The author was instrumental in a colleague ruining their life through a gambling addiction. Then they helped make the case for prediction markets, which also went wrong.
Their track record is not great, and I don't think they fully realise that the issue is them: the principles and axioms they rely on don't lead to good results.
> I don’t claim to know the exact right policy answer for America.
Perhaps start by reversing your positions, and throwing support behind those trying to undo the damage you caused.
I don’t think we should hold a transaction worth $5 someone did as a teenager over their head as a dark mark on their character for the rest of their life
If you're consistently wrong, then it's time to stop being a thought leader, and really examine the lens through which you view the world.
The author still thinks they were "freeing prediction markets from unnecessary restrictions", but clearly some restrictions are necessary, and totally free markets aren't actually an economic panacea. This is not really new information, so the flaw is in the thinker, not the data.
If your ideas are consistently proved harmful, acting against your instincts is a better play than continuing to trust them.
> He said that he helped build a case for it -- not that he still supports it.
I would expect that if they didn't think they were unnecessary anymore, they would have said something like "I helped build the case for freeing prediction markets from restrictions that I thought were unnecessary". Their description of the predictions being unnecessary is still stated as a present tense fact (and the entire clause is in bold-face, making it clear that it's something they want to draw attention to).
The author wrote their article--they had the chance to clarify their position. The facts remain: on multiple occasions, they have been instrumental in negative outcomes because of their support for things that we already knew were a bad idea. They should stop giving advice.
Sometimes gambling has some social value then. Isn't trading on the stock market gambling? Do you also support abolishing the stock market? What about issuing loans to someone with poor credit?
> Do you also support abolishing the stock market?
An anti-capitalist here: Yes... Oh heavens, yes. There are few things I desire more then to see all the stock markets in the world burn and never to be rebuilt. For me, people who make money at the stock market are participating in a systematic exploitation of the working classes. The siphoning of profits away from the workers who created them and earned them, and into the hands of the rich who contribute nothing, yet get everything.
What is the alternative? I'm sure there will still be trade of labor even in a socialist economy. This is assuming the labor theory of value is right, which it isn't, but I'll be charitable.
There is no need for an alternative. Trading stocks is not a necessary precondition for trading goods and services. Most of mine, and probably your businesses are done without anybody holding stocks in the stuff you are buying or selling. You can abolish the stock market, and pretty much everything stays the same... except the rich lose one (of many) avenues of systemic exploitation.
Day trading is gambling. Buy-and-hold is investing. Algorithmic micro-trading is investing, despite looking like gambling. It's about whether there's an immediate dopamine release or not.
Did he argue for the current implementation, or only for deregulation relative to the previous state? As I understand it, up until recently they were totally illegal.
That is not so simple. The lottery is gambling, but the lottery doesn’t trigger the dopamine receptors like slot machine or scratch tickets (also gambling) do. This is because the response is too far behind the behavior in time (hours or days) for it to trigger the same addictive behavior as slot machines and scratch tickets where the behavior-response cycle is in seconds.
Now I don‘t consider day trading to be gambling (even though it is packaged and marketed to appeal to and sell to gambling addicts). For it to be gambling, it would need to be a game.
It is something far more sinister and far worse then gambling. I consider it exploitation, or more accurately capitalist exploitation. This also applies other aspects of the stock market, even the ones which are not marketed to exploit gambling addicts, including investment backed retirement funds [401(k) in the USA], index funds, and publicly traded companies. To me, all these things are equally bad (well actually the retirement funds may be the most sinister of the bunch) even though day trading might have the ugliest manifestation. These are all exploitation of the working class.
> And I know exactly what that costs: Before I was an economist, I was a teenager working for bookies on Australian racetracks. I once took five dollars from a coworker who “didn’t bet” and put it on number one in the next race. Six months later he was betting thousands a race and stealing from his own family. Compulsive gambling destroys lives — and the families it wrecks have no lobbyists.
> I don’t claim to know the exact right policy answer for America. But I know we never even had a grown-up debate.
If you've seen the destruction caused by something and can't figure it out, maybe you have a problem?
And let's be honest: the idea of "debating" things that are obvious is often one of the primary ways by which indefensible things are legitimized.
