Did any of the boosters of real-money prediction markets correctly predict that prediction market platforms would be quickly dominated by thinly disguised sports gambling?
(I mean this question literally and earnestly, not as a snide takedown of prediction markets or their proponents)
I have been a firm believer in predictions markets since first learning about them over a decade ago (still am). I certainly did not predict this would happen, nor would have I seen it as a plausible outcome had you asked me.
I don’t know of anyone else who did either, neither in the for or against camp. The counterarguments were always:
Assassination markets
Insider trading
Something something unduly influencing results of elections
I don’t remember seeing any list of counter arguments which included: “will be optimised to prey on people with weak impulse control”.
Yeah I’ve been interested in prediction markets for years (and usually played the “against” role in discussions) and don’t think I’ve ever came across a serious sports gambling objection before it seemed inevitable.
To be clear I don’t think it’s a major defeater to prediction markets; sports gambling is evil (especially the Current Year implementations with algorithmic optimization of Dark Patterns) but the net contribution of prediction markets to sports gambling success is probably pretty minimal.
I also don’t think it’s a defeater for prediction markets in general. However:
the net contribution of prediction markets to sports gambling success is probably pretty minimal.
I’m actually pretty unsure about this. One issue is that by having CFTC-regulated sports betting
“prediction markets”, federal preemption causes sports betting to expand into states that would otherwise prohibit it.
Also, I don’t think the right question is “have prediction markets contributed to the success of sports gambling?” Rather, it’s “has have the harms from sports gambling on prediction markets outweighed their benefits?” I don’t have a strong view on this, but it seems plausible so far.
I think the biggest impact, though, is that now prediction markets are becoming strongly associated with sports betting, in a way that threatens their political viability as a project.
I wonder how much value there would be in a company that principally doesn’t engage in sports betting. From my understanding, lots of people that bet on these markets like betting on non-sports claims but just hate the sports market component.
As a (not super confident) non-believer in real-money prediction markets, curious if you have a best steelman link/post you like or if you want to tell me why you disagree with me (basically the exact 3 reasons you listed plus some more context)?
seems to me we could get a huge chunk of the benefits with play money markets + the existing binary event contracts the cme already allowed.
I can understand that prediction markets trending towards sports gambling was overlooked by the sort of people who (i) were arguing about the creation of new markets for stuff that didn’t already have an abundance of well-marketed gambling options and (ii) generally weren’t personally interested in betting on sports.
But lack of debate at the time about preying on people with weak impulse control surprises me, given that prediction markets are by design zero-sum games (like binary options trades, which have long been dominated by boiler room outfits preying on people with weak impulse control, and are regulated equivalently to sports gambling in many jurisdictions) rather than trades between entities with different liquidity needs or risk tolerance. Even if (or especially if) some of the market participants are superforecasters whose data-driven approach makes their assessments worth paying attention to, they still need punters to win money off and most bets offered simply aren’t a good hedge for anything.
At Manifold we talked a lot about what kinds of markets/verticals to focus on and were always aware that sports gambling is a big demographic, while mostly choosing to stay out, partly for ideological reasons (not interesting to us), partly because we weren’t positioned for it.
I don’t think we registered a specific concrete prediction to this effect, but eg in our 2022 seed round memo (~4 months after we were founded) we called out Betfair and Draftkings as the largest available markets.
I think there was one certain failure mode of “prediction markets will somehow both be legal, and also more legal than regular sports gambling, in the US”.
This combination of scenarios seemed very unlikely to me 4-6 years ago! I think this was seen universally as a tough combination, you can see this in the market prices / valuations of the related companies.
That said, there was an understanding a while back that US public prediction markets would likely be sleazy/predatory in ways similar to sports gambling. This is one reason I preferred prediction tournaments like Metaculus over financial prediction markets like Kalshi.
I’d also flag that there was, and still is, potential for real-money prediction markets to get adapted by large experienced financial authorities for more serious purposes like hedging. There are overall professionalized and useful ways to use these sorts of tools, though it is the case that much of the current market is quite miserable.
I am pretty sure I thought this, yes. That’s how it is in the UK. And all prediction markets push in this direction. I thought that the benefits would outweigh the costs, but I am less confident of that now. (Though I think the benfits are huge, really really large)
I weakly support regulation of huge sports gambling losses which seems very possible to do.
In the US it’s contingent on some quirks of gambling law. Dedicated online sports gambling was broadly legalized in most states a few years before sports came to prediction markets (during the early days of prediction market discourse, online sports betting was mostly banned anyway by a federal law struck down by SCOTUS in 2018). But prediction markets are less regulated than the sportsbooks, e.g. they have an minimum age of 18 while sportsbooks are 21 in most states. Otherwise sports markets on prediction platforms would presumably mostly just displace gambling elsewhere.
