Of course he should be punished but the best lesson here is for bettors. Those who wager on "prediction markets": you are betting against people who have access to more information or can influence the outcome of the wager. Don't waste your money.
How many crypto people (with legitimate backgrounds just like the founders of Polymarket and Kalshi) stood up and said big things about freedom and the unbanked etc., turns out they were literally just scamming people- there are so many examples besides FTX.
Letting people bet on any random thing is not at all related to this "price everything" theory. If that was their real goal they wouldn't behave so much like a normal sports betting company. I have yet to actually hear anyone defend their actual actions in a plausible way.
Because one wants to look like the other for very obvious reasons.
The people yoloing into crypto in the hopes it will go up are not the same people advocating for a global currency revolution.
So that Visa and MasterCard can't censor things they don't like. So that PayPal can't block creators from withdrawing money because they made a Japanese style game
Sadly, it's not limited to "evil dictatorships" on the other side of the world.
Wait until you hear about the US Dollar.
The whole Epstein thing (the money, I mean) just shows that money has always wanted to be moved around, and a certain class of people don't care how it gets done- I mean the arms dealers, but also the billionaires hiding money in their charities. A libertarian would say that crypto democratizes that for everyone. I don't think it can last forever though.
In other words, prediction markets require suckers to lose money to insiders in order for the public to learn new information. In this case, people lost over a million dollars to an insider so the public could learn that "d4vd" was searched a lot.
Is this good?
And the people they're both making money from, are people who think they have enough expertise + exposure to function as superforecasters — and who probably could function as superforecasters, in a market with fewer "sharks" in the pool — but who lose out simply because they were slightly less well-calibrated than whoever they were trading with.
Which is to say: prediction markets can still work and be worthwhile to participate in, even if everyone in them is rational. They don't require suckers.
But, in practice, they certainly do seem to attract them.
This seems like a complicated way to say "suckers". Of course they don't usually self-identify as such and think they act rationally.
By the conventional use of the term, a "sucker" is always a sucker; suckers suck constitutionally.
But a professional gambler in a skill-based game (e.g. poker), is only going to lose money on net, if they happen to be playing against people with "higher ELO" than them.
And in the case of a prediction market, the "ELO" isn't absolute; people's expertise "rankings" are relative to each particular question. There's no "general factor of expertise" that makes someone able to beat the odds on every question. Each question forms its own market "niche", where only people with expertise will be interested in participating; and so each such niche is to some degree illiquid, with not enough trades to make an efficient market (i.e. the kind you wouldn't expect to find a $20 bill on the ground in.)
To be more concrete: while there are "specialists" (insiders, but also ordinary experts in hyper-specialized verticals) who might clean up by betting on the things they know a lot about, they'll generally be miscalibrated as overconfident on the things outside their specialty (see: any scientist who got famous for their research and now writes pop-science books about topics they know very little about, often making incorrect statements), and so will lose out vs "generalists" who can't successfully make the in-domain bets the specialists make, but who are better-calibrated on multiple topics (or on particular odd intersections of topics) because they spend less time hyperfocused on one niche, and more time flitting between various niches.
Which is to say: there's no "house edge" here to lose against. In a prediction market, everyone's going to be the "shark" for some questions and the "sucker" for other questions. Every question is its own game, and every game has an edge, but with that edge going to a different party. If you actually know what you know, then you can identify which questions you have the edge for (probably a finite number), answer only those, and make some (very small) amount of money. You may lose sometimes because someone knew even better than you (esp. for questions that go beyond yes-or-no, where there are 3+ mutually-exclusive prediction-categories you can buy into, such that others might "hit the bullseye" while you just "hit the ring"); but on average, if you stick to your "field of pre-eminent expertise" (presuming you have such), you would make a small positive gain over time.
That being said, anyone without a "field of pre-eminent expertise", who thinks they can place correct bets purely by being rational + doing the level of research one can accomplish using public Internet sources, is 100% a sucker, yes.
* Insider: A person who is cheating because they actually know the answer in advance or have direct, non-public, confidential information which materially improves their odds over even domain experts. If caught, they can go to jail. Insider as in "insider trading" not just an "industry insider".
* Superforecaster: A person who has deep domain expertise and/or experience as well as strong research and estimation skills which increase their odds over a naive bettor. This may include historical data or first-hand investigation which is not commonly or easily available to others but has not been obtained illegally.
