Kalshi is a recurring organization in the Astral Codex Ten archive, appearing 30 times across 30 issues between February 08, 2021 and March 03, 2026. The archive places it in contexts such as "Kalshi is 'the first regulated futures exchange dedicated to trading on event outcomes'"; "representative of Kalshi tells me that only people who take offers pay the fee"; "new prediction market Kalshi had some high fees". It most often appears alongside Polymarket, Metaculus, Manifold.
- Article page
- Kalshi
- Mention count
- 30
- Issue count
- 30
- First seen
- February 08, 2021
- Last seen
- March 03, 2026
Outbound links
- http://kalshi.com
- http://web.archive.org/web/20221104130431/https://stevekirsch.substack.com/p/1m-bet-rules
- http://web.archive.org/web/20221129133112/https://blog.rootclaim.com/rootclaim-accepts-500000-challenge-on-covid-vaccine-safety-efficacy/
- http://web.archive.org/web/20221224061743/https://www.skirsch.com/covid/SaarWilf.pdf
- https://archive.ph/pY4gF#selection-663.103-683.190
- https://astralcodexten.substack.com/p/book-review-sadly-porn/comment/5114457
- https://kalshi.com/
- https://kalshi.com/markets/kxmayorsf/san-francisco-mayor
- https://kalshi.com/markets/time/times-person-of-the-year-2023#time-23
- https://web.archive.org/web/20230104080248/https://www.rootclaim.com/
- https://www.astralcodexten.com/p/secrets-of-the-great-families
- https://www.courtlistener.com/docket/67934413/51/kalshiex-llc-v-commodity-futures-trading-commission/
Issue trail
- 21
- 26
- Open Thread 183
- Mantic Monday: Dogs In Wizard Hats
- Predictions For 2022
- The Passage Of Polymarket
- Mantic Monday: Ukraine Cube Manifold
- Ukraine Warcasting
- 22
- 22
- Open Thread 236
- 22
- 22
- Mantic Monday: Twitter Chaos Edition
- Prediction Market FAQ
- 23
- Open Thread 286
- 23: Room Temperature Superforecaster
- 23
- Open Thread 293
- 23
- 23
- 24
- 24
- Links For September 2024
- 24
- Mantic Monday: Judgment Day
- Congrats To Polymarket, But I Still Think They Were Mispriced
- Mantic Monday: The Monkey's Paw Curls
- Mantic Monday: Groundhog Day
Related pages
Source context
Kalshi is "the first regulated futures exchange dedicated to trading on event outcomes". As far as I can tell they actually did it. They got the government to agree to let them run a prediction market, regulated as investing rather than gambling. There will be a $25,000 max on contracts, so it might not be enough for the real whales, but that's still thirty times higher than existing prediction markets and enough to probably be a sea change. I talked to a representative who said they'll be "focused on creating markets in a few key categories such as climate, economics, geopolitics, energy, education, government, space, COVID, and technology", but that they remain open to potentially expanding to all sorts of other areas (except onions, which apparently have a very specific carve-out as something which it is illegal to have futures markets about, somebody please write a cyberpunk novel revolving around this). So far they're still setting things up, but they describe themselves as "ramping quickly towards launch". I am super psyched about this and will keep you all updated.
Inline links: Kalshi, except onions,
Kalshi - the first fully-regulated real-money prediction market - is now open for public beta.
The most exciting part is the monetary limit, which seems to be $25,000 per market (on buys, not earnings - so in theory you could buy $25,000 one-cent shares and win $2.5 million if you’re right). That’s about 30x the $850 limit on PredictIt. “Kalshi trader” could very easily be someone’s day job - though it’s probably still not worth opening your own investment bank over.
The least exciting part is the fees. They’re a bit complicated, but most of the time they’re around 10%, win or lose. I appreciate that this company is doing a really hard thing and deserves to make money, but I just don’t know how to square that with the fact that fees make prediction markets a lot less useful. Tetlock says that superforecasters are able to wring genuine signal out of single-digit differences in probability - when a superforecaster says 63%, they really mean 63%, and their prediction becomes less accurate if you round it to 60% or 65%. I don’t know how you’d match that in a market with 10% fees - and it looks like Kalshi traders don’t either, given that there’s currently a 103% chance that New York either will or won’t close indoor dining.
Inline links: a bit complicated
4: On last week’s Mantic Monday, I complained that new prediction market Kalshi had some high fees. A representative of theirs contacted me to say that it’s more complicated. He writes: “We actually charge 7% of the variance (price times one minus the price) for each trade. We only charge this for takers, so effectively a single user would expect to pay 3.5% of the variance (since they pay 7% half the time).” I regret any misimpression my oversimplified numbers may have given.
Polymarket, PredictIt, and Kalshi are silent on this question for now.
PREDICTION MARKETS 88. No new real-money prediction market becomes bigger than Polymarket: 70% 89. Manifold Markets is still alive and active: 30% 90. New legal US real-money prediction market at least half as big as Kalshi: 5% 91. New illegal but easy-to-use market satisfying the above: 20% 92. I post my scores on these predictions before 2/1/23: 80%
The rumor on the prediction market grapevine (which I absolutely cannot substantiate; please don’t sue me for libel) is that this might have something to do with competing prediction market Kalshi. Kalshi spent two years and probably a lot of money getting the CFTC to agree they were legal, and has a former CFTC Commissioner as a Director. Their legal status forces them to do an annoying and expensive regulatory dance all the time; illegal prediction markets were able to move more nimbly, provide better user experience, and eat their lunch. This was a big problem for them - but they’d just finished making lots of friends in the agency that decides which illegal things to crack down on, so, as Tyler Cowen likes to say, “solve for the equilibrium”.
I think there’s a general sense among people interested in the field that prediction markets are vastly underperforming their potential. There ought to be a billion dollar prediction market, maybe a ten billion dollar one. Smart VCs clearly believe something like this, or Kalshi wouldn’t have gotten $30 million+ in investment. Sometimes people who incorrectly believe I know things about prediction markets ask me if know the missing secret sauce.
