Comment by mcintyre1994
2 days ago
I don’t really understand the argument for prediction markets if you don’t have inside information. The reason they beat other forms of news is because insiders are incentivised to bet, that makes some sense. But surely an investor without insider knowledge will always make less money on a market where they’re trading against insiders than one where they’re not.
You forget that people are not necessarily doing this for rational reasons.
Some people do it for for entertainment, some people are gambling addicts, some people think they have a strong grasp or inside knowledge when they don't.
It is, at root, a casino. Apply your lens to any casino game, and it shouldn't exist (some very narrow exceptions apply in the casino).
It is not a casino in the sense that in the casino you are better against the house. Polymarket is basically an arbiter with financial infrastructure.
I don’t know how this works but assuredly polymarket takes a cut, right? So if we were betting on a coin toss on polymarket, the payout would be less than 2 for both heads ands tail after accounting for polymarket’s fee. That’s not different from the rake for a poker game in a casino?
> I don’t really understand the argument for prediction markets if you don’t have inside information.
If you don't have inside information and you participate in prediction markets, you're there mostly to provide liquidity.
The argument is not that you should bet on prediction markets, the argument is that you should use the odds from the market to make decisions about the future.
But they don’t work without someone making the argument that some non-insiders should bet on them right? Because the insiders aren’t going to bother moving the market for us if there’s nobody to take money off.
The traditional way to square that circle is to say that someone who's interested in the answer should subsidize the market. Essentially they provide liquidity to the market which essentially pays people with accurate information to bet. Some work has been done to figure our effective ways of doing that. In practice, it seems like gamblers often provide enough liquidity that this is not needed
If you don't have insider info, they are betting houses. Prediction Markets is just a cynical euphemism.