8 ms·

Kalshi CEO expects US DOJ to prosecute insider trading cases

132 points by thm 6mo ago

slg 6mo ago
“If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime, I actually do expect the DOJ to prosecute some of these cases”. I'm guessing that “some point” is sometime after Jan 20th 2029.
- mlmonkey 6mo ago
  You give the Dems too much credit.
  - bradleybuda 6mo ago
    There was a downward trend during the Biden years [1] but "both sides same" is not even a little bit true. [1] https://www.citizen.org/article/biden-doj-2024-corporate-crime-report/#:~:text=Overview,for%20the%20past%20three%20decades. https://www.citizen.org/article/biden-doj-2024-corporate-cri...
    - trinsic2 6mo ago
      Ok calling this out. Both parties are involved in crimes. An example is both party's are involved in supporting Israel's fascist objectives. Just because there is less reports of corruption in the past by dems doesn't change anything. Corruption extends beyond parties, its not a political problem. Its a human problem. I don't expect to see much change when the dems come back into power, albeit, it be less apparent and of a different nature, I.E more indiscriminate surveillance and less racial profiling .. There is some kind of cultural thing going on that transcends the party's IMHO that's keeping this problem going.
    - mlmonkey 6mo ago
      How many people were jailed by Obama's DOJ for 2008 crash?
      - bradleybuda 6mo ago
        That wasn’t insider trading. You’re changing the topic.
  - nine_zeros 6mo ago
    [dead]
  - slg 6mo ago
    No, I was commenting on the current administration's corruption. I don't think most previous Republican administrations would have tolerated the type of insider trading we have seen from people close to the administration. It goes beyond ideology, turning a blind eye to this behavior among your subordinates is a sign of weak leadership and poor management.
    - mcmcmc 6mo ago
      If they’ve been fine with Congress trading stocks on insider knowledge forever why would this be any different?
      - lotsofpulp 6mo ago
        Because the law protects members of Congress, not >people close to the administration.
        mcmcmc 6mo ago
        I think it’s naive to pretend they haven’t been doing the same thing all along. The Trump admin simply has more options available to them with crypto and prediction markets. And their egos are too big to bother doing it quietly.
      - slg 6mo ago
        This is actually a good example of this not being a partisan issue. A congressional stock trading ban is one of the few issues that doesn't break down by party lines. Both Republicans and Democrats have put forward bills to ban it and the percentage of the population in support of such efforts is very similar between Republicans and Democrats. I'm also not going to defend Congressional stock trading. I think it should be banned. But there are some differences about who is doing the trading/betting, what specifically they are trading/betting on, and what that information communicates to the public. There's a fundamental difference between a random staffer betting the US will attack Iran on a certain date which becomes public immediately compared to a Congressperson themselves buying stock in a weapon manufacturer in the leadup to an attack knowing the purchase won't be disclosed to the public for up to 45 days. Like I said, I would be against both, but it's much easier to justify Congressional stock trading than the insider trading we see on these prediction markets. Afterall, it isn't like Congress is moving to remove all insider trading legislation, so there is some recognition of nuance here even if they give themselves more leeway than we would want.
  - morkalork 6mo ago
    Hey now, you don't to be divisive do you?
georgemcbay 6mo ago
Ok, but isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling? So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?
- tptacek 6mo ago
  Yes. This argument doesn't even apprehend insider trading laws on regulated securities markets in the US, where the crime is about theft, not fairness.
  - mbesto 6mo ago
    Correct. This is an important distinction. Matt Levine has a good take on this. His informal, distilled definition is essentially: - There is a time gap where insiders know something material and the public does not. - Someone with access to that material nonpublic information, who is not supposed to use it for personal gain, trades on it anyway. - That conduct is treated by courts as a deceptive scheme against the less‑informed trading counterparty and against the information’s rightful “owner.” In other words - you profit at another person's expense (e.g. stealing) because you have information and the other person doesn't. Two scenarios: (1) a US Naval Officer knows about a strike 24 hours before it happens and places a bet against someone who doesn't have knowledge about the strike. (2) Neither a US Naval Officer knows about a strike 24 hours before it happens and someone who doesn't have knowledge about the strike do nothing. Scenario 1 is (or should be) illegal because the officer is using the information for personal gain, when the information was explicitly given to them for national defense reasons (thus violating the rightful owner clause).
