The microstructure of wealth transfer in prediction markets

2026-01-1916:05233187jbecker.dev

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Slot machines on the Las Vegas Strip return about 93 cents on the dollar. This is widely considered some of the worst odds in gambling. Yet on Kalshi, a CFTC-regulated prediction market, traders have wagered vast sums on longshot contracts with historical returns as low as 43 cents on the dollar. Thousands of participants are voluntarily accepting expected values far lower than a casino slot machine to bet on their convictions.

The efficient market hypothesis suggests that asset prices should perfectly aggregate all available information. Prediction markets theoretically provide the purest test of this theory. Unlike equities, there is no ambiguity about intrinsic value. A contract either pays $1 or it does not. A price of 5 cents should imply exactly a 5% probability.

We analyzed 72.1 million trades covering $18.26 billion in volume to test this efficiency. Our findings suggest that collective accuracy relies less on rational actors than on a mechanism for harvesting error. We document a systematic wealth transfer where impulsive Takers pay a structural premium for affirmative "YES" outcomes while Makers capture an "Optimism Tax" simply by selling into this biased flow. The effect is strongest in high-engagement categories like Sports and Entertainment, while low-engagement categories like Finance approach perfect efficiency.

This paper makes three contributions. First, it confirms the presence of the longshot bias on Kalshi and quantifies its magnitude across price levels. Second, it decomposes returns by market role, revealing a persistent wealth transfer from takers to makers driven by asymmetric order flow. Third, it identifies a YES/NO asymmetry where takers disproportionately favor affirmative bets at longshot prices, exacerbating their losses.

Prediction Markets and Kalshi

Prediction markets are exchanges where participants trade binary contracts on real-world outcomes. These contracts settle at either $1 or $0, with prices ranging from 1 to 99 cents serving as probability proxies. Unlike equity markets, prediction markets are strictly zero-sum: every dollar of profit corresponds exactly to a dollar of loss.

Kalshi launched in 2021 as the first U.S. prediction market regulated by the CFTC. Initially focused on economic and weather data, the platform stayed niche until 2024. A legal victory over the CFTC secured the right to list political contracts, and the 2024 election cycle triggered explosive growth. Sports markets, introduced in 2025, now dominate trading activity.

Volume distribution across categories is highly uneven. Sports accounts for 72% of notional volume, followed by politics at 13% and crypto at 5%.

Note: Data collection concluded on 2025-11-25 at 17:00 ET; Q4 2025 figures are incomplete.

Data and Methodology

The dataset, available on GitHub, contains 7.68 million markets and 72.1 million trades. Each trade records the execution price (1-99 cents), taker side (yes/no), contract count, and timestamp. Markets include resolution outcome and category classification.

Role assignment: Each trade identifies the liquidity taker. The maker took the opposite position. If taker_side = yes at 10 cents, the taker bought YES at 10¢; the maker bought NO at 90¢.
Cost Basis ( $C_{b}$ ): To compare asymmetries between YES and NO contracts, we normalize all trades by capital risked. For a standard YES trade at 5 cents, $C_{b} = 5$ . For a NO trade at 5 cents, $C_{b} = 5$ . All references to "Price" in this paper refer to this Cost Basis unless otherwise noted.
Mispricing ( $δ_{S}$ ) measures the divergence between actual win rate and implied probability for a subset of trades $S$ :

δ_{S} = \frac{1}{∣ S ∣} \sum_{i \in S} o_{i} - \frac{1}{∣ S ∣} \sum_{i \in S} \frac{p_{i}}{100}

Gross Excess return ( $r_{i}$ ) is the return relative to cost, gross of platform fees, where $p_{i}$ is price in cents and $o_{i} \in {0, 1}$ is the outcome:

r_{i} = \frac{(100 \cdot o_{i} - p_{i})}{p_{i}}

Sample

Calculations derive from resolved markets only. Markets that were voided, delisted, or remain open are excluded. Additionally, trades from markets with less than $100 in notional volume were excluded. The dataset remains robust across all price levels; the sparsest bin (81-90¢) contains 5.8 million trades.

The Longshot Bias on Kalshi

First documented by Griffith (1949) in horse racing and later formalized by Thaler & Ziemba (1988) in their analysis of parimutuel betting markets, the longshot bias describes the tendency for bettors to overpay for low-probability outcomes. In efficient markets, a contract priced at $p$ cents should win approximately $p$ % of the time. In markets exhibiting longshot bias, low-priced contracts win less than their implied probability, while high-priced contracts win more.

The data confirms this pattern on Kalshi. Contracts trading at 5 cents win only 4.18% of the time, implying mispricing of -16.36%. Conversely, contracts at 95 cents win 95.83% of the time. This pattern is consistent; all contracts priced below 20 cents underperform their odds, while those above 80 cents outperform.

The existence of the longshot bias raises a question unique to zero-sum markets: if some traders systematically overpay, who captures the surplus?

The Maker-Taker Wealth Transfer

Decomposing Returns by Role

Market microstructure defines two populations based on their interaction with the order book. A Maker provides liquidity by placing limit orders that rest on the book. A Taker consumes this liquidity by executing against resting orders.

Decomposing aggregate returns by role reveals a stark asymmetry:

Role	Avg. Excess Return	95% CI
Taker	-1.12%	[-1.13%, -1.11%]
Maker	+1.12%	[+1.11%, +1.13%]

The divergence is most pronounced at the tails. At 1-cent contracts, takers win only 0.43% of the time against an implied probability of 1%, corresponding to a mispricing of -57%. Makers on the same contracts win 1.57% of the time, resulting in a mispricing of +57%. At 50 cents, mispricing compresses; takers show -2.65%, and makers show +2.66%.

Takers exhibit negative excess returns at 80 of 99 price levels. Makers exhibit positive excess returns at the same 80 levels. The market's aggregate miscalibration is concentrated in a specific population; takers bear the losses while makers capture the gains.

Is This Just Spread Compensation?

An obvious objection arises; makers earn the bid-ask spread as compensation for providing liquidity. Their positive returns may simply reflect spread capture rather than the exploitation of biased flow. While plausible, two observations suggest otherwise.

The first observation suggests the effect extends beyond pure spread capture; maker returns depend on which side they take. If profits were purely spread-based, it should not matter whether makers bought YES or NO. We test this by decomposing maker performance by position direction:

Makers who buy NO outperform makers who buy YES 59% of the time. The volume-weighted excess return is +0.77 pp for makers buying YES versus +1.25 pp for makers buying NO, a gap of 0.47 percentage points. The effect is miniscule (Cohen's d = 0.02-0.03) but consistent. At minimum, this suggests spread capture is not the whole story.

A second observation strengthens the case further; the maker-taker gap varies substantially by market category.

Variation Across Categories

We examine whether the maker-taker gap varies by market category. If the bias reflects uninformed demand, categories attracting less sophisticated participants should show larger gaps.

