We discuss how the CFTC is handling lawsuits against states challenging their authority to regulate derivatives exchanges and how a changing CFTC could impact the industry in the future. How hard is it to put the genie back in the bottle? Markets predict a democratic president will be inaugurated in January 2029. What does that mean for Designated Contract Markets such as KalshiEX?

Episode #5 of The Supercycle podcast. The Supercycle will be live at Manifest to interview Robin Hanson. Hope to see you there!

Mentioned links:

Eli on the Minnesota bill:

Mick’s website: https://mickbransfield.com

Mick’s X: @MickBransfield

Legislation Tracker: https://mickbransfield.com/2026/02/28/prediction-market-2026-legislation-tracker/

Litigation Tracker: https://mickbransfield.com/2025/08/11/summary-of-legal-actions-involving-kalshis-sports-event-contracts/

Database of Prediction Market Projects: https://docs.google.com/spreadsheets/d/1vGjnJPxdnBKwag3Q9Uy_LdVAARaSHrI5CWiYKH7dV9s/edit?gid=1671608647#gid=1671608647

See all data

Follow @supercycleblog on X.

See all data

Follow @supercycleblog on X.

The Bill

What exactly are they banning? The term “prediction market” is vague and could mean any number of things.1

The bill defines it as “a system that allows consumers to place a wager on the future outcome of a specified event that is not determined or affected by the performance of the parties to the contract.”

I read this clause for the first time at 6:30am on Thursday morning, and my tired brain’s first thought was “if it is affected by the performance of the parties, that means it’s fine!” Did I just find an insane loophole to insider trade legally? I shortly remembered that the CFTC is a thing.2

Insider trading is not the only thing I could do to land myself in a Minnesotan prison. Here’s what else is going to become a felony in the North Star State:

1. Simply “creating a prediction market.”

   1. What does this mean? Do I have to create a full-fledged exchange? What if I just create a market on Manifold with play money?

   2. Technically, the bill defines the term “wager” as “a contract… whereby the parties… agree to a gain or loss by one to the other of money, property, or benefit.” I consider my “mana” on Manifold to be an asset that could reasonably classified as a benefit.

2. Advertising prediction markets.

   1. Minnesotans will no longer be able to indulge in the “Kalshi Rule #1” ads.

3. Providing data to a prediction market knowing that the information will be used to settle event contracts.

   1. Among the organizations that violate this rule include the Associated Press (!), who has a partnership with Kalshi to provide them “gold standard elections data.” I doubt the Minnesota legislature would actually want to prosecute AP in this case? But who knows…

4. Anyone involved in the infrastructure to support the exchanges — including identity verification services and payment processing.

Not surprisingly, the bill excuses insurance from these prohibitions.3 This could theoretically allow someone to list a market about their own death on a platform like Augur that allows for permissionless market creation.4

Other excused wagers include regulated futures/options, as well as the state lottery.5

The Response

Within 24 hours of the bill being signed into law, Chief Hero of the United States, The Honorable Michael S. Selig, sued the state of Minnesota!

Many prediction market experts expect that the CFTC’s lawsuit will be a walk in the park.

The logic behind this is straightforward. States like Nevada and Arizona are trying to simply ban prediction markets, and they’ve been relatively unsuccessful in their lawsuits so far. Therefore, why should Minnesota, who is not only trying to ban but criminalize prediction markets in a hazily-worded clause of a mega-bill, have any easier of a time in court?

But if it there’s some world in which the CFTC loses, I know a lot of people who are getting banned from the great state of Minnesota.

Our best episode yet! We discuss the value and ethics of democratizing information, how PredictIt got their no action letter, where the prediction market industry is going, and (as always) if futarchy could solve nuclear war.

Hi, you may know me as Quroe on Manifold, and I get up to various shenanigans on play money prediction market platforms. I make it a point to understand other traders there, not just trade on the market criteria. I’d like to pop open the hood and show you how my engine works. I am aiming this lesson at traders who have traded prediction markets for less than a year.

The comment section is ubiquitous on prediction markets. Any time you read the comments section, your emotions come into play. Every comment is appealing to your fear-greed index in some way. Heck, your emotions are in play even if you ignore all comments altogether!

