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Comment by slg | Hacker News Reader

Say whatever you want about the merits of prediction markets. But I just don't see a way those benefits outweigh the societal dangers of these constant reminders that people in or close to power can freely profit from their positions in the ways the rest of the population can't. There's always talk about the dangers of disincentivizing job creators, but what happens when a society routinely disincentives job havers in this way? We're just getting a constant barrage of information telling us that if we show up to our job and simply work as we're expected that we're stooges who won't get ahead. You'll need to look for your own individual scheme, ethics be damned, if you just want to keep up with the rest of the population. That's not healthy on an individual level or cumulatively at a societal level.

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The current setup does sort of seem like a tax on being stupid. Why would any non-insider participate in these markets? You’re just asking to get screwed.

Though it’s not that different from the stock market, where the folks at WSB happily give their money to Citadel, Jane Street, and friends, because every once a while, one of them hits it big after going all in that the ball lands on green.

Gambling is a hell of a drug and there are good reasons why it is illegal in so many places. Prediction markets have some good externalities (information), but it’s another addictive outlet for those vulnerable to gambling addiction.

As a hedge. Say you own real estate in UAE, and you note that insurance does not cover acts of war. Betting on something like "Iran Bombs Dubai" creates some form of real estate insurance for you.

Even if you suppose my example is bad, you should be able to envision some case where such hedge is helpful.

Why not get a real insurance, where it is actually verified that your house was bombed?

Because there are many things where insurance doesn't exist.

Ok let's work on that then. But meanwhile, close down unregulated websites like polymarket, where there is no verification of actual damage.

You can't just "work on that".

Insurance works on repeatable, predictable risks based on models.

You can't get insurance against a military attack. But you can hedge using a prediction market. It's essentially the version of insurance for one-off events, that relies on wagers since you can't use models.

There is a market for custom and rare risk insurance - it's called "surplus lines"

I'm not saying it's not out there, but in many cases finding insurance for act of war is difficult. It is certainly rare and almost always far less accessible than using polymarket. If you have a very large holding you can probably get someone to write it for you though.

Yes, but the examples where it's good has a name "insurance". It exists, it's generally well regulated, and is not easily exploited.

The reason it works better is because in a prediction market, the person betting against you has no resources or ability to go after you for fraudulent behavior. Whereas an insurance company has both.

Nobody would insure this, and if they did, that policy would take months to be written, wouldn't cover the single probability of 1 event, etc...

So you are renaming something that doesn't and won't ever exist.

And you're trying to rename unregulated gambling as something that is good for society.

Exploiting people with gambling addiction is not a reasonable replacement for insurance.

> The current setup does sort of seem like a tax on being stupid.

More like a tax on being ethical or having any morality.

What is unethical?

The good point of prediction markets is that they provide information. This information is available to everyone, for free, which benefits everyone.

Insiders help achieve this. Insiders have information and by participating in the market they then expose and share that information. So this is good. If we ban insiders, we're just banning accurate information from getting into the market. If we do that, we might as well just ban prediction markets altogether. I don't have a strong opinion either way on that, but a prediction market without insiders is pointless.

Insider trading is unethical, and has long been recognized as such. It is outrageous for you to suggest that it is a good thing.

It is not a free market if there is insider trading. If insiders are trading other market participants are by definition getting screwed by what was advertised as a fair, impartial system.

You certainly wouldn't participate in a market where you did not think you had fair odds. Tho maybe you're inclined towards the rigging side of things.

Finally, since you're trying to work the information angle, would you care to share any legitimately meaninful information you've gained from prediction markets?

> Insider trading is unethical

It is illegal to insider trade in financial markets, which makes sense to me. But financial markets and prediction markets are different; one exists to surface capital, the other information.

Insider trading is forbidden in financial markets because allowing it would be a disincentive to participation by non-insiders, which would be bad because it would reduce the amount of capital the market was able to provide.

In prediction markets, allowing insider trading would be disincentive to participation by non-insiders, which would be a good thing, because the market should surface the most accurate information as possible and insiders have more accurate information than non-insiders.

> and has long been recognized as such.

Prediction markets are in their infancy. They've only really existed for about a decade and even now are tiny compared with markets like commodities or equities. So I don't see how this could have been "long recognized."

> It is outrageous for you to suggest that it is a good thing.

This is not an argument.

> You certainly wouldn't participate in a market where you did not think you had fair odds.

Of course I wouldn't and I wouldn't advise anyone else to do so. But why would we want uninformed people participating in prediction markets? I don't think they should.

What does "fair" even mean here? If Alice is more informed than Bob about X, she'll probably be better at making predictions about X. I guess it is "unfair," but what would the point of a prediction market be if we only allowed uninformed people to participate? Then it's more like a survey of what the average person thinks will happen, which is probably common knowledge, so we don't need a market to find that out.

