The Future of Play Money Prediction Markets

The Wikipedia model

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Play money prediction markets were once the only legitimate venue for participating in prediction markets due to regulatory concerns. They trained the first generation of prediction market traders and served as the first large-scale instantiations for how these markets actually work.

Many play money platforms, such as Manifold, have strong communities that persist to this day. However, the rise of Polymarket and Kalshi provides concrete incentives for sharp traders to trade on real money prediction markets instead of play money platforms. Many early Manifold traders became early active users of Polymarket and Kalshi.

In this post, I examine the performance of play money prediction markets compared to their real money counterparts. Following this analysis, I outline several advantages in their market structure and describe a future where they function as important actors in the prediction market industry.

Quantifying prediction market performance

The Brier score is a scoring rule that measures the accuracy of probabilistic predictions. It ranges from 0 to 1, where 0 represents perfect accuracy and 1 represents the worst possible predictions.

The score is calculated as the mean squared difference between predicted probabilities and actual outcomes. For a single binary prediction, if you predict probability p and the outcome is o (1 if an event occurs, 0 if not), the Brier score = (p - o)². Lower scores indicate better calibration and resolution of predictions.

Brier.fyi uses Brier scores to evaluate prediction market accuracy across four prediction market platforms: Polymarket, Kalshi, Manifold, and Metaculus. Polymarket and Kalshi are the two largest real money prediction market platforms. Manifold and Metaculus are the two largest play money platforms. Manifold uses "mana", which is play money currency. Metaculus operates as a forecasting website with slightly different prediction mechanics, but can be interpolated into many of the prediction market aspects.

Polymarket, Kalshi, Manifold, and Metaculus have Brier score as follows:

Unsurprisingly, real money prediction markets outperform their play money counterparts. This makes intuitive sense: if price discovery occurred on play money prediction markets, someone could easily arbitrage between play money markets and real money markets.

Nevertheless, they perform better than one might expect and actually outperform real money prediction markets on certain axes such as science markets (Metaculus vs Kalshi).

The advantages of play money prediction markets

1. They do not fall victim to numeraire effects.

In my last post, I described one reason why prediction market prices are not always equal to their respective probability of an event occurring. This is due to numeraire effects, as the utility of the currency may change under certain cases.

Play money eliminates these frictions as traders are not incorporating any real money valuations. The artificial currency becomes a pure scoring mechanism rather than a store of value, allowing prices to reflect collective probability estimates.

2. There may be some selection effects between specific traders and market categories.

The data shows Manifold and Metaculus performing relatively well in science markets despite using play money. Science questions often attract specialized audiences—academics, researchers, and subject matter experts who trade for intellectual engagement rather than profit. These markets have naturally thin liquidity even with real money, as the audience is limited and payoffs can be distant.

In such domains, the marginal benefit of real money incentives diminishes. A physicist forecasting particle physics discoveries is likely motivated more by demonstrating expertise than earning $50. Play money markets can actually attract more of these experts by removing the friction of financial onboarding while preserving the competitive and reputational elements.

3. The number of traders in markets is so low that there isn't much difference in actual traders.

The government shutdown market has been consistently featured on the homepage of Polymarket as this is the market that people want information on. In total, only around 1,000 unique addresses have traded on this market.

4. You can acquire better information for long-term markets.

There is no opportunity cost or associated platform risk for markets that resolve over 10 years in the future. Play money markets are the only platform where you can feasibly ask questions like:

• What will the human population on Mars be in 2075?
• Will a grandchild of George W. Bush become the US president?
• Will we discover extraterrestrial life by 2050?

Community-driven infrastructure for collective intelligence

Wikipedia pioneered free access to information and proved that you can build one of the most important internet primitives without strong financial incentives. Just 1,300 people create over 75% of the new content posted to Wikipedia every day, demonstrating how small, motivated communities can generate enormous public value without monetary incentives. These core contributors are motivated by intellectual curiosity, reputation within a small community, and the satisfaction of contributing to something greater. These are the same traits as the play money prediction market platform founders and early traders.

Play money market platforms can provide the substrate to experiment with new market design and market structures that real money markets can later adopt. A dedicated core of forecasters, motivated by in-group social status hierarchies and intellectual curiosity, can generate unique insights on specific questions.

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