[bs7280]

I mentioned this on a different post - the biggest problem with prediction markets is not the gambling or dumb people losing money. Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control.

A small example of this would be NFL / NBA Refs fixing playoff games with a bad call or two. This actually happened 20 years ago, an NBA ref went to prison over being bribed just $2000 per game.

The much worse example is the fact that you can make 100-1 odds on whether the US airstrikes Iran today... or How many times Pam Bondi says the word "China" in a press conference.

[Buttons840]

It's a national security issue too.

Somebody poor grunt who chose to earn a living by laboring (which has proven to be much less effective than being born with money) will be putting fuel in the bombers and thinking "I could just make an anonymous bet..."

It's a national security issue.

We saw this with the Venezuela attack. A flurry of trading and someone made $400,000 for placing a bet mere hours before the "surprise" attack. https://www.pbs.org/newshour/nation/a-400000-payout-after-ma...

[mhb]

Wouldn't the counterargument to this be that if the poor grunt is willing to betray his country for money in the prediction market, he would also be willing to take money from enemy x to do the same thing?

With the prediction market, there is a financial incentive for people on the opposite side of the bet being motivated to uncover the malfeasance.

[NickC25]

With the venezuela attack, the real trade wasn't on Polymarket or Kalshi.

The trade was going long the 3x Oil&Gas ETFs the trading day beforehand. There was huge buying for absolutely zero perceived reason...then boom we just straight up kidnapped Maduro.

[ironbound]

Pizza orders are also an indicator https://en.wikipedia.org/wiki/Pentagon_pizza_theory

[nostromo]

That person is reportedly in jail and facing serious time.

https://finance.yahoo.com/news/trump-jails-venezuela-leaker-...

Anyone with a security clearance making bets like this is not a smart person.

[eru]

No worse than existing financial markets, and we already deal with those.

[TZubiri]

I'd just like to make the distinction between:

1- Making a bet with privileged information. 2- Creating the event and making the bet.

2 would be a war crime, 1 would be a probabilistic leak.

Trump claimed they didn't want to pass through congress because they leak, and there were no leaks about the event. But if any personnel made a polymarket bet, that would constitute a leak. It wasn't acted upon, but if personnel continues to leak information in this manner, it is possible that an adversary will eventually listen to this signal, and that it was just ignored because it is too fresh.

This analysis would also make it clear why it would be immoral to participate in such markets as a civilian. Because if it is your country you might be compensating an insider for information, benefitting the enemy. And if you are not, you might be harming the enemy, but you would be an unlawful belligerent.

[ncr100]

This is fascinating.

[tptacek]

This gets into a philosophical point about what a prediction market actually is. If it's a device for anonymously aggregating fragmented group information into a coherent accurate prediction, the lopsided bets are a feature; the only point of the market is the price signal, and the lopsided bets true up the price.

But most of us understand that prediction markets aren't that, no matter what Robin Hansen said when he was helping invent the modern incarnation of things like Polymarket and Kalshi. They're gambling venues, and we have "Nevada Gaming Commission"-style concerns about fairness. To me, the next logical step is to say that they should be heavily regulated, but in the era of DraftKings, that seems off the table.

[SleepySteve_sk]

I think of them as "Accountability" markets. Someone who can influence the outcome is encouraged to make a public bet on their success, and define what the success criteria is. The bet is then a means to hold them publicly accountable for doing what they said they would do. The market then becomes a voting machine for the public to decide if they think the person will succeed or not.

[eru]

See also https://en.wikipedia.org/wiki/Insider_trading#Arguments_for_...

[shagie]

> How many times Pam Bondi says the word "China" in a press conference.

A classic example is the color of the Queen's hat at Royal Ascot.

https://www.upi.com/Odd_News/2008/06/20/Bets-placed-on-queen...

https://news.williamhill.com/horse-racing/queens-hat-betting...

And the relevant one from 2005 - https://www.foxnews.com/story/hat-trick-upsets-british-booki...

> But alarms were raised Thursday morning, hours before the royal appearance, when a run of bets for brown started coming in, displacing light blue as the favorite.

> "Nobody was backing brown at all and suddenly everyone wanted in on it," Paddy Power (search), owner of the eponymous chain of betting shops that inaugurated the hat bet 10 years ago, told The Times.

> Power's odds on brown went from 12-1, to 2-1, to even and finally to 8-11 before he yanked the bet at 11:30 a.m., 2½ hours before the Queen was due to show.

> "Someone must have been in the know. We laid 50 pounds at 20-1 and 200 pounds at 10-1 and some smaller bets," David Hood, spokesman for rival betting chain William Hill (search), told the Daily Telegraph.

