A couple of decentralized prediction markets[1][2] powered by blockchain technology are trying to move regulatory compliance from centralized betting exchanges to the users themselves, which could be construed as an attempt to minimize regulatory liability, similar to DMCA Safe Harbor provisions.
I wonder how these companies/groups will prevent minors from betting? Even countries where gambling is fully legal frown upon underage gambling. I think these startups are not going to be able to dodge all the regulatory problems by pushing the betting onto a blockchain.
They aren't startups, not any more than "Bitcoin" or "Bittorrent" are startups.
Once the software is initially developed and released, there's no head to cut off or assets to seize, there's just a million little pseudo-anonymous players scattered all over the world.
Seizing the money raised in the distribution of the reputation isn't going to shut down Augur any more than seizing Satoshi's house and putting him in prison would shut down Bitcoin. At a certain point (Augur and Ethereum aren't there yet) it just takes on a life of its own beyond its creators.
I mean, Bittorrent ostensibly had a "central organization" at one point but there's nothing you could do to it that would shut down the protocol.
I take your point, and I don't expect any legal action against Augur until (if?) it grows big, by which time it will have less of an obvious core. But there will still be identifiable promoters, e.g. anyone hosting a website advertising/facilitating Augur. I'd guess that these people would be the ones at risk, rather than the individual bettors.
Anyway, I'm watching its development with interest, but I suspect that it won't become a big success.
I'm a little confused by augur. It can only predict things well based on a large crowd of people betting on it? So the more specific or niche the event, the less chances it will be correct?
The correctness should be taken care of by the bettable event, ideally carefully considered by the market maker. If the event is not believed to be easily verifiable, you probably should avoid betting on it.
"Intrade’s system was designed to evoke sophisticated investment, not a casino or a horse track"
I resent the supposition that there is not sophisticated investments being made on horse racing.
There are many professional investors all over the world, making sophisticated investments in horse racing.
One company I'm involved with, essentially a one man band, pays between £10,000 - £15,000 per annum just to access horse racing data, both daily races and historic results. They then use this raw data to produce complex ratings for daily races and to perform historic data analysis. Their toolset is mostly R and Python based.
This is just one small company in the UK. If you looked at other jurisdictions, such as Hong Kong, there are multi-million dollar syndicates crunching numbers to make sophisticated horse racing investments.
No matter how you dress it up, betting on an outcome is not an investment, it is playing a game. You can invest in applying sophisticated tactics to a game to swing the odds in your favor (look at a formula 1 or NFL team for an example of this taken to extreme), but you are still playing.
“Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.”
Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
There's a very reasonable distinction to be made between "gambling" bets, which are zero sum, and investments, which are not.
If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
One important missing dimension-of-distinction here is 'zero-sum'/'negative-sum' vs. 'possibly-positive-sum'.
The lines can seem fuzzy in practice, but it does make good sense to reserve the term 'investment' for deploying resources, with the hope of gain, in domains where a net-positive-sum outcome for all is possible.
Meanwhile, pure 'gambling' reshuffles value in a net-zero-sum or even net-negative-sum process, and in many cases only persists because some participants ('suckers', 'marks', 'degenerates') have equally-persistent behavioral/decision-making problems.
Another related dimension-of-distinction is whether the randomness is an inherent product of a chaotic/complex/natural process, or synthesized precisely with intent to confuse.
Coming to understand (and either control or hedge) the randomness in nature or in complex hard-to-predict systems can be a very positive-sum process, and even generate spillover benefits for others (positive externalities). But engineering a game with fixed completely-deterministic odds, rigged against most players and (designed-to-be) just beyond the ability of their usual rules-of-thumb to model, is essentially predatory.
People generally shouldn't play such games, or confuse them with the other more-reasoned 'bets' made in other domains. Of course people will sometimes make the 'bad' bets, because they're not always easy to distinguish and everyone has to learn. But the end of that process would ideally be to better discriminate between kinds-of-bets, not to lump them together as 'all just gambling'.
