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The microstructure of wealth transfer in prediction markets

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Re: The microstructure of wealth transfer in prediction markets

#101

Post by bs7280 »

wyager wrote: post #73
bs7280 wrote: post #33

I mentioned this on a different post - the biggest problem with prediction markets is not the gambling or dumb people losing money. Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control. A small example of this would be NFL / NBA Refs fixing playoff games with a bad call or two. This actually happened 20 years ago, an NBA ref went to prison over being bribed just $20…

> Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control. OK, and? The market is just paying them to make information about their decisions public.

I replied to 1 comment below yours - but I want to ask, how do you think this incentivizes people to make info about decisions public? That would lower the return on their bets.

Re: The microstructure of wealth transfer in prediction markets

#102

Post by matusp »

__MatrixMan__ wrote: post #41

I hope we manage to leverage prediction markets to actually achieve goals rather than just making a casino out of it. For instance, if you spot malware in a commit you could bet heavily against it being merged, and that would attract the maintainers' attention, and they'll see what you see and not merge it, and you get paid for the code review--that money would come from whoever bet that it would get merged, which yo…

Alternatively, you can bet a few tens of thousand that your enemy is going to be alive in a few weeks and let the market handle the rest.

Re: The microstructure of wealth transfer in prediction markets

#103

Post by Workaccount2 »

JumpCrisscross wrote: post #29
yieldcrv wrote: post #26

To me this is all the more reason to get regulatory gatekeeping out of the financial markets If the odds in some financial products are worse than gambling while everyone can access gambling, then people should stop making a distinction under the guise of protecting investors it just drives investors to actual gambling because they cant get the exposure they were already looking for

> it just drives investors to actual gambling because they cant get the exposure they were already looking for This argument gets trotted out by Wall Street every decade or so, usually under the guise of "democratising" some piece of finance. It's almost always bunk. Most investment capital is looking for safe returns. It's not competing with gambling. Even within the high-risk end of finance, the game is in turning…

> Gamblers are seeking a different thrill from what financial markets are designed to provide.

I'd almost agree if the volume on $SPY zero day options wasn't so immense.

Re: The microstructure of wealth transfer in prediction markets

#104

Post by dogmayor »

kibwen wrote: post #99
jvanderbot wrote: post #51

Earlier quoted context omitted.

That's the actual point. Everyone else is there to make money gambling, but the whole premise is to incentivize people with secret information to share it anonymously with the public, and take a reward for doing it. All without traceability or secret drops or whatever. POSIWID

The market can only resolve based on public information, so it could only incentivize revealing information that is already destined to be imminently revealed. Furthermore, it doesn't incentivize sharing that information with enough lead time to actually take action based on that information; the opposite is actually true, insiders are incentivized to wait until just before the event to make their trade, meaning that…

Untrue. Insiders are incentivized to trade when they can buy at the lowest price. That could be at any point up to the event.

Re: The microstructure of wealth transfer in prediction markets

#105

Post by tsimionescu »

teknopaul wrote: post #85
nostromo wrote: post #83

Earlier quoted context omitted.

That person is reportedly in jail and facing serious time. https://finance.yahoo.com/news/trump-jails-venezuela-leaker-... Anyone with a security clearance making bets like this is not a smart person.

Stats on politicians trading habits, indicates insider trading like this is standard practice in the USofA. No beleives MAGA nuts are trading experts.

Politicians don't have anything to lose from this. There is (shockingly!) nothing illegal about politicians making trades based on decisions that they know they are about to take that have a significant and easily predictable impact on the market.

By contrast, making public bets based on classified information that you are not authorized to publicize is a simple and relatively direct breach of laws regarding the handling of classified documents and state secrets.

Re: The microstructure of wealth transfer in prediction markets

#106

Post by fasterik »

danny_codes wrote: post #91

I feel we need a term for these attempts to paint gambling as something other than gambling. Or just proper enforcement for gambling platforms like "prediction markets". Personally I find it disappointing to see so many people wasting their time on this stuff. I'm sure Coplan, for example, could be a productive member of society, but instead chooses to waste his time on stupid stuff like Polymarket.

