Why You’re Likely to Lose Money Betting on the News
You’ve likely seen those colorful charts showing the "odds" of who will win the next election or if the Federal Reserve will cut interest rates this month. It looks like a smart way to turn your news habits into quick cash, but for most people, it’s a fast track to an empty brokerage account. These platforms, known as prediction markets, are increasingly marketed as a more accurate version of the news, yet they function more like a casino where the house always has a massive head start. What's Going On Prediction markets are websites where you buy and sell "shares" in the outcome of future events. If you think a specific candidate will win an election, you might buy a share for 60 cents; if they win, that share becomes worth a dollar, and you keep the 40-cent profit. If they lose, your share goes to zero. While this sounds like a sophisticated way to invest, the data shows that a tiny group of professional traders—the "sharks"—walk away with almost all...