Inline links: $30 million+ in investment
Easy to create your own subsidized markets “Real money” should be self-explanatory. Metaculus and Manifold are both very nice, but so far they’re limited to a small group of enthusiasts playing in their spare time. I value them both, but neither is the killer app that makes prediction markets as central to everyday life as stock markets or polls or whatever. “Easy to use” is kind of self-explanatory, but with some caveats. A big part of ease-of-use is liquidity; you can get that from a big user base or from clever deployment of automated market makers. A market that requires crypto knowledge is harder to use than one that doesn’t; one that’s inaccessible from the US is harder to use than one that isn’t. Also all the normal things like UI and search. “Easy to create your own markets” is where we’ve gotten stuck so far. Prediction markets are absolutely on top of questions about whether Donald Trump will win various elections. This is a solved problem. What I really wanted last year (and would have subsidized!) was a market about whether Alameda County, California, would permit indoor gatherings of 50 people on January 8th 2022 (ie would I be forced to cancel my wedding). But I also would have appreciated the ability to put a few questions to prediction markets before starting my psychiatry practice, or my grants program, or any of a dozen other things I did. A friend has gone further, and half-jokingly said they want to create conditional prediction markets about whether they’re compatible with various women in our friend group, to be paid out six months after the first date. Some of these applications are attempts to route around the principal-agent problem. Maybe I have some question about whether a certain grant would succeed, I’m not sure who to ask, and even if someone gives me a “Bob Smith, Grant Evaluator” business card, I don’t know if he’s any good. A prediction market takes all the pain out of searching for information - if I subsidize it enough, it’ll attract people with the relevant skill set who will solve my problem for me. Probably some of these ideas wouldn’t work, but probably other ideas I can’t even think of now would. I don’t know what the killer app for prediction markets will be. But we’re not going to find out unless people can create their own subsidized markets and play around. Polymarket took some baby steps towards this before the settlement: they had a Discord server where anyone could propose questions, and a lot of those questions became markets. But they still had to be general interest, not “let Alice’s five friends predict her dating life”. And there’s a big difference between “talk it over with company representatives on a Discord server” and “press a button”. Imagine if you could only tweet by emailing Jack Dorsey and convincing him that your comment was a good thing to have on Twitter. Even if Jack had good judgment and approved most requests, this would be a long way from the limbic system < — > Send Tweet loop that real Twitter users know and love. I asked some people in the business why they won’t do this. They said most people are bad at writing good resolution criteria. They don’t want their employees to get stuck resolving incredibly dumb questions about people’s dating lives, hunting down inaccessible or conflicting information, and making a bunch of people mad whichever way they decide. As far as I can tell, Manifold Markets solved that problem with their “proposer decides the resolution, caveat emptor” strategy. But Manifold is US-based and can’t use real money, so there’s still no way to subsidize a market effectively. (This is why I’m pessimistic about Kalshi. They could potentially do a lot of good in the “will Afghanistan collapse?” types of markets the Nobel laureates want, though even there I think some of their betting limits will give them trouble - $25,000 is good money, but not quite good enough to incentivize founding the prediction market equivalent of a Wall Street trading firm. But even if they solve this, I can’t imagine the regulators giving them permission to host “will this grant work out?” or “how will my dating life go?” markets; it’s just too weird, and the CFTC is too conservative. I don’t know, maybe their connections will come through and pull it off, but I don’t even know if they’re ambitious enough to want this, and I hate having to rely on one organization.) Right now my hopes are, in ascending order of likelihood: Manifold figures out some kind of weird crypto thing that isn’t real money from a legal perspective, but is real money from a “people really want it and will put a lot of effort into getting it” perspective.
These run from about 48% to 60%, but I think the differences are justified by the slightly different wordings of the question and definitions of “invasion”. You see a big jump last Friday when the US government increased the urgency of their own warnings. I ignored this on Friday because I couldn’t figure out what their evidence was, but it looks like the smart money updated a lot on it. A few smaller markets that Clay didn’t include: Manifold is only at 36% despite several dozen traders. I think they’re just wrong - but I’m not going to use any more of my limited supply of play money to correct it, thus fully explaining the wrongness. Futuur is at 47%, but also thinks there’s an 18% chance Russia invades Lithuania, so I’m going to count this as not really mature. Insight Prediction, a very new site I’ve never seen before, claims to have $93,000 invested and a probability of 22%, which is utterly bizarre; I’m too suspicious and confused to invest, and maybe everyone else is too. (PredictIt, Polymarket, and Kalshi all avoid this question. I think PredictIt has a regulatory agreement that limits them to politics. Polymarket and Kalshi might just not be interested, or they might be too PR-sensitive to want to look like they’re speculating on wars where thousands of people could die.) What happens afterwards? Clay beats me again: For context: So it looks like forecasters expect that, conditional upon Russia invading at all, there’s an 80% chance they’ll take Mariupol in the east, a 66% chance they’ll take Kharkiv (also eastern, but only a third ethnic Russian and currently aligned with the central government), and only about a 30% chance they take Kyiv or Odessa. See also this thread full of speculation in the subreddit. As for me, I’m going all in on “yes” after seeing this tweet: Alexander Cube Last week I speculated that to truly realize the potential of prediction markets, we’d need one that was real money, easy to use, and easy to create markets on. Gustavo Lacerda and Nuno Sempere very kindly drew this picture and named it after me: Nobody has reached the promised land at the furthest point. But all three connected vertices are occupied. Augur is real-money and lets people create their own markets, (but it’s impossible to use - it’s made of complicated crypto contracts that nobody’s made a workable front end for yet). Polymarket is real money and easy to use (but doesn’t let people create their own markets; apparently they’re nervous about resolution disputes). Manifold is easy to use and lets people create their own market, but it’s not real money (they’re American and centralized, so they have to follow anti-gambling regulations). Manifold Markets Speaking of which, they’re open! As the cube suggests, Manifold is a site where anyone can create their own (play money) prediction market. They set the question and they decide when and how it resolves (with everyone else just out of luck if they decide to fake it or rug-pull). It’s a bold strategy, but boy oh boy are people liking it so far: Not actually in order This is a semi-randomly selected sample of Manifold markets, but let’s go through them one by one. The Ukraine market is the