Polymarket bets on the chances of submersibles and the war in Ukraine

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As the internet swarmed with submersible news and memes, some people saw an opportunity to make a few bucks.

They placed their money on a relatively obscure prediction market website, Polymarket, which offered users the chance to bet on the question: will the missing submarine be found by June 23? The market attracted $2.3 million in volume, according to the website.

This has turned into a moment of resurgence, albeit a grim one, for online prediction markets. Polymarket, which launched in 2020, is one of many online prediction markets that have emerged in recent years to take bets on a wide variety of current events.

It is also the one who embraced blockchain technology as a way to possibly circumvent regulation that has scuttled other prediction markets.

Neeraj Agrawal, director of communications at the Coin Center, a Washington-based think tank that advocates the free use of cryptocurrency networks, called the regulation of prediction markets that use crypto an open question.

Agrawal said he had mixed feelings about the market betting on whether the submersible would be found, what he calls the first viral moment for a crypto prediction market.

Over 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 Ukraine’s Zaporizhzhia nuclear power plant by July 15. July 12.

But it’s the darker markets that have caught the eye. Shortly after the submarket, attention shifted to the Russian coup and the likelihood of Russia using nuclear weapons by June 30, as well as other hot markets related to Russia.

Polymarket described the submarket as having nothing to do with passenger results.

We understand that there has been some confusion resulting from the misconception that our prediction market was tied to the fate of passengers. We would like to point out that this was not the case, wrote Polymarket. Our goal is not to profit from unfortunate events like this, which we have not done 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. These markets initially became popular around presidential elections. Polymarket describes itself as an information market that sells stocks to reveal the probability of an outcome. Each share costs a fraction of $1. Once the market is closed, 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 believe a certain outcome will be. A deal on a possible cage fight between Mark Zuckerberg and Elon Musk was almost evenly split. On 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 are required to purchase USDC tokens, a type of cryptocurrency called asstablecoin whose value is pegged to the US dollar, and its actions are blockchain-based contracts, also known as smart contracts, that execute without no central authority.

Agrawal said that in centralized markets there is usually one person or company that owns the market. This structure disappears in a decentralized market, which makes it an open question on how to regulate it.

It’s unclear how much money is bet on Polymarket on any given day, but the platform’s website shows significant trading volumes for some markets, including $4.6 million for Who Will Win the Republican Presidential Nomination of the United States in 2024?

Such deals are legally dubious. Polymarket operates worldwide but is read-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 a swaps exchange or contracts market appointed.

Other prediction markets have come under similar regulatory scrutiny. The CFTC attempted to block Predictit, one of the most successful online prediction marketplaces, from operating in the United States. Predictit is fighting these CFTC efforts in court.

Prediction markets predate the Internet by hundreds of years and have been studied as a way to gauge public opinion. Rebecca Haw Allensworth, a professor at Vanderbilt Universitys School of Law, said the main purpose of prediction markets is to pool varied knowledge from various sources to predict an outcome.

In an emailed statement to NBC News, Polymarket described itself as the solution to misinformation and sensationalist journalism.

Polymarkets’ mission is to serve as an alternative source of information, leveraging the wisdom of the crowd to get real-time, unbiased predictions about the things that matter most, the Polymarkets team wrote.

Allensworth noted that prediction markets have their own problems when it comes to manipulation. She said opening betting pools to the public leaves prediction markets susceptible to information cascades in which someone with a wide reach or who is perceived to be knowledgeable can cause people to accumulate their response,

In the case of grim viral events making waves in the market, Allensworth sees no chance that statistics will be useful or effective.

It’s really about entertainment, she says.

Michael Abramowicz, a professor specializing in law and economics at George Washington University and author of Predictocracy, a book on prediction markets, said prediction markets lost popularity in their traditional form once they began offering forecasts of terrorist events in 2003.

Basing the market on crypto, however, opens the door to more advanced markets.

Crypto prediction markets are more likely to be able to include a variety of topics because they are harder to regulate, Abramowicz said. The more regulated the prediction markets are, the more people will turn to crypto alternatives.

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