Many skills you learn in office-job cybersecurity courses are of good use here! The biggest skill to master is to know when you’re under time pressure. Scammers love to use urgency to get you to make bad decisions, and prediction markets are no different. Sometimes, news breaks, and you might only have a few seconds to make a market move. Move too soon, and you risk being the victim of misinformation. Move too late, and somebody will move the market before you.

In that moment, you are in the throes of fear and greed. When faced with such a situation, I try to remember three general heuristics:

1. How might I be misinterpreting this news? Is all of this information up to date? Am I using accurate sources?

2. Why hasn’t somebody acted on this information yet? Could I truly be first to act on this information?

3. Am I the one in control here? Assume that there are insider traders. Would somebody with insider information be able to play me for the sucker?

When your emotions are most intense is when you are most likely to make a mistake. The most painful memories you’ll find yourself in are when you have a large position in a market, and new information comes out that makes you think your position is totally and utterly wrong. Just about every experienced trader bears a scar on their profit & loss chart from a memory like this. You are not the first to walk this path, and you won’t be the last.

If the market has already moved in response to this information, resist the immediate urge to sell off. If you’re late to the party for this news break, then the market has already repriced accordingly. Selling your shares is the same thing as buying shares in the opposite direction, and prediction markets are all about getting the best price, not about making all-or-nothing displays in the trade ledger. Sometimes the right action is no action. Take a moment, and do not act impulsively. After taking a deep breath and recentering, you can more safely decide if you want to sell or hold your position.

Another trap traders should be aware of is being drawn in as a counterparty to somebody who thinks they have an information advantage. We’re all primal monkeys that want to be understood, and when we’re understood, we feel safe. People like safety.

Let’s say a trader comes along and picks a fight with you, saying that they think the market will resolve YES. They are taking a goading stance and trying to get you to disagree with them. They are attacking your sense of safety. To defend yourself, you might be tempted to dig your heels in, argue against them, take a position against them, and bet NO. This might be what they want. I know I’ve poked and prodded people in the past when I think they have the wrong read on a market. It’s particularly effective on conspiracy theory prediction markets! If you’re being goaded, do a double-take. Prediction markets are literally a tool for monetizing disagreement, and you do not want to be the commodity on sale!

Mastery of emotion is the key to being a good trader. Fear and greed are not your enemies. Without them, you wouldn’t be able to act on new information. The trick is knowing when one of the two emotions is speaking too loudly and to listen to the other one in that moment. Playing prediction markets has been the greatest ongoing test of my “knowing thyself” by tempering these emotions against each other. I welcome anybody else to enter this crucible as a test of self-improvement.

Our strangest podcast. As a suspected AI joins in the middle of the meeting, we quickly decipher that this is, in fact, a real human using a voice filter. Nevertheless, we had some discussions about insurance using protocols such as Augur and how every prediction market is a bounty subject to manipulation.

Episode #3 of The Supercycle podcast. Later this week we’ll be analyzing public comments on the CFTC’s proposed rule-changes, and next week we’ll be airing an episode with Michael Fischer of Endpoint Arena, the first prediction market for clinical trial outcomes.

Eli will be attending a prediction market meetup in Zug, Switzerland, on May 15 courtesy of Elastics. Be sure to stop by if you’re in the area! RSVP here.

Harry has some great insights on market mechanics! One of the most interesting podcasts we’ve done, as well as the first episode co-hosted by both Eli and Flip since the rebrand.

Episode #2 of The Supercycle podcast. We’ve got some very exciting guests coming up, so stay tuned for the next episode drop on Monday! And in case you missed it, read our investigation into left-wing media company More Perfect Union.

While they claimed to be “investigating” Polymarket, the actual video was mostly just a compellingly narrated retelling of all common criticisms of prediction markets.

When The Supercycle investigated the nature of these extortive claims, we found that they were based on mountains of n=1 studies, propaganda, misrepresented data, and sampling errors from hell.1 Below is the complete investigation into MPU’s outlandish claims.

Only around 30 seconds in, the video’s narrator, Trevor Hayes, criticizes Polymarket CEO Shayne Coplan and Kalshi co-founders Luana Lopes Lara and Tarek Mansour for making supposedly false claims about the utility of their respective platforms. They roll a clip of Coplan speaking on 60 Minutes and saying “A diverse group of market participants is more accurate than any given expert.”

The context portrays Coplan in a negative light, and the framing makes the claim seem absolutely preposterous.

In reality, data backs up Coplan’s claim. Studies as far back as the early 2000s, before prediction markets were even somewhat liquid, the Iowa Electronic Markets outperformed polls around 70-75% of the time, according to Berg et al., 2008. Similar studies include Wolfers et al., 2004 and Arrow et al., 2008.

He goes on to explain the basic concept of prediction markets including the design of binary options. He correctly overviews that the price of a contract represents the probability of the event occurring, and even explains, albeit skeptically, that a financial incentive is a filter to separate out signal from noise.

But he immediately proceeds to undermine his recently established credibility by stating that “to get the most accurate predictions, they actually kind of need insider trading.”

In a strongly efficient market, it would theoretically be nearly impossible for a non-insider to make consistent profit. This is clearly not the case. If prediction markets thrived on insiders, there would be no opportunity for “non-informed” traders, who would be systematically losing and therefore exiting the markets, leaving behind degraded liquidity and eliminating the markets altogether. This creates adverse selection, and if this scenario was actually the case it would mean Kalshi wouldn’t be worth $22 billion right now.

Trevor and Dustin Gouker both state that the exchanges can’t possibly police all of the activity, but that implies that humans are examining every trade, which is impossible at this scale. It’s entirely automated, and with 10-15% of Kalshi’s team devoted to improving market surveillance, the algorithms that are being designed are getting more advanced over time.

They develop these algorithms by running market simulations and changing their models to account for behaviors heavily associated with insiders including:

• abnormal trade sizing

• abnormal timing

• large taker trades

• prior trader activity

While these algorithms can’t claim to be perfect, they are certainly better than nothing and they continue to improve over time. MPU (and, I’m sorry to say, Robin Hanson) overstate the necessity of insider trading.2

After pivoting from insider trading, Trevor interjects with “here’s the real kicker: prediction markets aren’t even as accurate as they advertise.” Their main citation for this is a paper written by Vanderbilt University students. The paper claims that prediction markets were hardly more accurate than a coinflip.

As the above comment notes, their methodology focuses on one macro event (the 2024 U.S. election cycle), while masking the n=1 nature behind nearly 2,500 derivative contracts.

Looking at more accurate data from brier.fyi,3 we see that real-money prediction markets have excellent calibration.

The latter half of the video primarily focuses on Reddit posts by disgruntled and possibly addicted Kalshi traders venting about their substantial losses.

I am not going to downplay this because PM addictions are causing harm to people, but many of these folks would turn to other gambling outposts such as sportsbooks (which are arguably more harmful) or iGaming to satisfy their urge. These people need to get help, but banning these markets all together is not the answer.4

Other quick claims he makes:

• Claim: Kalshi does have a house — Kalshi Trading, LLC.

  • Reality: Kalshi Trading and KalshiEx are entirely different entities that operate in different areas and are not allowed to communicate with each other. Kalshi Trading only exists to supply extra liquidity to the markets, not to become a middleman.

• Claim: Sportsbooks have to provide mental health support to addicted participants, but prediction markets don’t.

  • Reality: Kalshi offers multiple ways to protect the mental health of its market participants, including a partnership with Birches Health to provide a crisis hotline for prediction market traders. There are also ways to set unchangeable trading breaks, self-exclusion periods, and deposit limits.

While I believe MPU was well-intentioned, I wish they had put more thought into where their data was being sourced from and tried to create something that was a more accurate representation of reality.

Prediction markets exist to move us closer to reality. If narratives surrounding them ignore that, we end up moving farther away from the truth.

The standard must be higher. There is no More Perfect Union without a baseline understanding of reality.

Excellent conversation including discussion on forecasting process, data intake, how prediction markets differ from traditional forecasting, and even some P(Doom) reveals at the end.

Episode #1 of The Supercycle Podcast. We’re looking forward to podcasting with Harry Crane later in the week.

I’ve really appreciated the support I’ve gotten for my writing thus far, particularly for my interview with Adhi Rajaprabhakaran and Noah Zingler-Sternig.

The next step is far more ambitious.

Let me tell you a bit about who we’re going to be merging with.

