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> Prediction markets don't have any "natural" reason like that for excluding insider trading.

No, they have a different reason. Consider the consequences of a sufficiently large prediction market bet on whether or not <head of state> will be assassinated this year.

Consider also the consequences of insiders and decisionmakers having an immediate financial incentive to take the other side of a bet whose outcome they control.



It's called assassination markets.

There is a RFC on Bitcoin talk from 2011 https://bitcointalk.org/index.php?topic=26350.0


When the pot gets big enough, there is no difference between a prediction market and an assassination market.




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