This reminds me of how people who worked for Facebook despite it being obvious that nobody with moral fiber should work for Facebook are more listened to when criticizing Facebook than people who realized the obvious to begin with. It's such a farce.
But it also reminds me that prediction markets are one of those things that are transparently a terrible idea because they create problematic incentives, and not just because people ruin their lives gambling. If you can make $1 million by triggering something that or getting somebody to trigger something that basically has no business happening, whether it's stripping on the Senate floor, causing a volcano to erupt, or crops yields to reduce by secret herbicide dusting, or any other bologna, somebody will do it if the balance makes it worthwhile. Likewise, they give people reasons to vote that are negative - "I have $100 on prop XYZ passing, of course I support it." (Though side note: the ubiquity of betting being super terrible for society because people can't handle gambling at all is one of those things that I've been super surprised by that seems to have good evidence now. I guess because gambling mostly just doesn't do it for me to the degree that I find it shocking just how addictive it is and just how much it exacerbates bad situations for many people.)
And I can't see how there's any benefit that's bigger than the problems. If prediction markets are better than Nate Silver, why is it worth all the problems to society for that extra accuracy margin? I can see why individual actors might find value, but I don't see how their value accrues to society in any way that makes it worth it.
is this the author's attempt at washing their hands of the damage they've done? Smart enough to win all these prestigious economics awards and hold all these prestigious positions but too naive to be able to predict the consequences of what they've been fighting for? Things that were, in my opinion, very easy to predict, given all the regulation in place around existing markets. What does this say about the author and the field of economics? Every day we get to play the "dumb or awful?" game.
Put the same energy into championing regulation then. Don't walk away from a mess you claim to have helped create. (which the OP may indeed be doing, but it isn't clear they are, hence the chiding)
Look what they've become? You mean look at what they have been from the get go?
The corrupting influence they are having on society has been obvious from the start and was predicted by anyone with any familiarity of the effects of "traditional" gambling on people. Except the author apparently, because they had seen precisely what gambling can do to people and still pushed this.
"The dream was that markets would surface useful information"
The dream was that the markets would make the people who owned them stupid amounts of money like any casino owner. Pretending otherwise is self-delusion at it's finest but the author seems good at that.
I don't like prediction markets, but I think a lot of people in this thread are assuming that gambling vs. not is clear cut.
Insurance was illegal at different times in history because it was considered gambling. Ditto for commodity trading.
Even you look at the structure of a futures contact, the basics look really similar to a bet that can be traded with someone else.
The main differences are the regulatory environment, and the intention the actors in the market have.
Commodities, options, and futures are all legitimately used to hedge against future outcomes. The "gamble" (placing money on a future outcome) is a mechanism for the main goal: protection against instability.
When you look at stocks and - in particular - derivatives, it starts to look a lot closer to how gambling is structured. I'm pro stock market, but that doesn't mean I won't admit that the line between it and gambling is pretty hard to draw. It's a lot more grey than people give credit for
> Trump Media may soon sell early access to the president’s Truth Social posts.
Think about whether the spirit of the domestic/foreign emoluments clause would be okay with this. I'm sure some will argue there's enough layers of BS in this scheme that it's totally fine.
Ethics and judgement aside, I think startup founders can learn a lot from this administration as to how "successful" people twist things in their favor. The industry is full of it.
The law only matters if there’s someone willing to enforce it. We learned from Trump’s first term that no-one is willing to enforce the emoluments clause.
> We built a superior information aggregation machine for the economy
Wow, no you built an avenue for corruption, insider trading and problem-gambling, and you should have known this beforehand. Would have known it beforehand if you'd bothered to consult with non-economists.
>Trump Media may soon sell early access to the president’s Truth Social posts. Think about what this means. This is how the president announces war; every embassy on earth has to maintain a Truth Social account just to stay informed of American policy.
He is already so beyond the pale this doesnt even move the needle.
If they try this, multiple random people will write bots to republish everything instantly. The cash gusher they expected will turn into a trickle and the white house will look like a bunch of greedy Ferengi that lack the lobes to pull off a basic swindle. It's guaranteed to be an instant loss. I'll laugh pretty hard if they go ahead with it.
