PREDICTION OR PREDATION
PREDICTION MARKETS
NO FAIRNESS → 📉 → NO HOPE
Nihilism is cultural, it’s a vibe. But nihilism is, like everything, material.
LOSS OF MOTION
economic
Behind nihilism and gambling are two things:
1. The economy for most workers is in a bad and perhaps worse-than-we-know place (there was no January jobs report last week. Remind me why we get up in the morning?).
2. Capital isn’t as productive as it used to be, in a secular decline since 1983 (the post-COVID bump in rates is the anomaly). The entire curve of Americans’ economic life, in particular, is being pushed down long-term by this decline in productivity, wage growth, etc.
TECHNOLOGIC
Ironically, I would point as one culprit of this decline to the very same entities that have given us Kalshi and Polymarket: Silicon Valley — which has run out of ideas since the iPhone. What they’ve come up with instead: Artificial Intelligence initiatives, and Speculative Platforms (i.e. Gambling). The recent Nvidia bombshell about its OpenAI deal is only the most obvious of mounting signs that the entire AI thing is, at least in its current incarnation, a capital-incinerating delusion. I suppose that’s why a16z is now essentially building digital casinos.
INSIDER TRADING
Prediction markets can be called nihilistic in two ways — first, in the sense that they exploit uninformed desperation, and second, that their more explicit goal is to monetize insider information. They trace back to a DARPA project led by Robin Hanson (not coincidentally an affiliate of the gambling‑mad Effective Altruist movement), with the fairly explicit aim of rewarding rats and informers — people with privileged access to secret information that, if acted on under standard securities law, would constitute insider trading.
Somehow this prohibition doesn’t extend to markets like Kalshi and Polymarket, where Trump insiders appear to be placing large bets on, for instance, the planned kidnapping of Venezuelan President Nicolás Maduro.
TOXIC FLOW
Ethics aside (because fuck that, right?), this kind of behavior creates major business problems for the platforms in the long run — a dynamic Hanson doesn’t seem to have thought through. The dirty secret of markets like Kalshi, Coinbase, or the NYSE is that they rely on a steady stream of stupid traders to remain attractive. In fact, on balance, they seem to prefer the stupid traders — so much so that genuinely informed participants are often dismissed as “toxic flow.”
As one obscure but quite interesting analytical post from semaji.eth X account puts it: “The business of market making is only profitable with the right toxicity ratio — the ratio of retail (i.e., the man on the street) to sharps. And even with the right toxicity ratio, market making is still only profitable if you can somehow mitigate the magnitude of the losses when you encounter toxic flow.”
(For a more conventionally credible take on the toxic flow problem, here’s another one from Spencer Farrar at Theory VC.)
In other words, too much toxic flow (i.e., non‑degenerates who actually know things) will end up cleaning out the retail punters, who exist mainly as exit liquidity for the “sharps.” Yet as much as whales are where the money is, this vast pool of normies remains critical.
LOSS OF HUMANITY
Kalshi and Polymarket absolutely need a critical mass of desperate drones with brains so melted by short‑form video that the anhedonia of putting $10 a month into an index fund would trigger the DTs.
If markets like Kalshi and Polymarket are specifically designed to incentivize insider trading, their customer base is going to — inevitably, structurally, again and again forever — get absolutely rinsed.
And eventually, they’ll run out of money.