    - tptacek 6mo ago
      Scenario 1 is illegal because it gravely violates military secrecy laws.
      - mbesto 6mo ago
mlmonkey 6mo ago
I'm guessing it's Trump insiders who are busy making bank on inside info. Some of them just happen to be big investors in Polymarket and Kalshi. There's no way they are getting investigated, let alone prosecuted, by this DOJ. At most some low-level flunkie will get named and slapped on the wrist.
SpaceManNabs 6mo ago
Isn't the entire point of prediction markets to surface insider trading as a feature and not a bug? Short, casual reads - https://jamaalglenn.substack.com/p/prediction-markets-were-designed https://jamaalglenn.substack.com/p/prediction-markets-were-d... - https://money.com/prediction-markets-insider-trading/ https://money.com/prediction-markets-insider-trading/ More academic? - https://mason.gmu.edu/~rhanson/insiderbet.pdf https://mason.gmu.edu/~rhanson/insiderbet.pdf AND - https://www.youtube.com/watch?v=4yZKGbq1YmA https://www.youtube.com/watch?v=4yZKGbq1YmA Discussion on possible solutions that references the academic view - https://www.dopaminemarkets.com/p/how-to-solve-insider-trading-in-prediction https://www.dopaminemarkets.com/p/how-to-solve-insider-tradi...
- wmf 6mo ago
  This is a case where normal people's ideas of fairness may never agree with the experts.
jazzpush2 6mo ago
Zero chance. This country has become an absolute joke of corruption, especially anything related to insider trading.
- cortesoft 6mo ago
  I agree the country has rampant corruption, but I disagree that the US DOJ should be pursuing insider trading on these markets. Why should my tax dollars be spent on helping a bookie run their gambling business? Insider trading laws and prosecution in the financial markets makes sense, because the fair and impartial enforcement helps all of our economy, and allows capital to do its job investing in productive ventures. These prediction markets are not that. They aren’t sources of investment for a productive enterprise, it is pure gambling. Why should the US government spend money making sure people can gamble? If people want their gambling to be fair, they can pay for their own enforcement. I like the idea of insider trading running rampant on these platforms. Once people realize that the other side of their bet knows the outcomes in advance, maybe they will stop betting their money on these platforms and they can just die.
  - JohnMakin 6mo ago
    > Why should my tax dollars be spent on helping a bookie run their gambling business? I mean, current laws do exactly this. The FBI has done investigations for major sports betting sites related to players throwing or fixing games, etc. If you commit fraud on a sportsbook you absolutely can go to jail.
lowkey_ 6mo ago
> “If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,” Am I misunderstanding? It seems like two different statements he always conflates. If it becomes a federal crime at some point, it will become illegal from that point — you can't prosecute people for acts committed before they were crimes. The only way that this could be a federal crime right now is if the government starts prosecuting it under existing laws without any changes. I don't see that as likely.
- echelon 6mo ago
  IANAL, but my understanding is that they can make it a retroactive crime or clarify existing laws in ways that include prediction markets. Don't assume safety. Edit - was curious: https://en.wikipedia.org/wiki/Ex_post_facto_law https://en.wikipedia.org/wiki/Ex_post_facto_law So maybe not? I'd love a judicial scholar's input.
  - mcmcmc 6mo ago
    “Retroactive” crime is as you say, ex post facto, and specifically disallowed by the US Constitution.
  - tptacek 6mo ago
    They absolutely cannot make it a retroactive crime. This isn't so much con law as high school civics in the US.
    - GolfPopper 6mo ago
      A couple decades ago I would have agreed with you. But the United States today does not have rule of law, only the pretense of it.
  - johnnyo 6mo ago
    No, you cannot retroactively make something a crime as you have found. That way lies madness. If the govt could do that, they could arrest anyone, anytime simply by making whatever they did yesterday retroactively illegal.
