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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 certai

by 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
  > Corporate employees abusing trust are doing it equivalently whether they trade securities or place bets. But the crime the article is talking about isn't "abusing trust", it's insider trading. Insider trading is defined in a specific way. For one, as far as I understand it, it must involve securities.
  - JumpCrisscross 6mo ago
    > Insider trading is defined in a specific way. For one, as far as I understand it, it must involve securities I just remembered that Dodd-Frank expanded insider trading to cover e.g. commodities [1]. So it definitely applies outside securities in the U.S. [1] https://www.lw.com/admin/upload/SiteAttachments/Alert%202827.v5.pdf https://www.lw.com/admin/upload/SiteAttachments/Alert%202827...
vkou 6mo ago
> Prediction markets don't have any "natural" reason like that for excluding insider trading. No, they have a different reason. Consider the consequences of a sufficiently large prediction market bet on whether or not <head of state> will be assassinated this year. Consider also the consequences of insiders and decisionmakers having an immediate financial incentive to take the other side of a bet whose outcome they control.
- miohtama 6mo ago
  It's called assassination markets. There is a RFC on Bitcoin talk from 2011 https://bitcointalk.org/index.php?topic=26350.0 https://bitcointalk.org/index.php?topic=26350.0
  - vkou 6mo ago
    When the pot gets big enough, there is no difference between a prediction market and an assassination market.
ashleyn 6mo ago
>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. I can think of a few very good reasons you would want to prohibit insider trading on prediction markets. Betting on war outcomes; being incentivised to commit war crimes or throw vital operational goals for financial gain. Wagering on public figures' jobs; being incentivised to harm them.
- polski-g 6mo ago
  If I worked at Amazon, "AWS outage by ... date" bets on Polymarket would look mighty tempting.
- Karrot_Kream 6mo ago
  CFTC's guidelines around prediction markets specifically call out war outcomes. "As a general matter, DCMs are reminded that section 5c(c)(5)(C) of the CEA provides that the Commission may determine that an event contract is contrary to the public interest if the contract involves, among other things, assassination, war, or terrorism." The guidelines are at https://www.cftc.gov/csl/26-08/download https://www.cftc.gov/csl/26-08/download
sfink 6mo ago
Of course there's a natural reason: conflict of interest. If someone bets on a release date or a product being cancelled, then they can gain for reasons contrary to the good of their employer. Corporations depend on controlling the compensation to their employees in order to incentivize them to produce benefit to the corporation. If there is an uncontrolled route to compensation via a prediction market, then the corporation loses its ability to trade compensation for alignment with its objectives. > The prediction market not existing would not make the insider any less of an insider Correct, but the prediction market existing makes the insider less of an employee. (Actually, the prediction market not existing would make the insider more of an insider, in that if insider benefit via prediction markets is unregulated, corporations will be forced to limit the information and authority of its employees.)

by usrusr 6mo ago

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
> Corporate employees abusing trust are doing it equivalently whether they trade securities or place bets. But the crime the article is talking about isn't "abusing trust", it's insider trading. Insider trading is defined in a specific way. For one, as far as I understand it, it must involve securities.
- JumpCrisscross 6mo ago
  > Insider trading is defined in a specific way. For one, as far as I understand it, it must involve securities I just remembered that Dodd-Frank expanded insider trading to cover e.g. commodities [1]. So it definitely applies outside securities in the U.S. [1] https://www.lw.com/admin/upload/SiteAttachments/Alert%202827.v5.pdf https://www.lw.com/admin/upload/SiteAttachments/Alert%202827...

vkou 6mo ago

> Prediction markets don't have any "natural" reason like that for excluding insider trading. No, they have a different reason. Consider the consequences of a sufficiently large prediction market bet on whether or not <head of state> will be assassinated this year. Consider also the consequences of insiders and decisionmakers having an immediate financial incentive to take the other side of a bet whose outcome they control.

miohtama 6mo ago
It's called assassination markets. There is a RFC on Bitcoin talk from 2011 https://bitcointalk.org/index.php?topic=26350.0 https://bitcointalk.org/index.php?topic=26350.0
- vkou 6mo ago
  When the pot gets big enough, there is no difference between a prediction market and an assassination market.

ashleyn 6mo ago

>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. I can think of a few very good reasons you would want to prohibit insider trading on prediction markets. Betting on war outcomes; being incentivised to commit war crimes or throw vital operational goals for financial gain. Wagering on public figures' jobs; being incentivised to harm them.

polski-g 6mo ago
If I worked at Amazon, "AWS outage by ... date" bets on Polymarket would look mighty tempting.
Karrot_Kream 6mo ago
CFTC's guidelines around prediction markets specifically call out war outcomes. "As a general matter, DCMs are reminded that section 5c(c)(5)(C) of the CEA provides that the Commission may determine that an event contract is contrary to the public interest if the contract involves, among other things, assassination, war, or terrorism." The guidelines are at https://www.cftc.gov/csl/26-08/download https://www.cftc.gov/csl/26-08/download

sfink 6mo ago

Of course there's a natural reason: conflict of interest. If someone bets on a release date or a product being cancelled, then they can gain for reasons contrary to the good of their employer. Corporations depend on controlling the compensation to their employees in order to incentivize them to produce benefit to the corporation. If there is an uncontrolled route to compensation via a prediction market, then the corporation loses its ability to trade compensation for alignment with its objectives. > The prediction market not existing would not make the insider any less of an insider Correct, but the prediction market existing makes the insider less of an employee. (Actually, the prediction market not existing would make the insider more of an insider, in that if insider benefit via prediction markets is unregulated, corporations will be forced to limit the information and authority of its employees.)