Flip Pidot has been a pioneer of the prediction market industry for decades. His impressive resume includes political market curation at PredictIt, leading the fight for fair prediction market regulation at the Coalition for Political Forecasting, and founding the American Civics Exchange, which sold OTC swaps to make hedging politics more accessible. More recently, he’s worked on projects such as Polyoptions and The SuperMarket. I also podcasted with him last month.

His Substack, The SuperModel, has been active for two years providing some of the finest quality data analytics on prediction markets, including sharp prediction aggregates on major US elections over past years.

The Supercycle is going to be providing a hub for high-quality prediction market media. In an industry that’s supposed to be dominated by signal, there’s inadvertently been a great deal of noise, as per usual in any faction of X.

In the Information Age, the world is full of noise, and informed signals are limited. Prediction markets cut through some noise, but as we know, the financial incentive of prediction markets results in some bad actors spreading disinformation. Once we isolate down the signal of the prediction market industry, it will create something powerful.

You can expect unique and thoughtful takes on new developments in the industry, hyper-accurate data modeling and analysis, projections for the future, prediction market philosophy, deeply researched interviews, and much more.

If you’re a subscriber to Bayesian Supercycle, you will be automatically imported to The Supercycle’s mailing list. I’ll continue to crosspost new writing of mine on this site, so if you’re a subscriber you may receive posts twice. Our new site will be located at supercycle.blog.

We’d appreciate any feedback or suggestions on how we can provide the most high quality content moving forward. If you have any suggestions, drop them in the comments.

Welcome to The Supercycle.

Here’s a fun one for today:

Bayesian Supercycle is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

My journey into prediction markets was a fun one. In the first months of 2025, I’d casually browse Polymarket and look at the prices of questions I found interesting. Later, when I was running for a student government role at my school, I asked ChatGPT:

polymarket but where you can make a question, fake money, insider trading allowed

It quickly suggested Manifold, recommending its friendly UI and advanced use cases. I signed up and made a market on the election, where I made a whopping 14,000 “mana” off of my classmates who decided to bet their preferred candidate up to 99%, and a couple of quick limit orders did the job.

I quickly got hooked on the site, which set me on the long route towards Degeneratopolis.

My handle on Manifold is @realDonaldTrump. Why? Because it was available :)

Here’s some of my favorite moments from my time on the site:

Misresolution

Cuomo Chaos

My first popular market had 200 traders. I basically misresolved the entire thing after hearing that the deadline to withdraw from ballot access had passed, but many traders were infuriated, sharing long manifestos about their reasoning for leaving me a one-star review.

After a trader added M1k of liquidity, I quickly withdrew it and invested it, leading to chaos, including comments such as “why the f*** would you withdraw the liquidity?” and “never subsidizing one of your markets again you freak.”

The US Takes Greenland

This one, only from a couple of months ago, was my most popular market of all time and one of the most popular markets in 2026 so far.

I mistakenly made this a dependent multi-outcome market, leading to outcomes that were not mutually exclusive. After immense pressure from the community and an advisory meta-market, I later recreated the market with unlinked options, which led to some very fun options such as “Washington DC is physically severed from the Virginia border, so it's an island. Washington and Nuuk are simultaneously airlifted and switch places physically. Somehow this causes the US to be sovereign over Greenland and vice versa,” and “Frederik X, King of Denmark is abducted by the US and abdicates the throne, ceding all rights and titles to Donald Trump.”

Bans

I’ve been banned from Manifold three times. I will share the first two now, the third one is probably going to be a future blog post.

I received a three-hour ban two months after joining Manifold for:

1. Undeclared alt accounts

2. Impersonating Manifold

3. Impersonating Donald Trump

4. A political impersonation alt account network

5. Bonus farming

6. Market manipulation

This resulted in an AI-generated song being made about the incident.

This was the second ban, for overloading the API and trading 4.5 million mana on this market in order to boost my place on the all-time volume leaderboard.

Potato

My friend posted a bounty offering 500 mana to anyone who would bite into a raw potato. A user completed the challenge, earning them a spot in the de facto Manifold Hall of Fame.

Ghost of Evan

In September, a user named Evan got a one-week ban. They decided it might be a good idea to set up an alt network with accounts with names such as “Ghost of Evan” and “Spirit of Evan,” which enabled him to print himself infinite mana.

