The only material objection mentioned in the article is that prediction markets are easy to manipulate.

Well, only if they are thinly traded. If they get mentioned a lot more on CNN and CNBC, that is likely to change.

gpm 3 hours ago | parent | next [-]

There's two forms of manipulation mentioned. One is changing the market to influence public perception, that does become harder as the market grows in size.

The other is accepting the bribe, sorry, taking the other side of the bet, and making something happen. That only becomes worse with scale. When you're in the position to accept a million dollar payout to cause the press conference to only last 64 minutes, or to invade a foreign country, suddenly you have a million new reasons to do so.

On any prediction market where a reasonably small group of humans decide the outcome, and there's enough money to matter, "betting no" is better understood as offering a fee to make it happen, conditioned on damages should someone accept your offer and fail to do so. "Betting yes" is better understood as agreeing to facilitate the outcome - or assisting in the price discovery mechanism that says facilitators are over charging.

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zozbot234 7 hours ago | parent | prev | next [-]

They really aren't. Every attempt at manipulation just turns into easy money for those who predict the right odds.

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etiam 6 hours ago | parent [-]

That only really holds if reporting on the manipulation bets is not turned into effective propaganda for skewing events towards the manipulation outcome. So the main argument of the article holds IMO.

Edited to add: I'd like to rephrase that a bit actually. It doesn't even have to help bring about the particular outcome being bet on. It's enough that it can be used to shift public opinion in some way that's worth the cost to the manipulator.

	▲	zozbot234 6 hours ago \| parent [-]
		Sure, but events where that kind of "skew" is effective are going to be quite rare. And even then, the incentive is just for everyone to try and "skew" the event as early as possible, where factors other than monetary cost or reward then become dominant. No different from what usually happens with no prediction market at all. > It's enough that it can be used to shift public opinion in some way that's worth the cost to the manipulator. This has been tried in the real world and is just not very effective. It's just too hard to move the price in ways that will shift public opinion when literally anyone else has a huge incentive to bet against you.

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skippyboxedhero 3 hours ago | parent | prev | next [-]

No, completely wrong. Deep markets are not more accurate.

People who are unfamiliar with how regulated gamblings works assume that the "market" is just lots of informed people rationally trading with each other. This is not how it works. Bookmakers post lines to a small group of syndicates up to a limit, they will often do this non-publicly, and this is how prices are set. They are not set by the "wisdom of crowds", they are set by people who have invested hundreds of millions of dollars in predicting the outcome because bookmakers have an economic need for accurate lines.

When lines open to the public, there is often no significant movement after opening prices set by syndicates. That is because the public has no idea what the actual price should be, they are just uninformed noise traders clicking buttons randomly...that is the product too, the purpose of the product is entertainment not economic efficiency.

It is true that some lines are set incorrectly but the public is not able to benefit from this, because they do not have the information. I would guess that 95% of money made from gambling has been made by under 50 people. And, perhaps counter-intuitively, most of the time these people trading does not have an impact on price because they deliberately trade in a way that does not impact price. Again, the purpose is the same: they trade to make money, not produce economic efficiency.

The people who think prediction markets are useful in any way are people who never traded any markets and couldn't predict if the sun is going to come up tomorrow. If gamblers are noise traders, these people are noise speakers. These markets are completely pointless, gambling is economically pointless outside of the pleasure that people get from entertainment.

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zozbot234 3 hours ago | parent [-]

Noise traders ultimately create an even greater incentive for accurate prediction. The fact that the odds are set at the start and never change just proves that there's very little change in relevant information about upcoming sport games, races etc. where regulated bets happen. That's totally normal. Bets about real-world events are a rather different matter though.

	▲	skippyboxedhero 2 hours ago \| parent [-]
		No, they don't. If you have a line that is beatable, that line has been open for a long time, and you have informed people profiting from that line, it will usually not move. People who have information will disguise their flow, they won't bet with places that will move the line against them when they bet (if you bet this with Pinnacle, for example, they will work out you are beating their line immediately, they have quants who can work out how you are beating their line, and you have permanently destroyed your edge) so you put money down at soft book somehow and they will likely not move line against you...meaning the line doesn't move. Again, it is fairly common assumption that people make that it must be noise traders who are incentivizing syndicates. This is the case at open but not after, and there is a significant distinction between noise traders and noise traders through retail books. Retail books do not set the lines, they do not post lines early to syndicates, their product is completely different. There is literally no incentive for accurate prediction because the economic gain from noise trading does not accrue to anyone who has information. 95% accrues to firms with the greatest marketing advantage, again...this is entertainment, it is not about accurate prediction, you are misunderstanding at a very fundamental level what is going on here. It is like going to see the Minecraft Movie and thinking this is artistic expression on the level of Tokyo Story. This would all be different if there were real markets underpinned by economic demand for this risk but there isn't. This is why Betfair failed. This is why these "prices" you see aren't actually real prices.

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giantg2 6 hours ago | parent | prev [-]

"Well, only if they are thinly traded."

Right now, they're all thin traded at their open. As soon as they are created is when you see the volatility that makes them enticing. Once you get volume, there doesn't seem to be as much value to be had.