Comment by misja111
5 hours ago
I don't follow this part, can somebody maybe explain?
> Yet on Kalshi, a CFTC-regulated prediction market, traders have wagered vast sums on longshot contracts with historical returns as low as 43 cents on the dollar.
On prediction markets traders can bet both sides. E.g. on Polymarket I can currently bet that Greenland will be acquired by USA before 2027 and get 4:1 odds: or I can bet that this doesn't happen, and give 4:1 odds. If these odds are off, doesn't this mean that one side gets a bad return on investment, however the other side gets an equally good return?
On balance the average return on investment by traders should just be 100 cents minus the margin of the prediction market, which tends to be only a few percent.
>On prediction markets traders can bet both sides
In fact traders have to be there for both sides. The article means approximately that on 1c bets on unlikely things the people betting 1c to get a dollar if it happens do worse than those betting 99c to make a dollar if it doesn't happen.
I'm not sure that means betting 99c to make a dollar is a great business though - your money is tied up, often the volume is low so if you can only bet say $99 to win $100 it may not be worth the hassle to make $1, and you are vulnerable to the bettors knowing something you don't - maybe the unlikely event isn't really that unlikely but you don't know.