I'll admit that I still see some value in prediction markets in theory, but in practice the way they were implemented seems to have caused an order of magnitude more harm.
In retrospect their misuse as a loophole for sports gambling was an obvious outcome. Seems like every promising new technology inevitably is used for evil. Cryptocurrency is mostly used for criminals. Social media displaced more meaningful forms of connection. We're already starting to see this with AI (psychosis, slop, assisting bad actors) but I'm afraid it will get much worse.
> In retrospect their misuse as a loophole for sports gambling was an obvious outcome.
This isn't a 'benefit of hindsight' thing; a lot of people called this out in advance, just like all the other tech you listed.
We need to stop listening to the people who are wrong about everything, rather than pretending the maximalist seeking of profit with no regulation is a reasonable position. We know it doesn't work.
I guess most of my positions on prediction markets came from Scott Alexander, e.g. https://www.astralcodexten.com/p/prediction-market-faq which was posted in 2022. The implicit argument seems to be "We should come up with some way to regulate these so that it's less harmful than existing forms of gambling." I think the part that was harder to foresee was the Trump admin suddenly seizing on them as a loophole to override state regulation of sports betting. Certainly there does not seem to have been any careful consultation with prediction-market experts to determine the most robust, socially beneficial laws.
I understand that "Things would be great if they'd done it right!" is in some sense unfalsifiable. But also I think it's pretty clear that the current regime is geared solely towards maximizing the profits of prediction market companies and Trump Jr.
So I will admit the idea of "maybe you could make some guesses about the future and if you're right it's worth something" sounds appealing - like if I guessed people would get perfect nutrition by IV and not bother with eating and it came true and I made money from it, or the same about making money speculating on when the first Mars colony is founded, etc. But what I don't get, taking a step back, and never have, is what society and the world get out of having more accurate guesses about this. Even setting the obvious negatives (if you have your retirement savings sitting against a Mars colony before 2030 maybe you have some incentive to sabotage a launch in early 2029) aside, what are the positive values supposed to be? And I've never really understood this.
My position is that prediction markets are bad and harmful but so are all mainstream stock markets. They're all prediction markets. People collaborate to pump up the value of specific assets or contracts, leading to undesirable outcomes.
It would be dishonest to ban prediction markets without banning stock markets.
The best which can be done, under the current system, is to punish unfair information asymmetries, which is practically impossible to do reliably... And even if we could find a way to punish it reliably; what would happen is that most rich people would end up in jail. Information asymmetry is almost never fair and it's how people make big money these days.
I think the best solution is to create conditions to allow people to earn big money in other ways; ways which create value. If there were other ways to make big money besides unfair information asymmetry, then skilled people would find it easier to do that instead...
Unfortunately, skill/talent does not allow you to gain an information advantage; only social connections do. So the current system is really bad in terms of wasting specialized skills/talents... Current system takes talented people and re-orients them towards adversarial games of deception where they're just a number in a sea of increasingly desperate untalented people who are better at playing the deception game... And the talented folks eventually lose their talents through lack of practice; they're so focused on learning ways to trick people and algorithms, that their actual talents atrophy; by the time they become well known, if they ever do (most don't), they've become mediocre; corrupted by their participation in the process of trying to become relevant; their main talent always takes the back seat.
I disagree with this - plenty of people treat stock as just wanting a share of profits/ownership and not as value speculation. That said, I do think we should be making rules that devalue speculation, perhaps turn-based trading since there's no particular benefit to the world from high frequency trading or value discovery happening in 5 milliseconds instead of 5 seconds, and making it so that being publicly traded requires not having controlling owners or preferential share classes.
Edit: and with prediction markets you don't own anything. Even with commodity futures you can end up having to take possession of cows or something.
You could ban stock market trading but the market itself is a very useful vehicle for investment and has democratized wealth and retirement planning to some extent.
How to ban trading? You could heavily addon tax profits from short term trading under 3 months at 90% say, tapering to zero as time increases maybe 2 years. With zero ability to offset any losses with other tax forms.