> ...

> When Elizabeth II finally made her appearance, she was indeed wearing a brown hat with cream trim.

> "Somebody has made a tidy sum," sniffed Hood.

> Both he and Power, who estimated his firm lost about 10,000 pounds, or $18,000, suspected palace insiders.

[jvanderbot]

That's the actual point. Everyone else is there to make money gambling, but the whole premise is to incentivize people with secret information to share it anonymously with the public, and take a reward for doing it.

All without traceability or secret drops or whatever.

POSIWID

[robocat]

> POSIWID

Everyone can make up a silly purpose.

Against POSIWID: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...

[ncr100]

(The Purpose Of a System Is What It Does)

[kibwen]

The market can only resolve based on public information, so it could only incentivize revealing information that is already destined to be imminently revealed. Furthermore, it doesn't incentivize sharing that information with enough lead time to actually take action based on that information; the opposite is actually true, insiders are incentivized to wait until just before the event to make their trade, meaning that the public gets no actionable information in practice. And that's assuming that you can distinguish an insider from someone lying for the sake of market manipulation.

[eru]

> All without traceability or secret drops or whatever.

Well, that's not an argument against prediction markets.

They could have exactly the same amount of traceability as regular financial markets, and still work well as prediction markets.

[cyberax]

Without additional signals, you can just as well use it to manipulate markets.

E.g. there's a 1-to-1000 bet for $1m today on Trump falling down the staircase. So markets read this and go crazy, buying up the stock. The next day, nothing happens and the markets go down. But somebody could have made billions betting on that.

[JumpCrisscross]

> it gives very powerful people a vehicle to make lobsided bets on outcomes they control

I'm sceptical that prediction markets uniquely enable this. Like, if you want to bet on U.S. airstrikes in the short term, you could always buy oil options (or short exposed companies). If you're in for the long term, you're buying something that benefits from cheaper gas, e.g. an additives company.

[dragonwriter]

All of these things are much more subject to the problem that effects policy generally: the law of unintended consequences. Betting on the policy, rather than an intended/expected longer-term outcome that is easily derailed by intervening events outside of your direct control is much more direct (plus, if you are corrupt enough to bet on policy you control, that policy is probably already seeking a longer-term aim that serves your existing financial interests, so the ability to bet on the policy itself makes the corruption more attractive by providing a more immediate and certain payoff on top of the longer-term, less certain one.)

[jlawson]

Prediction markets don't uniquely enable it, but they make it far more effective and easy.

Insider trading is illegal. And for trades that aren't technically insider trading, often having some information ahead of time isn't as useful as it seems. Markets are known to react unpredictably to news; sometimes they move the opposite way from what you'd think, especially over the mid-long term, and there are many other influences on the price.

With a prediction market though, if you know what'll happen in the world, you know exactly what you'll win in the market.

[bs7280]

You are not wrong, and I should clarify I also have a big problem with the current state of legal insider trading of elected officials, but this polymarket problem is much more extreme. You can get a guaranteed 100-1 payout by blowing up some random people on the other side of the planet. Way worse than making even 2-5x on a leveraged futures bet with insider info. In that example, the victim is usually just other rich people.

[monero-xmr]

You can also just... not place bets on completely bizarre prediction markets like "how many times this person says this word". The market can sort it out, etc.

[TeMPOraL]

Plenty of more fun dynamics. For example, in some cases it becomes a way for voting for decisions one otherwise wouldn't control. If a person in position to make a decision doesn't really care about any choice in particular, seeing the prediction market lean one way would incentivize them to choose the opposite, making a short sale immediately before.

It also makes sense for the people voting: by betting against the outcome they want, they end up either a) paying for getting things their way, or b) getting consolation payoff if the decision makers pick the undesired choice.

[joelthelion]

A lot of these issues mostly disappear if you use play money.

It turns out that play money prediction markets are just as good as the real money ones.

[adrianwaj]

Perhaps a bet should convert into play money if the stakes get too high and the temptation for "induced manipulation" is deemed too strong. The issue is how high is too high?

Imagine a jury or judge start betting on their own cases? $500 might not sway them, but $200,000 bets coming in from villain/victims' relatives might and they thereafter decide to enter the market and also influence (or force) a legal outcome. So it can be used as a stealth form of bribery if external parties seek to make it profitable for insiders to effectuate an outcome. So at what point should the bet switch over to play money?

And what happens if all that play money can one day be redeemed into a new coin?

So with the rise of prediction markets one can predict a subsequent rise in surveillance. Can you even flag a bet on PolyMarket?

"Khamenei out as Supreme Leader of Iran by March 31?" https://polymarket.com/event/khamenei-out-as-supreme-leader-...

