prediction markets aren't just gambling \ stacker news ~oracle

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prediction markets aren't just gambling www.youtube.com/watch?v=Gq3v-Y6cvLI

1462 sats \ 12 comments \ @south_korea_ln 17 Dec oracle

I kinda get his point, most of the participants on prediction markets are in essence just gambling, yet, I do believe that it in theory, it can be more than that.

I think I've only once joined one of the sports markets on Predyx, as I do believe I'm truly just betting there. But when I put some money on the impeachment of the former Korean president or the prosecution of his wife, I felt like I was doing so by adding knowledge to the market.

So, the ones that put money on the sports markets, do you feel like you are gambling? Or financializing some of your knowledge?

If it is gambling, do you agree with CZ that prediction markets are just gambling? If it is financializing, do you think it is fair to equate it with insider trading, akin to Pelosi making money playing the stock market as a politician based on knowledge not available to the general public?

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69 sats \ 7 replies \ @SimpleStacker 17 Dec

I've commented a number of times on my views of prediction markets, e.g. #1343781, #344998, #861623

Overall, while I'm not against them per se, I'm a bit skeptical of their effectiveness as information aggregators, except for very high interest markets like presidential elections. I think for most markets, the market volume will be quite small, limited to a few, highly confident insiders, plus gamblers who are just along for the ride.

that being said, I am pretty convinced that while perhaps offering some informational utility, the revenue model is going to skew towards preying on gamblers.

67 sats \ 1 reply \ @south_korea_ln OP 15h

I do like your traditional unravelling argument

It's a traditional unraveling argument.

It's only profitable for me to trade in this market if I have more knowledge (including the interpretability of the knowledge), than the average market participant. Knowing this, I drop out if I have zero private info. This elevates the average level of knowledge among the remaining participants, which elevates the knowledge requirement to be profitable. Thus, the traders who have more limited info drop out. The process continues until only the most knowledgeable trader stays in the market.

Does this rely on the efficient market hypothesis?

In an event, I agree that the revenue model is going to skew towards preying on gamblers.

I think Predyx is still fun because there are so few people joining, lots of inefficiencies to take advantage of. Also, the feeling of being able to steer the market one way or another.

For that reason, I don't feel like joining the much bigger Polymarket or Kalshi platforms, even if they had LN payments enabled.

100 sats \ 0 replies \ @SimpleStacker 14h

The unraveling argument doesn't rely on the efficient market hypothesis per se, but I think it rests on similar assumptions. Namely, that everyone is hyper rational and can strategize many moves ahead. In reality, people aren't that super rational, so the market won't unravel completely. But people are somewhat rational, so the dynamic will still be there.

I think it makes sense to not want to participate in the larger platforms. There, you are more likely to be betting against real insiders. (Not to mention, some oracle shenanigans in Polymarket). For a relatively small and unknown platform, you're more likely to be betting against people just having fun.

67 sats \ 4 replies \ @Undisciplined 17 Dec

Compared to what, though?

The odds will tend to be close to what traditional books have but prediction markets have unilateral exit. It seems like that greatly reduces downside risks for gamblers.

69 sats \ 3 replies \ @SimpleStacker 14h

It does seem a superior way to gamble than with bookies, though I suppose bookies do have some sort of liquidity / market-making function.

I think my skepticism towards prediction markets is more towards the idea that you can have a functioning prediction market for every event under the sun. Some niche markets I think just won't have enough volume to generate a good prediction.

0 sats \ 2 replies \ @Undisciplined 7h

you can have a functioning prediction market for every event under the sun.

Is that a strawman or do people really expect that?

I wonder if they can’t absorb more of the financial sector than we’re anticipating, though. Most people don’t make investments for the purpose of actually owning the instruments they’re buying. They just want exposure to the asset growth. There might be less friction-y ways to do some of that stuff on a prediction market.

69 sats \ 1 reply \ @SimpleStacker 5h

I guess it's a bit of a straw man but a lot of the people supporting prediction markets don't often make those qualifications or state where they think the predictive utility ends

0 sats \ 0 replies \ @Undisciplined 4h

That seems fair. It’s a pretty new thing so we probably need to FAFO for a bit to separate the wheat from the chaff.

0 sats \ 2 replies \ @Undisciplined 17 Dec

It’s both adding information to the world and gambling, so it’s not just gambling.

There are plenty of reasons someone would want to know more about how likely various outcomes are, whether we’re talking about sports or politics or finance or anything else people care about.

69 sats \ 1 reply \ @south_korea_ln OP 15h

Do you know of examples where prediction markets gave useful information other than for presidential elections?

0 sats \ 0 replies \ @Undisciplined 7h

How useful does it have to be?

The markets around Fed rate cuts have been fairly active and accurate. That helps people make financial decisions.

Much smaller things can be useful though. Knowing your team’s chances of making the playoffs can help with planning social events or travel around it, for instance.

0 sats \ 0 replies \ @Coinsreporter 6h

For anyone who wants to ride along let's jump on to Predyx

https://beta.predyx.com/market/

I don't believe Prediction Markets are gambling in any way. I'm just not ready to accept it. What I'm ready to accept is that they are much better than betting where you bet against the rates bookies decide for you.

Also if prediction markets are gambling, futures and trading stocks are the same, investing in anything thinking it might gain you profit in future is also same.