The primary reason why Predictit can't interest anyone in arbitraging is that they don't take "netting" into account when they determine your maximum possible loss. Arbitrage therefore requires you to tie up way to much money, such that it will rarely be a worthwhile investment
At the well-functioning prediction market Intrade, you were required to cover only your maximum possible loss across a mutually exclusive set of contracts (such as a list of people of whom at most one will be elected president). In contrast, PredictIt binds up your funds based on your maximum possible loss at any given contract.
As an example: Suppose buyers are offering to buy one contract on each of 10 possible candidates, at 15 dollars per contract. In other words, there is 50 dollars of free money on the table. On Intrade, you could sell a contract on each, and bind up 100 dollars for a year. This secures you a return of 50% In contrast, on PredictIt you would have to bind up 850 dollars for a year to secure the 50 dollars; which dramatically reduces the effective return to 6%
PredictIt also has a fees structure that discourages arbitrage (by taking cuts on the profits, and calculating the profits on the basis of each individual contract).
I tried to start a discussion about this on the PredictIt forum, but the comment did not make it past moderation. The lack of arbitrage is due to the poorly designed structure of the market. Possibly their hands are tied by the CFTC, I don't think it indicates anything sinister about PredictIt.
This is almost certainly one of those cases where there really is free money lying on the street, but each contract price will have to substantially exceed the interest rate in order to make the investment worth it.
Even so, at the moment there are sane interest rates available if you tie up your money that way. It's not just the lack of netting; it's the lack of netting, combined with the small deposit limits, combined with the high withdrawl fees. Fix any of those, and you'd see more arbitrage (I think).
Also, they have a really dumb system where each candidate has both yes and no shares, instead of each election having shares per candidate. Which means there are more different prices than there should be, and no system-enforced rule that the sum of the probabilities = 1.
What public prediction markets exist in the world today? Have you used one recently?
What attributes do they have that should make us trust them or not, such as liquidity and transaction costs? Do they distort the tails? Which are usable by Americans?
This post is just a request for information. I don’t have much to say.
Intrade used to be the dominant market, but it is gone, opening up this question. The most popular question on prediction markets has been the US Presidential election. If a prediction market wants to get off the ground, it should start with this question. Since the campaign is gearing up, markets that hope to fill the vacuum should exist right now, hence this post.
Many sports bookies give odds on the election. Bookmakers are not technically prediction markets, but they are awfully close and I think the difference is not so important, though maybe they are less likely to provide historical data. They may well be the most liquid and accurate sources of odds. But the fact that they concentrate on sports is important. It means that they are less likely to expand into other forms of prediction and less likely to be available to Americans. I suspect that there are too many covering the election for an exhaustive list to be interesting, but feel free point to point out interesting ones, such as the most liquid, most accessible to Americans, or with the most extensive coverage of non-sports events.
Betting is illegal in America. This is rarely enforced directly against individuals, but often creates difficulty depositing money or using the sites. I don’t think that they usually run into problems if they avoid sports and finance. In particular, Intrade was spun off of a sports bookie specifically to reach Americans.
Here are a few comments on Wikipedia’s list. It seems to be using a strict market criterion, so it includes two sports sites just because they are structured as markets. Worse, it might exclude bookies that I would like to know about. Not counting cryptocurrency markets (which I would like to hear about), it appears that there are no serious money prediction markets. The closest is New Zealand-based iPredict, which is limited to a total deposit of US$6000, and it takes a 18 months to build up to that. The venerable Iowa Electronic Markets (restricted to federal elections) and the young NZ PredictIt have even smaller limits, in return for explicit legality in America. It includes two play money markets: Microsoft and Hypermind. Finally, it mentions the defunct play-money Scicast, most notable for its different topic: science and technology. Hypermind and Scicast came out of the IARPA contest. Not on the list, I should mention PredictionBook, which is close to being a play-money prediction market, but tuned in different directions, both in terms of the feedback it provides to participants and the way it encourages a proliferation of questions.
Update: In the previous paragraph, I discarded two sports bookies from Wikipedia's list. I did so because I thought that they had very little non-sports offerings, but in both cases I did a poor job of navigating them and underestimated the numbers. Smarkets still seems too small to be interesting, but Betfair does have solid political offerings and is rightfully at the top of the list.
As of March 2016 my recommendations are: