Comment by abetusk
2 days ago
"Why prediction markets aren't popular" [0] gives some compelling arguments (to me) about why prediction markets haven't caught on and probably never will.
As I understand it, the main argument is that for prediction markets that aim to incentivize the thing they're predicting, better to invest in the thing directly. Otherwise, "prediction markets" are successful precisely when they can't influence the outcome, like sports betting.
I remember finding the election betting interesting last presidential election, but I also remember that it was spiked when Musk invested to change the odds.
[0] https://worksinprogress.co/issue/why-prediction-markets-aren...
Musk, being the world's richest person, is something of an outlier. He can afford to give free money to the market for longer than anyone else, and the size of the market might not be big enough to handle the imbalance.
There's a level of irrational spending which only institutional investors can counterbalance, and they might not have the risk appetite to get into a single market on a relatively less regulated platform that could rug pull them.
It's somewhat interesting how the wisdom of the crowd and economic theory for rational actors are usually combined as an argument for free markets.
While the reverse is not used as an argument against unchecked wealth.
My understanding is that unchecked wealth only remains that way until its owner acts irrationally on a stock exchange, at which point it is quite rapidly checked and becomes someone else's unchecked wealth.
Which is to say that Elon Musk can inflate any market he wants, but only by losing sums of money that will become increasingly significant as more and more people find out about the free cash giveaway.
I’ve used it.
There’s no functional difference in how markets work when 99% of wealth is owned by a handful of kings vs 99% of wealth being owned by a handful of oligarchs.
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