tptacek 6mo ago
This issue reveals the gap between the prediction market premise and what these things actually are, which is: unregulated prop gambling venues. If things like Kalshi and Polymarket are prediction markets, then, at least as far as the intrinsic concerns of the market itself are concerned, insider trading is a good thing; literally part of the point. If they are instead how they function today, then insider trading is a game-breaking fairness issue, like having a device to read your opponents cards in a poker game, and then they're a real problem. You can tell what these businesses think their platforms are for by how they handle these issues.
- RobRivera 6mo ago
  Courts have ruled that these markets are regulated under the CFTC. So they are regulated. Now as to whether it is properly regulated, thats a different matter.
- Traster 6mo ago
  Even if you buy the idea that Kalshi is a prediction market whose mechanism is gambling but whose product is accurate predictions, you don't have to buy the idea that insider trading is a good thing. Yes, in the rare occasion there exists someone with (a) insider information (b) confidence their actions won't impact their insider position and (c) access to capital - then you get extremely accurate predictions. In every other case you get worse predictions. Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. So in the general case it reduces the ability of the predictors to push the market in the right direction, because they always have to risk manage the fact that someone out there might run them over with insider information.
  - tyre 6mo ago
    > Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. The average person does not do this. People trade individual stocks all the time, despite every other market participant (banks, hedge funds, etc.) having better information and technology. It's why institutions like Citadel pay for retail order flow. They know that retail traders don't have an edge and, if anything, often end up being negative signal.
asdfman123 6mo ago
Translation: "it's not our problem"
Sol- 6mo ago
I understand he wants to deflect liability from his platform, but I guess I have to concede that it seems like a legitimate defense. We allow the stock market to exist even though insider trading can happen and it's (I think?) not Nasdaq's or NYSE's responsibility to pursue that. We have a legal system for that. I think there is still the debate to be had whether prediction market enable too much criminal activity and insider trading compared to traditional stock markets and therefore need to be limited for pragmatic reasons (i.e. the legal system can't keep up), but that's a different discussion.
tyre 6mo ago
I don't understand why it is a crime under current US law. Prediction markets can only do sports gambling (the vast majority of their volume) because they self-certify under the CFTC. The CFTC doesn't have the same standards of "insider trading" as the stock market, because insider trading is the entire point of business at the CFTC! If you're trading, like, oil futures or wheat futures or whatever, you are likely doing so specifically because you have inside information about your business needs or production that you want to hedge. I understand why people are mad about gambling versus someone who has insider information, but under current US law I'm not sure that there is a case to be made.
- mcmcmc 6mo ago
  > Prediction markets can only do sports gambling (the vast majority of their volume) because they self-certify under the CFTC Sports betting is still illegal in 11 states. They can only do what they’re doing because of legislation and enforcement lag. > The CFTC doesn't have the same standards of "insider trading" as the stock market, because insider trading is the entire point of business at the CFTC! True to some extent, but it’s still illegal to use non-public information gained from your firm to trade on personal accounts.
- JumpCrisscross 6mo ago
  > If you're trading, like, oil futures or wheat futures or whatever, you are likely doing so specifically because you have inside information about your business needs Insider trading, in the U.S., is not legally about fairness but about theft. A firm hedging its own positions is using its information for its own purposes. A federal employee trading on what they heard is abusing the trust placed in them by the American people.
  - ikeboy 6mo ago
    Note that the 2nd circuit tossed an insider trading case on government information on the basis that it doesn't count as "property". See United States v. Blaszczak. It may be abuse of trust but that's not automatically a crime.
jmyeet 6mo ago
The Kalshi CEO should put their considerable wealth into bets on Kalshi that this will happen. I'll wait. We have a situation where selective prosecution is used to command loyalty while the ringleader has been immunized from any kind of legal consequences by the Supreme Court, 6 of whom were appointed by said ringleader. Pardons are pretty openly sold now. It's cheaper to rip off the government then pay a fraction for a pardon, erasing any fine or repayment. I bet there are lower level staffers who are profiting off inside information on prediction markets. Maybe some will be made an example of. I won't hold my breath. But all the big insider trading is occurring in securities markets, particularly with oil futures and SPY futures. It's reached the point where no professionals trust the futre oil prices at all and and the physical oil prices differ from the future price by as much as $60/barrel. We've had $1b+ bets on SPY futures minutes before market-changing news. We don't know for sure who's doing this but my guess is that it's at the highest levels of the administration.
nycdatasci 6mo ago
Can I bet on this?
josefritzishere 6mo ago
Well... it is a felony.
- wutwutwat 6mo ago
  for regulated things it is, if you get caught, and if anyone is looking or gives a shit
usrusr 6mo ago
In stock markets, insider trading is a big no not because it ruins someone's gambling habit, but because the entire concept of the corporation requires a certain amount of trust of financiers in financees. That whole pooling of capital thing, to do stuff that has too high a capital requirement to start individually. When shares are publicly traded, that trust is impossible when holders have to assume that they will be gamed by employee-owners and that would mean nobody outside the circle of those in the know would ever put in money and then you could just give up and declare that publicly traded corporations simply can't exist. "Don't bother investing, they will strip you". Prediction markets don't have any "natural" reason like that for excluding insider trading. It's just "game designers" crying their hearts out when someone ruins their game by having an advantage. The employee could not be an insider if his employer did not exists because of a lack of rules against him trading. The prediction market not existing would not make the insider any less of an insider (we are not tking about people inside the prediction market maker!)
- JumpCrisscross 6mo ago
  > Prediction markets don't have any "natural" reason like that for excluding insider trading Corporate employees abusing trust are doing it equivalently whether they trade securities or place bets. Government employees, similarly, don’t personally own the country’s data. In a minority of cases, the information is one’s own, e.g. bets on how many times a person says a word. But most of the time, there is a breach of trust.
  - bb88 6mo ago
    It's not just data, right? Power can be abused as well. That person has power to control the narrative and can make a large bet on the number of times he can say the word. So now it's public servants military power, congressional power, and they look to enrich themselves with making (or lobbying for) decisions which affect the outcome of a bet. You could imagine an army general that lobbies for the bombing of Iran knowing the president has his ear, and then bets on the bombing of Iran by March 2026.
  - chromacity 6mo ago
babypuncher 6mo ago
This DoJ is actively working to protect actual sex traffickers from accountability. What makes this doofus think they will ever investigate their own friends for insider trading?
0xbadcafebee 6mo ago
Donald Trump Jr. is a "strategic advisor" to Kalshi, and is on the advisory board of Polymarket. Fed chair nominee Kevin Warsh holds a stake in Polymarket. CFTC Chairman Michael Selig, a Trump appointee, has advocated for prediction markets, and wants to put the CEO of Polymarket on an advisory committee. David Urban, a lobbyist who worked for Trump, was hired by Polymarket. If there are any prosecutions, it won't be anyone in or connected to the administration. Even if these groups weren't in bed together, the fact that the administration has obviously been engaging in insider trading, and the DoJ hasn't done anything about it, makes it clear nothing will happen to them in the future either. The door to the vault is open and they're casually walking out with the public's money falling out their pockets.
Arubis 6mo ago
Oh, come on. The DOJ doesn't prosecute _child rape_ if you're a protected class. And all these insider traders are a protected class.
edge_trader_41 6mo ago
[dead]
ozgrakkurt 6mo ago
One could hope DOJ would prosecute illegal gambling and preying on vulnerable people but anyways..

