Why should we want prediction markets to be fair? I want them to reveal facts about the world.
They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading?
(Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).
>Why should we want prediction markets to be fair? I want them to reveal facts about the world.
I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider information, and you've a recipe for disastrous externalities.
And to spell it out, you can then go burn your neighbours house down and profit from it. Predictions markets don't just predict, they can cause "unlikely" things to happen because they give a way of profiting from making "unlikely" things happen. This is a problem with plain old stock market insider trading too, and with sports betting when the participants take out bets on themselves.
You can say you don't want prediction markets and that's fine. It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world.
If you think prediction or stock markets should be "fair" then you have a very bizarre definition of fair (one that's compatible with a game that only rich people can win).
Also desiring "fairness" implies that to imply the market's primary purpose is as a game. If it's just a game, it's nothing but toxic gambling.
ANYWAY: pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO. Hopefully you can tell I'm not a prediction market booster, there's a lot about them that I think it's pretty suspect. But this is a pretty lame line of reasoning IMO.
"Someone might shoot people with it" -> valid reason for gun control. Guns are for shooting people.
"Someone might stab someone with it" -> not a valid reason to ban knives. We already ban stabbing people. We take precautions to try and mitigate the dangers of knives, because they have a very big upside.
> It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world.
My point is you can’t have this without creating a massive incentive for people to create events, and it’s inherently easier to create disorder, which hurts everyone in a free society.
> pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO.
This is like saying nuclear weapons are “one possible case of misuse of nuclear technology.” Yes, obviously, but it’s serious enough to justify massive regulation of nuclear technology.
I’m not saying prediction markets should be illegal. I’m saying that they should have a very small maximum wager, require public disclosure of who is taking which bets, and it should not pay out if the actor has any connection to agents that create the change in the world.
Sports gamblers have known about how problematic this concern is forever. Organized crime used predictions markets they could influence (sports betting) as a major source of revenue throughout history.
The result was not, and could never have been, known a priori. All sorts of random things could have gone wrong with the operation causing the raid to fail and Maduro to remain in power. Trump could have just randomly changed his mind, or postponed the raid to beyond the end of January (the cutoff for the betting market). The person placing the bet was still taking a chance, but it was an informed chance that shifted the market probability more in line with reality.
If it helps, you can think of the money made as the payment to a confidential informant for information that contributed to a more complete picture of the world. It just happens via a distributed algorithm, using market forces, rather than at the discretion of some intelligence officer or whoever. The more important the information you have to share, the more it moves the market and the bigger your "fee". It's not being a "grifter" to provide true information that moves the market correctly. In fact, this mechanism filters out the actual grifters - you can't make money (in expectation) by providing false information, like traditional informants sometimes can.
This "intelligence gathering" function is the primary goal of a prediction market. It's the only reason it makes sense to even have them. If you turn it into some parlor game where everybody who participates has access to all the same information, then what are we even doing here?
> This "intelligence gathering" function is the primary goal of a prediction market. It's the only reason it makes sense to even have them. If you turn it into some parlor game where everybody who participates has access to all the same information, then what are we even doing here?
If everyone has the same information, then whoever does better analysis wins. That's far from a parlor game.
Ideally people with good info and people with good analysis can both make money. (And ideally nobody takes real-world actions to make their bet come true.)
> The result was not, and could never have been, known a priori.
This is a level of solipsism not worth discussing.
Yes, Superman could be a real person and we all had our minds altered to think he’s a superhero.
Yes, when someone pulls the trigger of a gun pointed at someone’s head, it could misfire and explode in their hand.
The point is that someone influencing prediction markets can push this probability to very, very near zero. So much so, as to make the outcome effectively certain for all intents and purposes.
Literally everyone can burn their neighbor's house down! Everyone has access to "valuable predictive information" when that information is being created by the person making the bet.
Get the last word in if you must. We're going in circles.
OK, I see now that you're specifically referring to the case where someone places a bet and then actively goes out and causes the event to happen themselves. I was specifically replying to the people who were saying it was unfair for insiders to profit on the information they already possess.
I agree, I can see how that's a potential edge case, though I don't think it's as likely to happen in practice as you do. Certainly, anybody who commits a crime to cause a payout should be barred from receiving that payout, though you can tell a plausible story where someone manages to conceal it. I also really really doubt that that's what happened in this particular case.