Shorts, options et. included unless it can be proven as part of a bigger trade or insurance but then apply to bigger trade.
This could also apply to market makers making that closer to a public service.
The uniquely problematic aspect of prediction markets is not really the gambling one. There are plenty of speculative vehicles. The problem is it subverts natural incentive structures that society has evolved to reward, by introducing another incentive signal; one that sometimes can be many times bigger, thereby manipulating the natural, real-world, outcomes.
If you were playing in the World Cup in the lesser teams, very often betting+sabotage/plausible negligence would have been a more profitable enterprise for you than to actually do your best to win.
Stock markets have this problem too, but they are much more regulated, and even if manipulated by insiders, the blast radius is smaller and often auditable.
Some people gamble by trading stocks. Should we also abolish the stock market?
Prediction markets are meant to be the stock market but for events besides the value of a certain corporation. They were co-opted as a thin veneer of legitimacy over deregulated sports gambling. The concept itself theoretically has some value, however insignificant compared to the damage caused by the current policy.
The author was instrumental in a colleague ruining their life through a gambling addiction. Then they helped make the case for prediction markets, which also went wrong.
Their track record is not great, and I don't think they fully realise that the issue is them: the principles and axioms they rely on don't lead to good results.
> I don’t claim to know the exact right policy answer for America.
Perhaps start by reversing your positions, and throwing support behind those trying to undo the damage you caused.
I don’t think we should hold a transaction worth $5 someone did as a teenager over their head as a dark mark on their character for the rest of their life
I would agree, except the author has continued behaviour in that pattern over a larger scale for years after that.
Jesus. Literally. Can any HNer really throw a stone at this?
Finally a solution to being wrong - just invert all your opinions!
If you're consistently wrong, then it's time to stop being a thought leader, and really examine the lens through which you view the world.
The author still thinks they were "freeing prediction markets from unnecessary restrictions", but clearly some restrictions are necessary, and totally free markets aren't actually an economic panacea. This is not really new information, so the flaw is in the thinker, not the data.
If your ideas are consistently proved harmful, acting against your instincts is a better play than continuing to trust them.
You're mischaracterizing. He said that he helped build a case for it -- not that he still supports it.
As far as I can tell, prediction markets went from totally illegal to basically unregulated. Presumably the author was arguing for a middle ground.
> He said that he helped build a case for it -- not that he still supports it.
I would expect that if they didn't think they were unnecessary anymore, they would have said something like "I helped build the case for freeing prediction markets from restrictions that I thought were unnecessary". Their description of the predictions being unnecessary is still stated as a present tense fact (and the entire clause is in bold-face, making it clear that it's something they want to draw attention to).
The author wrote their article--they had the chance to clarify their position. The facts remain: on multiple occasions, they have been instrumental in negative outcomes because of their support for things that we already knew were a bad idea. They should stop giving advice.
Fair point.
Did you watch the podcast? I didn't, but I think it's unfair to judge the author's true position on prediction markets based only on the hook.
The current admin has bungled better ideas than prediction markets.
Gambling isn't some brilliant new idea, even if you rename it. I understand the technical distinction trying to be made, but seriously, it's gambling.
No one "bungled" anything. They just aren't being prosecuted..yet.
Sometimes gambling has some social value then. Isn't trading on the stock market gambling? Do you also support abolishing the stock market? What about issuing loans to someone with poor credit?
> Do you also support abolishing the stock market?
An anti-capitalist here: Yes... Oh heavens, yes. There are few things I desire more then to see all the stock markets in the world burn and never to be rebuilt. For me, people who make money at the stock market are participating in a systematic exploitation of the working classes. The siphoning of profits away from the workers who created them and earned them, and into the hands of the rich who contribute nothing, yet get everything.
What is the alternative? I'm sure there will still be trade of labor even in a socialist economy. This is assuming the labor theory of value is right, which it isn't, but I'll be charitable.
There is no need for an alternative. Trading stocks is not a necessary precondition for trading goods and services. Most of mine, and probably your businesses are done without anybody holding stocks in the stuff you are buying or selling. You can abolish the stock market, and pretty much everything stays the same... except the rich lose one (of many) avenues of systemic exploitation.
