for example, by having bets denominated in S&P 500 or other stock portfolios rather than $s
Bets should be denominated in the risk-free rate. Prediction markets should invest traders’ money into T-bills and pay back the winnings plus interest.
I believe that should be a good enough incentive to make prediction markets a good investment if you can find positive-EV bets that aren’t perfectly correlated with equities (or other risky assets).
(For Polymarket the situation is a bit more complicated because it uses crypto.)
I think in an ideal world we’d have prediction markets structured around several different levels of investment risk, so that people with different levels of investment risk tolerance can make bets (and we might also observe fascinating differences if the odds diverge, eg if AGI probabilities are massively different between S&P 500 bets and T-bills bets, for example).
I believe the correct way to do this, at least in theory, is to simply have bets denominated in the risk-free rate—and if anyone wants more risk, they can use leverage to simultaneously invest in equities and prediction markets.
Right now I don’t know if it’s possible to use margin loans to invest in prediction markets.
Bets should be denominated in the risk-free rate. Prediction markets should invest traders’ money into T-bills and pay back the winnings plus interest.
I believe that should be a good enough incentive to make prediction markets a good investment if you can find positive-EV bets that aren’t perfectly correlated with equities (or other risky assets).
(For Polymarket the situation is a bit more complicated because it uses crypto.)
I think in an ideal world we’d have prediction markets structured around several different levels of investment risk, so that people with different levels of investment risk tolerance can make bets (and we might also observe fascinating differences if the odds diverge, eg if AGI probabilities are massively different between S&P 500 bets and T-bills bets, for example).
I believe the correct way to do this, at least in theory, is to simply have bets denominated in the risk-free rate—and if anyone wants more risk, they can use leverage to simultaneously invest in equities and prediction markets.
Right now I don’t know if it’s possible to use margin loans to invest in prediction markets.