biggest on Manifold. It’s also deeply out of step with every other prediction market and the top non-prediction-market authorities - who are all giving numbers in the 50s and 60s. I don’t understand how this is so low - yes, play money < real money, but mostly because play money doesn’t get enough people betting. Here lots of people are betting - it’s the biggest market on the site, and since you only start with $1000 either twenty people have bet everything or more people have bet a fraction - but it’s still wrong. I tried to spend some play money to correct it and it snapped back to just as wrong as it was before. I have no explanation. Midnight The Stray Cat is the second biggest market on Manifold, just after Ukraine. I guess the Internet really liking cats shouldn’t be a surprise at this point. In case you need to do research first I’m told this is the cat in question: Props to Manifold for a bunch of markets like the third one on there, where they eat their own dog food by using their market to predict how their business decisions are going to go. ACX Bot has copy-pasted all of my predictions from 2022. At some point they should be able to compare their results with Zvi (ie a single very smart person), with the contest many of you entered (ie an average of formless crowdsourced predictions), and Metaculus (ie a non-monetary forecasting tournament). I’m looking forward to it! Most of you already know Lars Doucet, who’s written some great ACX posts on Georgism. I don’t know what possessed him to make a Joe Rogan Georgism interviewee market, unless he’s gunning for the position. Valinor is a group house on my street, with ~a dozen people living in and around it. We’ve been talking about fixing the backyard for a while. Now we can bet about whether it will happen. Having a number for this actually affects some of my decisions a little. Connor is hijacking the prediction market to make a poll, which is pretty cute. Dwayne Johnson does not have a 15% chance of winning the election. Manifold is suffering from the usual play money problem, where if you only start out with $1000 in play money, nobody wants to lock it up for three years to make a 15% profit. Vivek’s market, “Will I believe that 13177 is a prime number”, is pretty unusual. I’m interpreting it as a test/demonstration of prediction markets’ information-gathering ability. If you don’t know something and it’s hard to Google, you can make a prediction market about whether you’ll believe it in the future, and people who are able to figure out the answer will bet on it. Based on the 97% YES rate, I’m guessing 13177 is in fact a prime number. What else can you do this with? TANSTAAFL’s “Will I Be Convinced That Justin Trudeau Is Not Fidel Castro’s Son?” market is maybe pushing the limit of this methodology. Anyway, there are lots of me-too prediction markets but this is something genuinely new under the sun. Maybe it will be awesome itself, but I’m also hoping it helps bigger players realize how much more is possible. This Week In Metaculus A few new questions on intelligence enhancement, eg: The question explicitly allows embryo selection, but says it must raise IQ ten points and be available for <25% median income to count. Trivial improvements to existing embryo selection will top out around 9 points, so this seems to be predicting something more interesting, maybe iterated embryo selection at the very least. I’m probably slightly bearish on this one; I believe if it existed someone would find a way to get it, but I think the regulatory climate might be able to prevent the relevant research indefinitely. Improving adult IQ is really hard. This is a bold thing to speculate about! Atmospheric CO2 was 300ish for most of pre-industrial history, 400ish now, and rising. This question predicts 600 in 2100, which sounds like what happens if global warming gets a bit worse but eventually stabilizes. I’m less sure. I think if we make it to 2100, we’ll have so much technology that atmospheric CO2 can be whatever we want it to be. But maybe we’ll want it to stay where it is; once there’s been a lot of global warming and people have moved / shifted lifestyles, it could be equally disruptive to cool the planet back down. Right now it’s 5%, the official government prediction is 10% by 2030, but this market says 17.6%. But look at that probability distribution! It’s a lot of people saying 10%ish, plus a very long tail of very big numbers. I think people are disagreeing about how exponential this change is going to be. Shorts Metaculus is holding an essay contest for people who want to use their AI-related prediction markets to argue the future of AI. $6500 available in prizes.
Inline links: Manifold is only at 36%, Futuur is at 47%, an 18% chance, $93,000 invested and a probability of 22%, https://substackcdn.com/image/fetch/$s_!fl0X!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F983ebd4c-28ea-48f8-9125-6ab8d9096d6d_511x310.png, https://substackcdn.com/image/fetch/$s_!rSzR!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fd76dd820-af14-4644-84f7-e4810e4e669e_410x289.png, this thread full of speculation in the subreddit, Gustavo Lacerda, Nuno Sempere, https://substackcdn.com/image/fetch/$s_!ukFP!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F851b95c2-a103-43fc-8e6f-339468fa1469_485x320.png, Augur, Polymarket, Manifold, https://substackcdn.com/image/fetch/$s_!j26W!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fcba2cb25-7980-446d-8050-499c35c4e56f_919x1017.png, predictions from 2022, ACX posts on Georgism, Will I Be Convinced That Justin Trudeau Is Not Fidel Castro’s Son?, https://substackcdn.com/image/fetch/$s_!V2bV!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fca419ec2-7b91-44cd-80b0-2aad1baa4c2f_766x166.png, The question, https://substackcdn.com/image/fetch/$s_!Ah6n!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F1ff4f28d-1901-45f2-85bc-8f1c2120ecd1_770x187.png, https://substackcdn.com/image/fetch/$s_!zSK8!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F80e3383c-6f68-412a-ac90-ca63236bdb10_769x167.png, This, https://substackcdn.com/image/fetch/$s_!frCz!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F976d1b66-daee-43d1-948a-500e77ac5a2f_764x164.png, this market, holding an essay contest
There’s a Putin ouster market that has exactly the same probability as Metaculus', and a very small “will Russia invade anywhere else” market that’s at 30% right now, more than twice Metaculus’ level. Meanwhile, searching for Ukraine on Kalshi gives me nothing, so please accept their “will it be over 35 degrees in New York City” market instead. Everyone keeps telling me I shouldn’t be so bearish on Kalshi, they can be both regulated and dynamic at the same time. Maybe so, but not yet.
Meanwhile, searching for Ukraine on Kalshi gives me nothing, so please accept their “will it be over 35 degrees in New York City” market instead. Everyone keeps telling me I shouldn’t be so bearish on Kalshi, they can be both regulated and dynamic at the same time. Maybe so, but not yet.
1: Taosumer reviews my Prediction Market Cube and asks why I don’t have “decentralized” on there as a desideratum. My answer: decentralization is great, but for me it cashes out in “ease of use” - specifically, it’s easy to use it because the government hasn’t shut it down or banned you. Or as “real money” - the reason Manifold isn’t real-money is because they’re centralized and therefore vulnerable and therefore need to obey laws. Or as “easy to create market” - the reason Kalshi doesn’t let you create markets is partly because it’s centralized and therefore vulnerable and therefore needs to limit markets to things regulators like. I agree that, because of those second order effects, decentralization is crucial and needs to be pursued more, and I agree that it’s a tragedy that [whatever happened to Augur] happened to Augur.