Prediction markets perform the valuable function of information aggregation, at least in theory. When there is a financial incentive to make a correct prediction, the market should converge on the probability an ideal observer would assign to the event.

Of course in practice, there are issues like low trading volume, market manipulation, etc. And whether or not a particular market is performing better than, say, super-forecasters or experts in a given field is an empirical question.

That said, it seems a bit excessive to dismiss prediction markets as merely gambling platforms that add no value to society.

Re: The microstructure of wealth transfer in prediction markets

#107

Post by YuukiRey »

I’m surprised by the somewhat positive comments. I thought this was just a chance for insider trading without repercussions. If I work at $corp and know the hotly anticipated whatever is announced tomorrow, I can finally cash in on that knowledge.

And the people losing their life savings on gambling now have one more tool.

But what do I know. I’m probably oblivious to what greatness those Truth Engines will enable.

Re: The microstructure of wealth transfer in prediction markets

#108

Post by bs7280 »

monero-xmr wrote: post #82
JumpCrisscross wrote: post #39

Earlier quoted context omitted.

> it gives very powerful people a vehicle to make lobsided bets on outcomes they control I'm sceptical that prediction markets uniquely enable this. Like, if you want to bet on U.S. airstrikes in the short term, you could always buy oil options (or short exposed companies). If you're in for the long term, you're buying something that benefits from cheaper gas, e.g. an additives company.

You can also just... not place bets on completely bizarre prediction markets like "how many times this person says this word". The market can sort it out, etc.

You have completely missed my point. I don't give 2 shits about people losing money gambling. I give a shit about the Whitehouse doing insane things just so they can use the insider information to personally make money. Did you know on Oct 10th someone made $200M on a BTC short position made 30 minutes before Trumps announcement of 100% tariffs on China?

Re: The microstructure of wealth transfer in prediction markets

#109

Post by Buttons840 »

mhb wrote: post #78
Buttons840 wrote: post #38

Earlier quoted context omitted.

It's a national security issue too. Somebody poor grunt who chose to earn a living by laboring (which has proven to be much less effective than being born with money) will be putting fuel in the bombers and thinking "I could just make an anonymous bet..." It's a national security issue. We saw this with the Venezuela attack. A flurry of trading and someone made $400,000 for placing a bet mere hours before the "surpri…

Wouldn't the counterargument to this be that if the poor grunt is willing to betray his country for money in the prediction market, he would also be willing to take money from enemy x to do the same thing? With the prediction market, there is a financial incentive for people on the opposite side of the bet being motivated to uncover the malfeasance.

> he would also be willing to take money from enemy x to do the same thing?

The prediction market is the mechanism by which this happens.

Re: The microstructure of wealth transfer in prediction markets

#110

Post by jacobedawson »

TZubiri wrote: post #72
Buttons840 wrote: post #38

Earlier quoted context omitted.

It's a national security issue too. Somebody poor grunt who chose to earn a living by laboring (which has proven to be much less effective than being born with money) will be putting fuel in the bombers and thinking "I could just make an anonymous bet..." It's a national security issue. We saw this with the Venezuela attack. A flurry of trading and someone made $400,000 for placing a bet mere hours before the "surpri…

I'd just like to make the distinction between: 1- Making a bet with privileged information. 2- Creating the event and making the bet. 2 would be a war crime, 1 would be a probabilistic leak. Trump claimed they didn't want to pass through congress because they leak, and there were no leaks about the event. But if any personnel made a polymarket bet, that would constitute a leak. It wasn't acted upon, but if personnel…

Of course the next step beyond that is "leaking" false information as a decoy by placing large bets on certain events. If that happens enough times it seems like it should wash away the value for agencies hoping to act on "privileged" information.
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