Category	Taker Return	Maker Return	Gap	N trades
Sports	-1.11%	+1.12%	2.23 pp	43.6M
Politics	-0.51%	+0.51%	1.02 pp	4.9M
Crypto	-1.34%	+1.34%	2.69 pp	6.7M
Finance	-0.08%	+0.08%	0.17 pp	4.4M
Weather	-1.29%	+1.29%	2.57 pp	4.4M
Entertainment	-2.40%	+2.40%	4.79 pp	1.5M
Media	-3.64%	+3.64%	7.28 pp	0.6M
World Events	-3.66%	+3.66%	7.32 pp	0.2M

The variation is striking. Finance shows a gap of merely 0.17 pp; the market is extremely efficient, with takers losing only 0.08% per trade. At the other extreme, World Events and Media show gaps exceeding 7 percentage points. Sports, the largest category by volume, exhibits a moderate gap of 2.23 pp. Given $6.1 billion in taker volume, even this modest gap generates substantial wealth transfer.

Why is Finance efficient? The likely explanation is participant selection; financial questions attract traders who think in probabilities and expected values rather than fans betting on their favorite team or partisans betting on a preferred candidate. The questions themselves are dry ("Will the S&P close above 6000?"), which filters out emotional bettors.

Evolution Over Time

The maker-taker gap is not a fixed feature of the market; rather, it emerged as the platform grew. In Kalshi's early days, the pattern was reversed; takers earned positive excess returns while makers lost money.

From launch through 2023, taker returns averaged +2.0% while maker returns averaged -2.0%. Without sophisticated counterparties, takers won; amateur makers defined the early period and were the losing population. This began to reverse in 2024 Q2, with the gap crossing zero and then widening sharply after the 2024 election.

The inflection point coincides with two events; Kalshi's legal victory over the CFTC in October 2024, which permitted political contracts, and the subsequent 2024 election cycle. Volume exploded from $30 million in 2024 Q3 to $820 million in 2024 Q4. The new volume attracted sophisticated market makers, and with them, the extraction of value from taker flow.

Pre-election, the average gap was -2.9 pp (takers winning); post-election, it flipped to +2.5 pp (makers winning), a swing of 5.3 percentage points.

The composition of taker flow provides further evidence. If the wealth transfer arose because new participants arrived with stronger longshot preferences, we would expect the distribution to shift toward low-probability contracts. It did not:

The share of taker volume in longshot contracts (1-20¢) remained essentially flat; 4.8% pre-election versus 4.6% post-election. The distribution actually shifted toward the middle; the 91-99¢ bucket fell from 40-50% in 2021-2023 to under 20% in 2025, while mid-range prices (31-70¢) grew substantially. Taker behavior did not become more biased; if anything, it became less extreme. Yet taker losses increased; new market makers extract value more efficiently across all price levels.

This evolution reframes the aggregate results. The wealth transfer from takers to makers is not inherent to prediction market microstructure; it requires sophisticated market makers, and sophisticated market makers require sufficient volume to justify participation. In the low-volume early period, makers were likely unsophisticated individuals who lost to relatively informed takers. The volume surge attracted professional liquidity providers capable of extracting value from taker flow at all price points.

The YES/NO Asymmetry

The maker-taker decomposition identifies who absorbs the losses, but leaves open the question of how their selection bias operates. Why is taker flow so consistently mispriced? The answer is not that makers possess superior foresight, but rather that takers exhibit a costly preference for affirmative outcomes.

The Asymmetry at Equivalent Prices

Standard efficiency models imply that mispricing should be symmetric across contract types at equivalent prices; a 1-cent YES contract and a 1-cent NO contract should theoretically reflect similar expected values. The data contradicts this assumption. At a price of 1 cent, a YES contract carries a historical expected value of -41%; buyers lose nearly half their capital in expectation. Conversely, a NO contract at the same 1-cent price delivers a historical expected value of +23%. The divergence between these seemingly identical probability estimates is 64 percentage points.

The advantage for NO contracts is persistent. NO outperforms YES at 69 of 99 price levels, with the advantage concentrating at the market extremes. NO contracts generate superior returns at every price increment from 1 to 10 cents and again from 91 to 99 cents.

Despite the market being zero-sum, dollar-weighted returns are -1.02% for YES buyers compared to +0.83% for NO buyers, a 1.85 percentage point gap driven by the overpricing of YES contracts.

Takers Prefer Affirmative Bets

The underperformance of YES contracts may be linked to taker behavior. Breaking down the trading data reveals a structural imbalance in order flow composition.

In the 1-10 cent range, where YES represents the longshot outcome, takers account for 41-47% of YES volume; makers account for only 20-24%. This imbalance inverts at the opposite end of the probability curve. When contracts trade at 99 cents, implying that NO is the 1-cent longshot, makers actively purchase NO contracts at 43% of volume. Takers participate at a rate of only 23%.

One might hypothesize that makers exploit this asymmetry through superior directional forecasting—that they simply know when to buy NO. The evidence does not support this. When decomposing maker performance by position direction, returns are nearly identical. Statistically significant differences emerge only at the extreme tails (1–10¢ and 91–99¢), and even there, effect sizes are negligible (Cohen's d = 0.02–0.03). This symmetry is telling: makers do not profit by knowing which way to bet, but through some mechanism that applies equally to both directions.

Discussion

The analysis of 72.1 million trades on Kalshi reveals a distinct market microstructure where wealth systematically transfers from liquidity takers to liquidity makers. This phenomenon is driven by specific behavioral biases, modulated by market maturity, and concentrated in categories that elicit high emotional engagement.

The Mechanism of Extraction

A central question in zero-sum market analysis is whether profitable participants win through superior information (forecasting) or superior structure (market making). Our data strongly supports the latter. When decomposing maker returns by position direction, the performance gap is negligible: makers buying "YES" earn an excess return of +0.77%, while those buying "NO" earn +1.25% (Cohen’s d ≈ 0.02). This statistical symmetry indicates that makers do not possess a significant ability to pick winners. Instead, they profit via a structural arbitrage: providing liquidity to a taker population that exhibits a costly preference for affirmative, longshot outcomes.

This extraction mechanism relies on the "Optimism Tax." Takers disproportionately purchase "YES" contracts at longshot prices, accounting for nearly half of all volume in that range, despite "YES" longshots underperforming "NO" longshots by up to 64 percentage points. Makers, therefore, do not need to predict the future; they simply need to act as the counterparty to optimism. This aligns with findings by Reichenbach and Walther (2025) on Polymarket and Whelan (2025) on Betfair, suggesting that in prediction markets, makers accommodate biased flow rather than out-forecast it.

The Professionalization of Liquidity

The temporal evolution of maker-taker returns challenges the assumption that longshot bias inevitably leads to wealth transfer. From 2021 through 2023, the bias existed, yet takers maintained positive excess returns. The reversal of this trend coincides precisely with the explosive volume growth following Kalshi’s October 2024 legal victory.

The wealth transfer observed in late 2024 is a function of market depth. In the platform's infancy, low liquidity likely deterred sophisticated algorithmic market makers, leaving the order book to be populated by amateurs who were statistically indistinguishable from takers. The massive volume surge following the 2024 election incentivized the entry of professional liquidity providers capable of systematically capturing the spread and exploiting the biased flow. The longshot bias itself may have persisted for years, but it was only once market depth grew sufficiently to attract these sophisticated makers that the bias became a reliable source of profit extraction.

Category Differences and Participant Selection

The variation in maker-taker gaps across categories reveals how participant selection shapes market efficiency. At one extreme, Finance exhibits a gap of just 0.17 percentage points; nearly perfect efficiency. At the other, World Events and Media exceed 7 percentage points. This difference cannot be explained by the longshot bias alone; it reflects who chooses to trade in each category.

Finance (0.17 pp) serves as a control group demonstrating that prediction markets can approach efficiency. Questions like "Will the S&P close above 6000?" attract participants who think in probabilities and expected values, likely the same population that trades options or follows macroeconomic data. The barrier to informed participation is high, and casual bettors have no edge and likely recognize this, filtering themselves out.
Politics (1.02 pp) shows moderate inefficiency despite high emotional stakes. Political bettors follow polling closely and have practiced calibrating beliefs through election cycles. The gap is larger than Finance but far smaller than entertainment categories, suggesting that political engagement, while emotional, does not entirely erode probabilistic reasoning.
Sports (2.23 pp) represents the modal prediction market participant. The gap is moderate but consequential given the category's 72% volume share. Sports bettors exhibit well-documented biases, including home team loyalty, recency effects, and narrative attachment to star players. A fan betting on their team to win the championship is not calculating expected value; they are purchasing hope.
Crypto (2.69 pp) attracts participants conditioned by the "number go up" mentality of retail crypto markets, a population overlapping with meme stock traders and NFT speculators. Questions like "Will Bitcoin reach $100k?" invite narrative-driven betting rather than probability estimation.
Entertainment, Media, and World Events (4.79–7.32 pp) exhibit the largest gaps and share a common feature: minimal barriers to perceived expertise. Anyone who follows celebrity gossip feels qualified to bet on award show outcomes; anyone who reads headlines feels informed about geopolitics. This creates a participant pool that conflates familiarity with calibration.

The pattern suggests efficiency depends on two factors: the technical barrier to informed participation and the degree to which questions invite emotional reasoning. When barriers are high and framing is clinical, markets approach efficiency; when barriers are low and framing invites storytelling, the optimism tax reaches its maximum.

Limitations

While the data is robust, several limitations persist. First, the absence of unique trader IDs forces us to rely on the "Maker/Taker" classification as a proxy for "Sophisticated/Unsophisticated." While standard in microstructure literature, this imperfectly captures instances where sophisticated traders cross the spread to act on time-sensitive information. Second, we cannot directly observe the bid-ask spread in historical trade data, making it difficult to strictly decouple spread capture from explotation of biased flow. Finally, these results are specific to a US-regulated environment; offshore venues with different leverage caps and fee structures may exhibit different dynamics.

Conclusion

The promise of prediction markets lies in their ability to aggregate diverse information into a single, accurate probability. However, our analysis of Kalshi demonstrates that this signal is often distorted by systematic wealth transfer driven by human psychology and market microstructure.

The market is split into two distinct populations: a taker class that systematically overpays for low-probability, affirmative outcomes, and a maker class that extracts this premium through passive liquidity provision. This dynamic is not an inherent flaw of the "wisdom of the crowd," but rather a feature of how human psychology interacts with market microstructure. When the topic is dry and quantitative (Finance), the market is efficient. When the topic allows for tribalism and hope (Sports, Entertainment), the market transforms into a mechanism for transferring wealth from the optimistic to the calculated.

References

Fama, E.F., "Efficient Capital Markets: A Review of Theory and Empirical Work", Journal of Finance, 1970. Available: https://www.jstor.org/stable/2325486
Griffith, R.M., "Odds Adjustments by American Horse-Race Bettors", American Journal of Psychology, 1949. Available: https://www.jstor.org/stable/1418469
Reichenbach, F. & Walther, M., "Exploring Decentralized Prediction Markets: Accuracy, Skill, and Bias on Polymarket", SSRN, 2025. Available: https://ssrn.com/abstract=5910522
Thaler, R.H. & Ziemba, W.T., "Anomalies: Parimutuel Betting Markets: Racetracks and Lotteries", Journal of Economic Perspectives, 1988. Available: https://www.aeaweb.org/articles?id=10.1257/jep.2.2.161
Whelan, K., "Agreeing to Disagree: The Economics of Betting Exchanges", MPRA, 2025. Available: https://mpra.ub.uni-muenchen.de/126351/1/MPRA_paper_126351.pdf
U.S. Court of Appeals for the D.C. Circuit, "Kalshi, Inc. v. CFTC", Oct 2024. Available: https://media.cadc.uscourts.gov/opinions/docs/2024/10/24-5205-2077790.pdf

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Comments

By bs7280 2026-01-1918:1416 reply

I mentioned this on a different post - the biggest problem with prediction markets is not the gambling or dumb people losing money. Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control.

A small example of this would be NFL / NBA Refs fixing playoff games with a bad call or two. This actually happened 20 years ago, an NBA ref went to prison over being bribed just $2000 per game.

The much worse example is the fact that you can make 100-1 odds on whether the US airstrikes Iran today... or How many times Pam Bondi says the word "China" in a press conference.

By Buttons840 2026-01-1918:227 reply

It's a national security issue too.

Somebody poor grunt who chose to earn a living by laboring (which has proven to be much less effective than being born with money) will be putting fuel in the bombers and thinking "I could just make an anonymous bet..."

It's a national security issue.

We saw this with the Venezuela attack. A flurry of trading and someone made $400,000 for placing a bet mere hours before the "surprise" attack. https://www.pbs.org/newshour/nation/a-400000-payout-after-ma...

By mhb 2026-01-1919:275 reply

Wouldn't the counterargument to this be that if the poor grunt is willing to betray his country for money in the prediction market, he would also be willing to take money from enemy x to do the same thing?

With the prediction market, there is a financial incentive for people on the opposite side of the bet being motivated to uncover the malfeasance.

By milanhbs 2026-01-1922:52

A good general rule is to make it hard for people to do bad things, and to not create incentives to do so. This seems to do the opposite.

By throwaway85825 2026-01-2012:161 reply

If you're a grunt trying to contact Russia or china you're much more likely to end up talking to an FBI agent posing as a foreigner. Prediction markets make it easy and anonymous.

By pinkmuffinere 2026-01-2018:211 reply

Are they really anonymous? I’m not meaning to disagree, that just surprises me. I would have thought they need to follow KYC requirements.

By throwaway85825 2026-01-2021:19

There are crypto prediction markets that cater to the anonymous.

By anigbrowl 2026-01-1920:03

I think doing war crimes is the real betrayal of the country. But we have a president who think his personal morality is superior to international law, ratified treaties (despite the supremacy clause) and so on. This is overtly and explicitly unconstitutional.

By Buttons840 2026-01-1921:04

> he would also be willing to take money from enemy x to do the same thing?

The prediction market is the mechanism by which this happens.

By mlinhares 2026-01-1919:51

Nobody is going to uncover anything on bets when they're done an hour before the event happens. This isn't the stock market and trying to connect it to what happens on the stock market makes no sense.

By NickC25 2026-01-1921:451 reply

With the venezuela attack, the real trade wasn't on Polymarket or Kalshi.

The trade was going long the 3x Oil&Gas ETFs the trading day beforehand. There was huge buying for absolutely zero perceived reason...then boom we just straight up kidnapped Maduro.

By dist-epoch 2026-01-1921:504 reply

It's not necessarily illegal use of secret information.

There exists "alternate data", some companies monitor all kinds of stuff, satellite pictures, etc, some of these companies surely saw the inevitable asset positioning just before such a big attack (150 planes).

Just like the Ukraine invasion was first visible on Google Maps as traffic jams !!! at the border at midnight

https://www.washingtonpost.com/technology/2022/02/25/google-...

By HNisCIS 2026-01-208:23

Counting cars in Best Buy parking lots on black friday used to almost be a meme in the GIS community until ai models became reliable enough.

You can also do entertaining things like determine if a factory/data-center is running at full capacity by looking at the fans in the cooling stacks. Satellites take the red, green, and blue channels separately at different times so you can see if a fan is spinning through the apparent chromatic aberration of the blades, same deal with anything else that spins or moves. If you know the satellite you're buying imagery from, its TLE and a little information about the sensor you can work out all sorts of fun details.

By asdff 2026-01-208:421 reply

You could see USAF and navy air power operating in venezuela on ads-b. I was shocked seeing F15s. You'd think there'd be no way the military would have ads-b activated while performing military operations.

By jrjeksjd8d 2026-01-2013:363 reply

When you're doing extra-legal military operations in a country that isn't at war, what choice do you have? There are civilian aircraft up in the sky. Having a fighter jet run into one and kill a bunch of civilians is a bad PR situation.

By hrimfaxi 2026-01-2014:261 reply

When you're doing extra-legal military operations in a country that isn't at war, do you really care about PR?

By treis 2026-01-2014:591 reply

Yes? Nobody cares that they killed a bunch of Cuban body guards. Taking down a civilian airliner would have been a big deal.

By dist-epoch 2026-01-2018:04

If the fighter jet collides with the airliner, the pilot most likely dies. They care about that.

By asdff 2026-01-2019:36

Didn't they already clear the airspace?

By robcohen 2026-01-2017:36

How would this happen? Jets are significantly more maneuverable than anything else in the sky. The military could, you know, pilot the plane so it does not hit anything.

By eru 2026-01-206:491 reply

That's neat. Though I'd say it was the first public sign. The US had been telling anyone willing to listen for weeks beforehand that an invasion was coming.

By HNisCIS 2026-01-208:292 reply

Disbelief and normalcy are a hell of a drug. Unless someone fully expects something terrible to happen and they are deliberately trying to find out when it'll happen, most people will happily ignore all of the signs until it's too late.

Just look at the lead up to the Ukraine invasion, the US intelligence services were practically screaming from the rooftops that it was happening. Russians were obviously stacking up on two borders. Meanwhile, reporters were on the street asking people how they felt about the oncoming invasion and they all said some variation of "they've been threatening that forever, it's all talk, it won't happen".

By rdtsc 2026-01-2014:07

> Meanwhile, reporters were on the street asking people how they felt about the oncoming invasion and they all said some variation of "they've been threatening that forever, it's all talk, it won't happen".

The Ukrainian government took the approach of not starting a full on panic. They thought maybe there was still some chance of stopping it. And not knowing 100% the day and time meant stopping the economy, people fleeing and such. It could even play into the hands of the enemy as they could react and postpone as well.

Some have criticized the government for that tactic science. Some might say they should have listened to the US intelligence instead, but that presumes people should trust the US intelligence more than their own government.

By eru 2026-01-209:101 reply

Well, one problem is that the US intelligence services might have a credibility problem with the general public.

By HNisCIS 2026-01-2017:27

This was in the Before Times when we were mostly being helpful up them

By chrisss395 2026-01-224:08

This - the electronic warfare assets moved to this region months before were a huge sign of what was going to happen.

By ironbound 2026-01-1918:452 reply

Pizza orders are also an indicator https://en.wikipedia.org/wiki/Pentagon_pizza_theory

By dv_dt 2026-01-1919:202 reply

The irony that operational national security would be greatly improved if only they maintained a well staffed and resourced government kitchen for the Pentagon, but won't for many silly reasons. Oh no, lots of people would have to sit on idle standby many times, or gov't employees would get free meals.

By kibwen 2026-01-1920:011 reply

The Pentagon has a ton of restaurants inside. There's literally an official mall-style map of all of them right here, I count almost 30: https://www.whs.mil/Services-and-Information/DoDCC/

The pizza index is specifically about late-night pizza orders, when presumably most of those restaurants are closed (though some do appear to be open 24/7).

By dv_dt 2026-01-2014:40

If the pizza-indicator is still observable, then there is insufficient internal capacity (or perhaps it would be more correct to say insufficient at the right times) to mask the signal

By bandrami 2026-01-208:10

There are several restaurants there. The Domino's thing is back from the first Gulf War and wasn't even really true then

By silisili 2026-01-207:04

I believe that orders probably do go up. I don't believe the sites/accounts using Google's 'how busy' have any relevance at all. As I understand it, these just use GPS/location data of phones.

It only takes one person to pick up 40 pizzas, after all. Perhaps they could look at time estimates for a new order as a better indicator, if such an API exists prior to ordering.

By nostromo 2026-01-1919:372 reply

That person is reportedly in jail and facing serious time.

https://finance.yahoo.com/news/trump-jails-venezuela-leaker-...

Anyone with a security clearance making bets like this is not a smart person.

By teknopaul 2026-01-1919:432 reply

Stats on politicians trading habits, indicates insider trading like this is standard practice in the USofA.

No beleives MAGA nuts are trading experts.

By tsimionescu 2026-01-1920:41

Politicians don't have anything to lose from this. There is (shockingly!) nothing illegal about politicians making trades based on decisions that they know they are about to take that have a significant and easily predictable impact on the market.

By contrast, making public bets based on classified information that you are not authorized to publicize is a simple and relatively direct breach of laws regarding the handling of classified documents and state secrets.

By graemep 2026-01-2010:03

A number of Trump's cabinet advisors have strong backgrounds in finance. At least two former hedge fund managers and one VC that I know of in prominent positions and I do not know much about American politics.

By edmundsauto 2026-01-2421:56

Is this confirmed by a trustworthy source? This article only reports on what president Trump stated. Given the source and the lack of any details, this isn’t verifiable which I think is a minimum requirement.

By eru 2026-01-206:471 reply

No worse than existing financial markets, and we already deal with those.

By TheDong 2026-01-208:201 reply

The big difference here is that if you buy short-dated out-of-the-money options and make it big, the SEC comes knocking on your door and reads your text messages to find out what you knew and when.

It's both easy to track down stock traders due to KYC, and easy to prosecute due to laws.

Polymarket and friends make it both much harder to find the trader, and also it's less clear if there's a legal theory that lets you prosecute someone dealing in these new markets.

Sure, congress and the president can insider trade a bit here and there, but the everyday joe is rightfully afraid to.

By eru 2026-01-2012:28

It seems like the difference is all due to historical accidents in the US and laws that should arguably be changed. Nothing to do with prediction markets by itself.

By TZubiri 2026-01-1919:071 reply

I'd just like to make the distinction between:

1- Making a bet with privileged information. 2- Creating the event and making the bet.

2 would be a war crime, 1 would be a probabilistic leak.

Trump claimed they didn't want to pass through congress because they leak, and there were no leaks about the event. But if any personnel made a polymarket bet, that would constitute a leak. It wasn't acted upon, but if personnel continues to leak information in this manner, it is possible that an adversary will eventually listen to this signal, and that it was just ignored because it is too fresh.

This analysis would also make it clear why it would be immoral to participate in such markets as a civilian. Because if it is your country you might be compensating an insider for information, benefitting the enemy. And if you are not, you might be harming the enemy, but you would be an unlawful belligerent.

By jacobedawson 2026-01-1921:351 reply

Of course the next step beyond that is "leaking" false information as a decoy by placing large bets on certain events. If that happens enough times it seems like it should wash away the value for agencies hoping to act on "privileged" information.

By TZubiri 2026-01-2017:37

Sure, it's an information warfare, but at its core, you can mask a signal, but you will never be able to eliminate the signal, just dilute it, and at a cost.

By ncr100 2026-01-1918:38

This is fascinating.

By tptacek 2026-01-1918:273 reply

This gets into a philosophical point about what a prediction market actually is. If it's a device for anonymously aggregating fragmented group information into a coherent accurate prediction, the lopsided bets are a feature; the only point of the market is the price signal, and the lopsided bets true up the price.

But most of us understand that prediction markets aren't that, no matter what Robin Hansen said when he was helping invent the modern incarnation of things like Polymarket and Kalshi. They're gambling venues, and we have "Nevada Gaming Commission"-style concerns about fairness. To me, the next logical step is to say that they should be heavily regulated, but in the era of DraftKings, that seems off the table.

By SleepySteve_sk 2026-01-2014:291 reply

I think of them as "Accountability" markets. Someone who can influence the outcome is encouraged to make a public bet on their success, and define what the success criteria is. The bet is then a means to hold them publicly accountable for doing what they said they would do. The market then becomes a voting machine for the public to decide if they think the person will succeed or not.

By banannaise 2026-01-2019:41

> The market then becomes a voting machine for the public to decide if they think the person will succeed or not.

Which would be great, if the mechanism and prize for "voting" were something other than people's basic means of survival.

Gambling addiction isn't bad because there's something wrong with predicting outcomes, it's bad because it causes people to lose all of their money.

"Kalshi, but with a maximum order size of $1" would be great. Kalshi, with a maximum order size of oh crap I can't pay my rent this month, is very bad!

By eru 2026-01-206:50

By shagie 2026-01-1918:43

> How many times Pam Bondi says the word "China" in a press conference.

A classic example is the color of the Queen's hat at Royal Ascot.

https://www.upi.com/Odd_News/2008/06/20/Bets-placed-on-queen...

https://news.williamhill.com/horse-racing/queens-hat-betting...

And the relevant one from 2005 - https://www.foxnews.com/story/hat-trick-upsets-british-booki...

> But alarms were raised Thursday morning, hours before the royal appearance, when a run of bets for brown started coming in, displacing light blue as the favorite.

> "Nobody was backing brown at all and suddenly everyone wanted in on it," Paddy Power (search), owner of the eponymous chain of betting shops that inaugurated the hat bet 10 years ago, told The Times.

> Power's odds on brown went from 12-1, to 2-1, to even and finally to 8-11 before he yanked the bet at 11:30 a.m., 2½ hours before the Queen was due to show.

> "Someone must have been in the know. We laid 50 pounds at 20-1 and 200 pounds at 10-1 and some smaller bets," David Hood, spokesman for rival betting chain William Hill (search), told the Daily Telegraph.

> ...

> When Elizabeth II finally made her appearance, she was indeed wearing a brown hat with cream trim.

> "Somebody has made a tidy sum," sniffed Hood.

> Both he and Power, who estimated his firm lost about 10,000 pounds, or $18,000, suspected palace insiders.

By jvanderbot 2026-01-1918:315 reply

That's the actual point. Everyone else is there to make money gambling, but the whole premise is to incentivize people with secret information to share it anonymously with the public, and take a reward for doing it.

All without traceability or secret drops or whatever.

POSIWID

By robocat 2026-01-1920:141 reply

> POSIWID

Everyone can make up a silly purpose.

Against POSIWID: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...

By jvanderbot 2026-01-1921:401 reply

Oh, I suppose one could interpret it as literally as possible, and arrive at that essay's conclusion.

I have always considered the following to be basically synonymous:

* In the absence of info, consider the intended output of the system to be what it is measured to be

* The output of the system is best determined using observation vs reasoning

Most of the examples there are moreso about two systems colliding. Yes, the purpose of the military is to disable the enemy and by god they are disabling a lot of each other so much so that they don't seem to be doing much else.

Except the bus system, in which the purpose is indeed to turn fuel into exhaust, because the busses move whether they are full or not. The purpose of busses is to drive around, and it so happens people like to use them. If the purpose of busses was to shuttle people around, it could be done several other better ways.

If the purpose is to gamble, it can be done many other ways. This system seems purpose-designed (or purpose-emergent) to coax out secret information in the form of large bets.

By robocat 2026-01-213:08

That is the "Single Cause" Fallacy or Causal Reductionism. That is the tendency to oversimplify a complex system by highlighting one "root cause".

Selecting a single measurement is the same as selecting a purpose.

Either way, we see people can choose a nonsense root cause, to argue something specious by defining a nonsense POSIWID.

There's also a crossover with the human tendency to try and attribute causes to the bosses of a system. Sometimes systems are emergent and are not designed/run by any specific person. Especially when hallucinating benefits to specific people e.g. "follow the money". I'd like to define this as "agentic reification of emergent systems" however unfortunately modern times are creating noise around each of those words.

In general I find it interesting to see how people argue about systems. From what I see, very few people understand the systems they comment upon - instead most people rely on political memes and shallow analysis instead of any deeper rational thinking. I've been decomposing my own thinking about mortgages for a while and I'm still terribly ignorant about that system!

Aside: and thank you: I found out about the Glowies meme while writing this comment, meme seeded by Terry Davis https://news.ycombinator.com/user?id=TerryADavis

By ncr100 2026-01-1918:39

(The Purpose Of a System Is What It Does)

By kibwen 2026-01-1920:172 reply

The market can only resolve based on public information, so it could only incentivize revealing information that is already destined to be imminently revealed. Furthermore, it doesn't incentivize sharing that information with enough lead time to actually take action based on that information; the opposite is actually true, insiders are incentivized to wait until just before the event to make their trade, meaning that the public gets no actionable information in practice. And that's assuming that you can distinguish an insider from someone lying for the sake of market manipulation.

By dogmayor 2026-01-1920:38

Untrue. Insiders are incentivized to trade when they can buy at the lowest price. That could be at any point up to the event.

By eru 2026-01-206:56

> [...] insiders are incentivized to wait until just before the event to make their trade, [...]

What are you basing that one? And how is this supposed to work?

If you are an insider the incentive is to trade as soon as possible, lest some other insider beats you to the punch, or some conventional leak (or investigative journalist) spoils your party.

This is easiest to see, when there are multiple unconnected insiders: the first to trade wins. But even if you merely suspect another insider might exist, you have an incentive to trade first.

> And that's assuming that you can distinguish an insider from someone lying for the sake of market manipulation.

That's exactly the same as any other noise trader in financial markets, yes. Nothing specific about insider information.

By eru 2026-01-206:51

> All without traceability or secret drops or whatever.

Well, that's not an argument against prediction markets.

They could have exactly the same amount of traceability as regular financial markets, and still work well as prediction markets.

By cyberax 2026-01-1919:261 reply

Without additional signals, you can just as well use it to manipulate markets.

E.g. there's a 1-to-1000 bet for $1m today on Trump falling down the staircase. So markets read this and go crazy, buying up the stock. The next day, nothing happens and the markets go down. But somebody could have made billions betting on that.

By eru 2026-01-206:57

> But somebody could have made billions betting on that.

Just because there's a small bid for 1-to-1000 on market, doesn't mean you can buy billions worth of contracts at that price.

By JumpCrisscross 2026-01-1918:224 reply

> it gives very powerful people a vehicle to make lobsided bets on outcomes they control

I'm sceptical that prediction markets uniquely enable this. Like, if you want to bet on U.S. airstrikes in the short term, you could always buy oil options (or short exposed companies). If you're in for the long term, you're buying something that benefits from cheaper gas, e.g. an additives company.

By dragonwriter 2026-01-1918:31

All of these things are much more subject to the problem that effects policy generally: the law of unintended consequences. Betting on the policy, rather than an intended/expected longer-term outcome that is easily derailed by intervening events outside of your direct control is much more direct (plus, if you are corrupt enough to bet on policy you control, that policy is probably already seeking a longer-term aim that serves your existing financial interests, so the ability to bet on the policy itself makes the corruption more attractive by providing a more immediate and certain payoff on top of the longer-term, less certain one.)

By jlawson 2026-01-1918:371 reply

Prediction markets don't uniquely enable it, but they make it far more effective and easy.

Insider trading is illegal. And for trades that aren't technically insider trading, often having some information ahead of time isn't as useful as it seems. Markets are known to react unpredictably to news; sometimes they move the opposite way from what you'd think, especially over the mid-long term, and there are many other influences on the price.

With a prediction market though, if you know what'll happen in the world, you know exactly what you'll win in the market.

By eru 2026-01-206:59

> Insider trading is illegal.

Only in some markets and in some jurisdictions and some of the time.

Eg until fairly recently 'insider trading' in commodities wasn't anything you were punished for in the US.

By bs7280 2026-01-1919:072 reply

You are not wrong, and I should clarify I also have a big problem with the current state of legal insider trading of elected officials, but this polymarket problem is much more extreme. You can get a guaranteed 100-1 payout by blowing up some random people on the other side of the planet. Way worse than making even 2-5x on a leveraged futures bet with insider info. In that example, the victim is usually just other rich people.

By JumpCrisscross 2026-01-1919:59

If we want to go turtles all the way down, we could create a market to predict trading by decision makers and thus incentivize leaks from the betting markets.

By eru 2026-01-206:582 reply

Well, insider trading should be legalised in general. It would be better for the general public.

See https://en.wikipedia.org/wiki/Insider_trading#Arguments_for_...

By graemep 2026-01-2010:081 reply

It would deter those who are not insiders from investing as returns would shift from them to insiders.

As the biggest social benefit securities markets provide is to enable raising capital this is a huge drawback and makes things worse for the general public.

By eru 2026-01-2012:271 reply

> It would deter those who are not insiders from investing as returns would shift from them to insiders.

Retail investors should be index funds anyway.

Until fairly recently there was no 'insider trading' you could get in trouble for in commodities in the US. That hasn't stopped non-insiders from trading in commodities.

Also, even if insider trading is legal, that doesn't mean your company needs to allow it: you can still punish your own employees for it, and eg claw back bonuses and sue for breach of contract and breach of fiduciary duty.

The main thing the (American) laws against insider trading does what private contracts can't do is to make the golf buddy liable, too.

In any case, American insider trading regulation is already laxer than French insider trading law. And it doesn't look like French companies have an easier time raising capital.

By graemep 2026-01-2012:37

> Retail investors should be index funds anyway.

That does does not solve the problem as insider traders will still be shifting profit to themselves. You still need non-insiders (not necessarily retail investors) to make the market work - even for insider trading to work you need a non-insider to trade with.

> Until fairly recently there was no 'insider trading' you could get in trouble for in commodities in the US. That hasn't stopped non-insiders from trading in commodities.

Can you show that it had no impact on how non-insiders traded? How recently was recently?

> Also, even if insider trading is legal, that doesn't mean your company needs to allow it: you can still punish your own employees for it, and eg claw back bonuses and sue for breach of contract and breach of fiduciary duty.

A lot less of a deterrent, and a lot of people with access to inside information have a lot more to gain than to lose.

> In any case, American insider trading regulation is already laxer than French insider trading law. And it doesn't look like French companies have an easier time raising capital.

Both do have insider trading laws so both are probably good enough, and there are a lot of other variables.

By tim333 2026-01-2015:10

So if you buy stock in company A, have it go to zero because the business went bust, find the CEO already knew it was bust when he was selling the stock to you, you'd be fine with that?

By monero-xmr 2026-01-1919:341 reply

You can also just... not place bets on completely bizarre prediction markets like "how many times this person says this word". The market can sort it out, etc.

By bs7280 2026-01-1921:021 reply

You have completely missed my point. I don't give 2 shits about people losing money gambling. I give a shit about the Whitehouse doing insane things just so they can use the insider information to personally make money. Did you know on Oct 10th someone made $200M on a BTC short position made 30 minutes before Trumps announcement of 100% tariffs on China?

By monero-xmr 2026-01-1922:58

People make short positions all the time in crypto, and long, and levered long and short, because of hedging. Same in equities market

By TeMPOraL 2026-01-1918:54

Plenty of more fun dynamics. For example, in some cases it becomes a way for voting for decisions one otherwise wouldn't control. If a person in position to make a decision doesn't really care about any choice in particular, seeing the prediction market lean one way would incentivize them to choose the opposite, making a short sale immediately before.

It also makes sense for the people voting: by betting against the outcome they want, they end up either a) paying for getting things their way, or b) getting consolation payoff if the decision makers pick the undesired choice.

By joelthelion 2026-01-1919:301 reply

A lot of these issues mostly disappear if you use play money.

It turns out that play money prediction markets are just as good as the real money ones.

By adrianwaj 2026-01-203:181 reply

Perhaps a bet should convert into play money if the stakes get too high and the temptation for "induced manipulation" is deemed too strong. The issue is how high is too high?

Imagine a jury or judge start betting on their own cases? $500 might not sway them, but $200,000 bets coming in from villain/victims' relatives might and they thereafter decide to enter the market and also influence (or force) a legal outcome. So it can be used as a stealth form of bribery if external parties seek to make it profitable for insiders to effectuate an outcome. So at what point should the bet switch over to play money?

And what happens if all that play money can one day be redeemed into a new coin?

So with the rise of prediction markets one can predict a subsequent rise in surveillance. Can you even flag a bet on PolyMarket?

"Khamenei out as Supreme Leader of Iran by March 31?" https://polymarket.com/event/khamenei-out-as-supreme-leader-...

There's almost $7m in volume there. But what if multiple Israel-aligned groups coughed up say $250m and bet "no" then that's like a bounty, right, for someone in Iran to effectuate a yes on the ground? Khamenei himself could step down too after involving himself in the bet and then use the proceeds to ensure his ongoing protection. I don't know. PolyMarket or PolyPay?

By dlubarov 2026-01-204:55

Yeah - in principle betting markets are also bribery markets. Instead of betting based on expectations, one can bet the opposite of the outcome they desire.

It's interesting how those markets avoid any language like "death," I assume to not give the obvious appearance of an assassination market, though death seems covered by "is prevented from fulfilling his duties".

By sysguest 2026-01-1918:19

if you're not the person-in-complete-power, your bet is really likely to be 'rigged' against you

I'd rather play dice or buy lotteries

By roflyear 2026-01-1918:191 reply

well, at least for really odd ones - like the china example - the liquidity is (probably) going to be really low. you need people buying both sides to make money.

But for big events/talked about stuff/etc ofc this is not true.

By bs7280 2026-01-1919:301 reply

Again - Its not the money I care about, its what people are willing to do to make it.

By eru 2026-01-207:02

If there's not much money to be made (because of illiquidity and adverse selection keeping market participants out), then there's not much incentive for people to do weird things.

By tj-teej 2026-01-2011:14

Isn't this the intent of a prediction markets?

IIRC the original prediction markets existed to try and get as close as possible to finding the true answer to open questions. Someone willing to bet a lot of money on an outcome (because they have an edge/are very sure of an outcome) is the point, they're putting their money where their mouth is...

By caconym_ 2026-01-1918:24

> the biggest problem with prediction markets is not the gambling or dumb people losing money. Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control

This is quickly becoming the point of them, at least insofar as they are enjoying an extremely favorable regulatory environment courtesy of the Trump crew.

By qznc 2026-01-1918:311 reply

Why isn’t political gambling in the UK a problem then?

By shagie 2026-01-1918:451 reply

It is. https://en.wikipedia.org/wiki/2024_United_Kingdom_general_el...

> During the 2024 general election campaign, allegations were made that illicit bets were placed by political party members and police officers, some of whom may have had insider knowledge of the date of the general election before Rishi Sunak, the Prime Minister at the time, publicly announced when it would be held.

> ...

> In April 2025, the Gambling Commission charged 15 people with offences under Section 42 of the Gambling Act 2005, including Russell George, Tony Lee, Nick Mason, Laura Saunders, and Craig Williams. Trials are not expected to begin until September 2027 or January 2028.

By eru 2026-01-207:00

People being charged doesn't mean there's a problem of any significant magnitude for society.

By eru 2026-01-206:46

How is that any worse than existing financial markets?

You can already short sell a company and then cause trouble for them, eg with an anonymous phone call of a bomb threat or whatever.

Typically, the authorities will catch you, because they check suspiciously lucky traders. They can do the same with prediction markets.

> A small example of this would be NFL / NBA Refs fixing playoff games with a bad call or two. This actually happened 20 years ago, an NBA ref went to prison over being bribed just $2000 per game.

The outcome of a sports game isn't exactly important in the grand scheme of things. And no one is forced to bet on sports to hedge their harvest against the weather or something like that. It's all entertainment.

> The much worse example is the fact that you can make 100-1 odds on whether the US airstrikes Iran today... or How many times Pam Bondi says the word "China" in a press conference.

So? Don't participate in these particular bets then?

By wyager 2026-01-1919:142 reply

> Its the fact that it gives very powerful people a vehicle to make lobsided bets on outcomes they control.

OK, and? The market is just paying them to make information about their decisions public.

By socialcommenter 2026-01-1919:591 reply

Parent comment has a strong implication that the bets will impact their decisions, and invariably for the worse.

If "Politician XYZ takes the day off and sits on the couch" were paying 100-1 odds, it wouldn't be such a big drama (although, again, the existence of the bet would still impact their behaviour)

By bs7280 2026-01-1920:10

Correct. I've always had a hard time getting my point phrased in a way that gets people to understand my point, but I'm baffled that people don't see an issue with creating something that says "Hey if you blow up these random people in Iran today you can make $50 million dollars and no one can punish you" and thinking its not a big fucking deal.

This also isn't a theoretical issue that may happen - it dissapoints me that very few people know this but - on October 10th when BTC fell from $122k to $104k because of a trump announcement, someone created a short position 30 minutes before Trump announced 100% tariffs on Chinese imports and profited $200M USD.

By bs7280 2026-01-1920:29

I replied to 1 comment below yours - but I want to ask, how do you think this incentivizes people to make info about decisions public? That would lower the return on their bets.

By TZubiri 2026-01-1919:042 reply

I think the war ones are the only real concern.

In the context of legislating prediction markets or not, sports is not a concern at all.

Whether it's a net positive or negative for important shit like war and corruption, we'll see, but if it helps in the important stuff, but damages sports, sorry bud.

By bs7280 2026-01-1919:542 reply

First - I can not comprehend how you could possibly have a charitable interpretation on the war point and how it might have a net positive. I'm not trying to be condescending or anything, I would like to hear a single positive for being able to make BTC bets on killing people.

Second - even if you are not one of the millions of Americans that give a shit about sports, there is still a massive fraud implications just by the existence of crypto prediction markets. All it takes is one bad call to changed the outcome of game. The Superbowl last year had over $1 billion wagered on it.

By baobabKoodaa 2026-01-1922:452 reply

If I live in a country that is under threat of being attacked by U.S. it is nice to have a website where I can look to get a reasonable probability that the attack happens

By Atreiden 2026-01-2011:54

That figure will also be hugely unreliable, because as we've seen, there is tremendous incentive for insiders to leverage their information immediately before it's relevant.

If the odds sit at 97% NO for weeks or months, then 3 hours before the invasion an insider makes their play, you would have to be constantly monitoring this market, interpret that spike correctly as an insider trade, and be able to, in that very short amount of time, take actions that change the outcome for you, personally.

Doesn't seem like much of an upside to me.

By bs7280 2026-01-2016:14

The existence of the odds making for a way increases the odds a war happens to begin with.

By TZubiri 2026-01-2018:01

This is going to be a very nuanced point, so if you already have your mind made up on "Pro this" or "anti that" you are going to miss it. To me this is clearly a bleeding edge legal and technological phenomenon so if you hold a solid position either way, we are not in the same page at all. Prediction markets are going to be an issue in general in congress for the next years to come, and in specific cases in the courts for the next decades, it's silly to think that we, a random individual commenting on an internet forum, have the right answer at this nascent time, I recommend if you are coming into this with a premade opinion on the subject, to have a suspension of disbelief and enter into the discussion on the grounds that there's not a right answer at this time.

On to the nuanced response:

>"First - I can not comprehend how you could possibly have a charitable interpretation on the war point and how it might have a net positive."

>"I would like to hear a single positive for being able to make BTC bets on killing people."

This has been marked by yourself as a single point, but there's two distinct asks here, which I believe you are conflating. The latter of which is easy to answer, the first one is clearly to be decided and no one knows at this time (and could go either way).

First you ask how it might be a "net positive", that is that its positives outweigh the negatives. Then you ask to hear a single positive. Forgive me for overspelling the obvious here if the contradiction is already clear, but I must dwell on this as it seems to be precisely what's causing you to "not comprehend".

