Guidelines for Creating Prediction Markets

Prediction markets are powerful tools for forecasting future events by leveraging the collective knowledge of participants. This guide focuses on actionable steps and considerations for individuals creating prediction markets.

Step 1: Craft a Clear and Effective Question

Define the Core Question

• Ensure the question is precise and unambiguous
• Include measurable elements such as time frames, specific metrics, or conditions
• Avoid broad or vague phrasing

Examples:

• “Will SpaceX launch Starship into orbit by June 30, 2025?”
• “Will the inflation rate in Country X exceed 5% by December 31, 2024?”

Specify the Resolution Criteria

• Clearly describe how the outcome will be judged
• Identify trusted, verifiable sources for determining results (e.g., official reports, reputable news outlets)
• Make criteria objective and free of subjective interpretation

Avoid Ambiguities

• Provide definitions for technical terms or unusual concepts
• Explicitly mention any assumptions or conditions that apply

Step 2: Write a Detailed Market Description

Add Context

• Provide background information to help participants understand the importance of the question
• Highlight relevant data or trends that participants may consider

Explain the Resolution Process

• Detail how and when the market will be resolved
• Include timelines for data publication and dispute resolution, if applicable

Be Transparent About Changes

• Specify if and how market details might be updated, and how participants will be informed

Step 3: Engage and Inform Participants

Encourage Thoughtful Participation

• Highlight the importance of using reliable data and sound reasoning
• Provide resources or examples for newcomers to improve their predictions

Promote Fair Play

• Set expectations around avoiding manipulation or misuse of the market
• Ensure all participants have access to the same core information

Incentivize Participation

• Use rewards or recognition for accurate forecasters to boost engagement

Step 4: Finalizing and Launching the Market

Double-Check for Clarity

• Revisit the question, description, and resolution criteria to ensure everything is unambiguous and comprehensive

Communicate Effectively

• Share the market widely and provide regular updates
• Make key dates and milestones clear to participants

Step 5: Resolve the Market Responsibly

Follow the Defined Criteria

• Resolve the market strictly according to the predefined resolution criteria
• Reference the agreed-upon sources to declare the outcome

Be Transparent About the Outcome

• Communicate the resolution process and results clearly to participants

Learn and Iterate

• Gather feedback from participants to improve future markets
• Review what worked well and address any issues that arose

By focusing on clarity, transparency, and participant engagement, you can create prediction markets that provide meaningful forecasts and foster trust among participants.