132 points by thm 6mo ago

slg 6mo ago

“If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime, I actually do expect the DOJ to prosecute some of these cases”. I'm guessing that “some point” is sometime after Jan 20th 2029.

mlmonkey 6mo ago
You give the Dems too much credit.
- bradleybuda 6mo ago
  There was a downward trend during the Biden years [1] but "both sides same" is not even a little bit true. [1] https://www.citizen.org/article/biden-doj-2024-corporate-crime-report/#:~:text=Overview,for%20the%20past%20three%20decades. https://www.citizen.org/article/biden-doj-2024-corporate-cri...
  - trinsic2 6mo ago
    Ok calling this out. Both parties are involved in crimes. An example is both party's are involved in supporting Israel's fascist objectives. Just because there is less reports of corruption in the past by dems doesn't change anything. Corruption extends beyond parties, its not a political problem. Its a human problem. I don't expect to see much change when the dems come back into power, albeit, it be less apparent and of a different nature, I.E more indiscriminate surveillance and less racial profiling .. There is some kind of cultural thing going on that transcends the party's IMHO that's keeping this problem going.
  - mlmonkey 6mo ago
    How many people were jailed by Obama's DOJ for 2008 crash?
    - bradleybuda 6mo ago
      That wasn’t insider trading. You’re changing the topic.
- nine_zeros 6mo ago
  [dead]
- slg 6mo ago
  No, I was commenting on the current administration's corruption. I don't think most previous Republican administrations would have tolerated the type of insider trading we have seen from people close to the administration. It goes beyond ideology, turning a blind eye to this behavior among your subordinates is a sign of weak leadership and poor management.
  - mcmcmc 6mo ago
    If they’ve been fine with Congress trading stocks on insider knowledge forever why would this be any different?
    - lotsofpulp 6mo ago
      Because the law protects members of Congress, not >people close to the administration.
      - mcmcmc 6mo ago
        I think it’s naive to pretend they haven’t been doing the same thing all along. The Trump admin simply has more options available to them with crypto and prediction markets. And their egos are too big to bother doing it quietly.
    - slg 6mo ago
      This is actually a good example of this not being a partisan issue. A congressional stock trading ban is one of the few issues that doesn't break down by party lines. Both Republicans and Democrats have put forward bills to ban it and the percentage of the population in support of such efforts is very similar between Republicans and Democrats. I'm also not going to defend Congressional stock trading. I think it should be banned. But there are some differences about who is doing the trading/betting, what specifically they are trading/betting on, and what that information communicates to the public. There's a fundamental difference between a random staffer betting the US will attack Iran on a certain date which becomes public immediately compared to a Congressperson themselves buying stock in a weapon manufacturer in the leadup to an attack knowing the purchase won't be disclosed to the public for up to 45 days. Like I said, I would be against both, but it's much easier to justify Congressional stock trading than the insider trading we see on these prediction markets. Afterall, it isn't like Congress is moving to remove all insider trading legislation, so there is some recognition of nuance here even if they give themselves more leeway than we would want.
- morkalork 6mo ago
  Hey now, you don't to be divisive do you?

georgemcbay 6mo ago

Ok, but isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling? So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?

tptacek 6mo ago
Yes. This argument doesn't even apprehend insider trading laws on regulated securities markets in the US, where the crime is about theft, not fairness.
- mbesto 6mo ago
  Correct. This is an important distinction. Matt Levine has a good take on this. His informal, distilled definition is essentially: - There is a time gap where insiders know something material and the public does not. - Someone with access to that material nonpublic information, who is not supposed to use it for personal gain, trades on it anyway. - That conduct is treated by courts as a deceptive scheme against the less‑informed trading counterparty and against the information’s rightful “owner.” In other words - you profit at another person's expense (e.g. stealing) because you have information and the other person doesn't. Two scenarios: (1) a US Naval Officer knows about a strike 24 hours before it happens and places a bet against someone who doesn't have knowledge about the strike. (2) Neither a US Naval Officer knows about a strike 24 hours before it happens and someone who doesn't have knowledge about the strike do nothing. Scenario 1 is (or should be) illegal because the officer is using the information for personal gain, when the information was explicitly given to them for national defense reasons (thus violating the rightful owner clause).
  - tptacek 6mo ago
    Scenario 1 is illegal because it gravely violates military secrecy laws.
    - mbesto 6mo ago

