I’m not sure if there’s really any reason to trust betting markets. The sizes are so small compared to the import of the race that it seems like a donor could toss $1MM in the pool, say “look, my guy’s actually ahead!” thereby increasing the value of the pool and (if he or she wishes) subsequently exit at a profit once more people buy in. Just generally: the pools seem to be overly emotional, less analytically focused, and trivial to manipulate, which makes me wonder why we discuss them?

You have to be a little bit careful about "subsequently exit" in that text. You may not be able to do so if the market is, or becomes, thinly traded.

There has to really be somebody else on the other side of every single Predict It trade, this contrasts to two other situations we might think about:

1. A bucket shop. You aren't betting against PredictIt. So even if the price displayed is 40¢ and you have 1000 units, you can't necessarily turn them into $400, because you need somebody else to actually pay 40¢ for each of those 1000 units or they'll just sit there.

[ Eventually PI resolves each prediction by a means described in the prediction, e.g. "Will Joe Biden drop out of Presidential Race by end of October 2020?" resolved to "NO" at the end of October when, unsurprisingly, Joe had not dropped out, and everybody holding a unit of NO gets $1 minus fees added to their cash holding and all units both YES and NO vanish. ]

2. Market Makers. A listed stock has "market makers" who promise to deal in the stock on the market. You don't need to worry about finding someone to sell your 1000 units to, because the Market Maker will definitely always buy. But on PredictIt there is no Market Maker, so even if the last trade was at 40¢ and you're happy to take 39¢ your 1000 units might sit there until they resolve (and if you're happy to take 39¢ for them you likely do not expect them to resolve in your favour) if there are no buyers at 39¢.

It certainly is harder to rationalise caring very much about PredictIt when you notice that "Trump NO" (Donald Trump is not elected to be the next President of the United States of America) costs about 85¢ right now, even though he's lost and the resolution will pay $1 for that 85¢ "gamble".

But again, liquidity. That market is not very liquid, so you likely shouldn't think too much of it.

The Kiwis who run this as a research project hopefully learn something valuable from it. I wouldn't be surprised if their take is that it works better for less newsworthy stuff than a US Presidential Election.

> It certainly is harder to rationalise caring very much about PredictIt when you notice that "Trump NO" (Donald Trump is not elected to be the next President of the United States of America) costs about 85¢ right now, even though he's lost and the resolution will pay $1 for that 85¢ "gamble".

I just tried to buy a bunch of these. When I clicked [Submit Offer], I got this message:

    We have reached the maximum number
    of traders on this contract.

All proxy markets are giving me the same message. (Will VP be a woman, EC vote margin in 60-99 bucket, etc.)

> But again, liquidity. That market is not very liquid, so you likely shouldn't think too much of it.

Exactly. So this "86¢" appears to be totally meaningless now. If I can't buy at that price, then anyone holding it can't sell. There's no action here.