Tales from Prediction Markets

While not literally an assassination market, the souljahboy story demonstrates the site creates them: a player can use direct action to force an outcome to occur, rather than predict it as intended. For tweets, its silly. But what if someone sabotaged the vaccine distribution, for instance? There does seem to be room here for unintended and quite unfortuante outcomes.

IDK if academic is the right term, but market manipulation is definitely the nerdiest way of hiring a hitman.

We could take this up a notch by making the bet (person A dies by date X, $100) tradeable. Maybe also create a derivatives market. Now we have a hitman market and a bodyguard market.

Derivatives have several beneficial effects. One is uncertainty, which should stimulate a diversity of contracts: dead by X, $100; dead by Y, $105. People love arbitrage. The second benefit of a two sided market is naked short sellers.

Best case scenario, naked short selling creates an infinite supply of tradeable hitman contracts. In theory, demand is always finite but as Keynes famously said... "no one f#&k-ng knows how demand works!"

So eventually... Robin Hood adds every person on earth to their murder exchange and the market singles out a random person for $gme status. Her name in Ana and next friday, $6 billion of her murder contracts expire. Half the mercenaries on earth are trying to kill her. The other half are her personal army.

Sympathetic magic

A large enough bet is basically a voodoo doll into which you've just stuck a pin.

They have markets on whether Biden, Cuomo, and Gaetz will still be in office as of various dates. You could pretty cheaply buy shares that pay off $1M+ if Biden were to die. But I'd expect the cost of assassination to be well over that amount by orders of magnitude plus you'd need to run forever.

The trouble is, anyone can bet against the person remaining alive, so it becomes a public goods problem. Everyone's incentive is to let someone else do the assassination, and freeload. There's no extra profit in actually doing the hit, but a lot of extra risk.

But isn't a bet on a prediction market open to anyone? Unless the assassin took the bet and killed the target moments before the deadline, couldn't a casual observer jump in on the action after they learned of the target's death?

This is half clever, but taking up the other side of that bet in a public market would immediately make you a person of interest to law enforcement.

I could see a judge sending you to prison for this all the same.

> Not sure why anyone would get involved if they didn’t plan to cheat.

Some markets are full of dumb money. Some people are mistaken about whether they are the dumb money or the smart money. Some people really are smart money and they can make large, fast nearly riskless returns on invested capital.

People make money in large liquid markets with many sophisticated participants all the time. This has need true as long as stock, bond and commodity markets have existed, in markets with and without bans on insider trading.

> How long before there’s a bomb threat at the CDC in order to win a prediction bet?

How long before there’s a bomb threat at Pfizer to make a short part off big? Criminals and terrorists are not generally known for their skills at long term or strategic planning.

Well... You can cheat and lose. You can be cheated and win. Cheating hurts market integrity, but it doesn't kill it. Even consistent negative returns don't always kill a market. They can sometimes even live on as casinos, where average returns are guaranteed to be negative. Markets really hard to kill with market forces. Hence the Lenin-Luxembourg disagreement.

There's also https://www.metaculus.com/ (which does not require an application)

Why isn't it the point? The point of prediction markets is to distribution information. If you know a better source the prediction markets incentivize you to aggregate that source and distribute that information widely. Once people find out, then that becomes the norm and the asset gets priced correctly. That's exactly the point of prediction markets.

[EDIT] Didn't realize the first section of OP was a quote and not an argument. I agree with OP

I would say technically the point of a prediction market is to predict things in advance of them happening, so I think you might get people who sensibly disagree with this point of view. But in the article it's a little confusing, because the person who did this could only trade IIUC with other people on the same day as the day the figure would be published so the people who traded with them were doing something very ill-advised to start with. I can't see how any of this would have affected people who tried to actually predict the co2 level properly, except that now they don't have a market any more.

One thing these tales demonstrate is that they probably don't work so well when you can cheaply manipulate the outcome.

I don't know about the legality, but they've raised millions in VC funding. I suspect they have some kind of plan. They don't hold your money, all they do is act as an oracle as you note, which might help legally.

So far there's not been any major issues with markets resolving incorrectly, across over $100M of total volume and dozens of markets.

Predictit is also heavily used but limits individual bets to $850 per market. They have an official no action letter from the CFTC, so that's all legal.

1. Most of the markets I've looked at have a letter of no-action from the CFTC. But I'm not aware of one for polymarket.

2. I imagine that any suspicion of foul play would taint the waters, the same way a 51 percent attack could technically make you a bitcoin billionaire, at the cost of completely destroying bitcoin value. IEM works the same way, but is affiliated with a non-profit / government entity.

Isn’t the company holding your money anyway? Seems pretty reasonable to trust them to resolve the markets as best as they can, at least if they seem to be interested in staying in business for a while.

> Or, indeed, any heavily used real prediction market.

Predictious, Bitbets and others have had some success before. It didn't work well because none of the cryptos are stable, and also - given the semi illegal nature and the need to rely on anonymous operators - exit scams happen every now and then.

Oracle is simply a URL where the info will be sourced from to resolve. For example, bloomberg.com/in/fo, or trusted.g.uy/bet12

That page says "nor do we host any markets ourselves. Polymarket displays existing markets live on the Ethereum blockchain," so it's going to be a variety of oracles, none of them being Polymarket. They're just an aggregator.

The leading prediction market on Ethereum is Augur, which doesn't have trusted oracles at all. They have a way of crowdsourcing the bet resolutions, which has worked well so far.

There's been some interesting markets. The vaccine market produced some interesting models, and there's a few markets now on how many covid cases will be reported in various states and nationwide.

timeless book