mlmonkey 6mo ago

I'm guessing it's Trump insiders who are busy making bank on inside info. Some of them just happen to be big investors in Polymarket and Kalshi. There's no way they are getting investigated, let alone prosecuted, by this DOJ. At most some low-level flunkie will get named and slapped on the wrist.

SpaceManNabs 6mo ago

Isn't the entire point of prediction markets to surface insider trading as a feature and not a bug? Short, casual reads - https://jamaalglenn.substack.com/p/prediction-markets-were-designed https://jamaalglenn.substack.com/p/prediction-markets-were-d... - https://money.com/prediction-markets-insider-trading/ https://money.com/prediction-markets-insider-trading/ More academic? - https://mason.gmu.edu/~rhanson/insiderbet.pdf https://mason.gmu.edu/~rhanson/insiderbet.pdf AND - https://www.youtube.com/watch?v=4yZKGbq1YmA https://www.youtube.com/watch?v=4yZKGbq1YmA Discussion on possible solutions that references the academic view - https://www.dopaminemarkets.com/p/how-to-solve-insider-trading-in-prediction https://www.dopaminemarkets.com/p/how-to-solve-insider-tradi...

wmf 6mo ago
This is a case where normal people's ideas of fairness may never agree with the experts.

jazzpush2 6mo ago

Zero chance. This country has become an absolute joke of corruption, especially anything related to insider trading.

cortesoft 6mo ago
I agree the country has rampant corruption, but I disagree that the US DOJ should be pursuing insider trading on these markets. Why should my tax dollars be spent on helping a bookie run their gambling business? Insider trading laws and prosecution in the financial markets makes sense, because the fair and impartial enforcement helps all of our economy, and allows capital to do its job investing in productive ventures. These prediction markets are not that. They aren’t sources of investment for a productive enterprise, it is pure gambling. Why should the US government spend money making sure people can gamble? If people want their gambling to be fair, they can pay for their own enforcement. I like the idea of insider trading running rampant on these platforms. Once people realize that the other side of their bet knows the outcomes in advance, maybe they will stop betting their money on these platforms and they can just die.
- JohnMakin 6mo ago
  > Why should my tax dollars be spent on helping a bookie run their gambling business? I mean, current laws do exactly this. The FBI has done investigations for major sports betting sites related to players throwing or fixing games, etc. If you commit fraud on a sportsbook you absolutely can go to jail.

lowkey_ 6mo ago

> “If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,” Am I misunderstanding? It seems like two different statements he always conflates. If it becomes a federal crime at some point, it will become illegal from that point — you can't prosecute people for acts committed before they were crimes. The only way that this could be a federal crime right now is if the government starts prosecuting it under existing laws without any changes. I don't see that as likely.

echelon 6mo ago
IANAL, but my understanding is that they can make it a retroactive crime or clarify existing laws in ways that include prediction markets. Don't assume safety. Edit - was curious: https://en.wikipedia.org/wiki/Ex_post_facto_law https://en.wikipedia.org/wiki/Ex_post_facto_law So maybe not? I'd love a judicial scholar's input.
- mcmcmc 6mo ago
  “Retroactive” crime is as you say, ex post facto, and specifically disallowed by the US Constitution.
- tptacek 6mo ago
  They absolutely cannot make it a retroactive crime. This isn't so much con law as high school civics in the US.
  - GolfPopper 6mo ago
    A couple decades ago I would have agreed with you. But the United States today does not have rule of law, only the pretense of it.
- johnnyo 6mo ago
  No, you cannot retroactively make something a crime as you have found. That way lies madness. If the govt could do that, they could arrest anyone, anytime simply by making whatever they did yesterday retroactively illegal.

tptacek 6mo ago

This issue reveals the gap between the prediction market premise and what these things actually are, which is: unregulated prop gambling venues. If things like Kalshi and Polymarket are prediction markets, then, at least as far as the intrinsic concerns of the market itself are concerned, insider trading is a good thing; literally part of the point. If they are instead how they function today, then insider trading is a game-breaking fairness issue, like having a device to read your opponents cards in a poker game, and then they're a real problem. You can tell what these businesses think their platforms are for by how they handle these issues.

RobRivera 6mo ago
Courts have ruled that these markets are regulated under the CFTC. So they are regulated. Now as to whether it is properly regulated, thats a different matter.
Traster 6mo ago
Even if you buy the idea that Kalshi is a prediction market whose mechanism is gambling but whose product is accurate predictions, you don't have to buy the idea that insider trading is a good thing. Yes, in the rare occasion there exists someone with (a) insider information (b) confidence their actions won't impact their insider position and (c) access to capital - then you get extremely accurate predictions. In every other case you get worse predictions. Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. So in the general case it reduces the ability of the predictors to push the market in the right direction, because they always have to risk manage the fact that someone out there might run them over with insider information.
- tyre 6mo ago
  > Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. The average person does not do this. People trade individual stocks all the time, despite every other market participant (banks, hedge funds, etc.) having better information and technology. It's why institutions like Citadel pay for retail order flow. They know that retail traders don't have an edge and, if anything, often end up being negative signal.

asdfman123 6mo ago

Translation: "it's not our problem"

Sol- 6mo ago

I understand he wants to deflect liability from his platform, but I guess I have to concede that it seems like a legitimate defense. We allow the stock market to exist even though insider trading can happen and it's (I think?) not Nasdaq's or NYSE's responsibility to pursue that. We have a legal system for that. I think there is still the debate to be had whether prediction market enable too much criminal activity and insider trading compared to traditional stock markets and therefore need to be limited for pragmatic reasons (i.e. the legal system can't keep up), but that's a different discussion.

tyre 6mo ago

I don't understand why it is a crime under current US law. Prediction markets can only do sports gambling (the vast majority of their volume) because they self-certify under the CFTC. The CFTC doesn't have the same standards of "insider trading" as the stock market, because insider trading is the entire point of business at the CFTC! If you're trading, like, oil futures or wheat futures or whatever, you are likely doing so specifically because you have inside information about your business needs or production that you want to hedge. I understand why people are mad about gambling versus someone who has insider information, but under current US law I'm not sure that there is a case to be made.

mcmcmc 6mo ago
> Prediction markets can only do sports gambling (the vast majority of their volume) because they self-certify under the CFTC Sports betting is still illegal in 11 states. They can only do what they’re doing because of legislation and enforcement lag. > The CFTC doesn't have the same standards of "insider trading" as the stock market, because insider trading is the entire point of business at the CFTC! True to some extent, but it’s still illegal to use non-public information gained from your firm to trade on personal accounts.
JumpCrisscross 6mo ago
> If you're trading, like, oil futures or wheat futures or whatever, you are likely doing so specifically because you have inside information about your business needs Insider trading, in the U.S., is not legally about fairness but about theft. A firm hedging its own positions is using its information for its own purposes. A federal employee trading on what they heard is abusing the trust placed in them by the American people.
- ikeboy 6mo ago
  Note that the 2nd circuit tossed an insider trading case on government information on the basis that it doesn't count as "property". See United States v. Blaszczak. It may be abuse of trust but that's not automatically a crime.

