The microstructure of wealth transfer in prediction markets • Hacker News Board

Re: The microstructure of wealth transfer in prediction markets

#111

Post by NickC25 » Mon, Jan 19, 2026, 9:35 PM UTC

terminalshort wrote: post #55

JumpCrisscross wrote: post #29

Earlier quoted context omitted.

> 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…

The same financial products are used in both gambling and smart investing. The canonical example here being options. And the restrictions on what the public can and cannot invest in are complete bullshit. You can't buy shares in a series A startup because that is deemed to be too risky for anyone who is not an "accredited" investor ("accredited" here literally means rich). But anyone who wants to can bet on sports, g…

>or buy a 2x levered VIX ETF.

Which isn't even tied to the spot price of VIX on a daily basis.

So buying VIX as a hedge against black swan events (or Donald Trump's stupidity) is a losing trade, which is wild to me.

Re: The microstructure of wealth transfer in prediction markets

#112

Post by jvanderbot » Mon, Jan 19, 2026, 9:40 PM UTC

robocat wrote: post #96

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

> POSIWID Everyone can make up a silly purpose. Against POSIWID: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...

Oh, I suppose one could interpret it as literally as possible, and arrive at that essay's conclusion.

I have always considered the following to be basically synonymous:

* In the absence of info, consider the intended output of the system to be what it is measured to be

* The output of the system is best determined using observation vs reasoning

Most of the examples there are moreso about two systems colliding. Yes, the purpose of the military is to disable the enemy and by god they are disabling a lot of each other so much so that they don't seem to be doing much else.

Except the bus system, in which the purpose is indeed to turn fuel into exhaust, because the busses move whether they are full or not. The purpose of busses is to drive around, and it so happens people like to use them. If the purpose of busses was to shuttle people around, it could be done several other better ways.

If the purpose is to gamble, it can be done many other ways. This system seems purpose-designed (or purpose-emergent) to coax out secret information in the form of large bets.

Re: The microstructure of wealth transfer in prediction markets

#113

Post by NickC25 » Mon, Jan 19, 2026, 9:45 PM UTC

Buttons840 wrote: post #38

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…

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…

With the venezuela attack, the real trade wasn't on Polymarket or Kalshi.

The trade was going long the 3x Oil&Gas ETFs the trading day beforehand. There was huge buying for absolutely zero perceived reason...then boom we just straight up kidnapped Maduro.

Re: The microstructure of wealth transfer in prediction markets

#114

Post by dist-epoch » Mon, Jan 19, 2026, 9:50 PM UTC

NickC25 wrote: post #113

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…

With the venezuela attack, the real trade wasn't on Polymarket or Kalshi. The trade was going long the 3x Oil&Gas ETFs the trading day beforehand. There was huge buying for absolutely zero perceived reason...then boom we just straight up kidnapped Maduro.

It's not necessarily illegal use of secret information.

There exists "alternate data", some companies monitor all kinds of stuff, satellite pictures, etc, some of these companies surely saw the inevitable asset positioning just before such a big attack (150 planes).

Just like the Ukraine invasion was first visible on Google Maps as traffic jams !!! at the border at midnight

https://www.washingtonpost.com/technology/2022/02/25/google-...

Re: The microstructure of wealth transfer in prediction markets

#115

Post by baobabKoodaa » Mon, Jan 19, 2026, 10:45 PM UTC

bs7280 wrote: post #88

TZubiri wrote: post #69

Earlier quoted context omitted.

I think the war ones are the only real concern. In the context of legislating prediction markets or not, sports is not a concern at all. Whether it's a net positive or negative for important shit like war and corruption, we'll see, but if it helps in the important stuff, but damages sports, sorry bud.

First - I can not comprehend how you could possibly have a charitable interpretation on the war point and how it might have a net positive. I'm not trying to be condescending or anything, I would like to hear a single positive for being able to make BTC bets on killing people. Second - even if you are not one of the millions of Americans that give a shit about sports, there is still a massive fraud implications just…

If I live in a country that is under threat of being attacked by U.S. it is nice to have a website where I can look to get a reasonable probability that the attack happens

Re: The microstructure of wealth transfer in prediction markets

#116

Post by baobabKoodaa » Mon, Jan 19, 2026, 10:47 PM UTC

pants2 wrote: post #28

LeifCarrotson wrote: post #6

I'm a little confused by the "Yes" versus "No" asymmetry. For example, one of the top trending ~~bets~~ markets right now is on whether Miami or Indiana will win the NCAA football championship tonight. You can either take "Yes" on Indiana at 74c, or "No" at 27c, or you can take "Yes" on Miami at 27c or "No" at 74c. Or, there's another potential outcome - you can also bet on a tie at 10c yes/91c no. Is this research s…

Part of this perceived arbitrage is the fee structure. Kalshi has a weird transaction cost structure but taking advantage of that 1c arb probably costs you 2c in fees to Kalshi, so nobody does it.

This is incorrect and tiresome to constantly hear as a go-to explanation for supposed market inefficiencies.

Re: The microstructure of wealth transfer in prediction markets

#117

Post by milanhbs » Mon, Jan 19, 2026, 10:52 PM UTC

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.

A good general rule is to make it hard for people to do bad things, and to not create incentives to do so. This seems to do the opposite.

Re: The microstructure of wealth transfer in prediction markets

#118

Post by monero-xmr » Mon, Jan 19, 2026, 10:58 PM UTC

bs7280 wrote: post #108

monero-xmr wrote: post #82

Earlier quoted context omitted.

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?

People make short positions all the time in crypto, and long, and levered long and short, because of hedging. Same in equities market

Re: The microstructure of wealth transfer in prediction markets

#119

Post by PlatoIsADisease » Mon, Jan 19, 2026, 11:18 PM UTC

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…

I've been telling people it only takes 2 or 3 people to throw a football game. The person who hires the ref(optional), the ref, and the person who places the bet.

And I was told I was crazy.

Hahahahahahahahahaha. Nope I was right.

Re: The microstructure of wealth transfer in prediction markets

#120

Post by terminalshort » Mon, Jan 19, 2026, 11:37 PM UTC

NickC25 wrote: post #111

terminalshort wrote: post #55

Earlier quoted context omitted.

The same financial products are used in both gambling and smart investing. The canonical example here being options. And the restrictions on what the public can and cannot invest in are complete bullshit. You can't buy shares in a series A startup because that is deemed to be too risky for anyone who is not an "accredited" investor ("accredited" here literally means rich). But anyone who wants to can bet on sports, g…

>or buy a 2x levered VIX ETF. Which isn't even tied to the spot price of VIX on a daily basis. So buying VIX as a hedge against black swan events (or Donald Trump's stupidity) is a losing trade, which is wild to me.

It's not tied to the spot price of the VIX because there is no spot price. It's a third order calculated quantity based on options pricing. Not that anyone who gambles on that ETF knows that.