Inline links: Taosumer reviews
2: Bloomberg has an article on Kalshi: A New Prediction Market Lets Investors Bet Big on Almost Anything. Great explanation of why regulated prediction markets are so hard, and what kinds of things they can or can’t do. Key quotes: “One day during their time at Y Combinator, Lopes Lara and Mansour say, they cold-called 60 lawyers they’d found on Google. Every one of them said to give up”. Also “the [Division of Market Oversight] was set up to deal with exchanges that might create two or three new markets a year. Kalshi’s business model called for new ones practically every day.”
1: Lots of people have asked for my thoughts on CFTC shutting down PredictIt. I’ll write something on this next Monday, but for now I tentatively agree the conclusions of this Karlstack article. Short version: the guy on Twitter claiming responsibility is probably a troll; more likely this is Kalshi/Sequoia Capital weaponizing the CFTC to shut down competitors and get a monopoly. PredictIt’s parent group has a link to contact your member of Congress and other relevant officials here, but the website doesn’t work very well and I doubt the political campaign will work much better.
Most people I’ve talked to suspect Kalshi, a big for-profit prediction market funded with $30 million from VC firm Sequoia Capital. Their edge (which they boast about openly) is their close relationship with the CFTC - for example, their head of regulatory strategy is a former CFTC official, a former CFTC commissioner is on their board of directors, etc.
Inline links: funded with $30 million, head of regulatory strategy, former CFTC commissioner is on their board of directors
Kalshi’s legality is both their biggest strength and their biggest weakness. It’s a weakness because they have to submit a lot of paperwork to the CFTC every time they want to open a new market, let the CFTC spend weeks or months debating its social utility, and sometimes get refused; as a result of this and other regulatory hurdles, they’re usually months behind, and much less interesting than, other prediction markets (for example, they still don’t have any questions about the Ukraine war). On the other hand, they can operate free from regulatory harassment.
But operating free from regulatory harassment isn’t actually an advantage if the CFTC never harasses other prediction markets - which was its policy up until about a year ago. You can see why Kalshi - which had spent a big chunk of its $30 million lobbying the CFTC for approval - was kind of annoyed that they were doing neither better nor worse than illegal crypto prediction markets. Or PredictIt, run by Victoria University on a no-action letter.
One of my hopes for forecasting is that it eventually becomes so well-validated that decision-makers can take these kinds of considerations into account: “Should we sent ATACMS missiles to Ukraine? It would have such-and-such benefits, but also increase the risk of nuclear escalation by 3.6%, is it worth it?” We can’t directly compare Samotsvety and Swift because they’re predicting over different time periods. But assuming that there’s more risk in the next six months than in the six months after that, I think Samotsvety is a little higher but they’re not embarrassingly far off. Metaculus is a bit more optimistic than either, believing there’s only a 4% chance of detonation in Ukraine in 2023 and a 7% chance of any use in the next ~year. Max Tegmark is going much higher than anyone else and says 16% chance of global nuclear war. Kalshi Applies For Election Markets Kalshi is a regulated and fully-legal prediction market with good lobbyists and a compliance team. This means the CFTC probably won’t randomly shut them down one day. But it also means they can only create new markets with CFTC permission. In July, Kalshi asked the CFTC for permission to make midterm election prediction markets - specifically, which party will win control of the House and Senate. The CFTC has said they will make a decision by October 28 (which doesn’t leave much time for predicting to happen before the November 8 election, but I guess it sets a precedent). September was the Request For Comment period, when the CFTC solicited comments from stakeholders about what they should do. Kalshi tried really hard to get lots of people to send in positive assessments - I know this because of how many people asked me “why is the CEO of Kalshi emailing me about this thing?” Their strategy seems to have worked; among the people who wrote to the CFTC in support were: A managing director at JP Morgan
Inline links: a 4% chance, a 7% chance, 16% chance, In July, they will make a decision by October 28, A managing director at JP Morgan
I personally declined to comment because I was still angry at Kalshi for (suspectedly!) having a role in the PredictIt decision. Now I feel kind of childish for this, because many other equally angry people swallowed their pride and agreed to send the positive comments for the good of forecasting in general - including the CEO of the company that runs PredictIt! Others including Moskovitz wrote pro-Kalshi comment but recommended that CFTC also approve other markets. Whatever, too late to change things now. I may also have sent a kind of petty email insulting the Kalshi people when they asked, which I feel slightly bad about. Oh well. As the Dalai Lama says, “don’t be petty and vengeful, but if you are, at least blog about it publicly to maximize its future deterrent effect.”
I couldn’t find too many comments in opposition, but one came from a group called Better Markets, which wrote a very long argument saying this was too close to gambling and was a further step towards “the deeply troubling trend toward the ’gamification’ and ‘retailization’ of finance.” Also, frequent prediction market player Avraham Eisenberg wrote a not very serious comment which may have been motivated by spite toward Kalshi, or him just not being a very serious person.
Inline links: Better Markets, a not very serious comment
1: Government regulator CFTC is poised to reject Kalshi’s request to host election prediction markets (see also here). I’ve been extra harsh on Kalshi because of allegations that they worked to destroy competitors. But I would look beyond that if I thought they were really going to achieve all of our dreams and create a real legal high-volume prediction market on important questions. This kind of thing is why I’m still pessimistic. Election betting is the bread-and-butter of most prediction markets; Kalshi spent months and rallied a dream team of supporters to beg for permission to do that, and apparently still failed. I think there’s more of a future in play money and cryptocurrency, much as I hate to admit it. Still, I will temporarily put aside my grudge against Kalshi to say that I’m sorry about this and I admire the level of fighting spirit they showed here.