So the distinction, to me, between an investment and a bet, is that an investment actually affects the subject. Placing a bet, notionally, has no impact on the event the bet covers; the fact you have entered into a bet over the outcome of a horse race is completely independent of the outcome. On the other hand, if you put your money into training a horse, and win back a share of its prize money, or stud value, or whatever, that is an investment, because your money contributed to the overall realization of value.
Insurance, I'll grant, is a bet, but it's a bet where you have skin in the game - a bet against yourself, to hedge against loss outside your control. A bet you want to lose.
Futures are not outright gambling, no, they're temporal arbitrage - same as loans and bonds. Derivatives - well, depends on the market, but in one sense they're basically insurance, which is maybe a form of gambling, sure.
Aren't all investments "betting on an outcome"? Betting the stock will be worth more, betting my house will be worth more, betting my car will maintain more of its value versus a different model or betting its better to buy now against the outcome of inflation? Even a date is betting my time that the outcome will be me getting along with stranger.
It's so sad that intrade got stomped by the Feds while fanduel and draftkings are advertising on TV.
There's a serious social utility in prediction markets, whereas fantasy sports betting is just another way to separate punters from their money.
The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide. It might be called "Fantasy Sports" or it might be called something else, but it will be widely-advertised and very profitable.
The cat's out of the bag and they'll make sure it's never going back in.
>The NFL's army of lobbyists and attorneys will insure that some form of legalized digital sports betting is available mostly-nationwide.
Except if that were true, why wasn't there legal nationwide betting available before DraftKings and FanDuel? The NFL only cares about gambling to the extent it can grow interest in the sport, but once it gets too messy they will wipe their hands of the whole situation. The NFL's lobbyist have more important things to work on than dying on the hill of legalized sports betting.
DraftKings and FanDuel paid off top NFL-related personnel, so the interests of DK/FD align with the NFL's interests. Now, the NFL (or at least influential executives) will get their cut of the pie, without actually having to bake the pie themselves. Turns out, asking for permission rather than forgiveness works.
Though, yes, the NFL's lawyer army will have concussion battles to fight for the foreseeable future.
The Nevada Gaming Commission just wants licensing fees. Nevada also knows that if fantasy sports is considered gambling, most other states will disallow it. Which, again, is good for Nevada. This is motivated purely by self-interest.
> “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it’s grotesque,” said Sen. Ron Wyden, a Democrat from Oregon. The head of DARPA, Adm. John Poindexter, was forced to resign and the project was squelched.
How idiotic. It sound like a very good idea. Anyone with "insider knowledge" but no participation of a terrorist attack, will be very tempted to place a bet. By checking the bets you can avoid attacks.
Create such a market using bitcoins, and you'll get very valuable intel. It's like having ears everywhere.
Sure, just take the moral high ground while people needlessly die. I'd rather the insider make money nefariously than tsk-tsk about what he should have done if it means preventing attacks.
You size your bet with regard to the probability that the bet will inform a change in policy. Or maybe you hedge it by also betting on that change in policy.
Modelling for the purpose of "betting" is sort of the definition of my day job.
Over the past few years I've started applying some of the same techniques we use in the equity and bond markets to the fantasy sports arena.
The biggest issues I've come across are:
1) small sample size, football teams only play 16 games which means you really don't have alot of data to use.
2) counter party risk, lots of fantasy betting sites spring up and then fold, just like bitcoin. Ideally there would be a new form of prediction market that hosts bets but has a reliable third party escrow the funds.
3) Not enough volume, this is getting better but only due to Draft Kings huge advertising push this past year.
4) Lack of apis, most of these sites seem to want to cater to people who make 1 or two bets. Ideally I'd be able to make 1000's of bets each week.
If anyone else out there is working on models for fantasy sports betting please feel free to drop me a line if you'd like to discuss techniques for modelling( I believe the cool kids now call this machine learning).
To your point on #2, Augur (augur.net) should overcome a lot of that risk. Probably not all of it, since the oracles can rule against your win, but at least you know no one can make off with your money.
I've got a friend who used to work in quant hedge funds. He's moved to a company that exclusively trades sports. There's a lot of interesting alpha in there, and you don't get the same portfolio effects (market up/down) that you get in finance.
