If you ask the prediction market companies, they'll say they're helping you stay informed, while giving you the opportunity to profit from your skill at predicting the market.
Polymarket’s new prediction contract for the price of the Scarlet & Violet 151 Charizard SIR.
In many ways, they have a point: Prediction markets have outperformed traditional analysts across all kinds events. Including when Polymarket predicted Donald Trump would win his 2nd American Presidency on the eve of the election, a full day ahead of the traditional pundits.
There appears to be some truth to the effectiveness of predictions made by the open market.
And so, I suppose there's a chance the addition of Pokémon card prediction "contracts" could help determine the market direction compared to traditional analysis alone.
But is it worth the pain they bring?
Because the very reason prediction markets are accurate may also be a nightmare for collectibles markets like Pokémon...
To start: Imagine you have some non-public information that gives you an edge. Putting morality aside, you could choose to leverage that information to "bet" on a prediction market. Doing this causes the odds of that outcome to increase, which helps make the market become a more accurate predictor of the final event.
Prediction markets like Polymarket appear to welcome insider trading like this because it creates more accurate predictions. Meanwhile, those with the insider information stand to make a quick buck in the process.
The very mechanism that makes prediction markets accurate succeeds by inviting nefarious activity.
Back to Pokémon cards:
In my article on the Economics of Buyers in Pokémon, I explained that the Market Supply for any Pokémon card (what’s currently listed for sale at today’s prices) is generally very thin, meaning that it's only a small portion of the overall Stock (the total supply - every copy ever printed).
That thin supply creates the opportunity for buyouts where manipulators, with access relatively small pool of capital, can trigger massive moves in a cards price simply by buying out the thin supply, and relisting it at a much higher price before the rest of the market catches up.
Although the practice may be frowned upon it is completely legal.
Now, imagine there's also a prediction market contract for a Pokémon card. Suddenly, not only can you profit via the buyout directly, you can amplify that profit by also betting on the prediction market!
What could go wrong?
I don't believe prediction markets will bring predictive clarity to collectibles markets. Instead, I believe they will amplify the manipulation that already exists by providing even more economic incentive to do so.
If prediction markets for collectibles catch on (and, in our gambling-obsessed culture I fear they will), I suspect we'll be in for a bumpy ride. Be careful out there.
As usual,
Thank you so much for reading the TCG Buyers Club newsletter. My name's Grey, I buy cardboard, and I'm on a mission to make collecting and investing in Pokémon simple.
Cheers 🍻
P.S. Have you ever bet on a prediction market? Do you think they are good or bad for the Pokémon market? Reply and let me know: I read every one!