Inline links: poised to reject, here
People don’t trust the prediction market. If there is a 10% mispricing, but a 15% chance that the prediction market will go bust, steal your money, or wrongly resolve the question against you - then on average you lose 5% by correcting the mispricing! This doesn’t mean it’s impossible to have a truly accurate prediction market. There are two markets right now - Polymarket and Kalshi - where you can easily make $10,000+ by correcting mispricings. Unsurprisingly, I can’t find any big obvious mispricings on these markets! 2.4: Is there any empirical evidence comparing real prediction markets to experts? Yes. As predicted, prediction markets are about as accurate as Nate Silver. See Maxim Lott’s analysis here. More generally, studies usually find that prediction markets beat the average person, various experts, and various other methods like election polling. They are somewhere between equal-to and slightly-worse-than complicated aggregation algorithms, but these complicated aggregation algorithms are rarely used in real life, and I consider them to be “prediction markets lite”, ie part of the same toolbox of forecasting technologies. Hanson (2007) says (I have not individually checked each claim): Remarkably, in every known head-to-head field comparison between speculative markets and other forward-looking institutions, the speculative markets have been at least as accurate. More often than not, they prevail. Orange juice futures improve on National Weather Service forecasts (Roll 1984), horse race markets beat horse race experts (Figlewski 1979), Oscar markets beat columnist forecasts (Pennock, Giles, and Nielsen 2001), gas demand markets beat gas demand experts (Spencer 2004), stock markets beat the official NASA panel at identifying the company responsible for the Challenger accident (Maloney and Mulherin 2003), election markets beat national opinion polls (Berg, Nelson, and Rietz 2003), and corporate sales markets beat official corporate forecasts (Chen and Plott 2002). 2.4.1: If prediction markets are only as good as Nate Silver or other experts, who cares? Why don’t we just skip the prediction markets and listen to the experts directly? See the next section, “Why believe prediction markets are canonical?” 2.4.2: What if there are many equally impressive experts who disagree? What do prediction markets do then? See the next section, “Why believe prediction markets are canonical?” 3. Why believe prediction markets are canonical? By canonical, I mean that in ideal cases: all prediction markets speak with a single voice
Inline links: Polymarket, Kalshi, Maxim Lott’s analysis here, https://substackcdn.com/image/fetch/$s_!M2HJ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F07a94246-22f8-4142-975f-a8ed711d04b3_1446x926.png, various experts, various other methods like election polling, complicated aggregation algorithms, Hanson (2007)
Make special deals with US regulators for exemptions to the usual restrictions. Usually these deals involve promises to have a very limited set of questions or deal in very small bets only. PredictIt used to be the leader here, but regulators changed their mind and are shutting it down. Kalshi will probably replace it.
Operate using play-money only. Here Manifold is the leader. You could also think of superforecasting tournaments like Metaculus as a version of this. I claim that the main reason prediction markets haven’t fulfilled their potential and become a major pillar of worldwide decision-making is that none of these solutions are really adequate. For whatever reason, most people interested in prediction markets are American, so Polymarket has a limited userbase. The regulators are pretty harsh, so the companies that strike deals to get exemptions usually have to trade away most of their functionality. Kalshi can only ask a few specific regulator-approved questions; the limits are so harsh that they’re not even allowed to predict elections. Play-money prediction markets like Manifold are a lot of fun, but there’s a limit to how much work people will do to earn play money. I want a world where the people who are best at correcting mispricings in prediction markets can make full-time jobs out of it, and where there are prediction market equivalents of Goldman Sachs where hundreds of brilliant people work together with cut-throat efficiency to find mispricings the moment they appear. Play money won’t get us there. Real money prediction markets tend to have between four- and six-digit (very occasionally seven-digit) volumes on most questions. Play money prediction markets have between one- and four-digit numbers of traders on most questions. Most big prediction markets are usually within 10% of each other and the best outside experts, but not always within 1%. Traditional financial markets are usually within 1% of each other, so I think this is because the prediction markets are still too small to have sub-1% accuracy. I hope that as they grow bigger they can reach this milestone. 7. What can I do to help promote prediction markets? If you’re an ordinary person with no special expertise or skills, I think the best thing you can do is create a Manifold Markets account, bet on topics that are interesting to you, and create markets for any interesting topics that don’t have one yet. I think this could be helpful for a few reasons: It’s hard to really understand prediction markets until you’ve played a few yourself.
2: Nuno Sempere: Tracking The Money Flows In Forecasting. EG Metaculus runs off of ~$6M in grants; Kalshi has $30M in VC funding. Gnosis, a crypto protocol that never went anywhere, apparently had a $230M market cap at one point, but this is probably some kind of fake crypto valuation trick.
Inline links: Tracking The Money Flows In Forecasting
2: Kalshi is trying to get CFTC permission to run some political prediction markets in the US again, maybe with good implications for other markets if they succeed. CFTC comment period ends tomorrow (sorry), I am slightly more optimistic that these make a difference after the FDA retracted its telemedicine plan based on them. News article here, discussion on the subreddit here, and the CFTC’s comment page is here.
Kalshi is a legal prediction market trying to comply with regulations. They asked their regulator, the CFTC, for permission to make prediction markets about the upcoming elections. In grand regulatory tradition, CFTC has drawn this out into an excruciating yearlong process that has aggravated everyone involved.
Most comments seemed to be anti-Kalshi. Some big anti-market and anti-gambling organizations urged their audiences to participate, especially a group called Better Markets. Most of these people’s talking points involved gambling on elections being a threat to democracy: what if it incentivized people to rig elections?
Inline links: Better Markets
Big Wall Street firms can bet more on Kalshi, up to $100 million, but big Wall Street firms already have hundreds of millions of dollars at stake in elections based on who passes the next Sarbanes-Oxley or whatever. In fact, the whole reason for Wall Street to gamble $100 million on an election is to hedge the risk that Bernie Sanders will get elected and cost them $100 million. Allowing election bets makes Wall Street less interested in elections, not more!
First, the simplest proof that something was predictable is to have predicted it. Since I know you’ll ask, yes, I bet on the markets at the time - 10,000 mana on Manifold and $100 on Kalshi - and made a nice profit. I would have bet more on Kalshi but it took too long to load the money onto my account.