One thing that juices returns is access. If you know about the new markets opening you run your arbs on them and make good money.
I can't help but be reminded of that Taibbi quote about Wall Street being a vampire squid plunging its blood funnel into anything that smells like money. It's a living, I suppose, but does "running your arbs" create anything of value?
"Running arbs" is fine and definitely creates value. The problem with vampire squids is their parasitic relationship with govt, i.e. the people with the guns.
Arbitrage definitely adds value to society. Without arbitrage, traded assets could exist with arbitrary values.
The process of arbitrage involves observing a mis-priced asset and then making a profit from that observation. By doing so, you push the asset towards its correct value. This kind of activity maintains the integrity of a market.
It does up to a point. I think we're well beyond that point, when people pay for microwave relays to get a few milliseconds of arbitrage, because light is faster in air than in fiber. If someone ever drills a hole through the earth's core, it will be traders looking to save latency between New York and Hong Kong (kidding, I hope).
Yes I absolutely believe that there are diminishing returns associated with arbitrage. I would personally think that exchanges should put some lower limit on the 'time resolution' of their markets to prevent HFT investment beyond a certain point.
1) definitely true, but it's interesting that it doesn't seem to affect the betting so much. There seems to be rapid consensus on what the 'correct' odds are for any given match, with only minor odds fluctuations. Compare this with horse racing, where the odds before the start can swing wildly, even though the same horses may have run many times before. There are different unknowns in the two sports, of course, but it is strange how bettors seem to quantify the football unknowns similarly.
2) All down to your country's silly gambling laws, unfortunately. Europe, and the UK in particular, have got the right idea here. It's overwhelmingly the shady offshore bookies that disappear without paying out.
3) Probably the same reason as 2) really... American football doesn't seem to attract significant betting volumes outside the US. American horseracing is more popular, strangely.
4) There's very few companies with APIs here. Basically only the exchange-based bookies offer APIs. All other bookies want nothing to do with sophisticated players, and if your customers are at the level of automating bets, you probably don't want to be the one taking them on :)
(Edit): I forgot about Pinnacle - they are (I think) the only traditional bookie who offers an API. Mind you, they also are happy to take on profitable customers.
Here is where a classically trained statistician can really shine. Classical statistics is really all about extracting insight from data when it is hard to come by...
The average player's career is 3 years, the average coaches tenure is 3 years. Teams implement new offensive and defensive schemes even more frequently than that.
Couple those facts with a short season( 16 games) and injuries limiting most players to less than that and it means you really can't use historical stats with any certainty.
Essentially you start from scratch each season.
I mean there is a reason why the phrase "statistically significant" is often used.
if you can figure out how a "classically" trained statistician can create an acurate model with:
1) almost no data
2) inaccurate data
3) seasons in which the next one often bears no resemblance to the previous one
I tried this for a while in MLB but came to the conclusion that rake + irreducible variance made it pretty unattractive. Not sure about other sports. Apparently the real key was knowing all the other players lineups in MTT formats, according to recent stories.
I've been creating a platform for some time now that is similar except it has to do with trading future revenue streams. Check it out http://www.gimmeview.com
Random product idea: An app where people can place bets on outcomes in their own personal lives by assigning percentage certainty. And where the app will let them make bets on future public events the same way, events that are fed via a service and where the bets are stored centrally. The bets wouldn't be for money, they'd instead be for the credibility of who could be most "well-calibrated" via a "proper scoring rule" that would penalize you for inaccuracy or ignorance - so you have incentive to be knowledgeable about the event, and accurate about the odds. Soon you'd have a leaderboard of people who were best able to tell the future, and you could design future features from there.
But the MVP is pretty simple. Create an event, create a bet, create a leaderboard.
>Intrade’s system was designed to evoke sophisticated investment
No, it wasn't, or it failed at that:
1) They changed rules on bets midstream. I lost when they redefined the swine flu count as "the CDC's current total" rather than the original specification "number of cases as estimated by major media sources". (The CDC stopped updating.)
2) The bizarre $1 = 10% chance system. (Bet contracts would be set to have a value of $10 each, so a 100% chance should equate to a ~$10 bid.)
