alt Hacker NewsThe purpose of prediction markets is to communicate insider knowledge.
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Not just insider knowledge. Being more willing to put in hard work than anyone else, being better at synthesizing public knowledge, or maintaining a more clear and unemotional outlook all can also lead you to superior outcomes.
That isn’t how they were pitched to the FTC but it does appear to be their ultimate use case.
People say this but I don't believe that it is true.
The original theoretical purpose was to incentivize the creation of new knowledge, not reward insider knowledge that already exists. For example, to fund research that helps answer some unanswered question.
Today, the purpose is obviously gambling. We can see that clearly from the marketing.
and facilitate insider trading, like how do people miss that part
The purpose of any price-based system is to communicate knowledge, not necessarily insider knowledge.
There are actually two theories on insider knowledge. One states that allowing insider trading is beneficial, as it allows prices to better match the underlying reality, the other states that this discourages non-insider trading, which actually makes the prices worse. Stock markets lean heavily towards the second theory, while prediction markets seem to be leaning towards the first.