomberg.com/news/features/2024-10-25/polymarket-whale-traders-how-1-of-bettors-are-boosting-trump-s-odds https://www.bloomberg.com/news/features/2024-10-25/polymarke.... The Harris side had no equivalent counter-whales. So the ~60% Trump prediction was not really reflecting reality, more-so individual conviction. A more retail-only market would likely have priced it closer to 52–55% Trump, which matches with what the pollsters and mainstream media said.
- josefritzishere 6mo agoIf by "sharks" you mean "inside traders" then yes.
- skinfaxi 6mo agoI took it to be like a pool shark. https://en.wikipedia.org/wiki/Glossary_of_cue_sports_terms#shark https://en.wikipedia.org/wiki/Glossary_of_cue_sports_terms#s...
- josefritzishere 6mo agoYes, that'd be the grammatically correct use. But Insider trading has been rampant on the "prediction markets". In short, it's a scam, because gambling is always a scam. https://fortune.com/2026/04/26/prediction-markets-insider-trading-illegal-kalshi-polymarket-robin-hanson-economist/ https://fortune.com/2026/04/26/prediction-markets-insider-tr...
- orwin 6mo agoNot only that, huge UMA tokens holders can also rig some bets on a technicality without much effort, especially since big UMA token holders seems to know each others. If you bet against Zelansky wearing a suit to meet Trump, and that by all account, he seemed to be wearing a suit, but you don't want to loose the bet, the "Oracle"/UMA holders can decide that it wasn't, in fact, a suit, and your bet will win.
- tsunamifury 6mo agoI ran the earliest predictions market online at the reboot of The Industry Standard. Prediction markets fatally suffer from two Problems. 1) large sharks making huge bets at the end (destroying any signal from earlier bets) 2) inside information on poorly written bets. The solution is -parlay- edit: parimutuel style payouts but that destroys popularity (you are paid out at closing odds not at your time of bet odds spread to sell position).
- LargeWu 6mo ago"The solution is parlay style payouts" I think you mean parimutuel payouts?
- cmiles8 6mo agoThis whole prediction market space seems like a 2026 version of ball and cup game betting. Most of the people participating fail to understand that they (and their pointless bets up for harvesting) are the product here.
- david-gpu 6mo agoMy intuition is that it is a lot like sports betting: many laypeople bet for what they hope will happen, rather than trying to beat the market earnestly. The winners, as you point out, are the house and those with insider knowledge.
- Ylpertnodi 6mo ago... like a horse that is held back for a while and comes in at 23-1.a
- tyre 6mo agoIt’s extremely like sports betting, because the vast majority of their volume is sports betting.
- JohnFen 6mo agoPrediction markets are nothing more than gambling. Most people who gamble end up losing. If it were otherwise, running a gambling operation wouldn't be the enormously profitable endeavor that it is.
- 1vuio0pswjnm7 6mo agoAlternative is archive.is Text-only, no Javascript, no CAPTCHA, no DDoS on blog, no geo-blocking, HTTPS optional: https://assets.msn.com/content/view/v2/Detail/en-in/AA22jnEi/ https://assets.msn.com/content/view/v2/Detail/en-in/AA22jnEi...
- zahlman 6mo agoCan these asset links be determined programmatically (or via an API) from the original URL, or is scraping required?
- deleted 6mo ago[deleted]
- ath3nd 6mo ago[dead]
- mathgradthrow 6mo agoEverytime someone loses money on a bad bet in a prediction market, it's an opportunity for them to learn something about ~~counter-party risk~~ adverse selection. You could easily make the argument that the more people are losing in prediction markets, the more learning is happening.
- tptacek 6mo agoBetting venues can make money on transaction volume rather than holding an edge against their customers on the actual bets.
- jgalt212 6mo agoonly if such venues are Parimutuel.
- pants2 6mo agoCounterparty risk would be more like the betting site going belly-up and not getting money out despite having a profitable trade. This is just regular risk.
- mathgradthrow 6mo agoYou're right, but I was confusing counterparty risk and adverse selection.
- bobro 6mo agoEvery time a drug addict uses, they’re actually learning about biology and the sociology of addiction.
- jeffwask 6mo agoSo, the same as NFT's and Memecoin from the same people...
- pessimizer 6mo agoI thought the entire point of prediction markets was to attract insiders with a way to turn their knowledge into cash. Doesn't that imply that everybody else is going to be net negative? That's why death pools were supposed to be equivalent to assassination markets. Somebody would kill the person to win. The only way (I would think) to make money if you're not an insider is to take advantage of the fact that most people believe in the Law of Averages and consistently err to moderation, so they overestimate small chances and underestimate large chances. Just bet with the crowd when the crowd (and reason) is overwhelmingly on one side. That depends on the vig being low enough not to obliterate that little bit of expected profit, though.
- rmb177 6mo agoI realize I'm an N of 1, but I've participated in prediction markets since 2019 and am just above 5 figures in profit. Not life-changing money, but it certainly doesn't hurt. I'm pretty conservative in my predictions and just think there is a lot of free money on these sites. Maybe that just supports the sentiments of this article and most of the negative comments on this post. There are certainly cases where I got run over by the steamroller picking up nickels, but in general that's few and far between. A good example is getting trump losing the 2020 election at 90% after the election in November. If you find those types of markets and compound the earnings it's a pretty nice savings account. I've also been burned by insider trading and vague rule interpretations but at this point, you chalk it up to the nature of prediction markets. I now try to stay away from markets that are more manipulative (e.g. mention markets). I don't understand the hostility to prediction markets. There are definitely hedging opportunities and we're all adults.
- screamingninja 6mo agoHave you heard of the Sucker Effect? Your gains come solely from the those who made the wrong bet. There is no inherent value generation in the prediction markets unlike the stock markets. Yes, there is money to be made, but at a net loss to the society, so many would not consider these bets "opportunities" but rather "gambling".
- benced 6mo agoThe value generation is for passive observers: it is theoretically more informative to be told that there is a y% chance of x from someone with a financial incentive to be right. (also, we allow plenty of zero and negative sum interactions in society. I don't know why this is special.)
- DesaiAshu 6mo agoThis one is regulated as a commodities derivative rather than gambling Call a spade a spade, rather than calling it a club because the president’s son is on the board Corruption is corruption.
- blurbleblurble 6mo agoWhat's the difference between penny stocks and prediction markets?
- prepend 6mo agoSEC cares about penny stocks a little bit.
- esseph 6mo agoI can't put a hit out in someone I don't like by buying penny stocks, but I can by placing a prediction market bet.
- blurbleblurble 6mo agoThe twisted thing about it is that the surface logic of putting a hit on someone via prediction market involves betting that they'll stay alive. How innocuous looking.
- AureliusMA 6mo agoThe authorities heavily regulate penny stocks since Boiler rooms.
- blurbleblurble 6mo agoI don't see how regulating authorities could truly decipher the distinction between incompetence and pyramid hype fraud / shell company money laundering schemes at scale.
- edge_trader_41 6mo ago[flagged]
- SamTinnerholm 6mo ago[flagged]