[hmry]

Yeah. You aren't allowed to set up a life insurance policy on someone else's life, or a fire insurance policy on someone else's home. For obvious reasons. But buying an event contract that pays if someone dies or someone's house burns down is fine?

[chollida1]

being pedantic here but

> You aren't allowed to set up a life insurance policy on someone else's life, or a fire insurance policy on someone else's home

This isn't really true. Lots of people take out life insurance on others as a hedge for many reasons, small business partner is one. Same fire insurance, we had a case where someone pledged a building as collateral and we took out separate fire insurance on the building so we'd get paid out immediately.

I'm not sure where this false premise started but alot of people believe it.

[compiler-guy]

The technical term is that you must have an “insurable interest” in what you insure. Both of your examples are people protecting their insurable interest. Ownership is the most common insurable interest, but there are many other ways to have one.

This is done because the insurance company wants you to prefer that the covered event doesn’t happen, which avoids some conflicts of interest.

These prediction market events don’t have the usual insurance interests involved.

[nivertech]

Even if you have an insurable interest, moral hazard may arise - acting recklessly or other abuse, while knowing you are insured/covered. Somewhat similar to friendly fraud in retail/ecommerce.

[bluGill]

Insurance normally has fine print about those things. Life insurance doesn't pay out for suicide. Fire insurance doesn't pay out if you intentionally burn your house down (the fire department also will investigate because even though it is their job they don't like risking their life fighting fires)

You can get insurance without the above provisions, but it will cost a lot more. Once in a while someone manages to collect on a claim for loss of their expensive cigars after they smoke them - but this is rare and usually not worth the cost.

[swores]

> Life insurance doesn't pay out for suicide.

This may vary by country, it isn't a subject I'm particularly familiar with, but at least in the UK that isn't true - many, I think most, life insurance policies here do pay out for suicide. There's just a period of years between the start of the policy and when suicide starts to be covered, to prevent people who are planning on killing themselves from being able to take out insurance just before doing so.

[DaedalusII]

some life insurance policies pay out for suicide after an initial exclusion period. this is often six or twelve months. insurers can include it because suicide claims are relatively uncommon.

if there is evidence that someone took out the policy with the intention of creating a claim then the insurer may treat it as fraud and decline it.

[chollida1]

> The technical term is that you must have an “insurable interest” in what you insure.

Yep, we're in full agreement here

[sandworm101]

Unless you short the property. Essentially, sell it now on the bet that it will drop in value later. Then it burns down and you repurchase the vacant lot and return the property to the original owner.

Evil, but most everything in real estate is evil.

[emsign]

And that's exactly the problem with Polymarket and such, it gives an incentive to be destructive because that's easy. Entropy is easy.

With an insurance this trick won't work, because the insurance company will notice what you are doing. Polymarket doesn't care.

[WinstonSmith84]

> With an insurance this trick won't work, because the insurance company will notice what you are doing

This has worked well millions of times (and occasionally failed too with people ending in prison or with huge fines). Where I can agree however is that Polymarket makes that much easier.

[stressback]

I don't think any corporation "cares" about social issues, but, fwiw, polymarket isn't as ok with it as you imply. Polymarket reportedly detected the suspicious behavior, reported it, then worked with investigators to nab Gannon Ken Van Dyke.

[csomar]

Based on that logic, I can say I have a vested interest in the bet?

> This is done because the insurance company wants you to prefer that the covered event doesn’t happen

But buying the insurance cancels exactly that. Insurance fraud is a thing.

[compiler-guy]

Insurance doesn't exactly cancel that. Maybe in a theoretical world, perhaps.

For example, I have a decently-sized life-insurance policy. If buying insurance "exactly covered that", I would be indifferent to whether I lived or died. But I'm not. And I can't think of a policy-size that would make me so. Money is an imperfect substitute.