3) The flaky, designed-to-trick-you withdrawl system. When I asked for a check for my balance, there as a $X fee. So I asked for $Y, while leaving $X in the account, and was told I'd get $Y. Then they took $X out of the check, leaving an $X balance.
"The idea that the expert human mind could be outclassed by a bunch of amateurs getting together is very disturbing, as disturbing as saying the Earth is not the center of the solar system."
The article doesn't quite make the case that that is true.
Crowds predicting an election is no surprise -- crowds determine the outcome. It would be more compelling if the results were accurate a year ahead of time or something.
And for sports betting, the average betting amateur is actually quite well-informed.
I don't think this really applies to science very well. Crowds change opinions all the time, so they can't be right about some unchanging law of nature.
56 comments
[ 2.6 ms ] story [ 98.1 ms ] thread> “We’ve learned from our own experience,” [Intrade founder Ron Bernstein] replied, “that regulatory avoidance isn’t a good business model.”
[1] http://www.truthcoin.info/
[2] http://www.augur.net/
Once the software is initially developed and released, there's no head to cut off or assets to seize, there's just a million little pseudo-anonymous players scattered all over the world.
I mean, Bittorrent ostensibly had a "central organization" at one point but there's nothing you could do to it that would shut down the protocol.
Anyway, I'm watching its development with interest, but I suspect that it won't become a big success.
I resent the supposition that there is not sophisticated investments being made on horse racing.
There are many professional investors all over the world, making sophisticated investments in horse racing.
One company I'm involved with, essentially a one man band, pays between £10,000 - £15,000 per annum just to access horse racing data, both daily races and historic results. They then use this raw data to produce complex ratings for daily races and to perform historic data analysis. Their toolset is mostly R and Python based.
This is just one small company in the UK. If you looked at other jurisdictions, such as Hong Kong, there are multi-million dollar syndicates crunching numbers to make sophisticated horse racing investments.
“Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.”
Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
The lines can seem fuzzy in practice, but it does make good sense to reserve the term 'investment' for deploying resources, with the hope of gain, in domains where a net-positive-sum outcome for all is possible.
Meanwhile, pure 'gambling' reshuffles value in a net-zero-sum or even net-negative-sum process, and in many cases only persists because some participants ('suckers', 'marks', 'degenerates') have equally-persistent behavioral/decision-making problems.
Another related dimension-of-distinction is whether the randomness is an inherent product of a chaotic/complex/natural process, or synthesized precisely with intent to confuse.
Coming to understand (and either control or hedge) the randomness in nature or in complex hard-to-predict systems can be a very positive-sum process, and even generate spillover benefits for others (positive externalities). But engineering a game with fixed completely-deterministic odds, rigged against most players and (designed-to-be) just beyond the ability of their usual rules-of-thumb to model, is essentially predatory.
People generally shouldn't play such games, or confuse them with the other more-reasoned 'bets' made in other domains. Of course people will sometimes make the 'bad' bets, because they're not always easy to distinguish and everyone has to learn. But the end of that process would ideally be to better discriminate between kinds-of-bets, not to lump them together as 'all just gambling'.
Insurance, I'll grant, is a bet, but it's a bet where you have skin in the game - a bet against yourself, to hedge against loss outside your control. A bet you want to lose.
The cat's out of the bag and they'll make sure it's never going back in.
Except if that were true, why wasn't there legal nationwide betting available before DraftKings and FanDuel? The NFL only cares about gambling to the extent it can grow interest in the sport, but once it gets too messy they will wipe their hands of the whole situation. The NFL's lobbyist have more important things to work on than dying on the hill of legalized sports betting.
Though, yes, the NFL's lawyer army will have concussion battles to fight for the foreseeable future.
The Nevada Gaming Commission just wants licensing fees. Nevada also knows that if fantasy sports is considered gambling, most other states will disallow it. Which, again, is good for Nevada. This is motivated purely by self-interest.
How idiotic. It sound like a very good idea. Anyone with "insider knowledge" but no participation of a terrorist attack, will be very tempted to place a bet. By checking the bets you can avoid attacks. Create such a market using bitcoins, and you'll get very valuable intel. It's like having ears everywhere.
www.augur.net, fascinating stuff.
