Actually existing prediction markets?

The primary reason why Predictit can't interest anyone in arbitraging is that they don't take "netting" into account when they determine your maximum possible loss. Arbitrage therefore requires you to tie up way to much money, such that it will rarely be a worthwhile investment

At the well-functioning prediction market Intrade, you were required to cover only your maximum possible loss across a mutually exclusive set of contracts (such as a list of people of whom at most one will be elected president). In contrast, PredictIt binds up your funds based on your maximum possible loss at any given contract.

As an example: Suppose buyers are offering to buy one contract on each of 10 possible candidates, at 15 dollars per contract. In other words, there is 50 dollars of free money on the table. On Intrade, you could sell a contract on each, and bind up 100 dollars for a year. This secures you a return of 50% In contrast, on PredictIt you would have to bind up 850 dollars for a year to secure the 50 dollars; which dramatically reduces the effective return to 6%

PredictIt also has a fees structure that discourages arbitrage (by taking cuts on the profits, and calculating the profits on the basis of each individual contract).

I tried to start a discussion about this on the PredictIt forum, but the comment did not make it past moderation. The lack of arbitrage is due to the poorly designed structure of the market. Possibly their hands are tied by the CFTC, I don't think it indicates anything sinister about PredictIt.

This is almost certainly one of those cases where there really is free money lying on the street, but each contract price will have to substantially exceed the interest rate in order to make the investment worth it.

It is common across prediction markets that the fee structure makes it not worth it to push extreme events to further extremes. Thus unlikely candidates have too much mass and the total adds up to more than 1. But maybe Predictit is even worse for the reasons Anders gives.

Seconding https://www.predictious.com/ recommendation.

I don't know much about individual bookies. I was hoping that other people would talk about them. I added an update to the post saying that Betfair is probably the best existing prediction market. It was on Wikipedia's list, but I excluded it in error.

Here are my general thoughts on bookies:

I do think that bookies are currently the best source today for odds on the US presidential elections. The have the disadvantage of usually being opaque, rather than markets. But that same structure has the advantage of not swinging as wildly when large bets are placed. And my impression, is that even if they are structured as markets, they are less likely to record the past movements of the price, which is valuable to someone who wants to test the quality of prediction markets, rather than using them as black boxes (either for making money or for learning info).

But even though sports bookies are probably better than existing prediction markets, I think that if a prediction market got off the ground, it could be better than a sports bookie who only does it as a hobby. A sports bookie that took it seriously rather than as a hobby could be great, too, and maybe that's the direction Betfair is going, but it's moving slowly. The advantage of doing it separately is getting quasi-legal American participation. I think that the mindset of a prediction market rather than a sports bookie is important. For example, long-term predictions may require different rules than short-term sports bets. If the market views itself as selling information rather than entertainment, it might act differently. It might change the rules to stop encouraging overestimation of low probability events. But it might not, since they are good advertising.

The web page is here. In previous years they recruited new participants about this time of year, but they don't seem to be doing so this year. They are transitioning off of IARPA funding and much of the page is broken.

This was one of many competitors in the IARPA competition. I didn't include them because their predictions were not public. They couldn't be public, because the whole point was to compare their results. Except Scicast, because it wasn't predicting the same things. Even if you joined GJP, you probably only got aggregated predictions across your team, and maybe not even that.