Lots of great stuff here, of course! I'd only add that, as a non-economist, I have the sense that economists would be inclined to say that American insider-trading rules should be eliminated because they function primarily to keep insiders from making sales or purchases that add information to the market. So the worries about insider trading on the part of Kalshi's critics seem fundamentally off-base.
Good points - but what makes you think betting would make investigators rethink unfair trials? Seems like that is off their radar. PS love your work and posts Prasad!
// George Santos made a bet on George Santos, and was caught. I see no reason to doubt that current laws and processes will work here too.//
I think it’s not a “yes-or-no” but more of a “more-or-less” question. If the idea of betting on trial becomes mainstreamed (instead of existing in a grey area like how it currently is), that is likely to create much more instances of insider-trading, and I am not so sure current law and processes can handle the caseload
//If a trial is 98% going to be positive (p.s. many are), why are we running them?//
Kinda ironic coz that’s one of the recurring lessons we learned in Sensible Medicine isn’t it: that the medical intervention we think will work often turns out to be surprisingly ineffective, and medical reversal happened AFTER we reviewed them with rigorous trials
Now imagine all those gambler betting on the seeming redundancy of those trial based on the (wrong) prior that our current standard of care is actually effective, and that in turn dissuade patients from participation
Nah. Kalshi removes too much friction from the gambling process. The result has been destitution and domestic violence for millions of Americans. Gambling should be legal, but made as difficult as possible to add the necessary friction.
A bet is simply a voluntary action taken by an individual or group of individuals with another individual or group. No third party has the right to interfere with or "regulate" the process. We "bet" every day by considering the potential advantages and disadvantages of the actions we take. No one has the right to dictate our choices as long as there is no violation of the rights of other individuals. We live in a time where one can bet on whether the next pitch in a baseball game will be a ball or a strike. So the gambling horse has left the barn long ago. Bookies that set odds and have their own money at stake are probably more likely to assess a future outcome more honestly than other participants in the process. Given that, the Kalshi mechanism is providing another potential source of information that can enter the decision process.
I agree with you that weak comparators and poorly designed trials are a problem. I just don’t think letting people bet on the outcomes is a good way to fix it.
If a control arm is inappropriate, that needs to be addressed before patients enroll. I worry that putting money behind all the small pieces of information people see during a trial creates some pretty bad incentives.
The control-arm argument is the one worth taking seriously here and it is the part most people will skip past. A weak comparator is invisible in a press release and obvious in a betting line. When my group studied why ambulatory surgery patients were not getting home on time, we designed it expecting the answer to be pain, and it turned out to be nausea, with some patients needing an overnight stay for it. If we had picked a comparison that protected the hypothesis we walked in with, we would have published something true and useless, and it would have taken years for anyone to notice. Whatever one thinks of the betting, pricing the design rather than the sponsor is a real idea.
Perhaps prediction market betting will be normalized in the future like stock trading and company ownership. Perhaps there will be an analogous SEC and strong regulatory guardrails, ie, people know the rules and are confident in how they are applied. But we are not there. And that gets to something you do not mention. Appearances. Even if trials are not tainted by unsavory behavior, individuals dont like the idea of bets being placed on trial outcomes. It’s not like buying a company. It’s a bet on a drug—even if it’s a one or two drug company. Until we understand prediction markets, perceptions of the trial enterprise and confidence in it may decay. That is not something to gloss over, and it has a social cost we should not discount until we learn more and understand all perspectives (and not just those who have financial interests).
Not just distasteful but unnecessary. If the goal is to make money -although for some people life is more than that-, there are so many things to bet on, why denigrate medicine opening it for betting?
Lots of great stuff here, of course! I'd only add that, as a non-economist, I have the sense that economists would be inclined to say that American insider-trading rules should be eliminated because they function primarily to keep insiders from making sales or purchases that add information to the market. So the worries about insider trading on the part of Kalshi's critics seem fundamentally off-base.
Good article. Thank you
Good points - but what makes you think betting would make investigators rethink unfair trials? Seems like that is off their radar. PS love your work and posts Prasad!