> Finally, since you're trying to work the information angle, would you care to share any legitimately meaninful information you've gained from prediction markets?

Prediction market odds for elections and important world events are regularly quoted in the press and AFAICT seem to more accurate than pundits and and oped writers at predicting the future. A low bar, but still, if we are going to speculate about the future, we might as well see what actually informed people think.

I completely agree with you. The only thing I would add is, that prediction markets are not necessarily oracles for predicting the future. They can just as well be used for hedging: imagine, hypothetically I really do not want Trump to win. I can bet on Trump, not because I want or expect him to win, but to hedge my position (perhaps my business would suffer if Trump wins)

What a bunch of fluff.

The problem is that prediction markets are excellent vehicles for corruption as demonstrated by the article discussed here.

You're arguing that corruption is a good thing.

The article is opinionated and sensationalist.

The fact remains that prediction markets and financial markets are not the same thing. Bets between people happened all the time, and you would wager based on information asymmetry, that is the whole point of it.

By making these markets public facing, you get access to this information asymmetry, whereas before it was behind doors, and these bets were already taking place, you just didn't know it, now you do.

You're conflating insider trading and blatant corruption.

Imagine if a CEO of a company does something that would damage the price of the stock of it's own company, having shorted the stock before? That's not insider trading, that's (probably, I don't know the exact term) fraud and will lead to prison sentence.

Prediction markets enable the policymakers to make these bets. Arguably, there should probably be sorts of limit on who is allowed to be there. But there are still counter examples like Nancy Pelosi who somehow manages to go around these limitations in stock market.

That's whats currently happening.

The problem with insider trading in prediction markets isn't the "prediction" part, it's the "markets" part. Once there is real money changing hands, then the purpose of the prediction market stops being "surface information" and starts being "make money" (POSIWID sense of purpose). Since the money changing hands is a necessary incentive for the insiders to provide the information, the parts cannot be disentangled and the problem is fundamental.

Note also that prediction markets can't be too different from financial markets because prediction markets are in some sense a generalization of financial markets e.g. you can make a prediction market that predicts the price of some stock on some day.

"Information" is not neutrally reflective of some objective, deterministic reality. Processes involving information are slippery and reflexive, and that's the danger people are all but shouting for you to see. The feedback loops have extreme potential. The danger isn't in "exposing information" it's in people coercing reality to fit their bet. Peoples' lives are on the line.

The wild thing is that prediction market dabbler rationalists who think they're betting on the outcome of a pre-written fiction story are actually just upping the reward for someone to come along and bomb people to death. Your participation is not neutral. You are culpable in the outcome of the situation you're "gambling" on which has not been determined yet and you are literally throwing fuel on the fire. No matter which way you bet it's fuel.

I'm sorry, I don't believe you personally deserve it but for the betterment of the everyone we have no choice but to shame people like you (prediction market rationalizers) via downvotes and hot replies until you can see through the limits of your overly simple model of reality.

I don't think you're a bad or stupid person, but when it comes to your views on prediction markets, they are very bad and very stupid. Thankfully you are not your beliefs and you are free to change them at any time. I beg you to reconsider this one.

This sounds like a poor attempt at attempting to be on the right side of morality through manipulation and shame. There is nothing here that tries to help someone understand your viewpoint.

Let's start of with something simple. Should a single wager between two people be illegal, should sports betting at all be legal? Is it only illegal if one or more entities facilitate the bet?

I didn't say anything about illegality, I'm speaking strictly in terms of the ethics of please stop shitting in the pool shame on you.

Don't poop in the public swimming pool and don't feed perverse war games that result in children and their parents being maimed and killed.

Info available to everyone? Yeah nope. That’s like saying the moon is cheese with a straight face.

All anyone knows is that some bloke put money down an hour before the bet resolves.

They don’t know squat about what info those betters have.

Stop telling us the moon is cheese

Nobody is required to participate in these markets.

Nobody is required to use hacks in competitive multiplayer video games. You may choose to play fairly and be beaten over and over again.

If there are no consequences for the cheaters, it becomes essentially mandatory, and that's without there being money on the line.

Yeah, if your “virtue” is “not being able to participate”.

>Why would any non-insider participate in these markets?

Because they are grossly mis-priced for anyone mildly informed.

Did you get rich off these markets? If not, how can you say it's true?

If this were the case, deeper and more informed pockets than yours would take the opposing position until there’s no more alpha to be had.

Not true at all.

A great example was this market from the most recent primary election.

https://kalshi.com/markets/kxtxsenatedemturnout/voter-turnou...

Based on just simple math there was basically no chance of turnout being over 2.5m and yet the market for multiple days had the higher buckets at exorbitant prices.

The turnaround was 2.3m, I don't get your point. Texas doesn't require party affiliation.

