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That's sort of the point of prediction markets: they surface insider information by allowing people to profit off of it. The benefit is to people watching the
by nostrademons 5mo ago
That's sort of the point of prediction markets: they surface insider information by allowing people to profit off of it. The benefit is to people watching the prices, who can then use that information to make better decisions ahead of the answer being revealed to the public. It's not necessarily to market participants, who need to be aware of who else is trading the market and have a credible reason to believe they have better information.
- mikeweiss 5mo agoYou are correct, but you say this like the prediction markets are open about this fact. They aren't and if you ask them they will deny this.
- hoten 5mo agoI think they are open about it. John Oliver did a piece on it last month and I recall an interview where the founder of one of these prediction markets shared this as a beneficial effect of the product.
- mikeweiss 5mo agoI once asked in Kalshi subreddit if insider trading was the entire point and my post was removed by the mods..
- wallst07 5mo agoThat [getting banned] doesn't tell you anything really, they probably just thought you were a troll. I get banned from subs sometimes by just asking a opposing question.
- mikeweiss 5mo agoThey literally have a marketing page about how they are "different" https://kalshi.com/policy-center/insider-trading https://kalshi.com/policy-center/insider-trading
- mikeyouse 5mo agoThat’s the academic theory behind these markets, but there’s no actual value to knowing who the most searched celebrity will be or any of this other garbage. It’s just an unregulated casino with guesses about the popularity of Google searches instead of guessing black or red.
- hellojesus 5mo agoIf it's unregulated, how are people getting charged with insider trading?
- jliptzin 5mo agoIf 0.01% of people engaging in insider trading are caught and prosecuted, it is effectively unregulated.
- rcxdude 5mo agoIt's not being regulated as a casino (which would limit what the casino could do). It is being regulated, to a limited extent, like a commodity market (which does limit what the participants can do).
- AtNightWeCode 5mo agoI believe Polymarket wants it to fall under the regulations of cftc as it is implemented like an option/event contract. And cftc says that they don't care about which technology is used. But as far as I now this is the first case it will be tested for real and the views of cftc and a judge may not be the same. I fail to see how it can be classified as insider trading. But, it is till fraud so I'm not sure how much it matters in the end.
- hellojesus 5mo agoHow is it fraud? Wouldnt it just be a tos violation? In my view, anyone participating in these markets does so knowing that the outcomes are within the control of other participants. I can't think of any other reason individual account activity is public.
- altmanaltman 5mo agoThe point is to make money by letting people gamble on the future. What you said is a second order effect of doing the first thing. They should at least be regulated under gambling laws, doesnt make sense without it
- Domenic_S 5mo agoHmm, not following. The insider trade in this case was small enough to not change the lines meaningfully, no? D4vd's chances of being #1 went from <1% to >99% nearly overnight, was a huge upset. Polymarket might be different, but conventional Vegas-style lines change with the amount of $$ bet, if the pool is $50M and an insider bets $10k on the long shot, the line isn't moving -- I don't see how insider information can be surfaced in this scenario except after the fact (and only maybe then). In other words, if the line changes enough to signal insider info, it's not really insider info anymore.
- nostrademons 5mo agoBecause these markets aren't all that efficient yet (possibly because other potential market participants are scared off by insider trading charges). You don't have multiple people that all have insider information betting against each other, you have one person with insider information that cleans out everybody else. If this repeats enough, all the people without insider information will get cleaned out and exit the market, all the other people with insider information will enter the market for profit, and prices should converge to true likelihood. And yes, the whole purpose of prediction markets is to turn insider info into public info.
- Domenic_S 5mo agoBut you just said "The benefit is to people watching the prices" -- but if the odds haven't properly converged what information does watching the prices get you before-the-fact? Maybe I'm just not getting it, could you lay out a scenario?
- geocar 5mo ago> if the odds haven't properly converged what information does watching the prices get you before-the-fact? How do you know we are "before-the fact"? Because these numbers are bananas? Somebody just tanked their job, their life, for a million bucks. Anybody who took that bet, might've individually spent only a few bucks to see that. Everyone else (the people watching) learned the price of entertainment is a few bucks, and ruining someone's life is a million bucks. Was that a surprise to you? If not, then the (market) prices may be said to have converged (close to) reality. But maybe it is, and you think people would ruin their lives for less, or would pay more for human misery. In any event, the distance between whatever you think that probability is, and the return earned on these odds is information, that we all can enjoy (as benefit) before-the-fact.
- deleted 5mo ago[deleted]
- SpicyLemonZest 5mo agoWhat Polymarket says on the topic (https://integrity.polymarket.com/ https://integrity.polymarket.com/) is that they do not surface insider information and you mustn't trade if you have any. Because the prediction market community is filled with liars and fraudsters, of course, it does seem to be common knowledge that this restriction isn't meant to be taken seriously, much like Polymarket's fake rule that Americans aren't allowed to use it. But once you start from the premise that everything prediction markets say about their rules and practices is a lie, why should we believe they provide any genuine signal for anything?
- solarkraft 5mo agoThe odds have shown to be largely correct, thanks to people profitably arbitraging away inaccuracies.
- deleted 5mo ago[deleted]
- awongh 5mo agoThe unfortunate thing is that, while their academic position sounds plausible on paper, just like with most crypto things it's just a money grab. How many crypto people (with legitimate backgrounds just like the founders of Polymarket and Kalshi) stood up and said big things about freedom and the unbanked etc., turns out they were literally just scamming people- there are so many examples besides FTX. Letting people bet on any random thing is not at all related to this "price everything" theory. If that was their real goal they wouldn't behave so much like a normal sports betting company. I have yet to actually hear anyone defend their actual actions in a plausible way.