I mean, yes, unironically. If the goal of a prediction market is to find out the truth about the world, that's what will get you there faster.
Google might feel differently about whether it's OK in that case, but that's their prerogative.
Ask yourself: If the CIA really needed to know in advance what the top search result was going to be with as much accuracy as possible (for some weird reason, doesn't matter why), how would they go about doing it? Would they spend a bunch of time evaluating all of the public information, or would they just bribe (or otherwise convince) an insider at Google to tell them?
Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate?
If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises.
I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed to bet on their own games.
> I guess there could be second-order effects when insiders can actually change the outcome
You don't need to guess. That's exactly why it's illegal: It creates bad incentives, similarly to e.g. taking out a life insurance policy on a random person you have no financial dependence on.
> Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate?
He didn't say that it doesn't. It obviously does make stock markets more accurate.
But it tends to drive down the total amount of money available to be invested in stocks, which is compatible with the claim that it makes the market worse at funding productive enterprises.
> But it tends to drive down the total amount of money available to be invested in stocks
That seems like a big claim. For most market participants, there's always a counterparty that's so much more sophisticated that it doesn't make a difference if they're an insider or not.
The only "facts about the world" revealed by prediction markets are facts about what people betting in prediction markets believe. Which I guess is interesting in itself if you're a sociologist. Otherwise, not so much.
In this case the insiders only made their bets a few hours before the kidnapping was publicly announced, so it's not clear whether the betting "revealed facts about the world" in any publicly useful way.
Lol. Why should we make car ownership fair? I want cars to reveal facts about the world. I don't think it would serve that goal to forbid people from stealing your car.
I have to imagine governments are closely monitoring prediction markets as part of their intelligence apparatus. But then you just add another layer of subterfuge. Imagine a D-Day prediction market... "Will the Allies Land in Normandy, Pas-de-Calais, or somewhere else?" The US might buy a major position on Pas-de-Calais the night before as a decoy!
Insider trading is a feature, not a bug, say Shayne and Tarek, stupidly.
You can't have this amount of obvious manipulation and expect the average retail consumer to join. Same reason why there hasn't been mass consumer adoption of crypto. People just don't feel safe.
Even without insider trading it's a negative-sum game. Every dollar won is a dollar lost, and the platform takes a cut. Like all negative-sum games you should only participate if it's purely for entertainment or you have a clearly definable edge over the other players. If you can't spot the sucker, you are the sucker.
People like to gamble. I expect that the vast majority of interaction with these systems is seen by participants as gambling. "Who will win the presidential election" and "who will win the jets game" are similar kinds of questions. Both are negative sum.
And people do get upset and feel cheated when the bet isn't "fair." We just saw a big scandal where various athletes are changing their behavior in order to enable their buddies to win big in sports betting.
I really don't think that "well, we should just educate people about the fact that prediction markets are actually battlefields of insider information and their purpose is not to enable gambling on the future but instead to give society some model of future outcomes" is going to stick.
There has been virtually no adoption at all regarding crypto, except for being a financial product and in that regard it has already been adopted by people.
The average consumer is easily manipulated so there's not really a contradiction.
> Same reason why there hasn't been mass consumer adoption of crypto. People just don't feel safe.
The volatility and wild swings are a feature, not a bug, to retail investors who like this stuff. Investing in crypto is mainstream now. It's been advertised on TV for years. Download Robinhood, put money in, and trade the swings.
It's popular to "trade" crypto. The retail investors aren't buying to use it. They're not even doing crypto things with it, they're just getting an entry in the database of their investment platform. Everyone knows it's heavily manipulated and gamed, but they want to come along for the ride and make some money with the manipulators.
Prediction markets are exciting to the same audience for the same reason: Maybe outlier things can happen and you'll guess correctly ahead of time. That's the draw.
I think it genuinely does not matter whether it is legal or not. No one will prosecute them. Legal system was berarely capable of prosecuting rich people crimes and generally unwilling to do so. And the capable parts were dismantled last year.
It would take years to rebuild them. And even if they do by some miracle, next republican president will issue pardons like Trump did.
At least in the US, you are highly likely to be prosecuted if you engage in any profitable insider trading. Those patterns get automatically flagged and you will be investigated.
