alt Hacker NewsSo what would be the difference between buying insurance against downtime of a service you depend on (eg. Cloudflare) vs making a bet on the prediction market that there will be downtime? Even without these markets there is risk that the service goes down. The existence of the prediction market doesn't cause it to be possible.
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This is a framing that obscures rather than illuminating. Perhaps in this specific case, the prediction market bet acts as insurance (and even then, only for those market participants who are actual Cloudflare customers; many others are simply taking a bet). But the prediction market allows bets of many other kinds, many of which do not act as insurance against anything. Sports bets are the most obvious, but also election bets, bets on wars, bets on celebrities' lives, bets on show durations, bets on Jesus returning, bets on aliens existing - none of these can be construed as insurance. When the vast majority of actual bets traded on this betting market can not be construed as insurance, you can't defend the market as offering insurance.
There is no risk to me if the rockets lose their next game. Unless I bet $100 on them winning, then a risk appears.
If I have an insurable interest in Cloudflare’s uptime, I may buy insurance. If not, I may not.
(IANAL. In the US this seems to largely be a state law issue. California’s law, to my quick non-expert skimming, is really quite clear on this point.)
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The difference seems to be that it’s insurance if you’re buying protection against your own home burning down.
Versus when you’re financially wagering that your neighbor’s house burns down. (I.e whether you get paid back if the misfortune impacts you, vs you getting paid if misfortune visits someone else.)