Doesn’t matter. The separate prediction market is funded indirectly by the liquidity provided by the first prediction market. The separation of markets is just a legal cover.
Just so I understand: What you have in mind is something like the following?
Earth creates a prediction market, betting hard that Ceres is going to have a coup
Mars creates a corresponding prediction market, without betting anything
Some trader, who I’ll call Ivan, offers a bet that Ceres is going to have a coup on Mars’s market
If anyone takes him up on it, Ivan will buy a corresponding contract from Earth’s market, pocketing a small profit and eliminating all risk from his perspective
This generates liquidity in Mars’s market, about as much liquidity as there is on Earth’s market
And I guess I understand you so far. What happens then? Is it something like:
Initially, maybe the Earth/Mars relations are rather cold, so nobody expects a coup; therefore they bet it all the way up to 95% probability that there will be no coup.
But this now creates a strong incentive to make new bets that Ceres is going to have a coup and then make Ceres have that coup, e.g. Hook the Space Pirate sell contracts in the Martian market and then start a coup on Ceres.
I feel like at least this point of your original post fails though:
But even if hiring marines is technically cheaper, operating through the prediction market provides a level of deniability overt operations lack. After all, Mars’ enthusiastic participation in a blockchain prediction market created by Earth can hardly be considered a breach of the peace.
This sounds wrong. Prediction markets work because you run them with generous subsidies to incentivize participation; risk-based arbitrage is not a recommended way to fund the markets.
Just so I understand: What you have in mind is something like the following?
Earth creates a prediction market, betting hard that Ceres is going to have a coup
Mars creates a corresponding prediction market, without betting anything
Some trader, who I’ll call Ivan, offers a bet that Ceres is going to have a coup on Mars’s market
If anyone takes him up on it, Ivan will buy a corresponding contract from Earth’s market, pocketing a small profit and eliminating all risk from his perspective
This generates liquidity in Mars’s market, about as much liquidity as there is on Earth’s market
And I guess I understand you so far. What happens then? Is it something like:
Initially, maybe the Earth/Mars relations are rather cold, so nobody expects a coup; therefore they bet it all the way up to 95% probability that there will be no coup.
But this now creates a strong incentive to make new bets that Ceres is going to have a coup and then make Ceres have that coup, e.g. Hook the Space Pirate sell contracts in the Martian market and then start a coup on Ceres.
I feel like at least this point of your original post fails though: