The Nobel Peace Prize winner was announced today, and economist Jason Furman had something to say about it.
We see this more and more now, especially as prediction markets get more popular; namely, the steam is always right, because it has insider knowledge.The other day a student asked me about the prevalence of insider trading in prediction markets. I now have an answer. pic.twitter.com/CpYLCstLw5
— Jason Furman (@jasonfurman) October 10, 2025
That's kind of the goal of prediction markets - to allow for insider steam to show - and we've been dealing with it for years in some form.
In 2010, a rule of thumb for a serious player was that the steam was probably fake - a fake rumor, fish betting what they heard somewhere, or what have you. But now I suspect it's different.
With technology, things move fast. Someone is going to know the length of a national anthem at the Super Bowl, who is going to be nominated for an Oscar, or who is winning a Nobel Peace Prize. And one text to five people can be 50k wagered on one side in a hurry.
Because I don't bet these markets and ain't a professional I asked one for confirmation. Rob Pizzola, who many of you know, is a sharp and he texted that it is "very, very rare that the steam in these markets loses."
On the other hand, for those of us who play horses we know this to be true... sometimes. And sometimes ..... not true. We know it's much more complicated than steam on or off. And navigating it now in horse racing? I find it pretty difficult and ever-changing, but the lesson from sports bettors is not lost on me.
If it was years ago, we'd almost always be able to fade steam, because the steam was public money.
In the Rebel Stakes earlier this spring, after a very public horse like Sandman stumbled in the Southwest, we'd be all ready and firing to fade the early steam when the horse opened at 3-5. But that horse doesn't open at 3-5 anymore. In fact, he opened fairly meh and he closed at I think 3-1, which frankly was probably the horse's true odds.
Now, with the way the markets are bet, it's hard to decipher what or where the steam even is.
A lot of the time, I don't even think the sharps know for sure.
Case in point (or many points), I will look at a win pool and figure out what the board will look like late (to the best of my ability). Sometimes I will see an outlier - on-track steam that says a horse is well-bet and might be going to run well, but the exchange markets (or other markets) say it's dead, square money.
Honestly, with the sharp money playing an exchange, and with CAW money in the win and multi-leg pools, the breadth of what we see in the odds by market should be small. But many times it isn't.
I've seen some on-track steam horses at 2-1 who are 10-1 on the exchange markets. 12-1 horses who are 120-1. And on and on.
Just Wednesday at Keeneland, the Maker steam horse in the 4th - a horse my pal Les Stark likes to say is bet like "they already have tomorrow's newspaper" - was 8-5 on the board, 5-2 in multis, and 7-2 on the exchanges.
In 2005, 2015 or 2022, or 2024, when I see this I am never betting the Maker horse. My mind can not compute betting a horse at 8-5 that I can get at 7-2 elsewhere. It just goes against everything I believe in betting markets.
However, in 2025 I have pivoted and I am not so quick to discount it. If CAW's with millions invested in algos have a horse at 5-2; if the sharp exchange action has a horse at 7-2, and strong board action says the horse has a 40% or more chance to win (and the odds board shows signs it will not correct late), I respect it.
If the horse looks sneaky - say off replay, or a trainer change - I respect it even more, because those types are likely to have the proper, sharp, on-board steam; sometimes much closer to fair odds than the algos.
Maybe for many of you who just want to bet horses you like or bet against horses you do not, this post reads like nonsense gobbeldygook, and that's okay. The markets are weird, and I am probably weird trying to read them so much. But in 2025, with so many sharps playing this game, they do signal what's happening, and reading what they're saying in plain english can be extremely helpful..... when we get it right.
When do we chase steam and when do we fade steam in horse racing? In 2025, in my opinion, while it may be clear in prediction markets what to do, horse racing is a kettle of fish. But I do believe quite strongly that insider action with easy to use technology spreading the information has more validity than ever.
Have a nice Friday everyone.
