[jstanley]

Because the people who are consistently right will consistently win money and will make bigger bets which move the price more, in the limit case making the price converge on the true probability of the outcome.

This is the theoretical underpinning of prediction markets.

[lukev]

Equating being "consistently right" with having a sufficiently large stash of capital is ludicrous.

"right" people will wisely take most their winnings out of a high-variance market. "wrong" people with deep pockets (or lots of wrong people with shallow pockets) will continue to distort the market.

[chii]

> will continue to distort the market.

they can only do so as long as they have enough capital to lose. Because every time they try to move the betting markets against the truth, they will simply lose that money when the event happens (and turns out they were wrong).

So any distortion will merely be temporary. Unless they have access to unlimited capital of course - which is not true yet for anyone (but the US gov't).

[lukev]

That only makes sense in a hermetically sealed system, which this is very much not.

[krapht]

Yes, but is this a problem? Haven't most betting markets turned out to offer accurate predictions?

[lukev]

Not particularly so. But even if it were, would that justify the social cost of this kind of gambling?

[SauntSolaire]

Well, the more often you're right, the more capital you will be able to accrue to bet with next time.