This is interesting and makes a statement about positive or negative orientation in human psychology. Also, couldn’t the bets just be worded in the negative instead of the affirmative thus flipping the optimism bet?

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)

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

There's another idea, which is make contacts that pay out in shares of an ETF, but I haven't seen this idea put into practice

Edit to add that on non eligible markets your theory is correct, for example: https://polymarket.com/event/will-jesus-christ-return-before...

This is basically equivalent to the observation that, in a perfectly efficient market, no entity can ever make a profit.

And yet, in the real world, entities make profits all the time. In fact, they make wild, unimaginable, world-changing, history-altering profits. This is a tacit admission that our markets aren't even remotely efficient, and that includes predictions markets. Efficient, rational markets are the exception, not the rule.

> Takers pay a structural premium for affirmative "YES" outcomes while Makers capture an "Optimism Tax" simply by selling into this biased flow.

It's still operating like a casino in that there's a "house edge" that comes from taking bets. Unlike a casino, there is nothing stopping the average person from market making, which is why it doesn't make sense this structural inequality exists.

I have to say I was this huge fan of the idea and I didn’t anticipate it would happen like this.

This argument gets trotted out by Wall Street every decade or so, usually under the guise of "democratising" some piece of finance. It's almost always bunk.

Most investment capital is looking for safe returns. It's not competing with gambling. Even within the high-risk end of finance, the game is in turning that high risk into above-market but predictable returns through portfolio mechanics. (Fuckups aside, you can't generally portfolio mechanic your way out of the negative expectated value of a lottery ticket.)

More simply: the notion that we need to increase risk and profitiabilty for intermediaries in investments to keep people from gamblig is a false economy. Gamblers are seeking a different thrill from what financial markets are designed to provide. To the degree we have a problem, it's in letting our markets look more like casinos.

> exposure they were already looking for

Broadly speaking, if you want exposure to the economy you're investing. If you want exposure to a number that goes up, you're gambling. This is an overly-simplistic delineation. But it works for first-order estimates.

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

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

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...

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.

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.

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.

All without traceability or secret drops or whatever.

POSIWID