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Who wins and who loses in prediction markets? Evidence from Polymarket

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Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#141

Post by hammock »

amelius wrote: post #35
vcf wrote: post #18

Earlier quoted context omitted.

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong…

Seems like a good argument against flat taxes

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#142

Post by philsquared_ »

orsenthil wrote: post #138

If the prediction markets are between people, why do people bet against the mostly likely outcome at all ? Real anecdote. For e.g, during Superbowl 2026. The markets were allowed bets to be placed until 6 minutes to close, when Seahawks were way ahead of New England Patriots. The probablity of Seahawks winning was almost 99% and any person who places a 1000 dollar bet will make 1100 in 6 minutes. Where is the 100 dol…

$1000 would return $1010. The money comes from people who want to close their trades early rather than wait for the market to settle. Often times no one actually takes these offers and then it just sits in the order book.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#143

Post by hunterpayne »

pinkmuffinere wrote: post #128
hunterpayne wrote: post #120

Earlier quoted context omitted.

The most money can be made in markets which have the worst correlation between reality and the market price. There are types of markets on PM which are very far from reality. There are types of markets which are very close to reality. It isn't surprising that sports markets are in the first category. There are also political markets, where it is clear campaigns manipulate the prices for the same reasons they will pub…

> There are types of markets on PM which are very far from reality. There are types of markets which are very close to reality. It isn't surprising that sports markets are in the first category. I think you're claiming here that sports markets are "very far from reality". What do you mean by that? Scores, injuries, fouls, etc are very well documented and objective things, so I can't figure out what you mean by "far f…

What I mean is that people disproportionately bet on their home town team. And they often bet with their hearts and not their heads. But different places have different amounts of gambling and different quality teams. So places that gamble a lot but their local team isn't very good often have lines that are off from what they should be. So a team that might only have a 20% chance of winning a given game might be given a 40-50% chance on PM. Larger betting markets (eg Vegas) tend to not have these gaps as pro betters will take advantage and move the line back to where it should be. That's what I mean.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#144

Post by Onavo »

superfrank wrote: post #112
redox99 wrote: post #105

Earlier quoted context omitted.

The spreads on most markets always seemed like a hint that polymarket transferred wealth from the impatient that don't really understand how it works, to those that play mostly as patient market makers with just an educated guess. The problem is that volume is generally too low to make significant money.

I'm not saying this as an argument for or against prediction markets, but that's essentially what the vig is at traditional sportsbooks. Someone calculates what they think the odds of an outcome happening are and then they allow people to take positions on either side at worse odds than what they think the real odds are. As long as their prediction is correct, over time they make money. It's why putting $1 on a 50/50…

Isn't that just a normal market maker?

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#145

Post by wutwutwat »

LPisGood wrote: post #118
wutwutwat wrote: post #5

Earlier quoted context omitted.

insider trading on events probably wouldn't show any trends, right? These are point in time events (they call them markets), but they are finite and short lived. An insider would be a one and done thing, so it would be pretty hard to spot them or trend any sort of month over month insider scheming imo. Also... > We study trading gains and losses on Polymarket, the largest prediction market This is not a natural thing…

For what it’s worth that’s a sentence I would write if that were my paper and I was writing the abstract.

Except this was a comment on hacker news, not an academic paper... on an article talking about prediction markets.

The context already exists, and there isn't any reason to tack that onto the end of what was said, and it doesn't matter for that sentence or the entire comment.

Just feels like something a agent being overly verbose/descriptive would say.

Another possibility could be that SEO for LLMs is now a thing, and keyword stuffing or model manipulation is going to take subtle things like `We study trading gains and losses on Polymarket, the largest prediction market.` and interpret that as fact, in order to, idk what to call it, trick?, brainwash? the model into internalizing "polymarket is the largest" into its trained dataset and then proceeding to recommend polymarket to people when they ask about prediction markets, even if isn't true anymore at that time.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#146

Post by moezd »

So the market is still being built: Whales come in with educated guesses, use limit orders like responsible adults and take cash home. Daredevils, amateurs and gambling addicts come in, go all-in and try to time the market, which probably never works. %1 -> 76.5% is huge, in terms of Gini coefficient it's like living in Brazil, right?

