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.