// George Santos made a bet on George Santos, and was caught. I see no reason to doubt that current laws and processes will work here too.//
I think it’s not a “yes-or-no” but more of a “more-or-less” question. If the idea of betting on trial becomes mainstreamed (instead of existing in a grey area like how it currently is), that is likely to create much more instances of insider-trading, and I am not so sure current law and processes can handle the caseload
//If a trial is 98% going to be positive (p.s. many are), why are we running them?//
Kinda ironic coz that’s one of the recurring lessons we learned in Sensible Medicine isn’t it: that the medical intervention we think will work often turns out to be surprisingly ineffective, and medical reversal happened AFTER we reviewed them with rigorous trials
Now imagine all those gambler betting on the seeming redundancy of those trial based on the (wrong) prior that our current standard of care is actually effective, and that in turn dissuade patients from participation
It would be such a pity.
Vinay, Nope the errors by MSM are from malice. They are both stupid AND evil.
Nah. Kalshi removes too much friction from the gambling process. The result has been destitution and domestic violence for millions of Americans. Gambling should be legal, but made as difficult as possible to add the necessary friction.
I don't have a problem with it. Wondering how markets will work on non inferiority registration trials. They're very often non inferior
A bet is simply a voluntary action taken by an individual or group of individuals with another individual or group. No third party has the right to interfere with or "regulate" the process. We "bet" every day by considering the potential advantages and disadvantages of the actions we take. No one has the right to dictate our choices as long as there is no violation of the rights of other individuals. We live in a time where one can bet on whether the next pitch in a baseball game will be a ball or a strike. So the gambling horse has left the barn long ago. Bookies that set odds and have their own money at stake are probably more likely to assess a future outcome more honestly than other participants in the process. Given that, the Kalshi mechanism is providing another potential source of information that can enter the decision process.
I agree with you that weak comparators and poorly designed trials are a problem. I just don’t think letting people bet on the outcomes is a good way to fix it.
If a control arm is inappropriate, that needs to be addressed before patients enroll. I worry that putting money behind all the small pieces of information people see during a trial creates some pretty bad incentives.
I wrote a response here:
https://dfloramd.substack.com/p/betting-on-clinical-trials-will-not?r=11bw2f&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true
Correct.
The control-arm argument is the one worth taking seriously here and it is the part most people will skip past. A weak comparator is invisible in a press release and obvious in a betting line. When my group studied why ambulatory surgery patients were not getting home on time, we designed it expecting the answer to be pain, and it turned out to be nausea, with some patients needing an overnight stay for it. If we had picked a comparison that protected the hypothesis we walked in with, we would have published something true and useless, and it would have taken years for anyone to notice. Whatever one thinks of the betting, pricing the design rather than the sponsor is a real idea.
Betting seems so trifling. It is a shame that folks can’t find ways more meaningful ways to participate in the economy and civic society.
On the other hand, the system is corrupt at its core.
Is betting open now for how the medical professional associations will react to this ?
Perhaps prediction market betting will be normalized in the future like stock trading and company ownership. Perhaps there will be an analogous SEC and strong regulatory guardrails, ie, people know the rules and are confident in how they are applied. But we are not there. And that gets to something you do not mention. Appearances. Even if trials are not tainted by unsavory behavior, individuals dont like the idea of bets being placed on trial outcomes. It’s not like buying a company. It’s a bet on a drug—even if it’s a one or two drug company. Until we understand prediction markets, perceptions of the trial enterprise and confidence in it may decay. That is not something to gloss over, and it has a social cost we should not discount until we learn more and understand all perspectives (and not just those who have financial interests).
Good analysis and insight.
Betting is a tool to shed light in some dark areas of clinical trials to see whose fingers are pressing the potential outcomes scale.
Thanks
George Bone
ICCare
Not just distasteful but unnecessary. If the goal is to make money -although for some people life is more than that-, there are so many things to bet on, why denigrate medicine opening it for betting?
Indeed. I generally agree with Vinay, but this argument made me respect him a lot less.