Author: Elif Denef Seçgin
Betting on everything from politics to sports is becoming a new way for people to make money.
Many people who attended school know that we would bet on anything to make fun of something or earn a couple of dollars, like betting that our school team would beat our rival school team for $5. Well, it is official that you can make a prediction on the Polymarket website on anything from a sports match to political elections and the number of views of an X youtuber’s next video.
Let us start with the definition of a prediction market and Polymarket to make it clear. “A prediction market is a platform where people can bet on the outcome of future events. By buying and selling shares in the outcomes, participants collectively forecast the likelihood of events such as sports results, political elections, or entertainment awards.” One might question how the prices of these events is calculated in that market. This is the most intriguing part: the prices reflect the current probability of such events. For instance, if one event’s price is traded at 50 cents, it means that a 50% chance that it will happen. If you are certain that the probability is higher than 50%, you would buy shares at 50 cents. After the event occurs and you are right, you will earn 50 cents profit. You can change your position in the bet any time before the event finishes, and the Polymarket is one of the places where you can buy or sell such shares.
Polymarket suggests that because prices update continuously and reflect real-time trader beliefs, prediction markets can sometimes provide faster signals than traditional polls, though their superiority is still debated. Unlike traditional markets, prediction markets update continuously as traders incorporate new public information, although liquidity can vary across contracts. If there is an opportunity to gain some money, then there are Wall Street companies to seek profit. Many Wall Street companies such as DRW, Susquehanna and G-20 advisors stated that they want to hire people with a deep understanding of prediction markets.
Even though it seems exciting, there are some concerns over the prediction market since a mysterious person won over $400,000 on a bet that Nicolás Maduro, the Venezuelan strongman, would be caught by the US military. Also, another new user made a precise prediction about the winner of the Nobel Peace Prize a couple of hours before the event occurred. As a result, a US Congress member Ritchie Torres has proposed legislation that would prevent “insider trading” in the prediction market.
References:
2) https://www.ft.com/content/4e1ae184-f7e0-4a9b-9d0b-299b37bbd738