- drewstiff 5mo agoDid you ever consider that the crypto scammers might not be the same people as the crypto freedom folks? It wasn't one grand trick by a collective of genius con artists... Much like the cashier at the store isn't to blame for that guy calling your grandma and trying to trick her into sending money from her bank account.
- hilariously 5mo agoCrypto is a speculative investment vehicle, its basically a lottery machine - why would people who are so invested in a lottery machine that you can avoid taxes or buy drugs with be surprised they are considered part of the con artists doing the pump and dumps?
- daveguy 5mo agoDon't forget about regimes like Iran and North Korea using crypto to receive bribes, ransomware payments, and launder money. Crypto is a cesspool. Just wait for the bank runs when everyone tries to bail out. There's a reason we have banking regulations.
- acejam 5mo ago> Crypto is a cesspool. Wait until you hear about the US Dollar.
- 55555 5mo agoIt barely makes sense, though? The idea is that it will surface insider information to the public. That happens only because the insider is financially incentivized to place a bet. But they will only bet if they can win money, and they can only win money if someone is taking the other side of their bet, which necessarily means someone without their insider information. In other words, prediction markets require suckers to lose money to insiders in order for the public to learn new information. In this case, people lost over a million dollars to an insider so the public could learn that "d4vd" was searched a lot. Is this good?
- jquery 5mo agoYep. It’s basically how Wall Street functioned before regulations showed up to protect the public.
- derefr 5mo agoPeople with insider information often aren't necessarily aware they even have it. "Superforecasters" are often just "good at predicting" moves within a given vertical, because they have expertise and exposure to the trends of that vertical, and are good at making deductions and extrapolating trends. Those people make money from prediction markets just as often as people with true insider info do. And the people they're both making money from, are people who think they have enough expertise + exposure to function as superforecasters — and who probably could function as superforecasters, in a market with fewer "sharks" in the pool — but who lose out simply because they were slightly less well-calibrated than whoever they were trading with. Which is to say: prediction markets can still work and be worthwhile to participate in, even if everyone in them is rational. They don't require suckers. But, in practice, they certainly do seem to attract them.
- sedimannapoleon 5mo ago[dead]
- dubbel 5mo ago> And the people they're both making money from, are people who think they have enough expertise + exposure to function as superforecasters — and who probably could function as superforecasters, in a market with fewer "sharks" in the pool — but who lose out simply because they were slightly less well-calibrated than whoever they were trading with. This seems like a complicated way to say "suckers". Of course they don't usually self-identify as such and think they act rationally.
- nezi 5mo agoSure, but let’s consider the bet the accused took: who is the most searched person in 2025. What benefit is there in knowing this ahead of time? Who is making decisions based on this?
- breppp 5mo agoIf you run a records company I assume this might be worth some money
- vineyardmike 5mo agoAs opposed to the publicly available Google Trends data? As opposed to running legitimate market research? Wouldn't you rather know the most searched person in your vertical, market, etc? The data in this example was going to be made public anyways. All the examples of prediction markets are predicated on them becoming public. You not only need the info, you need the info before it becomes public.
- breppp 5mo ago> you need the info before it becomes public. and that's exactly how the Google engineer made money, right? He knew it beforehand, and once it was made public other people did too Realtime access to internal Google search data may help you predict a lot of things that might be worth money, for example there's an existing market where companies buy usage estimation for competitors products (not though Google). I don't see why so many people are completely sure this information is worthless
- manarth 5mo agoIt's not always enough to know what - the why is often important. For example, d4vd is a famous musician, and search stats may indicate his potential popularity and future record sales. Or the public may be searching his name to find out more about the body found in his car, and the subsequent murder investigation and arrest.
- 5mo ago
- jquery 5mo agoCouldn’t that same argument be used to justify stock market insider trading? The problem with insiders is not just that they can surface information, but they can actually manipulate the results. It’s why baseball players can’t bet on the results of their games, even if a prediction market guru might argue “their bets surface valuable information” or something.
- kasey_junk 5mo agoThat’s not the basis of insider trading in US securities law. US securities insider trading is premised on the idea that insiders are stealing from people they have an obligation to (the shareholders).
- not2b 5mo agoCool. So we benefit by prediction markets surfacing insider information about Trump's plans in the Iran conflict, and unknown insiders making hundreds of millions on that information with massive trades minutes before each announcement benefited the people watching prices in the oil market? That doesn't seem right.
- croes 5mo agoNice try to make crimes sound legal.
- jpadkins 5mo agoNice try to make a law sound moral.
- croes 5mo agoIf you want moral turn to religion. But I bet (pun intended) many of them teach giving away other people‘s secrets (including companies and governments) for personal profit is wrong. Imagine Venezuela getting information on the planned abduction of Maduro because of him https://www.justice.gov/opa/pr/us-soldier-charged-using-classified-information-profit-prediction-market-bets https://www.justice.gov/opa/pr/us-soldier-charged-using-clas... Could have been a harder fight with more causalities
- deleted 5mo ago[deleted]
- cookiengineer 5mo agoThis was also previously known as witch hunts.
- autumnstwilight 5mo agoSo far it seems insiders are mostly incentivized to bet on their insider information at the last possible minute, so that the market doesn't have time to adjust toward their position and lessen their profits. That doesn't leave non-insiders a lot of time to do anything useful with the information, even if it happens to be something that would benefit them to know about.
- sharts 5mo agoso…derivatives?