Insider trading was notoriously difficult to prosecute even when the law trying. It involves a lot of grey areas and is not something you can just easily automatically flag. We kind of know it is going on, because people in positions to have insider information are disproportionally "winning" those bets, but that all that goes about it.
And current administration removed people and groups capable to handle difficult convoluted white collar cases, so the best bet is that law enforcement will ignore these and will go only after simple low level frauds - because that is all they are competent to do now.
I don't think this is true. A lot of crime happens, most criminals don't get caught.
> It involves a lot of grey areas and is not something you can just easily automatically flag.
Successful, high confidence trades by traders who do not make them frequently are trivial to detect statistically. There exist automated systems which detect this. It's extremely difficult to make highly profitable trades based on insider information without making abnormally confident trades.
I suppose a big fund that frequently makes high confidence bets based on legitimate, deep, research could theoretically hide such activity, but I don't see that as a ver realistic option.
>so the best bet is that law enforcement will ignore these and will go only after simple low level frauds - because that is all they are competent to do now.
Insider trading is often one of the simplest white collar crimes to pursue, and it's just good PR because the public always likes it when the feds are going after rich corporate types.
The reason it's so simple is because you can automatically get a very high-confidence list of targets who are likely engaged in insider trading, it's also feasible to link many of the traders to insiders in an automated manner using tools like accurint. Even doing this manually makes your life really easy, you start by doing things like checking who each of these individuals follows on social media.
A very sophisticated operation could hide this better, but any highly lucrative trades will fundamentally stand out. Any particularly profitable insider trading will be detected and eventually investigated.
>We kind of know it is going on, because people in positions to have insider information are disproportionally "winning" those bets, but that all that goes about it.
This sentence kind of suggests to me that you might be thinking of some atypical case of insider trading, perhaps involving politicians rather than corporate insiders?
What you are saying is that it is possible to catch the most blatant and frequent inside traders. Insider information does not have to be "frequent" to be profitable "insider information" situation.
Which is specifically unlikely to cover senate people or even most people having access to inside information in this or that special circumstances.
> This sentence kind of suggests to me that you might be thinking of some atypical case of insider trading, perhaps involving politicians rather than corporate insiders?
The OP specified "members of the US Congress" as his group of interest. However, I think that yours "it is atypical to be engaged in insider trading that does not involve high frequency of trades" is just incorrect.
You don't have to be a frequent trader to make a lot of money insider trading, you do have to make very high confidence (i.e. risky) trades though. A single one of those will stand out, not the frequency. Unless you're a habitual options trader or something, such trades will instantly be a huge red flag.
>The OP specified "members of the US Congress" as his group of interest. However, I think that yours "it is atypical to be engaged in insider trading that does not involve high frequency of trades" is just incorrect.
My bad, I missed that. I suspect it's inherently harder to investigate members of congress for anything, but I also suspect that there's far less illegal insider trading happening by members of congress than people often suggest. I'm not sure there's really any very good evidence that congresspeople are beating the market, someone tried to look at the numbers here https://www.maximum-progress.com/p/congressional-insider-tra...
Regardless of what happens, it is not the case that insider trading isn't illegal for members of Congress, except for some technicalities:
- The act of 2012 does not purport to make insider trading by congressmen illegal. Rather, it purports to make explicit that insider trading by congressmen was illegal before it was passed.
- Insider trading isn't illegal for anyone, in the particular sense that there is no law making it a crime (or any other kind of violation). It exists purely as a construct of the SEC's interpretation of a law that doesn't mention it.
In general prediction markets can’t be “correct” or “incorrect” - for instance if a prediction market says there’s a 60% chance of an event occurring, and it doesn’t occur, was the market right or wrong? Well it’s hard to say - certainly the market said the event was more likely to occur than not, but only just, and who knows? Maybe the event _only just_ occurred, and very nearly didn’t!
So generally we say a prediction market is “correct” if it is “well calibrated”, which is to say that if we took all the events that the market said had a 60% chance of occurring, then approximately 60% percent of these events occurred (with the same holding true for all other percentages).
On this note, an interesting phenomenon that used to occur was “favorite-longshot bias”, where markets would consistently overestimate the likelihood of longshot events occurring - so events that the market predicted would occur 10% of the time would only occur 5% of the time. What’s fascinating is that once people realized that this bias exited, they began to exploit it by making bets against longshots, which had the effect of moving the market and removing the biases, making the markets well calibrated. It’s a pretty neat example of the efficient market hypothesis in action!