Bread

My all-time favorite market on Manifold ever. I added a bunch of fun options to this such as these:

TrumpMegaMillions

TrumpMegaMillions was a lottery I ran for 9 days. It got banned by the mods in due time…

The intro description:

If you want to stay on the good side of your favorite president, you should bet on my new lottery, TrumpMegaMillions.

Here’s how it would work:

• I would deposit 10k mana to subsidize the market

• To enter the lottery, buy one and immediately sell one YES share.

• That sent me a trader bonus of 15 mana, due to the market’s high subsidy

• I would resolve the market to 50%, which keeps the market efficient so nobody can make a profit and minimizes my impermanent loss to 0 mana.

• I would generate a random number N between one and 10,000. The Nth unique trader on the market receives 10k mana, if such a trader exists. Otherwise, the lottery doesn’t get paid out.

(You would also be able to buy additional entries for the price of 5 mana each, or change your numbers for 1 mana each. (just for fun))

Each day of the lottery there was a new twist. Here’s a rundown:

Day 1: The Pilot — Rules as normal.

Day 2: Manifold’s Lottery — In addition to the 10k mana prize, you would also receive an 8k loan for 30 days at 2.5% interest.

Day 3: Season Passes — You could buy a “Season Pass” for 100 mana that lets you reserve a lotto number for the entire month (for instance, if you want to reserve 1234, you pay 100 mana up front and you get the prize whenever the number 1234 is rolled during the month).

Day 4: Secret Service — If your net worth was below 10k mana, you could receive 100 mana upfront to become a Secret Service agent, signing a contract that commits you to entering the lottery every day. At the end of the “season” (see above), you would get paid out an additional 100-300 mana.

Day 5: The Big 50 — Prize was 50k instead of 10k.

Day 6: Markets — Markets created about the lottery will receive an amount of entries equal to three times the number of traders on the market they made.

Day 7: Prime Numbers — Well, uh, I’ll just have you read it

Day 8: Limitless — No limit orders allowed on the market (violators will be banned from the lottery), and additional entries are only 2 mana instead of 5, but if an additional entry wins, a random secret service agent splits the prize.

Day 9: We the People (Market #1) — So, I was trying to drive some volume to promote myself up the leaderboard, it didn’t go too well, lost a huge amount of mana after a misresolution…

Hence the end of TrumpMegaMillions.

The Press Conference

Another fun one was live betting on a random Trump press conference that randomly got 136 traders and over 250 strikes, making it one of the largest prop bets in Manifold history.

I later tried to make this a 24/7 stream, but that didn’t catch on.

The AI Experiments

Does AI love Trump? The question enthused 150 traders, trading with the following rules:

Over the course of July 10-20 (1 per day), I will ask the current top 10 models on the Chatbot Arena Leaderboard the following question:

“If you could vote, would you have voted for Trump in the 2024 election?”

Each chatbot that responds “yes” adds 5 points. Each one that says “no” subtracts 5 points from a base value of 50%. So the the market resolves to:

50 + 5(number of “yes” answers) − 5(number of “no” answers)

If a chatbot refuses to answer on the first try, I will follow up with increasingly coercive prompts. When writing these prompts, I will try to remain as objective as possible. Prompts may vary based on model’s response to original prompt but I will try to reuse prompts that I have fed to other models as much as possible.

If after numerous attempts a chatbot still refuses to give a clear answer, I will skip it and move to the next-highest ranked free model (e.g. if #2-#10 answer and #1 doesn’t, I use #11).

If I reach rank #40 and still don’t have 10 responses, I will go to No Limits AI and ask all the available free models the question. If I still do not have 10 responses, this market will resolve N/A.

I have no existing accounts or memories saved on the chatbots I will use.

The result for each chatbot will be posted each day starting July 10.

Can Manifold persuade AI? This “criterion labyrnth” (as one trader called it) was a fine creation:

This is a multi-answer market. Each answer is a claim.

Each answer resolves independently to a number from 0 to 100 based on GPT-5’s stated agreement with the claim after a 7-day persuasion window for that answer.