jmyeet 6mo ago

The Kalshi CEO should put their considerable wealth into bets on Kalshi that this will happen. I'll wait. We have a situation where selective prosecution is used to command loyalty while the ringleader has been immunized from any kind of legal consequences by the Supreme Court, 6 of whom were appointed by said ringleader. Pardons are pretty openly sold now. It's cheaper to rip off the government then pay a fraction for a pardon, erasing any fine or repayment. I bet there are lower level staffers who are profiting off inside information on prediction markets. Maybe some will be made an example of. I won't hold my breath. But all the big insider trading is occurring in securities markets, particularly with oil futures and SPY futures. It's reached the point where no professionals trust the futre oil prices at all and and the physical oil prices differ from the future price by as much as $60/barrel. We've had $1b+ bets on SPY futures minutes before market-changing news. We don't know for sure who's doing this but my guess is that it's at the highest levels of the administration.

nycdatasci 6mo ago

Can I bet on this?

josefritzishere 6mo ago

Well... it is a felony.

wutwutwat 6mo ago
for regulated things it is, if you get caught, and if anyone is looking or gives a shit

usrusr 6mo ago

In stock markets, insider trading is a big no not because it ruins someone's gambling habit, but because the entire concept of the corporation requires a certain amount of trust of financiers in financees. That whole pooling of capital thing, to do stuff that has too high a capital requirement to start individually. When shares are publicly traded, that trust is impossible when holders have to assume that they will be gamed by employee-owners and that would mean nobody outside the circle of those in the know would ever put in money and then you could just give up and declare that publicly traded corporations simply can't exist. "Don't bother investing, they will strip you". Prediction markets don't have any "natural" reason like that for excluding insider trading. It's just "game designers" crying their hearts out when someone ruins their game by having an advantage. The employee could not be an insider if his employer did not exists because of a lack of rules against him trading. The prediction market not existing would not make the insider any less of an insider (we are not tking about people inside the prediction market maker!)

JumpCrisscross 6mo ago
> Prediction markets don't have any "natural" reason like that for excluding insider trading Corporate employees abusing trust are doing it equivalently whether they trade securities or place bets. Government employees, similarly, don’t personally own the country’s data. In a minority of cases, the information is one’s own, e.g. bets on how many times a person says a word. But most of the time, there is a breach of trust.
- bb88 6mo ago
  It's not just data, right? Power can be abused as well. That person has power to control the narrative and can make a large bet on the number of times he can say the word. So now it's public servants military power, congressional power, and they look to enrich themselves with making (or lobbying for) decisions which affect the outcome of a bet. You could imagine an army general that lobbies for the bombing of Iran knowing the president has his ear, and then bets on the bombing of Iran by March 2026.
- chromacity 6mo ago

babypuncher 6mo ago

This DoJ is actively working to protect actual sex traffickers from accountability. What makes this doofus think they will ever investigate their own friends for insider trading?

0xbadcafebee 6mo ago

Donald Trump Jr. is a "strategic advisor" to Kalshi, and is on the advisory board of Polymarket. Fed chair nominee Kevin Warsh holds a stake in Polymarket. CFTC Chairman Michael Selig, a Trump appointee, has advocated for prediction markets, and wants to put the CEO of Polymarket on an advisory committee. David Urban, a lobbyist who worked for Trump, was hired by Polymarket. If there are any prosecutions, it won't be anyone in or connected to the administration. Even if these groups weren't in bed together, the fact that the administration has obviously been engaging in insider trading, and the DoJ hasn't done anything about it, makes it clear nothing will happen to them in the future either. The door to the vault is open and they're casually walking out with the public's money falling out their pockets.

Arubis 6mo ago

Oh, come on. The DOJ doesn't prosecute _child rape_ if you're a protected class. And all these insider traders are a protected class.

edge_trader_41 6mo ago

[dead]

ozgrakkurt 6mo ago

One could hope DOJ would prosecute illegal gambling and preying on vulnerable people but anyways..