Bettor Is Best?

Will markets for prediction be any better at guessing the future than ‘experts’? Can they be manipulated?

What will be, will be, but people want to see tomorrow, today. Our curiosity birthed oracles, astrologers, crystal gazers, and their analogues. When superstition became unfashionable, “experts” took over. And they could be spectacularly inaccurate, too: days before the 1929 Wall St crash, celebrated economist Irving Fisher predicted this: stocks will be at a “permanently high plateau”. Can “prediction markets” do better? If you haven’t followed their rise, these markets are a new kind of “aggregator”. Only, instead of connecting riders with drivers, they aggregate answers to questions. Any kind of question, even “when will Khamenei die?” 

No, seriously, that question was asked, and somebody made half a million dollars, by getting the answer right in a prediction market. On Kalshi, the largest US prediction market, questions about the likely timing of US-Iran nuclear deal, opening of Hormuz Strait, and US tariff on China by July 1, were trending yesterday. Which is understandable – tariffs and energy affect economies, and people’s lives. But what if someone with inside knowledge – exact dates and rates – places a bet, and walks away with the payout? The winning bet about Khamenei’s death isn’t the only ground for this fear. Some bettors got the timing of Trump’s Venezuela op right. Most recently, traders bet $500mn on the price of crude, 15 minutes before Trump announced he was delaying attacks on Iran’s energy infra by five days. That happened in the commodities market, but the point is inside knowledge. 

It’s a big concern, but not the biggest. Profiting from classified information is certainly unethical, in fact criminal, but when these markets are billed as modern oracles, the bigger fear is deliberate distortion. Say, the question is whether candidate A or candidate B will win an election. A rich person, or a foreign govt, can influence the market’s predictions, by placing more bets. Now, when some American news networks have started including these predictions in their coverage, the risk of manipulation is very real. So, why have prediction markets at all, when they are wrong so often? One platform predicted, US would add 60,000 jobs in Feb, but that month 90,000 jobs were lost. How can ordinary folks, betting on their gut feel, see the future? Kalshi co-founder Luana Lopes Lara thinks they can. When people place bets, they want to be right, she says. And to be right, they research. Millions of people researching and processing information, and together arriving at one prediction, has oracular potential. Really? We will know the answer to that once the prediction market matures.

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