Some of the longshot biases still exists and can't be removed due to technical constraints on the platforms. A lot of times there is a minimum contract price, which effectively means the probability of unlikely events cannot be modeled as lower than 1% or 0.1% or whatever. But there are contracts for events much less likely than that.
There are also issues with the time value of money for long-shot events. Someone has to be willing to buy a share of "No", and if that works out to a return lower than the risk-free rate (eg. buying t-bills) there will be no incentive to take the "No" position. That makes anything roughly under 3-4% per year pretty unreliable.
> for instance if a prediction market says there’s a 60% chance of an event occurring, and it doesn’t occur, was the market right or wrong? Well it’s hard to say - certainly the market said the event was more likely to occur than not, but only just, and who knows? Maybe the event _only just_ occurred, and very nearly didn’t!
For most events like this, you'd want to see the market spike to 0% or 100% as the deadline approached. And in particular for an event that happens, you want to see the spike to 100% before it happens. Remaining at 60% until after the fact is wrong because the occurrence of the event becomes more certain as it gets closer.
Being "well-calibrated" as you describe is a very bad quality metric in the sense that two sets of predictions can achieve the same calibration profile while differing markedly in quality. The farther the predictions are from 50%, the better they are, but your calibration metric doesn't take this into account.
The issue there is time. The Nobel prizes will be announced in around 9 months. Buying a share of "No" would currently cost 98.2 cents, working out to a (basically) risk-free return of around 2.4%. Alternatively someone who wants a very low-risk investment product could just buy 1-year t-bills with a return of... ~3.5%. And that doesn't require messing around with buying crypto and the inherent risk of trusting Polymarket with your money.
Anything under 3%/year of time until decision is going to have pretty limited predictive value within that range. Anything starting above that range will end up hitting that floor rather than going to zero because of the difficulty of finding a counterparty.
While Polymarket does offer holding rewards interest, it looks like it doesn't for this particular market.
That doesn't mean there aren't other explanations. It could mean that No holders expect to incur an opportunity cost greater than the risk free rate. Combine that with how there's low liquidity (there's less than $300 on the book buying Yes, and at 2 cents or less), and so we could just be seeing the effect of random fish temporarily distorting the price. It could also mean that the risk of a smart contract failing is making it not worth the hassle for a market maker to come in at such a slim margin and low volume.
They're offering interest on roughly a dozen hand-picked markets, according to their documentation. (I wasn't aware of that, so I stand corrected on the general assertion that they never do.)
> That doesn't mean there aren't other explanations.
Why do you need other explanations, when the observed probability can be precisely and fully explained by opportunity cost?
I don't have to "need" other explanations in order for them to exist. The current price does happen to accurately reflect what the risk free rate would imply. But look at the graph history: it hovered around 1% for a large chunk of December.
How much volume on this bet? Let's ignore black swan events and say it's a guaranteed 3% return. On how much? $1? $10? $1m?
I'd weigh the accuracy by how much money is at stake...
Even then, a "perfect" prediction market need not be accurate, if people use it for hedging. If some low probability event is really bad for me, I may pay over odds (pushing the implied probability up) to get paid if it happens. The equilibrium probability may be efficient, reasonable and biased.
Well, Nobel peace prizes aren't usually awarded to people calling for invasions of their home country either, or cheering for the extrajudicial double-tap killing of smugglers/random fishermen.
Who's to say a dead person can't have done the most to "promote peace conferences" as mentioned in Nobel's will? These days, I'd say dead people make a larger net contribution to peace than most politicians.
To be fair you’re not really providing a hard stance against the estimate. You say it is unlikely, and indeed the prediction is a 3% chance. That’s unlikely.
Well markets are evaluated on a number of different metrics depending on what you’re trying to determine.
If you want to go be pedantic about it and select one metric, markets are evaluated on their Brier Score or some other Proper Scoring Rule, not accuracy.
However, I prefer calibration as a high level way to explain prediction market performance to people, as it’s more intuitive.
Yeah it's a good way to introduce the idea. But I don't think someone would really grasp it until they understand why both calibration and "discrimination" are necessary in determining if a prediction market is accurate.
