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We haven't seen the worst of what gambling and prediction markets will do

derekthompson.org

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Re: We haven't seen the worst of what gambling and prediction markets will do

#591

Post by kqr »

Aerbil313 wrote: post #532
joelthelion wrote: post #499

There is a class of prediction markets that are useful and seem immune to most of these problems : play money prediction markets. I've been enjoying them for years; I feel they provide a useful service to understand what is going on in the world, and they don't seem to provide the perverse incentives that we are seeing here. Oh, and they seem to work just as well.

These "competitive forecasting" platforms seem very interesting. What do you need to be good at this sort of skill?

Strong beliefs that

- things rarely change,

- noise dominates most measurements,

- a good story is not evidence,

- it is very rarely possible to know things more certainly than 10--90 %.

Phrases to look up are "confirmation bias", "availability heuristic", "uncertainty calibration", "outside view", "Fermi method".

Re: We haven't seen the worst of what gambling and prediction markets will do

#592

Post by HelloMcFly »

vovavili wrote: post #577
doctaj wrote: post #575

Earlier quoted context omitted.

Note that #1 will get kicked off the platform immediately. Even non-inside traders who win significantly more than expected will be kicked off. If you’re on the platform, you’re losing.

At the moment being, Polymarket has an enormous reputational incentive against behaving like a predatory gambling company. People rely on it as a kind of decentralized alternative to New York Times. Distorting this effect would be very short-sighted.

I believe they are incentivized to discourage insider bets and essentially "rigged" wins. I do not think they will ever be able to control the problem of insiders leveraging guaranteed knowledge to take money for the poor suckers who don't know the game they are playing. Maybe that's too pessimistic, but at this point I don't see how anything but a pessimistic view is warranted.

Re: We haven't seen the worst of what gambling and prediction markets will do

#593

Post by vovavili »

HelloMcFly wrote: post #592
vovavili wrote: post #577

Earlier quoted context omitted.

At the moment being, Polymarket has an enormous reputational incentive against behaving like a predatory gambling company. People rely on it as a kind of decentralized alternative to New York Times. Distorting this effect would be very short-sighted.

I believe they are incentivized to discourage insider bets and essentially "rigged" wins. I do not think they will ever be able to control the problem of insiders leveraging guaranteed knowledge to take money for the poor suckers who don't know the game they are playing. Maybe that's too pessimistic, but at this point I don't see how anything but a pessimistic view is warranted.

That's true for now. A part of me hopes that one day prediction markets will have the same set of technical constraints, norms and laws that make the stock market mostly work. Let's wait and see.

Re: We haven't seen the worst of what gambling and prediction markets will do

#594

Post by amfarrell617 »

nsvd2 wrote: post #550
Spacecosmonaut wrote: post #545

Earlier quoted context omitted.

There is genuine value in a wisdom of the crowds assessment of future events that is only sharpened up by the requirement to put money on the line.

I think you're right broadly, but when that wisdom is applied to e.g. how many dildos will be thrown at WNBA players, I don't know how much actual value is created.

That… that actually seems like something which society should want to predict with more precision so that we can hire someone with a net on a stick.

Re: We haven't seen the worst of what gambling and prediction markets will do

#595

Post by netrap »

cortesoft wrote: post #352
munk-a wrote: post #263

Earlier quoted context omitted.

> It feels like you can spin this idea for nearly anything. Apparently 25% of alcohol sales are to alcoholics. I'd like to propose not letting the perfect be the enemy of the good. I accept this argument about gambling might be slippery-slope-able but I think it's pretty obvious to everyone without a vested interest that it's causing extreme societal harm. Would you be opening to banning just this one thing and then…

> I'd like to propose not letting the perfect be the enemy of the good. I accept this argument about gambling might be slippery-slope-able but I think it's pretty obvious to everyone without a vested interest that it's causing extreme societal harm. I am pretty sure anyone without a vested interest will also realize that alcoholism has caused extreme societal harm as well. I would say with pretty strong certainty tha…

We ban other drugs though? Just saying that we DO ban things already...