The biggest issues I've come across are:
1) small sample size, football teams only play 16 games which means you really don't have alot of data to use.
2) counter party risk, lots of fantasy betting sites spring up and then fold, just like bitcoin. Ideally there would be a new form of prediction market that hosts bets but has a reliable third party escrow the funds.
3) Not enough volume, this is getting better but only due to Draft Kings huge advertising push this past year.
4) Lack of apis, most of these sites seem to want to cater to people who make 1 or two bets. Ideally I'd be able to make 1000's of bets each week.
If anyone else out there is working on models for fantasy sports betting please feel free to drop me a line if you'd like to discuss techniques for modelling( I believe the cool kids now call this machine learning).
One thing that juices returns is access. If you know about the new markets opening you run your arbs on them and make good money.
Hours are weird.
Something similar could be said of the people chasing the ball around the field.
The process of arbitrage involves observing a mis-priced asset and then making a profit from that observation. By doing so, you push the asset towards its correct value. This kind of activity maintains the integrity of a market.
2) All down to your country's silly gambling laws, unfortunately. Europe, and the UK in particular, have got the right idea here. It's overwhelmingly the shady offshore bookies that disappear without paying out.
3) Probably the same reason as 2) really... American football doesn't seem to attract significant betting volumes outside the US. American horseracing is more popular, strangely.
4) There's very few companies with APIs here. Basically only the exchange-based bookies offer APIs. All other bookies want nothing to do with sophisticated players, and if your customers are at the level of automating bets, you probably don't want to be the one taking them on :)
(Edit): I forgot about Pinnacle - they are (I think) the only traditional bookie who offers an API. Mind you, they also are happy to take on profitable customers.
Here is where a classically trained statistician can really shine. Classical statistics is really all about extracting insight from data when it is hard to come by...
The average player's career is 3 years, the average coaches tenure is 3 years. Teams implement new offensive and defensive schemes even more frequently than that.
Couple those facts with a short season( 16 games) and injuries limiting most players to less than that and it means you really can't use historical stats with any certainty.
Essentially you start from scratch each season.
I mean there is a reason why the phrase "statistically significant" is often used.
if you can figure out how a "classically" trained statistician can create an acurate model with:
1) almost no data
2) inaccurate data
3) seasons in which the next one often bears no resemblance to the previous one
....then please feel free to contact me!
Not sure if this is meant to be satire / sarcasm?
By "classically" trained statistician, i meant someone who has taken a bunch of grad level courses in statistics (as opposed to CS flavoured ML).
A lot of Fisher's and Gosset's work was done in an era of "small" data.
>>if you can figure out how a "classically" trained statistician can create an acurate model with:
>>1) almost no data
>>2) inaccurate data
>>3) seasons in which the next one often bears no resemblance to the previous one
Stats / ML can't help much with 1) and 2). But wrt 3), dealing with issues of non-stationarity is very much a subject of statistical literature.
You mean like many bitcoin companies right?
But the MVP is pretty simple. Create an event, create a bet, create a leaderboard.
No, it wasn't, or it failed at that:
1) They changed rules on bets midstream. I lost when they redefined the swine flu count as "the CDC's current total" rather than the original specification "number of cases as estimated by major media sources". (The CDC stopped updating.)
2) The bizarre $1 = 10% chance system. (Bet contracts would be set to have a value of $10 each, so a 100% chance should equate to a ~$10 bid.)
3) The flaky, designed-to-trick-you withdrawl system. When I asked for a check for my balance, there as a $X fee. So I asked for $Y, while leaving $X in the account, and was told I'd get $Y. Then they took $X out of the check, leaving an $X balance.
The article doesn't quite make the case that that is true.
Crowds predicting an election is no surprise -- crowds determine the outcome. It would be more compelling if the results were accurate a year ahead of time or something.
And for sports betting, the average betting amateur is actually quite well-informed.
I don't think this really applies to science very well. Crowds change opinions all the time, so they can't be right about some unchanging law of nature.