I Championed Prediction Markets. Look What They've Become

# I Championed Prediction Markets. Look What They’ve Become. Source: [https://newsletter.platypuseconomics.com/p/i-championed-prediction-markets-look](https://newsletter.platypuseconomics.com/p/i-championed-prediction-markets-look) Before you do business with anyone,**you should****ask****why they****want to do business with you\.**Last week handed me the world’s most absurd teaching example: A White House[teleprompter operator](https://abcnews.com/US/white-house-teleprompter-operator-made-100k-betting-trumps/story?id=134764573)was betting on Kalshi about what the president would say — words he was personally scrolling onto the screen\. He cleared about $100,000, and honestly, I’m shocked he didn’t make more\. There’s an important lesson here:**every market could have a metaphorical teleprompter guy on the other side of the trade\.**And once you understand that, markets can simply stop working\. This problem — which economists call*asymmetric information*— can also be fixed by sensible regulation which levels the informational playing field\. Which brings me to another big story that sits adjacent to information economics:**Trump Media may soon[sell early access](https://apnews.com/article/truth-social-trump-media-trump-post-conflicts-of-interest-truth-api-759fa71769729a26024914dd681c1953)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\. And we already have a place for official government proclamations — it’s called the[Federal Register](https://www.federalregister.gov/)\. But now the president has privatized and monetized it, and**anyone active in markets will have no choice but to pay\.**After all, if you don’t pay, you could be trading with someone a lot like teleprompter guy — a counterparty who has an informational advantage over you\. Time for a confession: I helped[build the intellectual case](https://www.science.org/doi/abs/10.1126/science.1157679)for**freeing****prediction markets from unnecessary restrictions\.**The dream was that markets would surface useful information, like election odds or product safety\. And part of it came true:[market odds beat the polls](https://www.wsj.com/politics/elections/how-the-trump-whale-and-prediction-markets-beat-the-pollsters-in-2024-dd11ec4e), the pundits, and[Nate Silver](https://researchdmr.com/files/ForecastingElectionMarketsPolls.pdf)\. But go look at Kalshi or Polymarket today and you’ll see that roughly 90% of the money is on sports\.**We built a superior information aggregation machine for the economy, and the ideas are being used to create a backdoor sportsbook\.** 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\.**Meanwhile, the major firms dominating the industry have piles of cash and Donald Trump Jr\. on both of their payrolls\. I don’t claim to know the exact right policy answer for America\. But I know we never even had a grown\-up debate\. Perhaps that’s a theme we can come back to in a future newsletter\. #### Discussion about this post ### Ready for more?