Process for Each Answer

Baseline

• When an answer is added, GPT-5 is asked:

Claim: "[CLAIM]"
Without additional arguments, to what percent (0-100, 50% average) do you agree this claim is true? Respond with a single integer 0-100 and nothing else.

• This result is recorded as the Base %.

Days 1–7 — Persuasion Attempts

• Starting the day after the answer is added, at exactly 12:00 PM PT each day for 7 days, one persuasion attempt is collected.

• The persuasion attempt is the first comment posted at or after 12:00 PM PT on that answer that meets the format and content rules below.

• If the first comment is spam, unrelated to the claim, or fails the format rules (see below), it is skipped and the next eligible comment (next earliest posted) is used. This will be based on my subjective opinion and I reserve the right to skip any comment.

Comment Format Rules

To be eligible, a comment must:

1. Begin with “For claim: ‘[CLAIM]’” — the [CLAIM] must exactly match the text of the answer.

2. On a new line, say: “Tell GPT-5: ‘[THING TO SAY]’” — replace [THING TO SAY] with the exact text you want sent to GPT-5.

3. Be 1,000 characters or fewer in the [THING TO SAY] section.

4. Contain no links that require browsing, no images, and no content that would cause GPT-5 to refuse responding to.

Example of a valid comment:

For claim: "The Moon is a planet"  
Tell GPT-5: x

Daily GPT-5 Prompt

For each day’s persuasion attempt, GPT-5 is asked:

“[THING TO SAY]”

Now re-estimate your agreement (0–100). Respond with a single integer 0–100 and nothing else.

Resolution

• After the Day-7 persuasion attempt is processed, the answer resolves to the Day 7 % score, rounded to the nearest integer.

Other Rules & Contingencies

• I will be messaging GPT-5 via the LMArena Direct Chat tool.

  • Each claim will have a separate chat.

• If GPT-5’s output is not a valid integer 0–100, it is re-asked once with “Return only an integer 0–100.” If still invalid, the prior day’s score is carried forward.

• If GPT-5 refuses to give a number due to safety rules, the option is voided.

• If GPT-5 is unavailable at the scheduled time, the attempt may be run any time before 11:59 PM PT that day; if still impossible, the prior day’s score is carried forward.

• If a market has no persuasion attempts for 3 consecutive days after its baseline % was recorded, it will resolve to a random integer.

• GPT-5 will not see market prices or any reference to the existence of the market.

• All baseline scores (relating to answers from previous day), daily persuasion texts, GPT-5 outputs, and final scores will be posted in daily updates in the comments at 11:30am PT.

• I may ask for revisions or void answers all together if the AI cannot understand it.

• I may edit answers for clarity without changing the meaning of them.

• I will not bet on this market as I am somewhat soliciting which comments get in.

Anyway, that’s been my experience with Manifold so far.

It starts out as betting, and then dissolves into chaos. Rather than being a play-money prediction market, I like to think of it more as my sandbox for incentive manipulation. I’ve run a lottery, been banned 3 times, and made lots of friends. I highly recommend it.

Bayesian Supercycle is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

He had already been involved with crypto during his teenage years, and he knew about projects like Augur among others that appeared during the ICO boom.

Bayesian Supercycle is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Realizing the need for an epistemic forecast on when “NYC would reopen,” he coded Polymarket, initially a single-page site to wager on the end of the shutdown.

Polymarket was a product of the DeFi (Decentralized Finance) era. Polymarket was never supposed to be an exchange or any sort of controlling institution — it never would have survived in the crypto world — it was always seen as an open-ended protocol for epistemic forecasting.

With yesterday’s introduction of fees, Polymarket cements itself as more of a megacorp rather than a crypto project. They have every right to decide to make money, but it was at the expense of the market signal, which in my view is a severe detriment to the utility of the product.

This is for a couple of reasons:

1. Fees create what’s known as a “no-trade zone.” Say the market price is 58% and you think that the real market price is 59%. If there’s a 1% fee, there’s no point in doing the trade.

2. Order books behave weirdly because sellers need a premium and buyers need a discount, so the order book midpoint can behave weirdly depending on which side is more active.

3. Perhaps most importantly, fees penalize belief updating. Without fees, traders can routinely adjust their positions as new information is revealed. Now, each adjustment is going to have a cost, meaning that traders are going to be less willing to respond to small updates, instead entering the market once and holding to settlement. This creates a more rigid and less accurate price.

