[alex_young]

Why do “prediction” markets benefit from bets over nominal sums? Isn’t the power of them based on the wisdom of crowds? Wouldn’t capping bets at say $1 be better than trying to hunt down cheaters?

Seems like they actually are less predictive if you can get more votes with larger amounts of money.

[stratos123]

If the bets on a prediction market are capped, then even if you have a better-than-average prediction (for example, if are an expert on the topic the prediction market is about), you can't bet any more than a layman. So a prediction market with capped bets will always be less accurate.

Or taking a longer timeframe: if you think you are a great forecaster but aren't, and are very stubborn, with capped bets you might get to keep trading forever. With uncapped bets you lose all your money and can't trade anymore, leaving the markets to the people who are better than you at forecasting.