[nostrademons]

Because these markets aren't all that efficient yet (possibly because other potential market participants are scared off by insider trading charges). You don't have multiple people that all have insider information betting against each other, you have one person with insider information that cleans out everybody else. If this repeats enough, all the people without insider information will get cleaned out and exit the market, all the other people with insider information will enter the market for profit, and prices should converge to true likelihood.

And yes, the whole purpose of prediction markets is to turn insider info into public info.

[tsimionescu]

> And yes, the whole purpose of prediction markets is to turn insider info into public info.

You realize that betting on an event you have insider info on is against their terms and conditions, right? So while it may be your personal goal, it's certainly not Polymarket's or Kalshi's.

[Domenic_S]

But you just said "The benefit is to people watching the prices" -- but if the odds haven't properly converged what information does watching the prices get you before-the-fact?

Maybe I'm just not getting it, could you lay out a scenario?

[geocar]

> if the odds haven't properly converged what information does watching the prices get you before-the-fact?

How do you know we are "before-the fact"? Because these numbers are bananas?

Somebody just tanked their job, their life, for a million bucks.

Anybody who took that bet, might've individually spent only a few bucks to see that.

Everyone else (the people watching) learned the price of entertainment is a few bucks, and ruining someone's life is a million bucks.

Was that a surprise to you? If not, then the (market) prices may be said to have converged (close to) reality.

But maybe it is, and you think people would ruin their lives for less, or would pay more for human misery. In any event, the distance between whatever you think that probability is, and the return earned on these odds is information, that we all can enjoy (as benefit) before-the-fact.

[vanuatu]

if the only people remaining are insiders, the market is effectively nonexistent because nobody is going to take the other side of the trade