It is trivial to show a single positive, it can be done so in two manners, first showing that a single positive is possible, and then a bit harder would be to argue that said positive is definitely a positive and not a negative, in isolation. On the first type, to merely show that an individual positive is possible, I could do so in three different manners, one which is on good faith and relevant to the actual events/discussion, e.g: "on assasination events, victims can get information on their safety and act accordingly.", the issue is that this might distract you into discussing the specifics of what I just said instead of following the greater argument. A second way would be to show an individual positive that is technically so, but obviously would not be used to argue anything else, which avoids the reader from being defensive, e.g: "It's fun for people to gamble". It's worth noting that this is a single positive in isolation. Thirdly, I can argue anything really, and it is at least a candidate, mere refutation the fact is irrelevant as we are for this point only considering that there could be positives: e.g: "It might solve AGI/string physics", even in the exercise of finding a silly positive effect, we nevertheless find that it's technically possible that prediction markets might fund scientific research.

On the second type, to show that such positive effect is actually positive, I don't think there's much grounds to deny here that there exist individual positive effects. So I won't try to waste much effort, here, I think a stronger argument would be to argue that the net effect is negative, which again is distinct from being able to point out a single positive.

Regarding the net effect of markets on war or assasination attempts, I do not hold an answer, do you? Do you know for a fact whether it's a net positive or a net negative? Somewhere in the US courts, legislation and lawyers there seems to be a different answer. The journalists and a large amount of readers seem to be of course against it, but they don't hold much more power or say in the matter than the bare minimum any citizen gets by democratic vote, and to that extent, the power they hold is just over the capability to affect legislation for companies that have a global audience, and are just headquartered in your country as a base of operations, and would immediately move to another jurisdiction, or give way to a competitor in another jurisdiction if the conditions were to turn too unfavourable.

Personally, I don't make bets on wars, or assasination attempts because of the possibility that they may cause negative effects, it is sufficient and I consider the burden of proof to be inverted, but by no means do I hold the belief that it is a net negative. And I still reserve the right morally and legally to participate in these markets if for some bad turn of luck I were to be caught in the middle of a war, in the same manner that I might reserve the right to own and bear arms.

By tim333 2026-01-2015:15

Assassination in political battles could theoretically be an issue. In the recent Trump vs Harris one, approx $3bn was bet and an assassination attempt was made although not for betting purposes one presumes.

You could probably hire a gunman for much less than $3bn. I don't know if the crypto markets are anonymous enough to get away with it though.

By PlatoIsADisease 2026-01-1923:181 reply

I've been telling people it only takes 2 or 3 people to throw a football game. The person who hires the ref(optional), the ref, and the person who places the bet.

And I was told I was crazy.

Hahahahahahahahahaha. Nope I was right.

By eru 2026-01-207:011 reply

Huh? It's pretty obvious that you can influence the outcome of a sports event, if you can influence the ref or if you can get a player on one side to pretend to be less competent than she normally is.

By PlatoIsADisease 2026-01-2011:472 reply

10 years ago we'd be called conspiracy theorists.

By 4ggr0 2026-01-2013:26

Sports Betting Scandals have been a thing for probably almost as long as sports exist, i don't get why you think that this was a thoughtcrime 10 years ago?

https://en.wikipedia.org/wiki/Sports_betting#Famous_betting_...

wouldn't surprise me to find out that even cavemen were manipulating outcomes of stone-throwing contests to earn some more meat.

By eru 2026-01-2012:24

I think the disagreement was over whether it was likely that people threw matches like this, not whether it was possible.

By jpmattia 2026-01-1918:281 reply

Something that appears to be missing: Certain events attract "advertising" types of bets. E.g. There is value in making a candidate appear to be a leader, so dedicating dollars to swinging the market is more of a form of advertising than an intelligent bet.

So it would be interesting to measure the inefficiencies of various bets vs the total market value in that bet.

e: Although full disclosure, I did not pick apart the entire paper. Maybe it's buried in there.

By jonbecker 2026-01-1918:321 reply

super interesting, re: spending money to move the line is just another form of non-profit-seeking "consumption."

i didn't filter for manipulation specifically, but i did find that politics was actually one of the most efficient categories (only ~1% maker/taker gap), suggesting the market absorbs those flows pretty well.

By jpmattia 2026-01-1918:421 reply

> but i did find that politics was actually one of the most efficient categories (only ~1% maker/taker gap)

I confess I'm surprised by that result in particular. I realize your results are for Kalshi, but ISTR some reports from the presidential elections on Polymarket.

But more generally: When you say there is "only a ~1% maker/taker gap", is that weighted by the size of the bets? or is it averaged over the number of bets placed?

In any case: Thanks for a very interesting paper!

By jonbecker 2026-01-1918:541 reply

If we weight by contracts purchased the gap is 1.02%, dollar weighted the gap is 1.00%.

I'm glad you enjoyed the paper :)

By jpmattia 2026-01-2016:18

[I'm still thinking about this a day later!]

I think an additional table/graph of how large-bet performance vs small-bet performance would be interesting in general, as well as broken out by market type.

It kinda answers of the question: Are large bets equal to smart money? or are they equal in "smartness" to small bets?

By LeifCarrotson 2026-01-1917:113 reply

I'm a little confused by the "Yes" versus "No" asymmetry.

For example, one of the top trending ~~bets~~ markets right now is on whether Miami or Indiana will win the NCAA football championship tonight. You can either take "Yes" on Indiana at 74c, or "No" at 27c, or you can take "Yes" on Miami at 27c or "No" at 74c. Or, there's another potential outcome - you can also bet on a tie at 10c yes/91c no.

Is this research suggesting that an optimistic Miami fan can somehow get a better return by buying "No" on Indiana than a "Yes" on Miami?

Why is Kalshi structured with these yes vs. no options for all outcomes?

By postflopclarity 2026-01-1917:151 reply

> Why is Kalshi structured with these yes vs. no options for all outcomes?

it's basically how they do margin. otherwise you wouldn't be able to sell / post asks without already having a long position. for kalshi, it's actually one single security in the background they just present it as two order books (but really it's one). for polymarket, they are two distinct products that trade separately, and technically could have arbitrage between them. although in practice they're normally priced correctly to sum to 1 (or 1.01)

By denotational 2026-01-1918:181 reply

It’s not really margin since there’s no leverage: the potential loss associated with the bet has to be deposited, so it’s fully collateralised.

By postflopclarity 2026-01-1918:35

right, I guess I should have said it's what they have _instead_ of letting users trade on margin.

By pants2 2026-01-1918:001 reply

Part of this perceived arbitrage is the fee structure. Kalshi has a weird transaction cost structure but taking advantage of that 1c arb probably costs you 2c in fees to Kalshi, so nobody does it.

By baobabKoodaa 2026-01-1922:47

This is incorrect and tiresome to constantly hear as a go-to explanation for supposed market inefficiencies.

By sambaumann 2026-01-1918:26

10c yes seems really high for a tie. NCAA rules don't allow for ties in football. I know prediction markets have very long shot bets but I would expect that to be closer to 1c

Edit: it looks like the tie market is only for if the game is tied at halftime, which makes much more sense