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Comment by exabrial | Hacker News Reader

can we stop calling them "prediction markets" and please call them what they actually are: gambling

Some prediction markets can be gambling, some not. Gambling is a broader category that does not include all of the prediction markets.

Can you provide examples of prediction markets that aren’t gambling?

When you have information/know the outcome in advance.

Ah, insider trading! Or playing a rigged game and then taking money from people not in on the game. So fraud!

You can come upon such information by other means

In sports? Perhaps you just observe a player get injured in a car accident and bet based on that.

So it’s still gambling for the other participants who don’t have that insider knowledge then. If one person at a blackjack table is counting cards, does that make it not gambling for everyone else?

I don't really think so, because if you don't have information in prediction markets, you are the patsy.

Gambling is just hoping probability comes up in your favor. You'll lose over the long term, but you could win an individual bet. Neither is under your control or can be influenced by any "inside" information. The dice don't care what you know or don't know, and bets don't change the payout.

Granted some types of "gambling" such as horse racing or sports in general are more like a prediction market than a true bet against odds, where knowing something that the general betting public doesn't know could be used to your advantage.

The ones where you have insider information.

It's a good question, actually now that I think of it.

Obviously, insider trading, but as a society we have long decided that this is evil.

And if we compare markets where I am ready to put my money where my mouth is, then this actually is called gambling. Just not a game of chance but rather game of skill.

Honest question which I think is at the heart of the question: What’s the difference between these and NYSE / Robinhood?

You actually own something when you buy stock.

Even that is fuzzy.

https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

You own the same thing when you buy a lottery ticket. You own a paper entitling you to an unknown amount of future money based on uncertain events.

When I own a stock I also vote on the board of directors and so I have long term influence on the future. (I don't agree with stocks where I don't get that vote, or where my vote is meaningless because insiders have more control than their ownership share - even though they exist. Yes I know the amount of stock I own is trivial, but I still at least have it)

Buying a share of a company affords marginal utility outside the value going up or down, in that you ostensibly have a vote on how the company is run

Abtractly, there is no conceptual difference. Everything is a gamble. We are always betting on everything. We are always positioning ourselves in relation to everything else in the world. Often unconsciously and unknowingly.

It becomes problematic when we make a game of it and add financial stakes. Gambling is a lot like drugs in its ability to hijack the brain's reward circuits. I stopped investing in cryptocurrencies because seeing +400% profits was like crack. I never gambled any money I couldn't afford to lose but there are people out there who were leveraging their entire lives to FOMO into markets.

They do both involve taking risks for money admittedly but there are crucial differences.

You actually participate meaningfully in the outcome via investing instead of just price discovery and the successes are derived from the valuation or income of the venture instead of the losers. The participation is not only in impact on their credit rating and sales but also concrete choices in government of it.

Not to mention in principle there is an actual activity being backed by the investment to produce non-zero sum gains. While there may be risks involved in say, running a turnip farm or sending a ship across the ocean, you are still supporting a useful activity for its own end. Crucially as well there is motivation to do the task even without the market, even though it may enable it.

If you can manipulate the outcome of the turnip farm (as opposed to the market) to make it succeed that is doing useful work and not just cheating a bet. A guideline of the distinction would be - would charging somebody for making the outcome successful in a not otherwise criminal way be a Kafkaesque injustice?

You can in fact use the market to gamble via options intended for credit or insurance but stopping those by stopping the market entirely would be throwing out the baby with the bathwater.

I don't think there is a difference today. Stocks used to be about long-term value but now the same gambling-esque mentality has applied to stocks as well, see things like GME. The modern stock market is basically a prediction market for attention/virality, in the same way that cryptocoins are.

I've never understood this comparison. To me it's simple: Investments actually produce net gain in the economy. Some people use the NYSE _like_ gambling, but the key difference is value is created.

Investing takes x capital, put it into a machine, and x + (yield * x) comes out. In gambling, x is put in, x always comes out, but on the way out x is simply distributed among a different population.

Investing literally creates net value (or loss, technically) that didn't exist before. Gambling cannot do either: x is always constant, however x is divided up differently.

There's many videos about this: https://www.youtube.com/watch?v=HnRslDPlkg4

All stocks are incentivized to go a specific direction. You could consider Options more like gambling, but for that reason they are restricted to specific people. We also have things to prevent bad incentives, like insider trading laws, which prediction markets don't have.

So, I guess the answer is, regulatory control.

Its not gambling if you can influence the outcome

Some industries chang names every 10 years to avoid regulation. Loan sharing became Buy Now Pay Later.

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