Spectral sits down with Insight Prediction’s founder Doug Campbell for an interesting conversation about living in Moscow, his work modeling for the Obama Administration, and, of course, the intricacies of building and providing liquidity to a prediction market platform.
How to Build a Betting Market
"I had been thinking about this idea of starting an online betting market for a long," Doug Campbell, founder of Insight Prediction. He was dissatisfied with existing platforms, especially their design limitations and focus on sports betting. “They had very low bet minimums...it took forever to get your money out."
His journey to running a prediction market wasn’t straightforward. Campbell was born in Indiana, studied political science, earned a Ph.D. in economics from UC Davis, then served in Obama Administration identifying voting patterns, then moved to Moscow where he taught economics until the outbreak of war, when he moved to Washington, D.C.
Of course, his own luck helped fuel the rise of Insight Prediction: "I basically bought short-term out of the money put options, and then overnight, basically, I doubled my wealth," he says, detailing his strategic moves during the early days of the COVID-19 pandemic.
Insight Prediction stands apart in its approach to betting markets. While most platforms are sports-centric, Campbell sees the potential for markets that delve into political and policy-driven predictions. "I think it, you can, at least in theory, have markets about topics which are more interesting than, you know, are the Patriots going to be the Colts next weekend," Campbell says.
Discussing the competitive landscape, Campbell acknowledges other players like PolyMarket and Kalci but emphasizes Insight Prediction’s unique positioning. "I think there's a lot of things we can do that Polymarket has a difficult time doing just because they are all on-chain, whereas we are centralized," he states. This strategic differentiation is central to his vision of offering diverse and engaging markets that go beyond the constraints of his competitors.
One of the challenges Campbell highlights is providing liquidity without significant losses. This is particularly difficult in fast-moving markets where strong price fluctuations. "Providing liquidity in a fast-moving news market can be very tough. You can lose money easily," he admits, pointing out the intricacies involved in maintaining a dynamic and responsive platform.
Looking to the future, Campbell sees enormous potential in prediction markets, especially in their ability to predict geopolitical events and influence public policy. He believes these markets could serve as powerful tools for decision-makers. "Imagine if ..you had the power to create a prediction market about some conditional geopolitical event," Campbell says.
Campbell advises caution and thoroughness for those venturing into prediction markets and model-making. "A bad model could potentially be worse than no model," he says.
How Prediction Markets Deal with the CFTC and the Current Regulatory Environment
Another potential issue is an ever-changing regulatory environment.
"The CFTC has granted a small number of licenses," Campbell explains, referring to the U.S. Commodity Futures Trading Commission's cautious approach to prediction markets. This regulatory body plays a crucial role in overseeing markets, ensuring they operate within legal and ethical boundaries. It’s a tough regulatory environment. "They just operate like a senate, a house in the president market...it's not very well done."
The largest political market in the United States holds a license obtained from a New Zealand university, the Victoria University of Wellington, and received a no-action letter from the CFTC after a recent decision to ban political trading (similar to the one received by the University of Iowa’s Iowa Electronic Election market).
In a testament to the potential of prediction markets, Doug Campbell shares an intriguing insight about the power of collective forecasting: "There was a little bit of research that came and looked at who does a good job predicting geopolitical events. They found [that certain people are basically] super forecasters...and had a tournament where they went head to head with some teams that included analysts from the CIA."
Apparently, they beat them handily.
Think you can out-predict the CIA? What about the Major Credit Bureaus?
Would you like to try guessing geopolitical, news, and other markets? Check out Insight Prediction.
And don’t forget that Spectral’s first challenge is open—we’re building a web3 credit score that uses on-chain transactions to guess liquidations. There are $150,000 in bounties for the top-performing modelers and (after those bounties are exhausted) an 85 percent share of revenue at stake.