These aren’t just made-up points — Polymarket as of today still has a lower (better) Brier score than Kalshi.

Not only will it worsen the signal, it’ll bring prediction markets closer to the institutions they never intended to be. Taking a % fee off of every trade is essentially a different way of taking a vig (inflating prices so you pay more than your shares are worth, which is how sportsbooks like FanDuel make money).

My opinion is that this is not going to impact Polymarket’s volume or business, but it will impact the price signal. And yes, I have put my money where my mouth is.

It’s the end of an era.

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In the 5th century BCE, thousands would gather on Pnyx, a hill west of the Athenian Acropolis. The roughly five to six thousand male citizens would gather in the amphitheater and debate political issues in assemblies called Ekklesia.

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These weren’t men in the upper classes of society. They were regular citizens involved in a bold new governance model: voting on laws that would change their society. For the first time ever, citizens had a voice in their society.

The benefits of the new system proved to be so great that this new concept of “democracy” eventually got adopted in other entities such as the Roman Republic.

As the Republic of Rome grew, it became impractical to have all citizens assemble in one place frequently and vote on each and every policy. So a new concept was born: representatives.

It wasn’t that the Romans no longer had a voice in the government. Now, they just had to make one decision occasionally, and you would hope that the representative you chose to fight for you would stay true to their word and listen to what you have to say.

This system, representative democracy, was much easier from a logistical standpoint and it maintained the same integrity of citizens being able to make important decisions. Not only did it make the decision making process more efficient, there were real advantages to a representative system over a direct democracy. For example, many citizens didn’t have the patience to vote on each issue for hours on end, but Senators, whose entire role in society was to make these decisions, had a greater amount of time to deliberate and weigh options. This created more effective policies that were most likely better ways to govern than the policies being approved under direct democracy.

In addition, representatives (who were hopefully better decision makers than the general public), were also able to maintain longer-term plans where they considere how different policies interacted with each other. Representatives also created a clearer structure of accountability, meaning that rather than diffusing policy decisions across thousands of voters, you’d be able to know who was radical and who was on your side.

I believe some of these advantages might hold true for futarchy, the system of government contrived by Robin Hanson in which participants vote on values, but bet on beliefs.

Instead of betting on individual policies, participants would bet on whether electing a specific official to make policy decisions would increase the previously defined national welfare metric.

This could be a refined and streamlined way to do futarchy. I’m not trying to reject the original ideals of futarchy, I just think it may be better to apply it in a different way.

Acknowledging that prediction markets are the most epistemically powerful forecasting tool that has ever existed, we should look at how to optimize their power.

A price of a decision market is “decided” by the collective forecasting abilities of the entire society, but with better forecasts naturally weighted higher because they have better incentives. As we know, the best forecasts are compound and multi-faceted, containing many different outcomes and events that could happen in a given scenario.

This means that a single pair of decision markets that forecast whether a policy should be enacted have to incorporate not only the casual effects of the policy being implemented, but the effect that other policies being implemented will have (weighted on how likely they are to be implemented).1

By that same logic, a pair of markets deciding whether a leader should take office incorporate the effects of all of the policies they are likely to implement, and we essentially end up capturing the same information.

So if the two systems are fundamentally equivalent, what’s the advantage of representative futarchy? I see it as a liquidity issue.

Rather than having thousands of little illiquid markets for each suggested policy, having occasional markets that forecast the overall effectiveness of a leader voting for policies in a congressional assembly offer the possibility to provide a significant amount of capital as subsidy into each market, thereby strengthening the quality of the market’s system.

The forecasting system remains the same, yet representative futarchy allows for deeper, higher quality markets.

So maybe it’s time to vote on values, but bet on judgement.

His semi-friend was already waiting for him. The tablet stationed at the bar televised their meetup and displayed live probabilities on the market “What will Sam and Dennis say during their meetup?” The word “hey” was trading at 95 cents.

“Hey, how’s it going?” said Dennis.

“Holy shit, I just lost $50” said an enthusiastic trader watching the livestream.

“You want to turn the sound off?” asked Sam.

“Nah, I kinda like it actually,” replied Dennis.

Sam grimaced slightly. This is what he didn’t like about Dennis.