Did any of the boosters of real-money prediction markets correctly predict that prediction market platforms would be quickly dominated by thinly disguised sports gambling?
(I mean this question literally and earnestly, not as a snide takedown of prediction markets or their proponents)
I have been a firm believer in predictions markets since first learning about them over a decade ago (still am). I certainly did not predict this would happen, nor would have I seen it as a plausible outcome had you asked me.
I don’t know of anyone else who did either, neither in the for or against camp. The counterarguments were always:
Assassination markets
Insider trading
Something something unduly influencing results of elections
I don’t remember seeing any list of counter arguments which included: “will be optimised to prey on people with weak impulse control”.
Yeah I’ve been interested in prediction markets for years (and usually played the “against” role in discussions) and don’t think I’ve ever came across a serious sports gambling objection before it seemed inevitable.
To be clear I don’t think it’s a major defeater to prediction markets; sports gambling is evil (especially the Current Year implementations with algorithmic optimization of Dark Patterns) but the net contribution of prediction markets to sports gambling success is probably pretty minimal.
I also don’t think it’s a defeater for prediction markets in general. However:
I’m actually pretty unsure about this. One issue is that by having CFTC-regulated sports betting “prediction markets”, federal preemption causes sports betting to expand into states that would otherwise prohibit it.
Also, I don’t think the right question is “have prediction markets contributed to the success of sports gambling?” Rather, it’s “has have the harms from sports gambling on prediction markets outweighed their benefits?” I don’t have a strong view on this, but it seems plausible so far.
I think the biggest impact, though, is that now prediction markets are becoming strongly associated with sports betting, in a way that threatens their political viability as a project.
I wonder how much value there would be in a company that principally doesn’t engage in sports betting. From my understanding, lots of people that bet on these markets like betting on non-sports claims but just hate the sports market component.
As a (not super confident) non-believer in real-money prediction markets, curious if you have a best steelman link/post you like or if you want to tell me why you disagree with me (basically the exact 3 reasons you listed plus some more context)?
seems to me we could get a huge chunk of the benefits with play money markets + the existing binary event contracts the cme already allowed.
I can understand that prediction markets trending towards sports gambling was overlooked by the sort of people who (i) were arguing about the creation of new markets for stuff that didn’t already have an abundance of well-marketed gambling options and (ii) generally weren’t personally interested in betting on sports.
But lack of debate at the time about preying on people with weak impulse control surprises me, given that prediction markets are by design zero-sum games (like binary options trades, which have long been dominated by boiler room outfits preying on people with weak impulse control, and are regulated equivalently to sports gambling in many jurisdictions) rather than trades between entities with different liquidity needs or risk tolerance. Even if (or especially if) some of the market participants are superforecasters whose data-driven approach makes their assessments worth paying attention to, they still need punters to win money off and most bets offered simply aren’t a good hedge for anything.
At Manifold we talked a lot about what kinds of markets/verticals to focus on and were always aware that sports gambling is a big demographic, while mostly choosing to stay out, partly for ideological reasons (not interesting to us), partly because we weren’t positioned for it.
I don’t think we registered a specific concrete prediction to this effect, but eg in our 2022 seed round memo (~4 months after we were founded) we called out Betfair and Draftkings as the largest available markets.
I think there was one certain failure mode of “prediction markets will somehow both be legal, and also more legal than regular sports gambling, in the US”.
This combination of scenarios seemed very unlikely to me 4-6 years ago! I think this was seen universally as a tough combination, you can see this in the market prices / valuations of the related companies.
That said, there was an understanding a while back that US public prediction markets would likely be sleazy/predatory in ways similar to sports gambling. This is one reason I preferred prediction tournaments like Metaculus over financial prediction markets like Kalshi.
I’d also flag that there was, and still is, potential for real-money prediction markets to get adapted by large experienced financial authorities for more serious purposes like hedging. There are overall professionalized and useful ways to use these sorts of tools, though it is the case that much of the current market is quite miserable.
I am pretty sure I thought this, yes. That’s how it is in the UK. And all prediction markets push in this direction. I thought that the benefits would outweigh the costs, but I am less confident of that now. (Though I think the benfits are huge, really really large)
I weakly support regulation of huge sports gambling losses which seems very possible to do.
In the US it’s contingent on some quirks of gambling law. Dedicated online sports gambling was broadly legalized in most states a few years before sports came to prediction markets (during the early days of prediction market discourse, online sports betting was mostly banned anyway by a federal law struck down by SCOTUS in 2018). But prediction markets are less regulated than the sportsbooks, e.g. they have an minimum age of 18 while sportsbooks are 21 in most states. Otherwise sports markets on prediction platforms would presumably mostly just displace gambling elsewhere.
Also interested in this question! CC @Nathan Young who might know