You know, Polymarket really works and anyone can use it right now, including US citizens; the only really serious problem with it is that it costs a flat fee of about ~$50 to deposit and withdraw, and you have to be able to figure out how to send cryptocurrency.
Some comments:
I don't use Polymarket because, relative to a material investment,
More generally, I haven't yet seen a prediction market where the "easy money" looks more attractive on a risk-and-work-adjusted basis than working on HypoFuzz. Perhaps others have similar opportunity costs?
USDC is a very different thing than tether.
Do you have most of your net worth tied up in Eth, or something other than USD at any rate? If not I don't see how the volatility point could apply.
With the capital I have on hand as a PhD student, there's just no way that running something like Vitalik's pipeline to make money on prediction markets will have a higher excess return-on-hours-worked over holding ETH than my next-best option (which I currently think is a business I'm starting).
If I was starting with a larger capital pool, or equivalently a lower hourly rate, I can see how it would be attractive though.
you really could have been the first mover on a few of these new enterprises back in 2021 if you had brainstormed a bit. Describe one of them.
Fun!
TIPS aren't great for betting on inflation:
If you have the kind of ability to short TIPS, you have the kind of ability to trade inflation swaps which are a much purer way to bet on inflation.
(That's not to say TIPS aren't a useful product - as an investment vehicle with the risks it mitigates they are excellent, but for betting on inflation they aren't especially useful for retail)
On the question of subsidization and liquidity, has anyone considered investing money locked into a prediction to create outcomes which aren't zero-sum? I imagine prediction markets like PredictIt invest the funds sunk into their markets in some manner already, but those returns/losses aren't accessible to bettors.
Currently, the money placed into a prediction market just idles there from the perspective of bettors.
Suppose instead of distributing earnings/losses based solely on the market outcome, in the meantime the money was placed into high yields savings. At the resolution of the market, the payout would include not only the money put in the market but also any interest earned. On the flipside investment losses could erode winnings.
Of course, this gives rise to the possibility of markets which have major market repercussions being mispriced, reflecting concerns over investment losses. But if anything that teases out more useful information from the market. It also erases the opportunity cost of storing money a betting market over other financial markets.
FWIW FTX allows you to bet on its prediction markets on margin with a tokenized version of the S&P 500 as collateral, which accomplishes exactly what you want to accomplish here
Counterpoint:
Why do people trade?
We often trade to express an opinion on whether a future event will drive value up or down.
You believe that a vaccine will be widely distributed, so you try investing in travel stocks. You believe emissions regulation is coming, so you try shorting auto companies.
But these trades don’t provide direct exposure to the event. There’s a lot of noise that gets in the way. Kalshi enables you to isolate trading on the event itself.
This makes me pessimistic about it, see Prediction Markets Fail To Mooch.
Suppose Kalshi launches their cool new prediction marketplace soon, and it attracts a large userbase with high trading volume, and it doesn’t get shut down or strangled with red tape. What then?
The year is 20XX and prediction markets are in full swing, with all kinds of new business models and betting opportunities now available, many of which you hadn’t even thought of before Kalshi launched. But not for lack of imagination--you realize that you really could have been the first mover on a few of these new enterprises back in 2021 if you had brainstormed a bit. Describe one of them.