Comment by worldsayshi
9 hours ago
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.
With proper constraints, there is a major positive externality in aggregating public and private information through market mechanisms. Robin Hanson wrote about this subject extensively. Dismissing it outright as a zero-sum game is a bit naive.
It also creates a lot incentives for creating unpredictable chaos as an insider.
I explicitly accounted for this incentive with my first three words.
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v. edgelordy
>With proper constraints, there is a major positive externality in aggregating public and private information through market mechanisms. Robin Hanson wrote about this subject extensively. Dismissing it outright as a zero-sum game is a bit naive.
It's only gambling when you are betting of completely random events. If you know what the odds are of something happening, even with some approximation, then it is not gambling.
Of course, over 99% people placing bets on Polymarket are gamblers, but some aren't.
Why does knowing the odds make it not gambling?
The odds are known in a game of roulette, is that not gambling?
You can calculate the odds in games like blackjack to attempt to gain an edge, is that not gambling?
Also, I really feel like so many of the people defending prediction markets don't understand the very basics of economy and behavioral science: incentives.
You're creating a legalized system with the incentives to influence events to make terrible stuff happen.
We've already seen huge bets on the deadline of US attack to Venezuela spike few hours/days before the actual aggression.
Which means that insiders not only hold information, but have the incentives to make stuff happen.
And naysayers (which seem to be dropping from the same basket of NFT/crypto cultists) will tell you that this is about probability and information discovery.
And the naysayers would be right. They come from two approaches:
- Property rights: bettors are waging using their own property at their own direct risk. To prohitbit such a thing is to violate their property rights, plain and simple; - Information aggregation: prediction markets originally appeared to help make informed decisions about an event by proof-of-stake. If I'm not mistaken, this idea was originally developed by NSA/CIA/FBI for this purpose.
You mentioned misincentives like hold information (which isn't actually related to prediction markets, but more so to NDAs and similar) and "making stuff happen". The latter is functionally the same as policemen/judges/prosecutors/prisons having an incentive to create more criminals. Really, most goals people have may be achieved via criminal means. We don't outlaw free will because people have an incentive to achieve their goals via criminal means, we increase punishments (increasing potential loses), improve tracking/prevention (reducing success chances), etc.
Gambling -> bad gamblers lose -> bankruptcy -> creditors eat losses
Technically, a lot of gamblers are gambling someone else’s money, they just havens lost enough yet for it to matter.
If you want to bring back debtors prison I guess I’d be fine with legalized gambling. If I’m stuck holding the coupon, I’ll pass.
> bettors are waging using their own property [...] To prohitbit such a thing is to violate their property rights
This is technically true but doesn't deserve top-billing. Any fraudster or embezzler (or mugger or drunk-driver) will incidentally be risking some of their own property while exercising their right to control it.
> informed decisions about an event by proof-of-stake
A large chunk of the problem here occurs when people (politicians, judges, police, CEOs, etc.) are wagering assets and outcomes that aren't actually theirs, but things they control in (violated) trust. In other words, the personal "stake" of their overt bet is actually far too small.
> The latter is functionally the same as policemen/judges/prosecutors/prisons having an incentive to create more criminals. [...] we increase punishments
So... repercussions like "is is a crime for those people to possess a private account on the anonymous bribery website"?
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No, they would be wrong.
Have them have a prediction market on whether their house will be arsoned tomorrow or they will be hit by a car and instantly they will recognize the danger of the incentives and the bs of "information hedging based on price discovery".
Cause way worse events allow betting and profiting.
Give me a break, we're at the complete decadence of society and its intellect. Nobody can recognize right or wrong anymore let alone understand why insider trading, betting, etc, has been outlawed and prosecuted forever.
We live in the vilest era I remember since I was born, this is beyond disgusting.
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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.
The often-repeated "wisdom of the crowds" justification is misapplied to online betting markets. Like people, crowds can either be wise or unwise depending on the situation. Famous experiments like guessing how many gumballs are in a jar work because each person who can see the jar has a source of valid information, and in aggregate that can be surprisingly accurate.
You can't assume that the majority of individuals participating in betting markets have a source of valid information. Given the destructiveness of these markets to both individuals and society, the aggregate wisdom of the individuals participating in these markets is highly doubtful. Any meager value above more traditional forecasting does not justify the cost, corruption and a loss of trust in institutions.
