Nick Whitaker & J. Zachary Mazlish at Works in Progress:
Many entrepreneurs have tried to create prediction markets, contracts that trade on the outcome of future events. Luke Nosek, cofounder of PayPal, once worked on the problem. Sam Bankman-Fried, the jailed founder of cryptocurrency exchange FTX, is supposed to have originally wanted to build a prediction markets platform. A number of venture capital–backed start-ups are currently building prediction markets, including Kalshi, a prediction market regulated by the Commodities Futures Trading Commission (CFTC); Manifold, a play money prediction market; and Polymarket, a crypto-based prediction market currently illegal in the US.
Many academics have advocated for the creation of prediction markets. Economics Nobel laureate Kenneth Arrow argued for their deregulation in Science, alongside Cass Sunstein, the most cited legal scholar; Thomas Schelling, one of the foremost game theorists; and Philip Tetlock, who created superforecasting. Economist Bryan Caplan’s Substack is called Bet On It, alluding to the value of wagering on beliefs: bets are costly for people with wrong beliefs and profitable for people with accurate ones. This is the promise of prediction markets: they could use the wisdom of crowds and the price mechanism of markets to land on highly accurate probabilities.
More here.
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