Geoff Buchan writes in with another theory about how prediction markets can go wrong:
I did want to mention one fascinating datum on Brexit: one UK bookmaker said they received about twice as many bets on leave as on remain, but the average bet on remain was *five* times what was bet on leave, meaning more than twice as much money was bet on remain.
Clearly weathier people, most likely pro remain, would be able to bet more, and I strongly suspect a similar bias exists in prediction markets, which, the last time I dabbled in them, had quite small open interest (think total money at stake). So such markets were, and perhaps are, subject to bias from deep pocketed people who may be expressing preference more than actual expectation.
Here we are in December (I wrote this in July but, y’know, bloglag) so youall have probably forgotten what Brexit even is. The general point still holds, though.