“binary markets throw away the distribution that forecasters actually produce”
Binary prediction markets compress continuous probability distributions into yes/no outcomes, discarding variance, skew, and tail information that forecasters naturally produce. functionSPACE analyzes 622 mutually exclusive bracket events on Polymarket and finds that less than half price a coherent probability distribution. The piece argues for continuous market design as the primitive that finally matches how both institutional analysts and prediction market traders actually reason about uncertainty.
Some technical background helpful
Platforms mentioned: Polymarket, Kalshi, functionSPACE