Day trading is gambling. Buy-and-hold is investing. Algorithmic micro-trading is investing, despite looking like gambling. It's about whether there's an immediate dopamine release or not.
Properly regulated, couldn't the same distinction be applied to prediction markets?
Yes. Banning is also considered proper regulation
Except the author argued against regulation for prediction markets.
Did he argue for the current implementation, or only for deregulation relative to the previous state? As I understand it, up until recently they were totally illegal.
That is not so simple. The lottery is gambling, but the lottery doesn’t trigger the dopamine receptors like slot machine or scratch tickets (also gambling) do. This is because the response is too far behind the behavior in time (hours or days) for it to trigger the same addictive behavior as slot machines and scratch tickets where the behavior-response cycle is in seconds.
Now I don‘t consider day trading to be gambling (even though it is packaged and marketed to appeal to and sell to gambling addicts). For it to be gambling, it would need to be a game.
It is something far more sinister and far worse then gambling. I consider it exploitation, or more accurately capitalist exploitation. This also applies other aspects of the stock market, even the ones which are not marketed to exploit gambling addicts, including investment backed retirement funds [401(k) in the USA], index funds, and publicly traded companies. To me, all these things are equally bad (well actually the retirement funds may be the most sinister of the bunch) even though day trading might have the ugliest manifestation. These are all exploitation of the working class.
> And I know exactly what that costs: Before I was an economist, I was a teenager working for bookies on Australian racetracks. I once took five dollars from a coworker who “didn’t bet” and put it on number one in the next race. Six months later he was betting thousands a race and stealing from his own family. Compulsive gambling destroys lives — and the families it wrecks have no lobbyists.
> I don’t claim to know the exact right policy answer for America. But I know we never even had a grown-up debate.
If you've seen the destruction caused by something and can't figure it out, maybe you have a problem?
And let's be honest: the idea of "debating" things that are obvious is often one of the primary ways by which indefensible things are legitimized.
This reminds me of how people who worked for Facebook despite it being obvious that nobody with moral fiber should work for Facebook are more listened to when criticizing Facebook than people who realized the obvious to begin with. It's such a farce.
But it also reminds me that prediction markets are one of those things that are transparently a terrible idea because they create problematic incentives, and not just because people ruin their lives gambling. If you can make $1 million by triggering something that or getting somebody to trigger something that basically has no business happening, whether it's stripping on the Senate floor, causing a volcano to erupt, or crops yields to reduce by secret herbicide dusting, or any other bologna, somebody will do it if the balance makes it worthwhile. Likewise, they give people reasons to vote that are negative - "I have $100 on prop XYZ passing, of course I support it." (Though side note: the ubiquity of betting being super terrible for society because people can't handle gambling at all is one of those things that I've been super surprised by that seems to have good evidence now. I guess because gambling mostly just doesn't do it for me to the degree that I find it shocking just how addictive it is and just how much it exacerbates bad situations for many people.)
And I can't see how there's any benefit that's bigger than the problems. If prediction markets are better than Nate Silver, why is it worth all the problems to society for that extra accuracy margin? I can see why individual actors might find value, but I don't see how their value accrues to society in any way that makes it worth it.
is this the author's attempt at washing their hands of the damage they've done? Smart enough to win all these prestigious economics awards and hold all these prestigious positions but too naive to be able to predict the consequences of what they've been fighting for? Things that were, in my opinion, very easy to predict, given all the regulation in place around existing markets. What does this say about the author and the field of economics? Every day we get to play the "dumb or awful?" game.
I read a sci-fi story years ago that had prediction markets in it that helped markets become more efficient. I thought it was a good idea at the time.
What neither I nor the author anticipated was that the easiest way to make the markets "efficient" was to rig them.
In hindsight it's obvious, but optimism is one of the most powerful blinders out there.
Put the same energy into championing regulation then. Don't walk away from a mess you claim to have helped create. (which the OP may indeed be doing, but it isn't clear they are, hence the chiding)
The people regulating this are the people profiting from it. Championing change isn't too different from prostrating in front of the King.
Your advice might work in a different world.
Look what they've become? You mean look at what they have been from the get go?