Less dramatically, I have really good auto coverage. The car itself is nothing special, and the coverage I have would make me whole (minus a very small deductible) But I am very much not indifferent to replacing the car with money, and it would take way more than the deductible to change my mind on that.

The hassle-value alone would go way over. And hassle-value is usually not insurable.

Insurance fraud is absolutely a thing--but the insurance company still wants you to prefer that the event doesn't happen. That it doesn't work perfectly doesn't really invalidate the point.

[mschild]

To perhaps be a bit more pendantic.

You're not allowed to take out life insurance on someone you don't know or have a relationship (business or otherwise) with.

Life insurance on a business partner works. Life insurance on your spouse as well.

Life insurance on the leader of a random country? Unlikely

[DaedalusII]

you cant take out life insurance on your spouse without them signing the paperwork in most cases

you dont take out cover on your business partner, the company itself does

[mschild]

True but you're still taking it out on another person.

[hmry]

No no I appreciate the pedantry, thank you for the correction

[SilasX]

Yeah, you are being pedantic. The clear meaning is that you're not just allowed to insure arbitrary properties.

If you wanted to correct a misconception, you should provide a better, more complete understanding, not just express frustration about a misconception that doesn't even exist outside of an uncharitable reading.

In this case, that means refining the point to the more accurate model, that you need an insurable interest -- i.e. reason you don't want the event to happen, even knowing you'd get a payout[1]. Your counterexamples only work as such because that exists![2] If you want to fix all the people who don't have your superior understanding, that would have been a great way to help them out.

>I'm not sure where this false premise started but alot of people believe it.

It exists because it's approximately true: you can't get insurance on 99.99999% of buildings in the world because you have no insurable interest in them. And any time someone could correct that false premise, they probably just complain rather than providing the complete understanding -- exactly the choice you just made here.

[1] IMO, this is the natural dividing line between gambling and insurance https://news.ycombinator.com/item?id=13916088

[2] Edit: And in your building collateral example, the policy would prevent you from double dipping -- getting both the building and the full payout.

[PyWoody]

> I'm not sure where this false premise started but alot of people believe it.

It being the driving plot behind Double Indemnity probably started it. I always thought it was true until your comment, too.

[loeg]

Some of the prediction markets explicitly forbid payouts based on death. E.g., Kalshi refused to pay out "leaves office" when Khamenei was killed.

[gpm]

> Kalshi refused to pay out

To be clear they had explicitly written in the contract from the start that death didn't count. And they paid out the full amount - just not to the same betters they would have if he had left office alive.

[munk-a]

There are a lot of things short of death that we don't want to encourage either. There is a huge grey zone here that I frankly don't want to entrust to private entities.

[loeg]

Sure, I'm not a fan of prediction markets in general either. Just responding to GP's specific claim about death incentives.

[epolanski]

I've seen contracts on whether California will burn this summer.

Any bum defending these contracts is to me either a shill or way too dumb to understand the concept of incentives.

Oh and there was an Israeli journalist that got life threats because he reported that an Iranian missile struck some place in Israel, and apparently there was a huge bet on it on polymarket.

[dzhiurgis]

Funny how average HNer is opposing Flock cameras that solve real crimes by covering it up as a "freedom" yet completely fine regulating contracts with hypothetical incentives.

[epolanski]

The incentives are not hypothetical.

[hackyhacky]

"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety."

[Ekaros]

Remember how things ended up when insurance policies on loans you didn't hold were allowed... I think there is quite a lot of good reasons to ban those sort of bets.

[criddell]

> But buying an event contract that pays if someone dies or someone's house burns down is fine?

You can sell your life insurance policy to somebody else. It's a way of getting money to sick people to use while thy are still alive.

[philipallstar]

Well, you are privately allowed to bet on whatever you like with another individual. That is indeed legally fine, though potentially distasteful.

Polymarket is facilitating bets between people, not bets with the house. Gambling and insurance are both bets with the house.