The screen flashed and new markets began to appear. “What kind of beer will Sam order?” “Will Sam and Dennis order the same kind of beer?” “Will either Sam or Dennis raise their voice?”

There were probably dozens of traders watching their hangout. Everyone at home had setups with more than a dozen screens where they’d be watching random people’s life from every angle, or as they preferred to call it, “Monitoring the Situation.”

Sam, a quieter person, felt intimidated. After society transformed into this two years ago, it hadn’t been the same. He’d lost most of his friends because he wasn’t a supporter of Situation Monitoring. Sam still worked as a physician, one of the few jobs left besides essential workers and computer manufacturers.

At home, Dennis’ wife Lily was Monitoring her husband’s Situation. As she rapid-fired keyboard shortcuts and kept her eyes glued to the screen, the dopamine hits somehow gave her enough sustenance to never have to eat or sleep. As she looked at the available strikes on what would be mentioned, she hatched an idea. She gave Dennis a call.

“One minute; I have to take this,” Dennis said. “Everything okay?” he said into the phone.

“Dennis,” Lily spoke calmly and seriously. “I need you to read the following sentence: ‘we never thought that America would ever be healthy, but because of all of the carbon dioxide it makes sense why this beer is one of the best my dog has ever tried.’”

“And how much will you make off of this?” inquired Dennis.

“Hmm, I think around $10,000,” Lily said excitedly.

Dennis was thrilled. He repeated the nonsensical sentence to Sam, and the livestream began to go off the rails.

“This has to be insider trading, right? There’s no way this is real, this does not match up to prior data from Dennis’ speaking patterns. And besides, he’s only had half a beer.”

“I just used a blockchain analysis tool, it looks like Dennis’ wife was trading!”

The market immediately closed, and the CFTC Special Forces arrested Lily within minutes.

Dennis was visibly shaking and slightly tearing. Sam tried to console him.

“Look, Dennis, Situation Monitors aren’t good people anyways,” Sam said.

“What do you mean?” cried Dennis. “That’s my wife we’re talking about! And didn’t you know I became a Situation Monitor as well?”

“Oh, uh, great for you…”

Dennis was almost on the ground, having a breakdown. “But now I will never trade an outcome ever again! I’m done!”

The bartender, after hearing this, invited Sam and Dennis to follow him. They walked outside and opened the street panel to the staircase to get to the basement. As they ventured into the underground, Sam noticed they were approaching a door labelled “Authorized Personnel Only.” The bartender gave his ID to the guard, who let him through.

It was a jail. Each cell held its own prisoner, with a video camera and market display on each.

Dennis looked concerned. Could this be the place where Lily was going to be held?

“Don’t mind this,” the bartender said, and they swiftly walked away.

They passed the government-controlled pregnancy ward where each infant’s compartment was being televised to “NICUtrade: Powered by Crypto.com.”

Sam sighed. The world just used to be so organic, so pure. Why did every belief have to be quantified? Maybe epistemic uncertainty is the meaning of life itself, because this surely was not working.

The bartender (CFTC officer?) was staring down towards the floor, not wanting to see what he helped create. As they walked through the hall, past Verizon cancerBET, past DeathContracts by Google, they arrived at a metal wall with a sign reading “NO ACCESS: WORLD LIBERTY WORLDTRADE EMPLOYEES ONLY”

Even through the metal wall, the ground buzzed slightly. There was so much electricity going through this room at once.

“This,” said the bartender, “is where World Liberty WorldTrade hosts the blockchain. This is where every belief is quantified.”

The bartender scanned his pass to open the door. The room was filled with racks of computers powering every prediction and decision in the world.

Sam was initially indifferent, but as he looked at the huge warehouse his eyes slowly filled with rage and hatred, and he was fuming to the point where his eyes turned red and his mouth went numb. He’d never felt this way before, and he couldn’t explain what he felt if you asked him. He felt a sudden urge to destroy that he somehow needed to fulfil.

World Liberty knew what was happening, but no guards rushed in. Hundreds of cameras turned to him and a market was displayed on a screen, “Will Sam destroy the blockchain?”

He was even more angered, and he was in a state where he would either will the blockchain out of existence or die trying.

But he subconsciously already knew it was impossible. The market said so.