Re: We haven't seen the worst of what gambling and prediction markets will do

#596

Post by xeyownt »

firloop wrote: post #277

> And now here come the prediction markets, such as Polymarket and Kalshi, whose combined 2025 revenue came in around $50 billion. Bizarre to call trading volume "revenue". Last year, trading fees for Kalshi amounted to about $263 million[0], whereas Polymarket largely did not have fees in 2025 and is turning them on in a few days[1]. [0]: https://finance.yahoo.com/news/kalshi-fee-revenue-2025-263-1... [1]: https://g…

Typo. It's obvious it can't be a revenue. Previous paragraph is dealing with the size of online gambling industry, next paragraph is about the same but for prediction market.

Re: We haven't seen the worst of what gambling and prediction markets will do

#597

Post by taeric »

super256 wrote: post #570
jappgar wrote: post #559

Earlier quoted context omitted.

It would be useful to predict things like earthquakes and tornados. Gambling on what politicians and celebrities will do is not science it's degenerate court gossip.

Game theory can be applied to these problem, and if you can correctly model reward, cost and motives, you can predict decisions of politicians more often than not.

Even granting the idea that game theory can be applied successfully here; that does not really help with one-off events. Consider, knowing the odds of a coin flip does not grant you any real help in knowing what the next coin flip will be.

This is also ignoring that game theory of partisan games breaks if any of the participants knows what the other will do. Is one of the more famous ideas.

To that end, if you want to predict what someone will do, more often than not you are best looking at their experience doing said thing.

Re: We haven't seen the worst of what gambling and prediction markets will do

#598

Post by firloop »

xeyownt wrote: post #596
firloop wrote: post #277

> And now here come the prediction markets, such as Polymarket and Kalshi, whose combined 2025 revenue came in around $50 billion. Bizarre to call trading volume "revenue". Last year, trading fees for Kalshi amounted to about $263 million[0], whereas Polymarket largely did not have fees in 2025 and is turning them on in a few days[1]. [0]: https://finance.yahoo.com/news/kalshi-fee-revenue-2025-263-1... [1]: https://g…

Typo. It's obvious it can't be a revenue. Previous paragraph is dealing with the size of online gambling industry, next paragraph is about the same but for prediction market.

Well, the previous paragraph compares how much people bet online with how much people spend on airfare, which also isn't quite right. It assumes 100% of what people bet is lost. For sure, the house always wins, but the amount lost is probably closer to 50-60% of what is quoted.

Re: We haven't seen the worst of what gambling and prediction markets will do

#599

Post by worldsayshi »

vovavili wrote: post #576
worldsayshi wrote: post #571

Earlier quoted context omitted.

It also creates a lot incentives for creating unpredictable chaos as an insider.

I explicitly accounted for this incentive with my first three words.

I'm curious what positive externalities you're thinking about? Being able to make plans for the future?

Re: We haven't seen the worst of what gambling and prediction markets will do

#600

Post by spacebanana7 »

worldsayshi wrote: post #542
firloop wrote: post #277

> And now here come the prediction markets, such as Polymarket and Kalshi, whose combined 2025 revenue came in around $50 billion. Bizarre to call trading volume "revenue". Last year, trading fees for Kalshi amounted to about $263 million[0], whereas Polymarket largely did not have fees in 2025 and is turning them on in a few days[1]. [0]: https://finance.yahoo.com/news/kalshi-fee-revenue-2025-263-1... [1]: https://g…

I can't believe people are throwing so much money on zero/negative sum games that on average have no benefit to anyone including yourself. I mean I know gambling is a thing but at least we are counting that as an addiction. But we seem to take polymarket more seriously.

It can be useful for insurance/hedging purposes.

For example if you're a European farmer it might be rational to protect yourself from fertiliser price swings by buying/shorting natural gas futures, derivates or long dated delivery contracts. Polymarket bets on specific geopolitical events are just another option for this, which can be attractive depending on the price.

Prediction markets have a pretty unique benefit in terms of offering political protection. For example if you're a DEI NGO it might have been worth making bets on Trump winning so you have enough funds to ride out measures that target your traditional funding sources from gov/corps/edu.

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