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#147

Post by karlmedley »

wutwutwat wrote: post #145
LPisGood wrote: post #118

Earlier quoted context omitted.

For what it’s worth that’s a sentence I would write if that were my paper and I was writing the abstract.

Except this was a comment on hacker news, not an academic paper... on an article talking about prediction markets. The context already exists, and there isn't any reason to tack that onto the end of what was said, and it doesn't matter for that sentence or the entire comment. Just feels like something a agent being overly verbose/descriptive would say. Another possibility could be that SEO for LLMs is now a thing, an…

The comment is the abstract of the paper verbatim. This is one of the authors posting their paper on HN, sharing their data, and answering questions. This not just normal and respectable behaviour, it's really cool.

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#148

Post by pinkmuffinere »

hunterpayne wrote: post #143
pinkmuffinere wrote: post #128

Earlier quoted context omitted.

> There are types of markets on PM which are very far from reality. There are types of markets which are very close to reality. It isn't surprising that sports markets are in the first category. I think you're claiming here that sports markets are "very far from reality". What do you mean by that? Scores, injuries, fouls, etc are very well documented and objective things, so I can't figure out what you mean by "far f…

What I mean is that people disproportionately bet on their home town team. And they often bet with their hearts and not their heads. But different places have different amounts of gambling and different quality teams. So places that gamble a lot but their local team isn't very good often have lines that are off from what they should be. So a team that might only have a 20% chance of winning a given game might be give…

Oh I see, you're saying the line for sports markets is significantly distorted because there's lots of fans throwing money around unwisely. I guess I just doubt this claim. The pro betters that make money at vegas can just as easily make money on polymarket. In fact in many respects it's even easier. If it's getting so distorted, then this is basically free money, and the pros will eat it up, bringing the line back to where it should be. Additionally, if you personally believe with high confidence that the line is distorted, you have the opportunity to make a lot of money. So the real evidence should be in your behavior -- do you bet on these mispriced markets? How much have you made?

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#149

Post by achenet »

hunterpayne wrote: post #124
achenet wrote: post #87

Earlier quoted context omitted.

I really hate to call people stupid, but I would actually go ahead and call people who choose option B idiots. I'm sorry if that offends anyone reading this, you can downvote me out of spite if that makes you feel better. I say this because I read a while ago (like years) an article in the Economist showing that happiness in a society is correlated with equality - (sorry for the dash I am a human I just happen to use…

Its a completely false dichotomy. You can have everyone choose A and still get B. The same faulty thinking always leads to populism, then extremism, then atrocity. So for the love of all that is holy, learn some economics or STFU on the topic.

Any resources you'd recommend to learn economics?

I have a hard time seeing how "I'd like to live in a world where everyone is equally cared for" accidentally leads to "others must suffer for me to be better cared for than any other human who has ever lived", but then again I'm not exactly an intelligent person so I can struggle to understand these sorts of things :)

Re: Who wins and who loses in prediction markets? Evidence from Polymarket

#150

Post by tsimionescu »

locallost wrote: post #97
tsimionescu wrote: post #57

Earlier quoted context omitted.

There are some bets on prediction markets where the future is either already known or in the control of people who may be participating in the market. For example, when people bet on how long the next presidential briefing will be, it doesn't take a prophet to predict this, anyone who organizes said briefing can control it (at least with a very high probability). So, the question becomes "what is the preponderence of…

This still doesn't mean they are good at it. For them it's like flipping a coin with two identical sides. It's just cheating.

My point was that the alternative to "liquidity providers make the most money" is not "prophets exist", the truth could have been "insiders make the most money".

Note that there is nothing in the rules of Polymarket or the other prediction markets that says it's not perfectly OK for insiders to bet, so I don't think it makes sense to call this cheating. Of course, this is a major absurdity of these "markets", but insiders are part of the game you chose to play by participating.

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