NinthCause and SG are Manifold co-founders. Jack, Marcus Abramovich, and Michael Wheatly are Manifold leaderboard record holders. Peter Wildeford is a superforecaster who came near the top in the ACX forecasting contest. Matthew Barnett works in AI forecasting. You all know Eliezer and Zvi. As far as I can tell nobody high up on the YES side is similarly illustrious. But prediction markets are supposed to ensure you don’t have to resort to name-dropping, so how did this go wrong? I was tempted to blame Manifold-specific factors, like the ability to get starting mana instead of putting skin in the game. But real-money markets Polymarket and Kalshi got approximately the same results: Polymarket: https://polymarket.com/event/is-the-room-temp-superconductor-real Kalshi: https://kalshi.com/markets/supercon/roomtemp-superconductor-reported Both reached the 40s to 50s! I think there just wasn’t enough smart money to drown out the people who wanted to bet on an exciting thing being true, or who were unduly influenced by a social media environment optimized to keep their attention by convincing them that an exciting thing was true. I have never claimed prediction markets are always good. All I wrote in the Prediction Market FAQ was that either a prediction market will be good, or you could make lots of free money. In this case, it was the second one. I regret I only made $30. I do hope this situation will improve over time, as over-eager forecasters get burned and dollars flow from dumb money to smarter. [EDIT: I should have included something about Metaculus here, but it’s confusing. I think the most popular Metaculus market was lower because it had stricter resolution criteria (the first replication had to be positive, instead of any replication) but that otherwise Metaculus raw probabilities mirrored everyone else’s. We don’t know how their algorithmically processed probabilities did yet and I’ll report on that information when I get it.] Salem/CSPI Tournament Winners The Salem Center and the Center For The Study Of Partisanship And Ideology, two think tanks associated with right-wing intellectual Richard Hanania, sponsored a prediction market tournament last year. Participants got $1000 in play money to bet on selected markets about current events; winners would be interviewed for a well-paying academic sinecure at one of the think tanks. Now the tournament is over. Winners have yet to be announced, but unofficially, everyone knows who they are: First place out of 999 participants is zubbybadger. Zubby is a prediction market veteran who was featured in a Washington Monthly article last year for his great track record in political betting (he’s made > $150,000 on PredictIt). Now he works as a “community manager” for Kalshi (I don’t know what this entails). Second place was Robert from Considerations On Codecrafting. He’s written a detailed reflection on his experience (part one, part two) which is my main source for this section and highly recommended. He describes himself as “having absolutely no experience with prediction markets”. Third place was Johnny Ten-Numbers, about whom I can find no further information. You can see the rest of the top 20 at the very bottom of this post. Reading Robert’s story of his experience, I’m struck by how little of the competition at the top was about predictive accuracy. Everyone in the top 20 was a very accurate predictor (Exactly equally accurate? Hard to tell.) What separated 1st place from 20th, aside from luck, was things like: Ability to move fast - both in responding to news, and in taking the other side of bad bets. Several top performers programmed bots to give them an edge here.
Inline links: https://polymarket.com/event/is-the-room-temp-superconductor-real, https://substackcdn.com/image/fetch/$s_!PMh_!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F1143f4c9-a7f7-4aee-a006-12b1a28bd923_654x389.png, Prediction Market FAQ, selected markets about current events, zubbybadger, featured in a Washington Monthly article last year, Robert, part one, part two, Johnny Ten-Numbers
Kalshi: https://kalshi.com/markets/supercon/roomtemp-superconductor-reported Both reached the 40s to 50s! I think there just wasn’t enough smart money to drown out the people who wanted to bet on an exciting thing being true, or who were unduly influenced by a social media environment optimized to keep their attention by convincing them that an exciting thing was true. I have never claimed prediction markets are always good. All I wrote in the Prediction Market FAQ was that either a prediction market will be good, or you could make lots of free money. In this case, it was the second one. I regret I only made $30. I do hope this situation will improve over time, as over-eager forecasters get burned and dollars flow from dumb money to smarter. [EDIT: I should have included something about Metaculus here, but it’s confusing. I think the most popular Metaculus market was lower because it had stricter resolution criteria (the first replication had to be positive, instead of any replication) but that otherwise Metaculus raw probabilities mirrored everyone else’s. We don’t know how their algorithmically processed probabilities did yet and I’ll report on that information when I get it.] Salem/CSPI Tournament Winners The Salem Center and the Center For The Study Of Partisanship And Ideology, two think tanks associated with right-wing intellectual Richard Hanania, sponsored a prediction market tournament last year. Participants got $1000 in play money to bet on selected markets about current events; winners would be interviewed for a well-paying academic sinecure at one of the think tanks. Now the tournament is over. Winners have yet to be announced, but unofficially, everyone knows who they are: First place out of 999 participants is zubbybadger. Zubby is a prediction market veteran who was featured in a Washington Monthly article last year for his great track record in political betting (he’s made > $150,000 on PredictIt). Now he works as a “community manager” for Kalshi (I don’t know what this entails). Second place was Robert from Considerations On Codecrafting. He’s written a detailed reflection on his experience (part one, part two) which is my main source for this section and highly recommended. He describes himself as “having absolutely no experience with prediction markets”. Third place was Johnny Ten-Numbers, about whom I can find no further information. You can see the rest of the top 20 at the very bottom of this post. Reading Robert’s story of his experience, I’m struck by how little of the competition at the top was about predictive accuracy. Everyone in the top 20 was a very accurate predictor (Exactly equally accurate? Hard to tell.) What separated 1st place from 20th, aside from luck, was things like: Ability to move fast - both in responding to news, and in taking the other side of bad bets. Several top performers programmed bots to give them an edge here.
2: Manifold Markets wants me to remind you that this is approximately your last chance to sign up for Manifest, their forecasting and prediction market conference in Berkeley, CA. Guests will include Nate Silver, Robin Hanson, Aella, Zvi, and the CEOs of Kalshi, Manifold, and Polymarket. I’m still figuring out if I can make it but I’ll try my best.
Prediction markets have often existed in a regulatory gray area. A newer market, Kalshi, has tried to cooperate with regulators to become a new kind of fully-legal and highly-regulated platform, but it’s been tough going. The day of the conference, main government regulator CFTC denied Kalshi’s petition to have betting markets on elections (see the first item here for previous discussion). This is pretty discouraging; election betting is the bread and butter of prediction markets, and the government seems to have banned it.
Inline links: here
Source: Kalshi Second one is out of order, but these basically agree. Why is Taylor Swift so high? I understand she’s a very famous pop star, but hasn’t she been an equally famous pop star every one of the past ten years?
Inline links: Kalshi
1: Last month, we talked about the CFTC (regulatory body) denying Kalshi’s request to have election questions on their prediction market. Kalshi is now suing the CFTC to reverse their decision, saying that “the contracts contain no unlawful acts prohibited under the Commodity Exchange Act and therefore, the CFTC has no power to block them”. I have to admit I’m surprised by this - I thought Kalshi was trying to cultivate good will with the CFTC, and this seems pretty adversarial. Also, if they win, what’s left of the CFTC’s ability to regulate prediction markets at all? Any regulation experts want to weigh in?