* Sucker: A person who bets despite having far less than a superforecaster's expertise, experience or knowledge. Probably over-estimates their knowledge while underestimating the degree of relevant knowledge which may be legally obtainable by others.
* Shark: Not really clear to me other than more skilled/knowledgeable than a sucker.
This argument doesn't work for 90+% of the volume on PM/Kalshi but I think most of the questions there are just gambling.
I would imagine that in theory, everyone thinks they have the best information at the time, something like:
House: "Odds that X happens? We'll put $1 on both sides to get it started. 50/50."
Someone comes along: "Oh dang, I'm definitely more than 50% confident that X is happening. Let me put $1 in." Now it's 67:33.
Someone else comes along: "Oh I'm more than 67% confident X is happening, let me put $1 in." Now it's 75:25.
And of course, you get people going: "I'm more than 25% confident that X is _not_ happening, let me put $1 in!" And now it's 60:40.
The murky part, I would imagine, comes when the odds and the payout actually act as something that influences the outcome, but in perfect theory-land, if everything goes as planned, this should move the odds to the most informationally-accurate measurement, which should, in theory, benefit observers by making this measurement public.
When the other side either has information that makes it not a bet, or if they have means to influence the odds, the best outcome for outsiders is to not play at all.
And of course, the entire conceit relies on the idea that more accurate information to the public is always good and always outweighs the negative externalities. But is it really all that important to the public good what the most searched artist is on Google in a certain year? Or if an announcer will say a certain word during the super bowl?
The markets also open up the door for hedging, arbitration and other sorts of opportunities where you don't necessarily even care what the result is.
It's akin to betting on penny stocks in the market where you are also aware that a single person could dramatically shift the market one way or the other if they wanted so you're betting not just on the stock's performance, but also on the meta-market.
it is good if the losers are voluntarily participating. They are not coerced (stupidity is not coercion) into it, and therefore, it is reasonable that they expected to win the bet.
The only problem i have with polymarket (and others like it) are that insiders can often remain anonymous. It should not, and if an insider earns, but their win requires they remain anonymous or face some social/reputational repercussions, then that should happen.
Therefore, as long as KYC is enforced for these markets, i would have zero issues with their existence.
So the mere fact that losers are voluntary does not, IMO, make the situation good.
Gambling to me, is like that. Banning it doesn't stop it, and it has barely any harm other than to the person who over-indulge. Regulating it is a good idea - where regulating means there's oversight on cheating, on the platform's governance etc.
The family that suddenly finds themselves homeless because one parent decided to go deep into debt to fuel their gambling addiction sure seems to have "damages sustained on third parties that did not have consent."
Gambling addiction has impacts beyond the person gambling, because we live in a society. They might gamble away their kid's college fund, lose their house, or resort to stealing money from family members. When they take out loans that they default on, it impacts the balls and raises costs for everyone else.
All of these are very similar to secondary and societal effects of hard drug addiction. It should at the very least be regulated. And most being is worthless from an information standpoint, so isn't providing any societal upside - a man doesn't hurt us. The world was strictly better before we had rampant gambling everywhere.
They are coerced in the same way as any other gambling: the false allure of easy money in a society built on financial struggle.
Imagine bad (incorrect and potentially harmful) information is public knowledge. Examples are "X cures cancer" or "Is Y dangerous to consume".
A prediction market will be seeded by public knowledge (of course it cures cancer or its safe to consume), which you describe "suckers". History is filled with many examples of bad public knowledge that turned out to be false (e.g. DDT is safe pesticide).
An insider (someone who knows the drug trial results, or works at the Corp creating the harmful substance) is incentivized to trade on that knowledge, which creates a better informed public (via people who pay attention to prediction markets).
Why does secret(insider) knowledge exist? To the benefit of the organization that wants to keep the knowledge secret. Insider trading laws purpose is to keep Corp and gov orgs in power. They prevent the dissemination of true information (for private power). Prediction markets incentivize the dissemination of true information, a public good.
Does the resolution use the scientific paper that says "DDT is safe" or the one that says "DDT is unsafe"? There's no objective resolution of scientific facts.
"Prediction markets provide better information" in the exact same way that "Markets are efficient". You need to interrogate what "Better information"/"efficient" actually means even if you take the claim at face value, and also it's just not a model that maps to reality well.
if i am the uninformed, without insider trading laws what is the incentive for me to bet when I know there are insiders?
