Are all users on prediction markets playing a fair game?

Answer: An estimated $143 million since 2024

Questions:

• When someone makes money on a bet or trade, where does that money come from?
• If you found out that some players in a game had access to information you didn't have, would you still want to play? Why or why not?
• Prediction markets claim to be more accurate than polls because "real money is on the line." Does insider trading make that claim stronger or weaker?

Here are the ready-to-go slides for this Question of the Day you can use in your classroom.

Behind the numbers (Harvard Law School Forum):

"The informed trading we document is not, in the aggregate, trivial. $143 million is a conservative lower-bound estimate of anomalous profits extracted over two years from a single platform. These profits represent transfers from uninformed retail participants to those with access to material non-public information—a regressive outcome that undermines the democratic appeal of prediction markets as venues where ordinary forecasters can profit from accurate beliefs. Whether this is normatively desirable depends on one’s views as to whether the Hayekian benefits of centralized pricing justify the social costs (if any) of gambling of this sort.:

About the Author

Dave Martin

Dave joins NGPF with 15 years of teaching experience in math and computer science. After joining the New York City Teaching Fellows program and earning a Master's degree in Education from Pace University, his teaching career has taken him to New York, New Jersey and a summer in the north of Ghana. Dave firmly believes that financial literacy is vital to creating well-rounded students that are prepared for a complex and highly competitive world. During what free time two young daughters will allow, Dave enjoys video games, Dungeons & Dragons, cooking, gardening, and taking naps.

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