The corrupting influence they are having on society has been obvious from the start and was predicted by anyone with any familiarity of the effects of "traditional" gambling on people. Except the author apparently, because they had seen precisely what gambling can do to people and still pushed this.
"The dream was that markets would surface useful information"
The dream was that the markets would make the people who owned them stupid amounts of money like any casino owner. Pretending otherwise is self-delusion at it's finest but the author seems good at that.
I don't like prediction markets, but I think a lot of people in this thread are assuming that gambling vs. not is clear cut.
Insurance was illegal at different times in history because it was considered gambling. Ditto for commodity trading.
Even you look at the structure of a futures contact, the basics look really similar to a bet that can be traded with someone else.
The main differences are the regulatory environment, and the intention the actors in the market have.
Commodities, options, and futures are all legitimately used to hedge against future outcomes. The "gamble" (placing money on a future outcome) is a mechanism for the main goal: protection against instability.
When you look at stocks and - in particular - derivatives, it starts to look a lot closer to how gambling is structured. I'm pro stock market, but that doesn't mean I won't admit that the line between it and gambling is pretty hard to draw. It's a lot more grey than people give credit for
> Insurance was illegal at different times in history because it was considered gambling.
And it was, in fact, gambling. You could take out a life insurance policy on anyone without any relationship with them.
I mean I get how there are benefits to society from crop futures and insurance. I don't get how there are from an election prediction.
> Trump Media may soon sell early access to the president’s Truth Social posts.
Think about whether the spirit of the domestic/foreign emoluments clause would be okay with this. I'm sure some will argue there's enough layers of BS in this scheme that it's totally fine.
Ethics and judgement aside, I think startup founders can learn a lot from this administration as to how "successful" people twist things in their favor. The industry is full of it.
The law only matters if there’s someone willing to enforce it. We learned from Trump’s first term that no-one is willing to enforce the emoluments clause.
> We built a superior information aggregation machine for the economy
Wow, no you built an avenue for corruption, insider trading and problem-gambling, and you should have known this beforehand. Would have known it beforehand if you'd bothered to consult with non-economists.
>Trump Media may soon sell early access to the president’s Truth Social posts. Think about what this means. This is how the president announces war; every embassy on earth has to maintain a Truth Social account just to stay informed of American policy.
He is already so beyond the pale this doesnt even move the needle.
If they try this, multiple random people will write bots to republish everything instantly. The cash gusher they expected will turn into a trickle and the white house will look like a bunch of greedy Ferengi that lack the lobes to pull off a basic swindle. It's guaranteed to be an instant loss. I'll laugh pretty hard if they go ahead with it.
Whilst true, that extra 0.5-1 second edge is huge for HFT firms.
The only true winners in those prediction markets are the insider whales that already know what will happen.
Anyone who is not an insider is a loser.
I'll admit that I still see some value in prediction markets in theory, but in practice the way they were implemented seems to have caused an order of magnitude more harm.
In retrospect their misuse as a loophole for sports gambling was an obvious outcome. Seems like every promising new technology inevitably is used for evil. Cryptocurrency is mostly used for criminals. Social media displaced more meaningful forms of connection. We're already starting to see this with AI (psychosis, slop, assisting bad actors) but I'm afraid it will get much worse.
> In retrospect their misuse as a loophole for sports gambling was an obvious outcome.
This isn't a 'benefit of hindsight' thing; a lot of people called this out in advance, just like all the other tech you listed.
We need to stop listening to the people who are wrong about everything, rather than pretending the maximalist seeking of profit with no regulation is a reasonable position. We know it doesn't work.
I guess most of my positions on prediction markets came from Scott Alexander, e.g. https://www.astralcodexten.com/p/prediction-market-faq which was posted in 2022. The implicit argument seems to be "We should come up with some way to regulate these so that it's less harmful than existing forms of gambling." I think the part that was harder to foresee was the Trump admin suddenly seizing on them as a loophole to override state regulation of sports betting. Certainly there does not seem to have been any careful consultation with prediction-market experts to determine the most robust, socially beneficial laws.
