When Players Can Create Results Themselves, It's No Longer a Prediction Market

Prediction markets like Polymarket are increasingly gaining attention, especially during elections or major geopolitical events. The core idea is very appealing: allowing the market—where people put real money on their beliefs—to discover the “truth” faster than surveys or experts.

But there is a fundamental problem: what happens when participants not only predict outcomes… but can also create them?

From “prediction” to “actionable scenarios”

A true prediction market should reflect the probabilities of the objective world. However, in many cases, it unintentionally creates incentives for participants to directly influence the outcome.

A simple example: A market asks, “Will someone storm the field during the big final?” A trader buys heavily on “yes,” then they run onto the field themselves.

In that case: This is no longer a prediction. It’s executing a scenario to profit.

This mechanism doesn’t require extreme situations. It only takes: A single action One individual to carry out it And a low cost compared to potential profit

And the market becomes “bent.”

When the market starts pricing… the cost of manipulation

In such cases, prices no longer reflect the natural probability of the event occurring.

Instead, the market is silently pricing something else: The cost to make that event happen.

This is extremely dangerous because: The market is no longer a tool for aggregating information But becomes a place that encourages interference behavior.

And once the financial motivation is strong enough, someone will always try.

“Thin” markets and isolated events are most vulnerable to exploitation.

Not all prediction markets carry the same level of risk.

The most manipulable types often have characteristics: Low liquidity Results depend on a specific event Vague or easily staged confirmation conditions

Especially: Political events Cultural, media-related events Small milestones that can have an impact

All it takes is: Spreading rumors Pressuring an individual Staging a scenario

…to skew the outcome.

“All markets can be manipulated”—but not equally.

A common argument is: “Markets are manipulable everywhere, from stocks to sports.”

Yes, but that’s not enough.

The key difference lies in the feasibility: In professional sports: requires many people, high risk, close monitoring In a small prediction market: one person might suffice

That’s the difference between: Existence And practical implementation

Lessons from sports markets

It’s not because sports are “cleaner,” but because of its structure: Many participants High oversight Complex results, hard for a single individual to control

This structure significantly increases manipulation costs.

This should be the benchmark for prediction markets.

The issue isn’t ethics—it’s product design.

Platforms need a clear principle: Not listing markets where an individual can easily influence the outcome Not creating contracts with “reward” structures that incentivize harmful behavior Not using vague, easily staged confirmation conditions

A simple but powerful rule: If the reward is large enough to fund actions that produce the outcome → that market should not exist.

Trust is lost very quickly.

Initially, these issues might only be suspicions.

But just one major incident: A clearly manipulated market A result staged for profit

The consequences won’t be limited to a single case.

It will become: Evidence that the system has problems A reason for regulators to intervene A barrier causing large capital withdrawals

The critical line

Prediction markets claim to be tools for discovering truth.

But to do that, they must ensure: Markets measure the world, not pay to change it.

If they don’t set their own limits, those limits will be imposed externally.

And when that happens, the game is no longer theirs.