Short the prediction market, long real life

I am not a gambler, nor do I understand the thrill of having your heartbeat race while staring at candlestick charts. But when CNN and CNBC announced that they would integrate digital odds from prediction markets into their live news broadcasts, I felt as if we were being toyed with by a new kind of “truth.”

Crypto bros are preaching: traditional polls will be replaced, experts are the high priests of an old era, and only odds built on real money can reflect the wisdom of the crowd and the reality of the truth. However, the trading logic fostered by prediction markets perfectly fits the “beauty contest” described by Keynes: you no longer care who is the most beautiful, you only care about “who others think is the most beautiful.” The very concept of beauty is thus “dissolved,” just like Duchamp’s urinal in the art museum. Prediction markets will continue to accelerate, then derail, until more and more clear-headed people begin to “short” this frenzy, to “short” the narrative of prediction markets itself.

Exchanges and casinos are two distinctly separate worlds. Farmers worry about grain prices falling, downstream food processors worry about prices rising, so they come to the derivatives market looking for someone willing to take on risk. Because their needs differ, trading can flow.

However, in the context of prediction markets, this kind of natural hedger does not exist. This leads to a market where, apart from market makers, there are only smart money with insider information and doomed-to-be-harvested gamblers: if a counterparty with an information advantage is willing to trade at this price with you, it’s very likely a losing deal for you. Once the “dumb money” runs out, liquidity quickly dries up. Because insider trading is allowed in large quantities, if prediction markets don’t have a constant supply of gamblers, they become an unsustainable new Ponzi scheme.

In natural systems, a thermometer’s reading does not change the temperature; no matter how we bet, Halley’s Comet will still return on schedule. But in social systems, probability itself has the power to “distort reality,” and the greed of the observer can change the reality being observed.

Ethereum can use staking and slashing mechanisms to ensure the “economic security” of the blockchain network, but prediction markets cannot guarantee “social security” at all. On the contrary, they even reward destruction.

If a billionaire makes a huge bet on an extreme event, he is essentially funding that outcome and using the market’s probability signal to create panic or consensus. Massive capital can form huge potential energy, which in turn drags media coverage and influences public confidence, forcibly collapsing an uncertain outcome into the form desired by the bettor.

Kaito, which wanted to be the hub for information distribution, ultimately became just a broadcaster of noise. Prediction markets tout themselves as telescopes peering into the future, but cannot stop themselves from becoming billboards that manufacture the future.

Many people think that as regulation loosens and capital pours in, prediction markets are bound to be the next big trend. But things always go too far.

People are gradually realizing that we are at the peak of the “gambling culture” cycle.

Comprehensive financialization only leads to emptiness. One day, people will tire of this high-frequency dopamine stimulation and return to experiencing life. We begin to turn off our screens, go hiking, touch real earth, read paper books, and build deep relationships outside of the screen.

To “short” prediction markets is not only to go long on “human subjectivity,” but also to go long on “life.”

Since we cannot return to the past, perhaps the only way out is to stop wasting away at the virtual gambling table, and turn to walk into the sunlight.