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Comment by steve1977 | Hacker News Reader

steve1977

Isn't the stock market a prediction market as well?

No, a stock is a share of ownership in a company.

Now yes, people bet on the derivative value of those ownership shares... but that also happens to basically every asset. If a stock is a prediction market, then so is corn, and gold, and your home.

Yes, they are. Accurate prediction is rewarded in every market, for every asset or asset class. There are adjacent order benefits (I live in my home, I eat corn, I have a say in how a company is run) but these are never divorced from the impact of prediction and prediction in aggregate is just a crowdsourced leading indicator of value; oil spikes the moment a missile hits Iran not because the 2 are explicitly linked, but because the market has predicted the effect on the flow of that oil over some subsequent timeframe and priced itself accordingly

Yes, but all of these things have underlying assets that are not themselves predictions. You can buy and sell corn commodities, but at the end of the contract, actual corn is delivered. Predictions markets are different in that they betting on the prediction itself and have no associated asset.

That's my point. Where to draw the line and why?

Polymarket bad because it's accessible to everyone, futures trading on the CME good because it's only available to the rich?

Corn futures deliver real physical corn at the expiration date.

Polymarket is literally booking wagers that have no underlying financial assets of any sort anywhere and labeling them as “options”

The difference in my mind is that prediction markets and gambling are betting on outcomes, not long term behaviors. You could make the argument that they are the same, in the sense that buying a stock is "betting" on a company to do well, but I think you'd be making a silly argument. Stocks are intangible these days, but they were traditionally a physical thing that one would trade. If you're betting on prediction markets, there's nothing to trade after the event happens, just payouts.

Not exactly. Kalshi is binary options. Not stocks.

Stocks are shares of ownership. Now, in practice many people buy them as bets, but even those aren't really predictions. Prediction markets are time-boxed all-or-nothing plays. You are either correct, or you lose your entire stake.

The stock market by itself has similar outcomes to the prediction markets (you buy X hoping it'll go up so you can earn $Y), but there's actual value being purchased. If I buy an apple stock, I own 0.001% or whatever of the company. If the company goes up to $10T in value, my little share is a percentage of that. I can sell it and be happy.

If the company goes to $0 then I own a portion of nothing, and so does everyone else who owns a share.

With prediction markets you don't own anything, and regardless of the outcome, someone can still win if they "bet right"

That said, futures and derivatives seem similar to prediction markets but I don't know enough about them to say more.

A commenter noted that MN already bans sports-betting, which is far closer to what prediction markets are than asset trading.

A closer stock analogy would be options.

I think the stocks don't have a arbiter managing a discrete outcome between parties that don't have any KYC compliance.

Stocks aren't prediction markets, but options and futures are.

Stock prices are a prediction built on crowdsourced information.

Couldn’t we say that any market rewards prediction? And that this is generally seen as a beneficial quality that results in more accurate valuations with better liquidity?

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