I understand that "Things would be great if they'd done it right!" is in some sense unfalsifiable. But also I think it's pretty clear that the current regime is geared solely towards maximizing the profits of prediction market companies and Trump Jr.
So I will admit the idea of "maybe you could make some guesses about the future and if you're right it's worth something" sounds appealing - like if I guessed people would get perfect nutrition by IV and not bother with eating and it came true and I made money from it, or the same about making money speculating on when the first Mars colony is founded, etc. But what I don't get, taking a step back, and never have, is what society and the world get out of having more accurate guesses about this. Even setting the obvious negatives (if you have your retirement savings sitting against a Mars colony before 2030 maybe you have some incentive to sabotage a launch in early 2029) aside, what are the positive values supposed to be? And I've never really understood this.
My position is that prediction markets are bad and harmful but so are all mainstream stock markets. They're all prediction markets. People collaborate to pump up the value of specific assets or contracts, leading to undesirable outcomes.
It would be dishonest to ban prediction markets without banning stock markets.
The best which can be done, under the current system, is to punish unfair information asymmetries, which is practically impossible to do reliably... And even if we could find a way to punish it reliably; what would happen is that most rich people would end up in jail. Information asymmetry is almost never fair and it's how people make big money these days.
I think the best solution is to create conditions to allow people to earn big money in other ways; ways which create value. If there were other ways to make big money besides unfair information asymmetry, then skilled people would find it easier to do that instead...
Unfortunately, skill/talent does not allow you to gain an information advantage; only social connections do. So the current system is really bad in terms of wasting specialized skills/talents... Current system takes talented people and re-orients them towards adversarial games of deception where they're just a number in a sea of increasingly desperate untalented people who are better at playing the deception game... And the talented folks eventually lose their talents through lack of practice; they're so focused on learning ways to trick people and algorithms, that their actual talents atrophy; by the time they become well known, if they ever do (most don't), they've become mediocre; corrupted by their participation in the process of trying to become relevant; their main talent always takes the back seat.
I disagree with this - plenty of people treat stock as just wanting a share of profits/ownership and not as value speculation. That said, I do think we should be making rules that devalue speculation, perhaps turn-based trading since there's no particular benefit to the world from high frequency trading or value discovery happening in 5 milliseconds instead of 5 seconds, and making it so that being publicly traded requires not having controlling owners or preferential share classes.
Edit: and with prediction markets you don't own anything. Even with commodity futures you can end up having to take possession of cows or something.
You could ban stock market trading but the market itself is a very useful vehicle for investment and has democratized wealth and retirement planning to some extent.
How to ban trading? You could heavily addon tax profits from short term trading under 3 months at 90% say, tapering to zero as time increases maybe 2 years. With zero ability to offset any losses with other tax forms.
Shorts, options et. included unless it can be proven as part of a bigger trade or insurance but then apply to bigger trade.
This could also apply to market makers making that closer to a public service.
People always assume that others will use something with good intentions, but in practice, malice tends to take root before goodwill does.
And some things always are malicious, like "prediction markets", which is just gambling reworded to sound like something else.
This was never, ever going to end well. There is no good use of "prediction markets".
The uniquely problematic aspect of prediction markets is not really the gambling one. There are plenty of speculative vehicles. The problem is it subverts natural incentive structures that society has evolved to reward, by introducing another incentive signal; one that sometimes can be many times bigger, thereby manipulating the natural, real-world, outcomes.
If you were playing in the World Cup in the lesser teams, very often betting+sabotage/plausible negligence would have been a more profitable enterprise for you than to actually do your best to win.
Stock markets have this problem too, but they are much more regulated, and even if manipulated by insiders, the blast radius is smaller and often auditable.
You're just describing the preexisting problems that led to bans and regulations on sports gambling.
Some people gamble by trading stocks. Should we also abolish the stock market?
Prediction markets are meant to be the stock market but for events besides the value of a certain corporation. They were co-opted as a thin veneer of legitimacy over deregulated sports gambling. The concept itself theoretically has some value, however insignificant compared to the damage caused by the current policy.
Restricting retail trading of derivatives and short positions doesn't sound like the worst idea.
Not so much malice as greed and lack of empathy.