[kube-system]

> Well, you are privately allowed to bet on whatever you like with another individual.

What jurisdiction are we painting with that broad brush? This is far from universally true, even in the US.

[bit-anarchist]

Could you provide an example?

[wsng]

In German law, any contract, including bets, is void if it is “sittenwidrig”. For example, if your wager in a bet is to become one’ slave in case you lose, this bet is void.

[bit-anarchist]

I suppose they never specified the wager. But, given the topic is prediction markets and the topics of the bets, I thought it was implied that the wagers would be exclusively in money. With that in mind, is there any example of a law against specific topics being betted on?

[jubilanti]

Nope. "We're just an intermediary between people" is a 100+ year old yarn that casinos and bookies have been trying to spin. If you're presenting a point of entry to a betting line and taking a cut, congrats, you're the house. Doesn't matter if you adjust the betting line manually based on intuition or algorithmically based on betting volume. Sometimes it doesn't get enforced because of corruption, but if this was the case, then why aren't there tons of independent unregulated poker casinos where players just play against each other? If you facilitate and take a cut, you're the house.

[somenameforme]

Polymarket doesn't take a cut. Their profit comes in transaction fees.

[munk-a]

The mob boss doesn't charge me interest on my loan - he just really likes receiving expensive gifts from me.

[FireBeyond]

"We don't take a cut of your bet, we just charge you a transaction fee on your bet" is reaching a bit.

[somenameforme]

My phrasing was poor, but they do so generally in a very good faith fashion. It's not just a wink wink rake type thing. For instance there are no fees at all on the most popular and high-volume markets - geopolitics and world events. And not only are there are no fees even on smaller markets for market 'makers' - people who put up an offer, but they provide a percentage of all fees collected from market 'takers' back to the makers, as a means of encouraging liquidity.

[CPLX]

What the hell are you talking about? You are absolutely not allowed to bet on whatever you'd like with another individual. Depending on what you're betting on (for example, the price of a stock or the throw of a card), it falls under varying different regimes. This is highly regulated and has been for most of the whole of human history.

Yes, there are de minimis exceptions. Your office NCAA pool, for example, is often legal, but it has nothing to do with what we're talking about and is also irrelevant to a business facilitating it via 18 U.S.C. § 1955.

[anthk]

In Spain in elderly caring homes there was a tradition to bet on Bingo matches for simbolic prices (barely one or two euros, enough for a coffee and that's it). It was legalized on paper recently, but technically everyone turned a blind eye.

https://russpain.com/en/news-3/authorities-consider-legalizi...

>Rarely exceed 25 euros.

Maybe in Christmas, because the weekly play was just about low prizes.

[FireBeyond]

It was, believe it still is, somewhat similar in Australia, where the game Two Up (https://en.wikipedia.org/wiki/Two-up), which was a wartime favorite among soldiers, was implicitly or allowed on Anzac Day despite being gambling.

[josefritzishere]

That "facilitating" argument didn't work out for Silk Road.

[philipallstar]

Because what the Silk Road did was illegal whether in person or not.

[kube-system]

What Polymarket and Kalshi are doing is also illegal in many places.

[epolanski]

To me this is technicality.

A bet is a bet, whether it's against the house or other people it's a bet.

[usrusr]

Can you name the individuals you are betting with on Polymarket? Can they name you?

[FireBeyond]

Gannon Ken Van Dyke has entered the chat.

[charcircuit]

Murder and arson are illegal. Just because there is an event contract that doesn't make them legal to do.

[svachalek]

It's also illegal to pay someone to do murder or arson, which is easy to obfuscate as an "event contract".

[selcuka]

Very true. Someone could place a huge bet for "person X will NOT be assassinated in the next 24 hours" and some lowlife could see the opportunity.

[energy123]

There's many true crime cases where the spouse took out multiple life insurance policies then did the killing to earn money. It's a bounty. We should care about the effect in practice.