As the internet swarmed with submersible news and memes, some people saw an opportunity to earn a few bucks.
They put their money into a relatively obscure prediction market website, Polymarket, which offered users the chance to place bets on the question: “Will the missing submarine be found before June 23?” The market attracted $2.3 million in volume, according to the website.
It became a moment of revival, albeit a dark one, for online prediction markets. polymarket, which released in 2020is one of the many online prediction markets that have sprung up in recent years to place bets on a wide variety of current events.
It is also one that has embraced blockchain technology as a way to possibly circumvent the regulation that has sunk other prediction markets.
Neeraj Agrawal, director of communications for coin centerA Washington-based think tank that advocates free use of cryptocurrency networks, called the regulation of crypto-using prediction markets “an open question.”
Agrawal said he had mixed feelings about market bets on whether the submersible would be found, something he calls “the first viral moment for a crypto prediction market.”
More than 60 markets are currently available on Polymarket, including whether Twitter will sue Meta by July 15, who will win the Guatemalan presidential election, and whether there will be an explosion at the Zaporizhzhia nuclear plant in Ukraine by July 12.
But it’s the bleaker markets that have drawn attention. Shortly after the secondary market, attention turned to the Russian coup and the likelihood of Russia will use nuclear weapons before June 30along with other trending markets related to Russia.
Polymarket described the submarket as having “nothing to do with any passenger-related outcomes.”
“We understand that there has been some confusion stemming from the misconception that our prediction market is related to passenger destinations. We want to emphasize that this was not the case,” Polymarket wrote. “Our goal is not to profit from unfortunate events like this, which we didn’t, it’s to help people better understand the world around them.”
Polymarket, like most prediction markets, works by allowing users to bet on the particular outcome of certain events. Such markets initially became popular around the presidential election. Polymarket describes itself as an “information market” that sells stocks to reveal the probability of an outcome. Each share costs a fraction of $1. After the market closes, the correct answer is valued at $1 per share and the wrong answer at $0.
The payout for each bet depends on the current market price, an indicator of how likely bettors are to believe it will be a certain outcome. A market on a possible cage fight between Mark Zuckerberg and Elon Musk was split almost evenly. As of Friday afternoon, a $10 bet on Musk returned $20.85 (or about $0.48 per share), while the same bet on Zuckerberg returned $17.88 (or about $0 .56 per share).
Unlike previous prediction markets, Polymarket uses blockchain technology for much of its operation. Users must purchase USDC tokens, a type of cryptocurrency known as a stablecoin whose the value is pegged to the US dollarand its actions are blockchain-based contracts, also known as smart contracts, that are executed without any central authority.
Agrawal said that in centralized markets there is often one person or company that “owns the market.” This structure disappears in a decentralized market, leaving open the question of how to regulate it.
It’s unclear how much money is wagered on Polymarket on any given day, but the platform’s website shows sizeable trade volumes for some markets, including $4.6 million for “Who Will Win the US Republican Presidential Nomination in 2024?”
Such markets are legally dubious. Polymarket operates globally, but is view-only for US users. The Commodity Futures Trading Commission (CFTC), the main US regulator of derivatives markets, fined Polymarket $1.4 million in 2022 for failing to register as an exchange clearinghouse or designated contract market.
Other prediction markets have faced similar regulatory scrutiny. The CFTC has attempted to prevent Predictit, one of the most successful online prediction marketplaces, from operating in the US. Predictit is fighting those CFTC efforts in court.
prediction markets predates the internet by hundreds of years and have been studied as a way of measuring public sentiment. Rebecca Haw Allensworth, a professor at Vanderbilt University Law School, said the main goal of prediction markets was to bring together varied insights from various sources to predict an outcome.
In an emailed statement to NBC News, Polymarket described itself as the solution to misinformation and tabloid journalism.
“Polymarket’s mission is to serve as an alternative news source, leveraging the wisdom of the crowd to get unbiased, real-time forecasts on the things that matter most,” the Polymarket team wrote.
Allensworth noted that prediction markets have their own problems when it comes to manipulation. Opening betting pools to the public, she said, leaves prediction markets susceptible to information cascades where a person with a long reach or perceived knowledgeability can cause people to hoard their response.
In the case of grim viral events that cause a sensation in the market, Allensworth sees no chance that statistics will be useful or effective.
“It really is about entertainment,” he said.
Michael Abramowicz, a professor who specializes in law and economics at George Washington University and wrote “Predictocracy,” a book on prediction markets, said prediction markets fell out of favor in their traditional form once they began offering event forecasts. terrorists in 2003.
However, basing the market on crypto opens the door for more innovative markets.
“Crypto prediction markets are more likely to be able to include a variety of topics because they are more difficult to regulate,” Abramowicz said. “The more regulated prediction markets are, the more people will turn to crypto alternatives.”