Nobody says this on assumption. It's well-evidenced.
https://polymarket.com/accuracy
https://www.metaculus.com/questions/track-record/
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There is definitely value in that, but that value is outweighed - dominated, even - by the incentive produced to fix outcomes, incentivized by that money put on the line.
How dare you impugn the mystical powers of the wisdom of the crowd. Why would anybody fix outcomes?
Wait a minute, you can bet on pro wrestling? OK I'm out of ideas.
https://www.betus.com.pa/sportsbook/entertainment/wwe/
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.
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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.
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There's value in that only if assessments made by people using the prediction for something aren't better than crowd wisdom. I would guess that a large part of prediction market participants are simple gamblers whose assessment is worse than the prediction of someone doing it because they need the information for something.
So if people who need predictions for decision-making start relying on prediction markets with a lot of low value gambler predictions and opinion manipulators (wealthy participants can use the platform to mislead people as well) the value of these things might be negative.
Or if decision makers start using the gambling markets to drive their decisions, the value of these things will go extremely negative.
The headline bet in Polymarket right now is on when US troops will invade Iran. If some unscrupulous official can pull some strings to get boots in the ground in the next few days, they stand to win a significant amount of money.
Genuinely asking: has there been a case of the prediction markets being "right" or valuable about something outside of the norm?
That's why the metaverse happened. Lots of money bet on it's success
Wisdom such as the mass purchase of GameStop shares, temporarily inflating the value of an ultimately doomed company?
My understanding of the world is enhanced immensely because suckers can bet on how many times the president will reference the lips of his press secretary in a speech.
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.
There are a lot of baked in assumptions here. For instance, as an extreme example, betting on nuclear war or climate collapse happening and then "winning" doesn't really provide you anything of much use in the society you will be living in after such events.
Extreme events are always poorly priced in markets. For example, there's no point in making a trade for the S&P 500 falling by 90% because if it does we'll be in such a catastrophe that money doesn't matter any more.
Insurance / hedging is most useful in protecting you from realistic well defined risks that affect you personally but not the wider system.
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Very astute observation. Might I even add, as humans we never know when our last day could be. So I find it silly to gamble, since I could easily die in a car accident on my way to pick up my winnings.
There's three kinds of players on Polymarket & others
* The insider trading ones that will never lose money
* The wallstreetbets degenerates with enough money that it's a fun game even if you lose money
* People that have seen every chance they have at becoming moderately wealthy disappear under the current economic state of their country, where overwhelming debt is likely. The era of making it wealthy from a job is gone, an enormous part of the population is stuck going from small job to ubering, while being showered with videos of wealth from social media. The only way to make it out is gambling. Whether that's polymarket, sports betting, etc.
When you're already in a shit situation with no hope, "it's a zero sum game" isn't a good counterargument.
There are also large trading/market making firms providing liquidity, especially on markets associated with up/down bets on crypto, stocks etc. They use all the options trading machinery they've already built for more 'respectable' venues like CME/Eurex etc, further squeezing the margins for retail traders.
They're active on bets that are even considered "meme" bets. Example: Jesus returning in 2026 - If you can get a loan at 4% as a big well respected trading firm and plonk it on Jesus not returning at 94 cents, you're making ca. 2% for 'free'. (Unless Jesus returns, in which case you have bigger problems than your portfolio pnl).
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.
This is true for traditional gambling platforms, because they bet directly against their users, and make money when their users lose those bets.
Polymarket has a different incentive. They profit when their users bet more money, through percentage fees. Insider trading helps them achieve this by bringing in more money to the platform--they won't kick insider traders off.
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.
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That was my initial opinion, but more recently it's been established that there's quite a bit of a cat and mouse game here – people have come up with elaborate workarounds to avoid getting booted or limited by the platform, while the platforms come up with increasingly sophisticated monitoring to catch them before they win too much.
Though to your point I think these big winners are not representative of most users, who in my experience often think they're beating the system but in reality just don't log their losses very well. The house always wins etc etc.
Do these platforms care since the insider traders aren’t taking money from the house?
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Buy a movie ticket and that money is gone. Throw $20 on a parlay for the weekend sportsball and thats actually interesting, something off script might happen. And that money might not actually be gone.