A Prediction Market User Made $436k Betting on Maduro's Downfall

Legal systems certainly should restrict markets where the incentivize is sufficiently direct (e.g. actual date of death prediction markets). There's a blurry line between what constitutes a sufficiently direct incentive, sure, but there are lots of blurry lines when it comes to legal systems.

In theory a fun example, but practically it doesn’t play out the way you’re describing.

We don't need new laws to solve your putative problem.

Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing. The insider whales are the only ones actually using it for its intended purpose.

Honestly, of all the vices, I think I pity gamblers a lot. It’s just so visible and understandable to see the harm. Something like being too into porn or drink, those are less visible harm. Where running out of money is comprehensible to even a child.

>But if someone knows the actual weight, no one would play.

Now what if someone in the audience knew the weight of an average elephant, giving them an advantage. Would people still bet. I would guess yes, but they wouldn't bet as much as the person who did because they have less information.

While having better information may make it more likely for you to win, it is not surefire. Things can change last minute.

If you want to go be pedantic about it and select one metric, markets are evaluated on their Brier Score or some other Proper Scoring Rule, not accuracy.

However, I prefer calibration as a high level way to explain prediction market performance to people, as it’s more intuitive.

Edit: just found the answer myself: “accuracy measures the percentage of correct predictions out of total predictions, while calibration assesses whether a prediction market's assigned probabilities align with the actual observed frequency of those outcomes”

I'm not sure the same(any) rules apply.

Anything under 3%/year of time until decision is going to have pretty limited predictive value within that range. Anything starting above that range will end up hitting that floor rather than going to zero because of the difficulty of finding a counterparty.

I'd weigh the accuracy by how much money is at stake...

Even then, a "perfect" prediction market need not be accurate, if people use it for hedging. If some low probability event is really bad for me, I may pay over odds (pushing the implied probability up) to get paid if it happens. The equilibrium probability may be efficient, reasonable and biased.

Who's to say a dead person can't have done the most to "promote peace conferences" as mentioned in Nobel's will? These days, I'd say dead people make a larger net contribution to peace than most politicians.

When you have insider information it's typically most profitable or at the very least less risky to exploit it at the earliest moment, but if you know you have a long head start you can do it slowly to keep from bidding up the price. In either case a giant bet only hour before tells me it's someone who only found out about the operation shortly before it happened.

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(1) Is an excellent point but they bought "will happen in the month of January" for something that occurred at the beginning of January, so basically the worst case scenario for exploiting bet expiry.

(2) Makes sense on face but I had read elsewhere there was a 2 week window. So at no point would it go outside the January window of the bet.

In this case a rational insider with a priori knowledge far ahead of time would have either placed a large bet first thing January 1st or started to ease in first thing on January 1st, as waiting would convey no advantage and only present risk other insiders would bite the apple first.

If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises.

I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed to bet on their own games.

I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider information, and you've a recipe for disastrous externalities.

Nice in theory,

in practice, the money begins creating the facts about the world.

Sometimes to the detriment of innocents.