Comment by ericmay

> I think you could make a case in separating the two, of course opening further discussion, but because sports betting takes place in a comparatively very controlled environment I think the risk profile is pretty different versus, idk, betting that the temperate will be at or above a certain point and then someone sticks a hair dryer on the thermostat[1]. Cheating can happen in sports of course, but the risk profile and real-world impact I think is quite a bit different. Worth discussing, but I think that's an important distinction.

That's kind of the point I was getting that. That's not really an argument about prediction markets, it's about what things should we be allowed to bet on.

I'm looking at FanDuel right now and I can bet on 1v1 eSports games of FIFA. The bets aren't even just who will win, but it's things like how many goals will a team score or who will score first. During the last Superbowl books were offering bets on things like what color tie the announcers would wear. I get that there's maybe a slight difference between that and betting on what words a sports announcer will say during the broadcast, but IMO, you're splitting hairs. They're both very easily to manipulate and very open to insider trading.

I think you probably agree with this, but IMO, there needs to be two separate conversations. One, are prediction markets sportsbooks by another name? Two, are there certain markets that we should not allow betting on?

Personally, I think the answer to both of those is yes, but I think if you smush them together into one conversation it makes things really messy.

The environments of various bets have varying degrees of "control" from insider trading. I wouldn't say that sports is more controlled than most other environments. Point shaving scandals are certainly as old as college sports.

The real question is what the purpose of prediction markets are. For sports, there isn't really much of a purpose to the markets except entertainment for the bettors, and harvesting cash for the bookies. There are also various advantage bettors (who may be involved in corruption or not), who attempt to harvest cash from some combination of the bookies and the bettors. Generally IMO these are bad due to simple human frailty though. We figured out a long time ago that for the most part, making gambling available to the general public was a net negative to society, because it mostly transfers money from addicts to big corporations, destroying lives.

For major world events, one purpose of prediction markets is just to generate a price. It's potentially useful for people to know that, in an adversarial market, what the aggregate probability of an event is. It can also be useful theoretically to hedge risks. Whether it's practical to do that depends on the depth of the market though, and with the current markets, it's not. Even more traditional "prediction" markets like commodity futures aren't deep enough to usefully hedge most risks. For example, you might think that major oil companies might hedge future pricing risks, e.g. they want to drill an oil field with a high production cost, but they're worried that the price might go down before they finish production on the wells. Generally though, the markets aren't deep enough for them to be able to do this, so they just won't drill fields that have a production cost more than roughly the lowest price in the past 20-30 years, depending on the age of the executives in charge of the decision.

There's this other purpose of prediction markets though, which is money/information laundering. People may have secret information where their employer has a strong interest in it remaining private, however the person with the information isn't that well compensated, so they monetize the information on prediction markets. On the darker side, you can have wildly illegal markets like "assassination futures" where people bet on when someone will die, and you can bet on a particular outcome, and then make it come true. There are lots of markets somewhere in the middle where someone can take an action in the context of them being a trusted agent of an organization, but instead of following their duty as an agent, they do what is profitable based on their bets in the prediction market.

Overall, IMO there are some good uses for prediction markets that allow people to hedge risk on both sides and enable useful economic activity, but most of the uses I've seen in practice are a net negative.

> So you read an article "China disappears random person" and then at the end you click a button and bet whether that person is alive or dead or whatever.

So think really hard about what the problem with this whole concept might be...