It’s actually a bit worse—there’s a 2% fee paid to liquidity providers, so if you only bet and don’t provide liquidity then you lose money on average. Of course you can lose money providing liquidity too if the market moves against you. Anyone can provide liquidity and get a share of that 2%.
It’s plausible to use betting markets to hedge other bets and make a net profit even if within the prediction market all bets are zero sum.
That’s especially true if the prediction market prediction includes insider information based on which it would be illegal to trade stocks and the stock market hasn’t yet included the information so that there are opportunities to hedge bets in both markets against each other.
Essentially, people can provide information into the prediction market and then another party can aquire that information to make a profit.
That’s true whether the information that’s given into the prediction market comes from insider information or from the analysis very skilled superforcasters.
Prediction markets are also effectively insurance markets. Buying insurance is essentially zero-sum but it allows the person who buys the insurance sometimes to engage in risks that are net profitable.
If you have a prediction market about whether businesses have to lock down, businesses can effectively insure themselves in the prediction market.
I think it’s plausible that 2% fees are two high to make PolyMarket an effective market for information but it’s something that’s generally possible.
Sure. I was pointing out that providing a market to anonymously sell illegal information skirts the rules. Whether or not this is a net good is subjective. Similar to having bets on whether so and so vip is still alive on a particular date. It means “notanassasin007” can buy in to that bet the day before and assassinate the vip.
Actually isn’t liquidity a problem? Let’s say someone is really really certain a specific vip will die. (Queue a movie scene of someone assembling a sniper rifle with their laptop open to polymarket). But if the killer tries to bet a million dollars their max gain is the funds invested on the other side of the betting book.
Sure. I was pointing out that providing a market to anonymously sell illegal information skirts the rules.
That seems misleading. “essentially you’re saying is X” is saying “a collary of what you are saying is X”.
The phrase “illegal information” isn’t very straightforward. A doctor does have legal obligations about not disclosing certain information about their patients but a lot of insider information isn’t subject to legal obligations against revealing it.
It’s illegal to trade stocks based on insider information but it’s not illegal to tell other people a lot of insider information about a company outside of stock trading.
Actually isn’t liquidity a problem?
The liquidity tells you about the value of the given information that you are providing to the market.
Cool. These are all pure zero sum bets, right? Where the EV for the ‘average’ better is $0?
It’s actually a bit worse—there’s a 2% fee paid to liquidity providers, so if you only bet and don’t provide liquidity then you lose money on average. Of course you can lose money providing liquidity too if the market moves against you. Anyone can provide liquidity and get a share of that 2%.
It’s plausible to use betting markets to hedge other bets and make a net profit even if within the prediction market all bets are zero sum.
That’s especially true if the prediction market prediction includes insider information based on which it would be illegal to trade stocks and the stock market hasn’t yet included the information so that there are opportunities to hedge bets in both markets against each other.
So essentially you’re saying you can benefit from insider trading information indirectly without legal culpability. Fair enough.
Essentially, people can provide information into the prediction market and then another party can aquire that information to make a profit.
That’s true whether the information that’s given into the prediction market comes from insider information or from the analysis very skilled superforcasters.
Prediction markets are also effectively insurance markets. Buying insurance is essentially zero-sum but it allows the person who buys the insurance sometimes to engage in risks that are net profitable.
If you have a prediction market about whether businesses have to lock down, businesses can effectively insure themselves in the prediction market.
I think it’s plausible that 2% fees are two high to make PolyMarket an effective market for information but it’s something that’s generally possible.
Sure. I was pointing out that providing a market to anonymously sell illegal information skirts the rules. Whether or not this is a net good is subjective. Similar to having bets on whether so and so vip is still alive on a particular date. It means “notanassasin007” can buy in to that bet the day before and assassinate the vip.
Actually isn’t liquidity a problem? Let’s say someone is really really certain a specific vip will die. (Queue a movie scene of someone assembling a sniper rifle with their laptop open to polymarket). But if the killer tries to bet a million dollars their max gain is the funds invested on the other side of the betting book.
That seems misleading. “essentially you’re saying is X” is saying “a collary of what you are saying is X”.
The phrase “illegal information” isn’t very straightforward. A doctor does have legal obligations about not disclosing certain information about their patients but a lot of insider information isn’t subject to legal obligations against revealing it.
It’s illegal to trade stocks based on insider information but it’s not illegal to tell other people a lot of insider information about a company outside of stock trading.
The liquidity tells you about the value of the given information that you are providing to the market.