prediction markets
Article
prediction markets is a recurring concept in the Astral Codex Ten archive, appearing 8 times across 8 issues between November 15, 2021 and July 08, 2025. The archive places it in contexts such as “conditional prediction markets”; “prediction markets seem maybe good”; “like prediction markets, initial coin offering style funding schemes”. It most often appears alongside Donald Trump, Metaculus, Polymarket.
Metadata
- Category: Concepts
- Mention count: 8
- Issue count: 8
- First seen: November 15, 2021
- Last seen: July 08, 2025
Appears In
- 15
- Movie Review: Don’t Look Up
- The Passage Of Polymarket
- My California Ballot 2022
- Prediction Market FAQ
- Open Thread 258
- 23
- Now I Really Won That AI Bet
Related Pages
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- Donald Trump (5 shared issues)
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- Metaculus (4 shared issues)
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- Polymarket (4 shared issues)
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- America (3 shared issues)
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- Kalshi (3 shared issues)
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- Manifold (3 shared issues)
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- Philip Tetlock (3 shared issues)
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- PredictIt (3 shared issues)
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- AGI (2 shared issues)
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- blockchain (2 shared issues)
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- CDC (2 shared issues)
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- Commodity Futures Trading Commission (2 shared issues)
External Links
Source Context
Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.
They focus not just on long-run outcomes but on conditionals and counterfactuals. The paper starts with an argument against conditional prediction markets that I’d somehow missed before. Suppose you want to know whether a mask mandate will save lives during a pandemic. Current state of the art is to start two prediction markets: “conditional on there being a mask mandate, how many people will die?” and “conditional on there not being a mask mandate, how many people will die?” In this situation, this doesn’t work! Governments are more likely to resort to mask mandates in worlds where the pandemic is very bad. So you should probably predict a higher number of deaths for the mandate condition. But then confused policy-makers will interpret your prediction market as evidence that a mask mandate will cost lives.
Overall, I’m really excited by this. My only concern is that it doesn’t have the same sort of hits-you-between-the-eyes obviously-there’s-no-way-to-bias-this quality that prediction markets do. If these people had predicted the effects of COVID restrictions before COVID, people would have doubted them for the same reason they doubted the ordinary experts.
Prediction markets reached near-certainty about the winner while traditional media was still talking about how un-call-ably close it was. Apparently having hundreds of people all incentivized to give precise probability estimates very slightly earlier than the next guy, works better than having a few journalists who are scared people will make fun of them if they jump the gun.
What do you do? I guess you do the principled philosophy thing. You collide the two narratives, integrate them, and try to build something useful out of the debris, while constantly being tripped up by fuzzy boundaries and edge cases. The rationalist community has been trying this for fifteen years, and so far what we’ve got is some combination of “these math lectures describe what to do perfectly in theory, shame we disagree on how to apply them to the real world” and “prediction markets seem maybe good” and “turns out the people who obsess over this are often trustworthy on object-level questions” . Other people have been chipping away at the same question for longer and developed Arts of their own, but no one seems fully satisfied.
Polymarket is probably the biggest prediction market currently available. US law considers unlicensed prediction markets to be somewhere between illegal gambling and illegal futures trading, ie definitely illegal. Polymarket and a few peers had survived anyway, through the “crypto is the Wild West and nobody has time to deal with all the illegal things happening there” exemption. Apparently they found time.
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”.
Throughout these bad decisions, intelligence analysts and national security advisors were begging the government to come up with some kind of good forecasting infrastructure. By the early 2000s, many of them had settled on prediction markets as the most promising opportunity. In 2008, twenty-two prominent economists including five Nobel Prize winners wrote an editorial begging the CFTC to legalize prediction markets; the CFTC refused. In 2010, Philip Tetlock (one of the signatories on the pro-prediction market letter) did some pretty basic forecasting work, not even prediction market level, and proved that he could significantly outperform top analysts at the CIA with access to classified information. The government refused to hire him or use any of his methods, and continued shutting down new prediction markets as they arose.
The argument in favor is that in a world where you can already buy stocks and crypto, I’m not sure sports gambling makes things any worse. And I’m hopeful that this would set a precedent that could one day lead to legalization of prediction markets.
This is a FAQ about prediction markets. I am a big proponent of them but have tried my hardest to keep it fair. For more information and other perspectives, see Wikipedia, the scholarly literature (eg here), and Zvi.
1. What are prediction markets? 2. Why believe prediction markets are accurate? 3. Why believe prediction markets are canonical? 4. What are the most common objections to prediction markets? 5. What are some clever uses for prediction markets? 6. What’s the current status of prediction markets? 7. What can I do to help promote prediction markets?
Inline links: What are prediction markets?, Why believe prediction markets are accurate?, Why believe prediction markets are canonical?, What are the most common objections to prediction markets?, What are some clever uses for prediction markets?, What’s the current status of prediction markets?, What can I do to help promote prediction markets?
1. What are prediction markets? 2. Why believe prediction markets are accurate? 3. Why believe prediction markets are canonical? 4. What are the most common objections to prediction markets? 5. What are some clever uses for prediction markets? 6. What’s the current status of prediction markets? 7. What can I do to help promote prediction markets? 1. What are prediction markets? Prediction markets are like stock markets, but for beliefs about future events. For example, you can buy or sell shares in events like “The Democrats will win the next election” or “A Category 5 hurricane will hit Florida this year”.
Inline links: What are prediction markets?, Why believe prediction markets are accurate?, Why believe prediction markets are canonical?, What are the most common objections to prediction markets?, What are some clever uses for prediction markets?, What’s the current status of prediction markets?, What can I do to help promote prediction markets?
6: Also, many, many of you commented that Bob and Ramchandra were just “reinventing the wheel” and antistocks were the same as some existing financial product, although none of you could agree on which existing product it was. See the cases for bucket shops, call options, equity swaps / total return swaps, dividend derivatives, and (inevitably) prediction markets. Also, several people chimed in to say they were working on something similar on the blockchain, including Tracer and Synthetix. I hope I don’t need to add the disclaimer that if you invest in a blockchain product based on a Bay Area House Party post, then you will lose all your money faster than anyone has ever lost all of their money before in all of history.
Sorry guys, LK-99 doesn’t work. The prediction markets have dropped from highs in the 40s down to 5 - 10. It’s over.
Inline links: LK-99 doesn’t work
What does this tell us about prediction markets? Were they dumb to ever believe at all? Or were they aggregating the evidence effectively, only to update after new evidence came in?
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
On prediction markets, where users had given 62% probability that Edwin would grant me the win that year, reactions were outraged. “Are you kidding me?” asked one commenter. “Is Edwin Chen an asshole? Clearly he is,” said another.
Inline links: reactions were outraged
I tried to contact Edwin for confirmation, without success. I wondered what had happened to him, and a quick search found that his AI data-labeling company did very well and he’s now probably a billionaire. I hope he’s relaxing on a yacht somewhere, far away from angry prediction market commenters.