Correct and the higher brackets above 2.5m were at 50-70 cents each.

> Why would any non-insider participate in these markets? You’re just asking to get screwed.

If people who do the obvious trades (sell oil right now - it's going down) lose money, all you have to do is do the opposite (buy oil right now - it's going down) and gain money. Is it not that simple? You will profit along with the insiders when Trump blockades the strait again, although you won't have such perfect timing.

Mind explaining to the class how you know how to make the same bet as the insiders without actually having insider information?

I think the bigger risk is changing major decisions (like war) based on the profitability of bets. Forget about drone war doctrine, if you're an adversary just place absurdly large bets which incentivize the opposition to do what you want. (i.e. bet so you "lose" the bet when the enemy changes their posture to gain the profit).

Politics is already full of these pay to play incentives but now anyone with enough cash can influence world events.

This kind of nation-level hedging has been talked about for years in betting market-aware communities. It's honestly a much better use than fleecing nobodies with insider knowledge.

We should be more worried about who placed the losing bets then. Russia, Israel and China having a market for government and military officials to accept their bribes is kind of a bigger story than insiders fleecing gamblers.

The oil trade structure actually does make sense, because this is how you buy oil, or really any commodity that takes so much space and weight. You order it ahead of time, then if you hold till the contract settles you are allowed to pick it up from the place and in the way designated in the contract specification. In fact you are obliged to pick it up, that's why prices can go negative in exceptional situations. Prediction markets are then just a clean cash-only derivative.

Most of the other prediction markets seems rather stupid to me (they are completely detached from any real world activity), other than their prices being a fairly reliable source of information for bystanders.

>The oil trade structure actually does make sense, because this is how you buy oil, or really any commodity that takes so much space and weight. You order it ahead of time, then if you hold till the contract settles you are allowed to pick it up from the place and in the way designated in the contract specification. In fact you are obliged to pick it up, that's why prices can go negative in exceptional situations. Prediction markets are then just a clean cash-only derivative.

You just described what is happening, you didn't actually provide any reason for why this is good for anyone but the individuals profiting from it.

Airlines in particular prefer to have a predictable price of fuel, whatever it might be, so they buy futures.

Do they? Afaik, they don't [1].

> WONG: However, Gerry says most of the major airlines in the U.S. eventually soured on fuel hedging. One reason - the Wall Street transaction fees to make these hedges got expensive.

> WOODS: Plus, Gerry says the airlines found that they could make money the old-fashioned way by raising prices. Today, none of the major airlines in the U.S. are hedging.

Hedging is one of those things that sounds cool but then when your service is x% more expensive than a competitor and you lose customers you just stop doing it. It's kinda like being on AWS; when everybody has an outage together nobody asks "oh what can be done differently".

[1]: https://www.npr.org/2026/03/27/nx-s1-5759203/fuel-hedging-on...

That's the US. Meanwhile in Europe the practice is alive and well:

https://www.irishtimes.com/business/2026/03/25/ryanair-to-ho...

> European carriers have hedged about 80 per cent of the fuel they need for this year and typically take out new hedges on a rolling basis to lock in future prices.

Almost every very large company that relies on commodities will have a treasury desk whose sole purpose is to work with future markets, its very common practice. It doesn't matter if one npr article has a anecdote, it exists.

"Almost"? Can you can name 1 with evidence?

Like if I look up home depot they talk about price volatility and that's the exact opposite of what a hedge produces. I'm honestly starting to doubt if they hedge at all; like why bother using Wall Street as an intermediary and just talk to your suppliers.

> [1] This was another historic quarter for lumber price volatility. During the first few weeks of the second quarter, prices for both framing and panel lumber reached all-time highs before quickly falling from their peaks. As an example, during the second quarter, framing lumber peaked at approximately $1,500 per thousand board feet before falling over $1,000 to approximately $500. While pricing for both framing and panel has come down from the peaks, the average price during the second quarter was still significantly higher than the same period last year. Inflation from core commodity categories positively impacted our average ticket growth by approximately 420 basis points during the second quarter.

[1]: 2021 Q2 - https://ir.homedepot.com/financial-reports/quarterly-earning...

That still does not satisfactorily answer the question though, why don't they just sign a purchase order with N month lead time? That still gives a well defined price ahead of time.

But that's literally what a "future" is.

The people who need the constant price do that, but creating this contract generates an investment at the same time. The person promising the price is taking a premium to take the risk, they can the sell that risk in a free market.

Is there a name for the phenomenon of when someone provides a single explanation that is so inconsequential that it ends up being counterproductive because surely they would have given a better explanation if one existed?

If your go-to reasoning for why we need prediction markets is so airlines can have more predictability in their fuel costs, you're inadvertently making a solid argument that we don't actually need prediction markets. And this isn't even getting into the other ways these airlines could satisfy the same need.

