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A prediction market user made $436k betting on Maduro's downfall

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Re: A prediction market user made $436k betting on Maduro's downfall

#151

Post by JasonADrury »

tlb wrote: post #104
bjackman wrote: post #99

Earlier quoted context omitted.

Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading? (Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).

Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises. I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed…

In the US insider trading is typically illegal because you're misappropriating that information from someone else.

For example, if you happen to be a bartender or a waiter who accidentally overhears material non-public information, you're free to trade on that.

Re: A prediction market user made $436k betting on Maduro's downfall

#152

Post by JasonADrury »

thaumasiotes wrote: post #112
tlb wrote: post #104

Earlier quoted context omitted.

Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises. I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed…

> Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate? He didn't say that it doesn't. It obviously does make stock markets more accurate. But it tends to drive down the total amount of money available to be invested in stocks, which is compatible with the claim that it makes the market worse at funding productive enterprises.

> But it tends to drive down the total amount of money available to be invested in stocks

That seems like a big claim. For most market participants, there's always a counterparty that's so much more sophisticated that it doesn't make a difference if they're an insider or not.

Re: A prediction market user made $436k betting on Maduro's downfall

#153

Post by PoignardAzur »

bjackman wrote: post #99
kqr wrote: post #96

Earlier quoted context omitted.

Well, better synthesis of public information is also a way to win. Some people think of that as more fair. Another way to win is to use them for hedging exposure elsewhere. That also doesn't require inside information.

Why should we want prediction markets to be fair? I want them to reveal facts about the world. They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading? (Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).

In this case the insiders only made their bets a few hours before the kidnapping was publicly announced, so it's not clear whether the betting "revealed facts about the world" in any publicly useful way.

Re: A prediction market user made $436k betting on Maduro's downfall

#154

Post by [deleted] »

watwut wrote: post #122
kelnos wrote: post #73

Earlier quoted context omitted.

> Absolutely possible but if you were the presidents son I do think you'd be more likely to slowly buy in over 1+ weeks. If you're the president's son, ~$400k is probably not worth your time.

If you are conservative or republican presidents son. Lets not loose the sight of highly assymetric corruption levels.

[deleted]

Re: A prediction market user made $436k betting on Maduro's downfall

#155

Post by bitshiftfaced »

lxgr wrote: post #148
bitshiftfaced wrote: post #142

Earlier quoted context omitted.

Polymarket pays interest on those bets about the same as the risk free rate.

It doesn't, or where do you think those 3% are coming from?

While Polymarket does offer holding rewards interest, it looks like it doesn't for this particular market.

That doesn't mean there aren't other explanations. It could mean that No holders expect to incur an opportunity cost greater than the risk free rate. Combine that with how there's low liquidity (there's less than $300 on the book buying Yes, and at 2 cents or less), and so we could just be seeing the effect of random fish temporarily distorting the price. It could also mean that the risk of a smart contract failing is making it not worth the hassle for a market maker to come in at such a slim margin and low volume.

Re: A prediction market user made $436k betting on Maduro's downfall

#156

Post by lxgr »

bitshiftfaced wrote: post #155
lxgr wrote: post #148

Earlier quoted context omitted.

It doesn't, or where do you think those 3% are coming from?

While Polymarket does offer holding rewards interest, it looks like it doesn't for this particular market. That doesn't mean there aren't other explanations. It could mean that No holders expect to incur an opportunity cost greater than the risk free rate. Combine that with how there's low liquidity (there's less than $300 on the book buying Yes, and at 2 cents or less), and so we could just be seeing the effect of r…

They're offering interest on roughly a dozen hand-picked markets, according to their documentation. (I wasn't aware of that, so I stand corrected on the general assertion that they never do.)

> That doesn't mean there aren't other explanations.

Why do you need other explanations, when the observed probability can be precisely and fully explained by opportunity cost?

Re: A prediction market user made $436k betting on Maduro's downfall

#157

Post by lxgr »

jasonjmcghee wrote: post #26
paulpauper wrote: post #6

It's technically not illegal if someone was able to observe the planes flying and place the bets accordingly. Public info is legal to trade on. But it's obviously also ripe for abuse. Any govt. employee can start trading on the side, 100% untraceable.

What are the laws around polymarket? I've never used it, but continue to see posts about employees making bets on privileged information and that being legal.

I highly doubt that that's the case, given that taking a large and publicly visible financial position based on confidential information still amounts to disclosing information.

Re: A prediction market user made $436k betting on Maduro's downfall

#158

Post by lxgr »

ecommerceguy wrote: post #8

can i bet on when prediction markets will collapse due to rampant insider bets?

Why would the markets collapse due to insider trading?

That said, at some point it would then be more accurate to call them reality modification bounty markets.

Re: A prediction market user made $436k betting on Maduro's downfall

#159

Post by lxgr »

tptacek wrote: post #23
giarc wrote: post #19

Earlier quoted context omitted.

How? Then why would non-insiders bet? The classic prediction market is guessing the weight of an elephant (or some animal) at a circus. The average guess of the crowd will actually get very close. But if someone knows the actual weight, no one would play.

The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling. Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing . The insider whales are the only ones actually using it for its intended purpose.

Would you argue the same for the stock market, i.e., that the only rational active market participants are insider traders? If not, why not?

Re: A prediction market user made $436k betting on Maduro's downfall

#160

Post by lxgr »

tptacek wrote: post #53
giarc wrote: post #49

Earlier quoted context omitted.

I don't know much, but I can't see why betting on a known outcome is good? Why not just ask the knower? Also, just because Robin Hanson says "it's about aggregating insider information" makes it true. He writes some stuff.....

The idea is that people have all sorts of fragmentary information about future events that they can't directly reveal, due to confidentiality or trade obligations (among other things), and that a prediction market effectively liberates the directional content of that information by converting it into prices. Robin Hanson can credibly claim to have invented prediction markets as we understand them today.

You seem to be arguing that that's the canonical definition of a prediction market, and anything else, including markets merely aggregating non-insider beliefs about future events, should be called something else. Do you have a better proposal?
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