[pgustafs]

Adding to your point, most successful markets are positive-sum -- hedgers gain value from mitigating their structural risks, and speculators get paid to assume price risk. For example, the wheat futures market has two natural participants -- farmers and bakers. Farmers can sell future produce to buy seeds right now. Bakers can hedge their wheat price exposure to reduce their chance of getting ruined by a bad harvest. Speculators get paid to hold onto wheat futures contracts if a farmer wants to sell a future when the bakers aren't around to buy (presumably baking), selling to a baker later for a higher price reflecting the price risk assumed. All of these participants derive value from the market.

It's not clear to me that prediction markets usually have natural hedging participants (maybe political operatives, but the tx costs are probably too high relative to the value at stake).

[wpietri]

Excellent point.

Prediction markets have been a thing for at least 25 years. I get the intellectual appeal, and they may be useful in certain niches. But I think their lack of significant uptake or impact is telling.

[nickff]

Prediction markets have huge positive externalities, as they help non-PM participants predict the future! One problem PMs have is that non-PM participants often feel that people betting short (or in some cases long) are 'hoping for failure'.