What I can’t figure out is why this person is being charged but the companies running the bets are not.
It's been written about extensively and is in every undergraduate economics course.
How have dots not been connected?
In my view, anyone participating in these markets does so knowing that the outcomes are within the control of other participants. I can't think of any other reason individual account activity is public.
You could also take the other side to hedge some risk. It's up to them to define the value, not you for them.
I understand betting on something as a hedge - for example a farmer betting there will be no rain as a way to hedge the failure of his crops.
But nobodies life depends which singer is most searched (apart from maybe the singers themselves trying to have a more stable income). Surely that doesn't equate to millions of dollars though.
The data in this example was going to be made public anyways. All the examples of prediction markets are predicated on them becoming public. You not only need the info, you need the info before it becomes public.
and that's exactly how the Google engineer made money, right? He knew it beforehand, and once it was made public other people did too
Realtime access to internal Google search data may help you predict a lot of things that might be worth money, for example there's an existing market where companies buy usage estimation for competitors products (not though Google). I don't see why so many people are completely sure this information is worthless
For example, d4vd is a famous musician, and search stats may indicate his potential popularity and future record sales.
Or the public may be searching his name to find out more about the body found in his car, and the subsequent murder investigation and arrest.
I wasn't really aware of that as I guess I am not the target demography. However, I can think of multiple ways of making money off this information, I still don't see why people are so sure it is worthless
Polymarket might be different, but conventional Vegas-style lines change with the amount of $$ bet, if the pool is $50M and an insider bets $10k on the long shot, the line isn't moving -- I don't see how insider information can be surfaced in this scenario except after the fact (and only maybe then).
In other words, if the line changes enough to signal insider info, it's not really insider info anymore.
And yes, the whole purpose of prediction markets is to turn insider info into public info.
You realize that betting on an event you have insider info on is against their terms and conditions, right? So while it may be your personal goal, it's certainly not Polymarket's or Kalshi's.
Maybe I'm just not getting it, could you lay out a scenario?
How do you know we are "before-the fact"? Because these numbers are bananas?
Somebody just tanked their job, their life, for a million bucks.
Anybody who took that bet, might've individually spent only a few bucks to see that.
Everyone else (the people watching) learned the price of entertainment is a few bucks, and ruining someone's life is a million bucks.
Was that a surprise to you? If not, then the (market) prices may be said to have converged (close to) reality.
But maybe it is, and you think people would ruin their lives for less, or would pay more for human misery. In any event, the distance between whatever you think that probability is, and the return earned on these odds is information, that we all can enjoy (as benefit) before-the-fact.
I get banned from subs sometimes by just asking a opposing question.
But I bet (pun intended) many of them teach giving away other people‘s secrets (including companies and governments) for personal profit is wrong.
Imagine Venezuela getting information on the planned abduction of Maduro because of him https://www.justice.gov/opa/pr/us-soldier-charged-using-clas...
Could have been a harder fight with more causalities
Because the prediction market community is filled with liars and fraudsters, of course, it does seem to be common knowledge that this restriction isn't meant to be taken seriously, much like Polymarket's fake rule that Americans aren't allowed to use it.
But once you start from the premise that everything prediction markets say about their rules and practices is a lie, why should we believe they provide any genuine signal for anything?
You bet against skilled people who set the stakes, so, yes, by observing numbers you can win in Keno, but if you comply to the TOS you will not win big money. The only chance to be able to "game the system" is to bet on something that lotteries brokers does not have time to look at, like 3rd Bulgarian bocce league matches.
The problem is that you need to somehow become an expert in 3rd Bulgarian bocce league and the money which are there are generally small.
I was investigating this (again) when AI showed up, as in theory it makes easier some analysis, but the big guys are also using AI.
Betting on a final score in most markets is fine.
When betting gets extremely narrow and specific e.g. "Player X will be subbed on for Player Y" it gets morally dubious.
There is a lot of overlap with insurance markets. The incentives have to be aligned (life insurance) with sensible guard rails against abuse (cooling off periods to be covered for suicide)
If gambling was more profitable for more people it wouldn't be called gambling. Might have some clever name like the NYSE.
https://www.reddit.com/r/CryptoCurrency/comments/1jki1lj/pol...
Not much in between. The efficient market hypothesis claims many victims.
if you know NVDA's earnings before it's announced, it's no different than knowing who the most googled musician would be before it's announced.