There's almost $7m in volume there. But what if multiple Israel-aligned groups coughed up say $250m and bet "no" then that's like a bounty, right, for someone in Iran to effectuate a yes on the ground? Khamenei himself could step down too after involving himself in the bet and then use the proceeds to ensure his ongoing protection. I don't know. PolyMarket or PolyPay?

[sysguest]

+1

if you're not the person-in-complete-power, your bet is really likely to be 'rigged' against you

I'd rather play dice or buy lotteries

[roflyear]

well, at least for really odd ones - like the china example - the liquidity is (probably) going to be really low. you need people buying both sides to make money.

But for big events/talked about stuff/etc ofc this is not true.

[bs7280]

Again - Its not the money I care about, its what people are willing to do to make it.

[tj-teej]

Isn't this the intent of a prediction markets?

IIRC the original prediction markets existed to try and get as close as possible to finding the true answer to open questions. Someone willing to bet a lot of money on an outcome (because they have an edge/are very sure of an outcome) is the point, they're putting their money where their mouth is...

[caconym_]

> the biggest problem with prediction markets is not the gambling or dumb people losing money. Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control

This is quickly becoming the point of them, at least insofar as they are enjoying an extremely favorable regulatory environment courtesy of the Trump crew.

[qznc]

Why isn’t political gambling in the UK a problem then?

[shagie]

It is. https://en.wikipedia.org/wiki/2024_United_Kingdom_general_el...

> During the 2024 general election campaign, allegations were made that illicit bets were placed by political party members and police officers, some of whom may have had insider knowledge of the date of the general election before Rishi Sunak, the Prime Minister at the time, publicly announced when it would be held.

> ...

> In April 2025, the Gambling Commission charged 15 people with offences under Section 42 of the Gambling Act 2005, including Russell George, Tony Lee, Nick Mason, Laura Saunders, and Craig Williams. Trials are not expected to begin until September 2027 or January 2028.

[eru]

How is that any worse than existing financial markets?

You can already short sell a company and then cause trouble for them, eg with an anonymous phone call of a bomb threat or whatever.

Typically, the authorities will catch you, because they check suspiciously lucky traders. They can do the same with prediction markets.

> A small example of this would be NFL / NBA Refs fixing playoff games with a bad call or two. This actually happened 20 years ago, an NBA ref went to prison over being bribed just $2000 per game.

The outcome of a sports game isn't exactly important in the grand scheme of things. And no one is forced to bet on sports to hedge their harvest against the weather or something like that. It's all entertainment.

> The much worse example is the fact that you can make 100-1 odds on whether the US airstrikes Iran today... or How many times Pam Bondi says the word "China" in a press conference.

So? Don't participate in these particular bets then?

[wyager]

> Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control.

OK, and? The market is just paying them to make information about their decisions public.

[socialcommenter]

Parent comment has a strong implication that the bets will impact their decisions, and invariably for the worse.

If "Politician XYZ takes the day off and sits on the couch" were paying 100-1 odds, it wouldn't be such a big drama (although, again, the existence of the bet would still impact their behaviour)

[bs7280]

I replied to 1 comment below yours - but I want to ask, how do you think this incentivizes people to make info about decisions public? That would lower the return on their bets.

[TZubiri]

I think the war ones are the only real concern.

In the context of legislating prediction markets or not, sports is not a concern at all.

Whether it's a net positive or negative for important shit like war and corruption, we'll see, but if it helps in the important stuff, but damages sports, sorry bud.

[bs7280]

First - I can not comprehend how you could possibly have a charitable interpretation on the war point and how it might have a net positive. I'm not trying to be condescending or anything, I would like to hear a single positive for being able to make BTC bets on killing people.

Second - even if you are not one of the millions of Americans that give a shit about sports, there is still a massive fraud implications just by the existence of crypto prediction markets. All it takes is one bad call to changed the outcome of game. The Superbowl last year had over $1 billion wagered on it.

[tim333]

Assassination in political battles could theoretically be an issue. In the recent Trump vs Harris one, approx $3bn was bet and an assassination attempt was made although not for betting purposes one presumes.

You could probably hire a gunman for much less than $3bn. I don't know if the crypto markets are anonymous enough to get away with it though.

[PlatoIsADisease]

I've been telling people it only takes 2 or 3 people to throw a football game. The person who hires the ref(optional), the ref, and the person who places the bet.

And I was told I was crazy.

Hahahahahahahahahaha. Nope I was right.

[eru]

Huh? It's pretty obvious that you can influence the outcome of a sports event, if you can influence the ref or if you can get a player on one side to pretend to be less competent than she normally is.