|
|
|
|
|
|
by kibwen
958 days ago
|
|
|
The problem with predictions markets is that they incentivize participants to distort the market in order to make their prediction come true (and thus receive a payout). It quickly stops being a place to gauge the likelihood of an event, and turns into a roundabout contract bidding mechanism, the most famous example being "the likelihood that so-and-so famous politician will be dead by next year" is just an anonymized assassination contract. There's a reason that insider trading is illegal; prediction markets are inordinately susceptible to Goodhart's Law. |
|
|
Or put another way: when people can maximize their profit by manipulating the measurement or market at least some of them will attempt to do so.
Stock markets are more difficult (but far from impossible) to control. To make Target's numbers come in low you'd have to suppress their retail sales or their supply chain. Whereas who wins X Race is a singular event that only requires one person (in the most optimistic case) to participate thereby controlling the outcome. In a sense a lot of what prediction markets make book on amounts to penny stocks and are just as risky. If you want to make such markets widely available you need regulation on what kind of events allow bets and strict rules against insider trading (eg sports participants and their families must be prohibited from participating).