Treat Info Institutions Alike
“Info institutions” solicit contributions, aggregate them into info summaries, and distribute such summaries to audiences. Examples include gossip, courts, journalism, academia, social media, speculative markets, and official reports of orgs (such as govts and churches). Such institutions often dis their competitors. For example, most have long dissed gossip, the oldest. Early journalists were dissed by governments and churches. Recently, academics and journalists have dissed social media.
Lately, journalists have been dissing prediction markets, with complaints that can be made about most info institutions. For example:
Prestige - Its bad if people get info they enjoy, vs what prestigious folks say is good for them.
Waste - People might enjoy it so much they waste time and money on it.
Money - This involves money, which could change incentives.
Privacy - Sometimes it is bad to spread more info. For example, info on candidate chances on election day.
Secrets - People who had promised to keep secrets might be induced instead to reveal them.
Sabotage - Participants might push changes to the world to make their takes more accurate.
On these complaints I say: treat the various info institutions alike. For example, if you want to ban govt officials from trading in prediction markets, for fear they’d reveal secrets, then also ban them from talking to reporters, or from gossiping. If you want to ban sports betting due to possible waste, then ban sports news and entertainment too. If you want to promote democracy by protecting political speech in gossip, journalism, and social media, then protect political prediction markets also.
For some kinds of complaints, we have good evidence that prediction markets are in fact superior to other info institutions:
Errors - In particular cases, predictions have been wrong.
Vagueness - In particular cases, it was unclear to some what exactly was being claimed.
Manipulation - Folks might offer biased contributions to distort audience actions.
Prediction markets have been consistently more accurate than other sources on the same topics at same time with similar resources. And an expectation of manipulation attempts on average makes such markets more accurate. If these issues are important, we should be willing to tolerate doing worse on other problems, to do better on these.
What dampens my enthusiasm for prediction markets is who participates:
As zero-sum contests (or negative-sum with transaction and opportunity costs included), they get two kinds of participants: (a) insiders, for whom the expected return is positive, and (b) gamblers, for whom the expected return is negative but they like the thrill of gambling anyway. If you aren't in one of these categories you have no incentive to participate.
Neither group's participation strikes me as morally good. Insiders trade on privileged knowledge, which is either illegal or at least morally questionable. The gamblers meanwhile feed a self-destructive addiction, and like Vegas it's the losses of these addicts that fund the entire enterprise. Value is siphoned from addicts to the pockets of insiders, market makers, and outside observers who benefit from information implicit in the market clearing prices.
Now you could argue that "insiders talking to journalists" also creates a moral hazard to divulge secret information. However most of the time that is not for direct personal gain at another's expense, as it is for trading. There's a good reason we treat insider stock trades more seriously than we do information leaks.
I don't see how you equate journalism with a financial market trading. It is information but it isn't trading. Normally I pay a set fee on an annual basis for journalists to provide me with information about my nation , the world, the environment, culture, etc. that I might not get otherwise. I'm not paying that fee in the hopes to make financial gain from it.
What are the benefits of sports betting? Are there any - other than it being an addicting behavior that generates a lot of money for a small number of large corporate interests?
You suggest that prediction markets are a form of protected political speech. They are not a form of political speech. They are a business transaction. They are no different than going to the racetrack and placing a bet on a particular horse to place or to win. One could argue that it is speech in that your presence at the track is a statement that you want to purchase the bet. But that bet is not really a political statement. It's a pretty minimal form of speech.
What is your evidence that prediction markets are consistently more accurate than other sources? You make this statement but offer no evidence. How do you define accuracy? You state that "an expectation of manipulation attempts on average makes such markets more accurate." This suggests exactly what critics have been saying. These markets are simply a means for insiders to make money through manipulation. It doesn't make them "accurate" it makes them rigged. Prediction markets should be regulated before they create market instabilities that cause financial crises we can't predict. At a minimum, banks should never be allowed to invest directly in prediction markets.