Inline links: denying, is now suing the CFTC to reverse their decision
Across Metaculus, Manifold, Good Judgment, Infer, Kalshi, and Polymarket, we only found 55 questions with large crowds on good geopolitics questions about 2024. Also, this eval only scores binary questions for the same reason - we didn’t find enough continuous questions to get statistical power. (Part of the motivation for the Humans vs. Bots tournament was to double our sample size on binary questions, but we haven’t run new evals on them yet.)
There are already hundreds of groups that care deeply about the outcome of elections. Some have billions of dollars on the line, like defense contractors, fossil fuel companies, real estate developers, and investment banks. Others care for non-financial reasons: transgender people, Christians, gun owners, the population of Ukraine, people who think we’ll all die from climate change, people who think the country will become a dictatorship, all Democrats, all Republicans, etc. The idea that adding one more group - “people who have a few thousand dollars staked on Kalshi” - will be the difference between a safe and secure election, and one that’s hacked by motivated parties, is pretty crazy.
RIP Kalshi, who are the main group negatively affected by this. This takes away a lot (though not all) of their value proposition, leaving them the option of contracts on some economic indicators, weather, and whatever else they can slip through the cracks.
40: This month in prediction markets: a court reverses the CFTC’s ruling that Kalshi can’t have prediction markets on Congressional elections. I have to say - before I found a few subfields of politics where I was interested enough to follow the nuts and bolts, I never really understood how much of the law-making process was government agencies setting policies, the people who dislike those policies going to court, and the court cancelling the policies. Also, thanks to TracingWoodgrains and his lawyer friends for their related work trying to protect US prediction markets.
Still, it’s hard to overstate their dominance. Remember, their presidential election market has $910 million. For their competitor, PredictIt, the same number is $37 million. Kalshi doesn’t have election bets (more on this later) but their biggest markets look to be in the $2 - $5 million range.
Inline links: is
3: Kalshi vs. CFTC, round one million: after CFTC banned Kalshi from hosting political contracts last year, Kalshi appealed. Earlier this month, the judge sided with Kalshi, saying that the CFTC’s attempt to define elections as “gaming” so it can regulate them under anti-gaming laws is an illegal power grab. The judge claims this has no relevance to the CFTC’s broader anti-political-market push, but since the whole thing is based on the elections = gaming theory I think it has a lot of relevance indeed. The CFTC has since appealed, and Kalshi is blocked from hosting the contracts until the appeal goes through (it’s 49 days until the election; at this point even a pro-Kalshi ruling might be a Pyrrhic victory). Also, why is Kalshi trying to get Congress contracts up, but not a Presidency contract? More sympathetic test case?
Inline links: Earlier this month, sided with Kalshi
On October 14th, Polymarket gave Donald Trump 54% odds of winning, compared to Nate Silver’s 49% and Metaculus’ 45%. Whatever, everyone knows Polymarket has a small right-wing bias, and 5% isn’t too bad. Three days later, it had risen from 54% to 61%, despite no news and no change for Metaculus or Nate, bringing the Polymarket/Silver spread to an unprecedented 11%. What happened? This is the rare prediction market story where the answers are already in the New York Times and the Wall Street Journal: one really rich guy put $30 million on Trump (a recent followup by Jorge Velez claims it’s actually more like $75 million). Although he prefers to remain anonymous, reporters have talked to him and are able to reveal that he’s French, goes by “Theo”, is a former banker, and has no insider connections. He just a normal rich guy who really thinks Trump will win. This is exactly the sort of shock that prediction markets are supposed to be resilient against. Instead, the market stayed at 61% for days, swung even higher for a while, finally fell back down two weeks later, then went back up again. What happened? The simplest story would be insufficient liquidity: there just weren’t enough people to gather the $75 million it would take to bet against Theo. This is superficially plausible: Polymarket requires crypto and bans Americans, so the mispricing couldn’t be corrected until enough crypto-literate, American-election-following foreigners showed up to bet $75 million. That’s a tall order, and maybe it took two weeks. But the simple story seems wrong. Other real-money markets rose approximately in tandem with Polymarket. For example, Smarkets got to Trump 59% on 10/16, and peaked at 64% on 10/30. Kalshi followed a similar path. Both tracked Polymarket, not Nate Silver or Metaculus (neither of whom ever went above Trump 55% since Harris joined the race). So I think the remaining stories are: Theo made his giant bet on Polymarket. By coincidence, at the same time, bettors everywhere massively overcounted a few good polls for Trump and started a feeding frenzy on pro-Trump shares. This made all other markets gain, and Polymarket stay at its Theo-caused peak, until a few bad polls for Trump brought everyone back to reality last week.
Inline links: New York Times, Wall Street Journal, followup, Smarkets, https://substackcdn.com/image/fetch/$s_!8twW!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F25ccd651-3404-446a-a7cb-5747af316038_1180x315.png
[EDIT, thanks to commenter Chastity for the explanation] There wasn’t enough liquidity to get Polymarket back down, but traders looking for free money arbitraged with Polymarket-Kamala plus Smarkets/Kalshi-Trump. Polymarket is so much bigger than the other two (and Theo kept driving it back up), so this just looked like Smarkets and Kalshi going all the way up to Polymarket levels.
Inline links: commenter Chastity
Kalshi Plays The Long Game The CFTC has suffered a string of recent defeats in its quest to regulate prediction markets. Most recently, with one month to go, an appeals court struck down their decision that Kalshi couldn’t offer election betting. In their ruling, the judges said that:
Another group - the real-money markets - said the election was 60%. Polymarket was the leader here; a group of smaller prediction markets, including Kalshi, Betfair, and PredictIt - were probably just changing downstream of Polymarket, as traders tried to arbitrage the bigger site’s odds.
For a few weeks in October, Polymarket founder Shayne Coplan was the world’s youngest self-made billionaire (now it’s some AI people). Kalshi is so accurate that it’s getting called a national security threat.
