Germany’s Cannabis Law: Details Matter
Germany’s Cannabis Law: Details Matter
How a small difference in phrasing can be very important and it may have confounded some forecasters.
Germany’s parliament just passed a law that allows adults to possess, grow, and consume cannabis for personal use, making it the latest country to partially legalize the drug. However, the law also imposes strict regulations on how cannabis can be acquired. This has created a discrepancy between the outcomes of different prediction markets with some markets at 99% and others at 50%.
The Details of the Law
The law legalizes possessing up to 25 grams of cannabis in public spaces and up to 50 grams at home. It also allows growing up to three plants per household for personal consumption. Smoking cannabis in some areas, such as near schools and sports grounds, will still be illegal. The law will take effect on April 1, 2024.
However, the law also prohibits the commercial sale of cannabis, which means that users will not be able to buy the drug from licensed shops or pharmacies. Instead, the law allows the formation of non-profit cannabis clubs, which can grow and distribute a limited amount of cannabis to their members, who must be German residents and pay a membership fee. Paying for membership ≠ paying for cannabis.
The Discrepancy between Prediction Markets
A big advantages of Manifold is that it allows anyone to create a market on any topic. This comes with a responsibility to phrase the markets precisely and clearly.
The description of the most popular market is clearly about passing the law:
The market will resolve Yes if the law legalizing Cannabis in Germany comes into effect in 2024. In Germany, Laws come into effect either on the date stated in the law itself or if not stated explicitly 14 days after the law was announced in the Bundesanzeiger.
More subtle: Phrasing it as “the law” to me is a reference to something. Implicitly, I would assume it is about the law which was in the news around the creation of the market in January 2023. While the details of the law have slightly changed since then, today it is still the same initiative pushed forward by Germany’s Federal Minister of Health, Karl Lauterbach. That is not perfect but good enough for clarity to me.
This market about a “Cannabis Store” dropped to 50%. Full disclosure: That was mostly me. I’m the biggest NO holder currently and I still have a NO-limit order there. Before I bet a lot on NO, I asked for clarification though and the creator answered.
Phrasing markets precisely is a key skill for creating markets. It is also important to understand them correctly, especially on Manifold, where anyone can create a market on any topic.
In the two markets shown here, there is no fundamental problem. However, I’m not so sure if every trader understood them correctly. I see people betting on YES against my limit orders.
A fellow newsletter just started. It annotates news headlines with prediction markets.
In another blog, Tanner Hoke tells us not to be afraid of uninformed trader. Just stay calm and take their money.
Probably until next week, stoned and sober readers! 😊