Swimming in Prediction Markets at Gnosis (GNO)

The prediction markets at Gnosis (GNO) are some of the least understand but disruptive blockchain platforms around.

Simply put, a prediction market is a group of people betting or speculating on the outcomes of future events. Hence, prediction markets range from your office football pool to a gigantic online sports book.

Effectively, Gnosis is a platform that lets anybody build blockchain prediction markets with a solution called Gnosis Olympia. Interestingly, Gnosis Olympia lets users bet with OLY tokens, which it describes as Olympia’s “official play money token.”

They cannot use the Gnosis (GNO) Tokens for gambling

I guess they use the term “play money token” to get around anti-gambling laws like America’s Interstate Wire Act. In detail, the Federal Wire Act makes it illegal to transmit bets or wagers electronically between American states. Thus, the Wire Act makes online gambling illegal in the United States.

Thus, you cannot use the Gnosis (GNO) Ethereum Request for Contact (ERC20) utility tokens cannot for gaming, gambling, or wagering. Therefore, the GNO tokens are more of a fundraising mechanism for Gnosis, than a cryptocurrency.

Confusingly, Gnosis’s website mentions another token called OWL that GNO owners can access that. However, the Gnosis team admits owners cannot trade GNO tokens linked to OWL. I imagine this is another attempt to obey anti-gambling laws.

However, there are still many potential uses for prediction markets including price discovery. For instance, an online retailer could use a prediction market to learn what prices potential buyers will pay for a new product.

How the Prediction Markets at Gnosis (GNO) work

Another obvious use for the Gnosis Prediction Markets is in politics. For example, a political party could use a prediction market to learn what potential voters really think of a candidate or a policy.

Theoretically, predictions can be more accurate than polling because people are more honest when they bet. Notably, an American who loathes President Donald J. Trump (R-New York) will not admit she thinks voters will reelect Trump in 2020. However, that person could wager money on Trump’s reelection.

For example, a Gnosis Prediction Market geared to stock traders could gather information about future prices. Theoretically, a prediction market could tell if traders are bullish or bearish on a particular stock.

Notably, a trader who will not not divulge opinions about stocks might bet money on market outcomes. Under these circumstances, Prediction Markets could be a powerful information gathering tool.

Will the Prediction Markets at Gnosis (GNO) Work?

Unfortunately, the prediction markets at Gnosis could not attract users for a very basic reason. It might not be possible to pay winners in real money because of laws like the Wire Act.

However, it could be possible to pay winners in rewards points. Importantly, an opinion from the international law firm Bird & Bird defines Ethereum utility tokens; like Gnosis (GNO) as “rewards points.” However, this opinion is not legally binding because no judge has ruled on it.

Under this definition, it could be possible for a Gnosis Prediction market to pay winners in Gnosis (GNO) tokens as long as the platform use them as “rewards points.” For instance, the winner can redeem the rewards points for prizes such as a trip to Las Vegas, merchandise, or Amazon Gift Cards.

Is there a Market for the Prediction Markets at Gnosis (GNO)?

Conversely, prosecutors could accuse the prediction market operators of violating gambling or tax laws. I think tax authorities are the greatest threat to prediction markets because governments will want their cut of the prediction markets’ action.

In fact, government-operated prediction markets could be a major use for Gnosis’s technology. Tellingly, many governments; including that of the United Kingdom and most of the United States, operate lotteries.

Thus unforeseen new markets for Gnosis could develop. Notably, America’s state lottery system developed from the numbers rackets and other private lotteries run by Organized Crime in the mid-20th Century. To explain, politicians noticed the vast profits the mob was making off the numbers; a crude prediction market and took it over.

Given the history, lucrative uses for prediction markets could appear but it will take time. Specifically, it took several decades of mob profits for US states to supplant the numbers racket with the lottery.

In addition, politicians could see digital prediction markets like those at Gnosis as a threat to government gambling monopolies like state lotteries and casino sports books. Tellingly, wealthy casino owners; like Sheldon Adelson, are major contributors to the Republican Party in the United States.

Is Gnosis (GNO) a Good cryptocurrency?

In my opinion, Gnosis is a questionable because it is not clear if there are any legal uses for the GNO tokens. To explain, if prediction markets are gambling, they will not be legal in many countries meaning there is no reason for Gnosis (GNO) to exist.

However, Mr. Market disagrees with my assessment of Gnosis (GNO). In fact, CoinMarketCap gave GNO a Coin Price of $13.45 and a Market Capitalization of $14.885 million on 20 February 2018. In addition, GNO achieved a 24-Hour Market Volume of $109,872 on the same day. They based these prices on a Circulating Supply of 1.105 million GNO and a total supply of 10 million GNO tokens.

Plus Gnosis is a good cryptocurrency from a technical and economic standpoint. It is part of Bancor’s Liquidity Network. Thus, Bancor can covert GNO tokens into other ERC tokens that take part in Bancor’s Network.

Additionally,  the BancorX protocol can convert some ERC20 tokens that participate in the Bancor Network into EOS (EOS). Hence, it appears Gnosis’s developers understand some of Ethereum’s limitations and are trying to solve them. In particular, some observers claim EOS has solved the blockchain scalability problem.

Finally, I think Gnosis (GNO) is a technically good cryptocurrency with a questionable purpose. I think prediction markets are a potentially lucrative application but Gnosis’s future is cloudy because of legal and political complications. Under those circumstances, staying away from Gnosis is a smart stratagem.