For a few weeks in October, Polymarket founder Shayne Coplan was the world’s youngest self-made billionaire (now it’s some AI people). Kalshi is so accurate that it’s getting called a national security threat. The catch is, of course, that it’s mostly degenerate gambling, especially sports betting. Kalshi is 81% sports by monthly volume. Polymarket does better - only 37% - but some of the remainder is things like this $686,000 market on how often Elon Musk will tweet this week - currently dominated by the “140 - 164 times” category. (ironically, this seems to be a regulatory difference - US regulators don’t mind sports betting, but look unfavorably on potentially “insensitive” markets like bets about wars. Polymarket has historically been offshore, and so able to concentrate on geopolitics; Kalshi has been in the US, and so stuck mostly to sports. But Polymarket is in the process of moving onshore; I don’t know if this will affect their ability to offer geopolitical markets) Degenerate gambling is bad. Insofar as prediction markets have acted as a Trojan Horse to enable it, this is bad. Insofar as my advocacy helped make this possible, I am bad. I can only plead that it didn’t really seem plausible, back in 2021, that a presidential administration would keep all normal restrictions on sports gambling but also let prediction markets do it as much as they wanted. If only there had been some kind of decentralized forecasting tool that could have given me a canonical probability on this outcome! Still, it might seem that, whatever the degenerate gamblers are doing, we at least have some interesting data. There are now strong, minimally-regulated, high-volume prediction markets on important global events. In this column, I previously claimed this would revolutionize society. Has it? I don’t feel revolutionized. Why not? The problem isn’t that the prediction markets are bad. There’s been a lot of noise about insider trading and disputed resolutions. But insider trading should only increase accuracy - it’s bad for traders, but good for information-seekers - and my impression is that the disputed resolutions were handled as well as possible. When I say I don’t feel revolutionized, it’s not because I don’t believe it when it says there’s a 20% chance Khameini will be out before the end of the month. The several thousand people who have invested $6 million in that question have probably converged upon the most accurate probability possible with existing knowledge, just the way prediction markets should. I actually like this. Everyone is talking about the protests in Iran, and it’s hard to gauge their importance, and knowing that there’s a 20% chance Khameini is removed by February really does help to place them in context. The missing link seems to be between “it’s now possible to place global events in probabilistic context → society revolutionized”. Here are some possibilities: Maybe people just haven’t caught on yet? Most news sources still don’t cite prediction markets, even when many people would care about their outcome. For example, the Khameini market hasn’t gotten mentioned in articles about the Iran protests, even though “will these protests succeed in toppling the regime?” is the obvious first question any reader would ask. Maybe the problem is that probabilities don’t matter? Maybe there’s some State Department official who would change plans slightly over a 20% vs. 40% chance of Khameini departure, or an Iranian official for whom that would mean the difference between loyalty and defection, and these people are benefiting slightly, but not enough that society feels revolutionized. Maybe society has been low-key revolutionized and we haven’t noticed? Very optimistically, maybe there aren’t as many “obviously the protests will work, only a defeatist doomer traitor would say they have any chance of failing!” “no, obviously the protests will fail, you’re a neoliberal shill if you think they could work” takes as there used to be. Maybe everyone has converged to a unified assessment of probabilistic knowledge, and we’re all better off as a result. Maybe Polymarket and Kalshi don’t have the right questions. Ask yourself: what are the big future-prediction questions that important disagreements pivot around? When I try this exercise, I get things like: Will the AI bubble pop? Will scaling get us all the way to AGI? Will AI be misaligned?
Inline links: so accurate that it’s getting called a national security threat, 81% sports by monthly volume, this $686,000 market on how often Elon Musk will tweet this week, bad, https://substackcdn.com/image/fetch/$s_!hMaa!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd2757108-8b49-4178-afb7-e5984990302c_1324x573.png
I don’t feel revolutionized. Why not? The problem isn’t that the prediction markets are bad. There’s been a lot of noise about insider trading and disputed resolutions. But insider trading should only increase accuracy - it’s bad for traders, but good for information-seekers - and my impression is that the disputed resolutions were handled as well as possible. When I say I don’t feel revolutionized, it’s not because I don’t believe it when it says there’s a 20% chance Khameini will be out before the end of the month. The several thousand people who have invested $6 million in that question have probably converged upon the most accurate probability possible with existing knowledge, just the way prediction markets should. I actually like this. Everyone is talking about the protests in Iran, and it’s hard to gauge their importance, and knowing that there’s a 20% chance Khameini is removed by February really does help to place them in context. The missing link seems to be between “it’s now possible to place global events in probabilistic context → society revolutionized”. Here are some possibilities: Maybe people just haven’t caught on yet? Most news sources still don’t cite prediction markets, even when many people would care about their outcome. For example, the Khameini market hasn’t gotten mentioned in articles about the Iran protests, even though “will these protests succeed in toppling the regime?” is the obvious first question any reader would ask. Maybe the problem is that probabilities don’t matter? Maybe there’s some State Department official who would change plans slightly over a 20% vs. 40% chance of Khameini departure, or an Iranian official for whom that would mean the difference between loyalty and defection, and these people are benefiting slightly, but not enough that society feels revolutionized. Maybe society has been low-key revolutionized and we haven’t noticed? Very optimistically, maybe there aren’t as many “obviously the protests will work, only a defeatist doomer traitor would say they have any chance of failing!” “no, obviously the protests will fail, you’re a neoliberal shill if you think they could work” takes as there used to be. Maybe everyone has converged to a unified assessment of probabilistic knowledge, and we’re all better off as a result. Maybe Polymarket and Kalshi don’t have the right questions. Ask yourself: what are the big future-prediction questions that important disagreements pivot around? When I try this exercise, I get things like: Will the AI bubble pop? Will scaling get us all the way to AGI? Will AI be misaligned?
First, that Polymarket and Kalshi are doing a good job filling the gambling niche, Metaculus is doing a good job filling the information-aggregation niche, and hedging is the last prediction market niche capable of spawning a billion-dollar company. Actually, why set your sights so low? There’s currently two trillion dollars tied up in the derivatives market; a better hedge would be very lucrative.
2: Yahoo Finance: Man Bet Entire Life Savings Of $342,195 That Elon Musk Would Fail. This is more heartwarming than it sounds - it’s about economist Alan Cole and a Kalshi market about whether DOGE would successfully cut the federal budget by some amount. Cole was an expert in tax law and knew that the budget is sufficiently constrained that it was literally impossible to cut it that amount, and so (after getting his wife’s buy-in) put his entire life savings on NO. NO turned out correct, netting him a 37% profit after one year.