The point is that's a dubious derivative of a market that makes sense.

As usual, it's a tax on naive and those who get addicted; the twist is that they are willing to pay it, demand and beg to pay it, so providers spring up, legal or not.

are you saying that the people trading on inside information about military operations are… producers hedging exposure?

> You'll need to look for your own individual scheme, ethics be damned.... That's not healthy on an individual level or cumulatively at a societal level.

I was thinking about what you said w/r/t the proximal issue (gambling in prediction markets) and my 1st though was "why is this a big deal? If you're not an insider, just don't participate in these markets ... and then the insiders don't have a counterparty to fleece."

But I thought a little more about and I think you're right. Insider's fleecing others in prediction markets just erodes trust everywhere. And we need a considerable amount of trust in people we don't know for society to function properly.

I don't know the owner at my local hardware store, but I trust that he won't sell me shoddy tools. The same goes for every societal interaction. We need to trust people we don't know. If that gets eroded, we go back a several centuries.

>>You'll need to look for your own individual scheme, ethics be damned

This is remarkably similar to how workers in the Soviet Union got ahead. Your job provided a lot of ways to make money on the side, none of them were beneficial to productivity/trust. I think this kind of reality might just be normal for societies in collapse (also, "gerontocracy")

> Say whatever you want about the merits of prediction markets

Go on, I'll wait for those "merits"

Lining the pockets of the vcs who funded them and the other insiders. Nothing but an extractionary industry with no underlying benefit.

More accurate information about the world allows for more effective decision making.

If people are insider trading so blatantly, there's no "more accurate information" here until it's too late and it's already news. You're just getting scammed

The hole point of a prediction market is to surface insider trading and information asymmetry by voting with what matters most [in trading markets], money.

In other terms, it allows people to transfer risk to money , or information for money.

No, that is not the point of a prediction market, though many people have been led to believe as much.

What do you mean "it's already news"? As in it's already happened?

I don't understand why insider trading would only happen as something becomes news. The inside knowledge haver is risking the information leaking some other way before they make their bet. Some very risk averse insider traders (lol?) may do so, but others are going to make their bets when they learn their information.

Assuming that they don't though, and every insider trader only ever makes their bets right before an event, I don't see how that changes anything? People working with non-insider knowledge are still going to be betting against each other before that point. They are still going to establish a likelihood of a thing happening that's more accurate than I would by myself.

The potential for scamming is high at low dollar figures sure. At some point of volume though, it's going to become too expensive to do.

I'm not saying insider trading would happen only as something becomes news. I'm saying you, as the outsider, doesn't find anything out until very close to the prediction materializing. That information provided to you by the insider comes very close to the event happening, because that's how the insider minimizes the risk that the event unfolds differently from their bet.

> People working with non-insider knowledge are still going to be betting against each other before that point. They are still going to establish a likelihood of a thing happening that's more accurate than I would by myself.

How is this useful information at all? Other than to sate your curiosity and undiagnosed gambling problem.

Price discovery in capital markets is useful because, well, there is no other way to discover price. By definition, the price of an asset is what someone is willing to pay for it.

Event discovery in prediction markets is throwing your money away hoping you guessed right, despite the fact that the biggest markets have insiders who are always going to outperform you. It's a sucker's game.

"Prediction markets" are just scams where insiders trade against suckers. So those who are not insiders should understand that their money will be alleviated by insiders, end of story.

As a foreigner, some view making business with the US as shady in of itself. I usually stand by the US legal system, (which even american citizens might find laughable), but this is by far the most likely reason I would distance myself from doing business.

It helps that some states are bringing criminal charges vs these companies. But it looks like a no contest as to how we'll look back to these kinds of things in 5 years.

Betting on war is war, you may argue that it's an individual's right to participate in war, (I don't think so, I think that it's a war crime for unmarked civilians to participate in war), but funding bellicose action is war.

> That's not healthy on an individual level or cumulatively at a societal level.

No it isn't. When this sets in, it becomes insidious and distorts the entire system.

what you’re describing kind of sounds like the wild west or the settlers frontier or the Industrial Revolution, all things that were actually quite beneficial, however in our current environment where everything has been regulated and captured by corporate lobbied legal machinery it’s much worse to have heavy restriction on the masses with the monied upper class able to grease the wheels, if we’re going to have the freedom we need to boom a healthy economy for everyone we need far more wild west from top to bottom

Well said.

> That's not healthy on an individual level or cumulatively at a societal level.

This is a product of a secular neoliberal culture (certainly including this website) that there is no 'society', really, or at least nothing that's BAD for society - effectively the same thing. If profit is king above all else, there's nothing wrong with vice, with scams, anything to chase the bag. It used to be that neoliberals understood community, but even suggesting that the health of society exists is considered reactionary now.

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