I suspect that you are arguing semantics, where parent and grandparent focus on the nuance of what is ACTUALLY being measured. I am saying it like this, because while I never used prediction markets, I briefly looked into them to see if I could use them well. The question of accuracy came up, which is why I happen to align with posters above.
Noob question from me: what’s the difference between accuracy and calibration? A well calibrated market would be more accurate and vice versa, not?
Edit: just found the answer myself: “accuracy measures the percentage of correct predictions out of total predictions, while calibration assesses whether a prediction market's assigned probabilities align with the actual observed frequency of those outcomes”
Suppose there are 1000 events and 500 will have outcome A and 500 will have outcome B. If you predict a 50% chance of A for every event you'll be perfectly calibrated. On the other hand, if you predict a 90% chance of a certain outcome and you're right for 800 events, you're not perfectly calibrated but you have a lower Brier score (lower is better).
A forecaster can be calibrated but almost only assign probabilities in the 40--60 % range. This is not as ueful as one assiging calibrated probabilities in the full range.
We try to measure the increased usefulness of the latter with proper scoring rules.
"Correct" is hard to define with prediction markets as likelihood often increases/decreases in the hours before a market is actually called or confirmed. i can't speak for the methodology here, but i remember this data report from a user: https://dune.com/alexmccullough/polymarket-brier-score
Silicon Valley and other so-called "tech" commpanies, along with "tech journalists" and other online commentators (prognosticators) who presumably work for such companies, are a never-ending source of "predictions" (promises) that never hold true
One longstanding example is "vapourware", but the deception carried out today goes even further, IMHO
What if the non-believers and realists could use "prediction markets", in addition to short selling, to bet against them
Maybe they are already doing so, but I have not seen any examples
Note the lack of links and that all of these Maduro reports originate from X which is rampant with polymarket grifters claiming secret insights into how the big bets are made.
Perhaps somebody here can provide a Polymarket link (not screenshots) to the proof?
I'm not saying the BBC has been scammed here but the only link I've found to the alleged account 404s. Perhaps its been taken down by Polymarket?
Anyway for anybody new to this, even if this checks out please - as ever - be cautious about the claims of easy money.
Thank you! Should have thought to check the archive myself. The link I'd found before also had a referrer on it from the X account which also made me suspicious.
The money involved in prediction markets at present isn't enough for governments to bother. $436k is a nice windfall for your average individual, but that's peanuts for anyone at a level to influence government actions.
The attitude of powerful politicians to money is more, "if I can get the milk, why should I keep a cow". You don't actually need billions in your bank account, there's not so much you need to spend it on anyway and it's more trouble than it's worth. The real power is in your network. You can move money to where you want it via that - even to yourself in the form of speaking fees, if you should need some change.
Fair point. It's gotten worse lately. I wonder if it's because of doomerism (not necessarily unjustified): they maybe don't trust their support networks to be around much longer.
Additionally, they can leverage crypto which is much less regulated and has already been publicly exploited for personal benefit by Musk and Trump.
But you don't become a Billionaire by having a risk averse "well, that's enough" mindset.
I would think the biggest question is if it's worth exploiting poly market. Getting 400k out of such an event sounds as peanuts and I am not so sure that scales to 4m+.
It's my understanding a couple news agencies knew before everyone else but held off publishing. Seems like a good opportunity for nephew of someone in the media if not directly one of an official.
Absolutely possible but if you were the presidents son I do think you'd be more likely to slowly buy in over 1+ weeks. If you were media related you'd want to do a giant bet before anybody else as you know lots of other people know and it's only a matter of time when someone else exploits it, and you only know slightly ahead of time.
When you have insider information it's typically most profitable or at the very least less risky to exploit it at the earliest moment, but if you know you have a long head start you can do it slowly to keep from bidding up the price. In either case a giant bet only hour before tells me it's someone who only found out about the operation shortly before it happened.
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(1) Is an excellent point but they bought "will happen in the month of January" for something that occurred at the beginning of January, so basically the worst case scenario for exploiting bet expiry.
(2) Makes sense on face but I had read elsewhere there was a 2 week window. So at no point would it go outside the January window of the bet, there was no point in waiting once January 1st hit.
In this case a rational insider with a priori knowledge far ahead of time would have either placed a large bet first thing January 1st or started to ease in first thing on January 1st, as waiting would convey ~no advantage and only present risk other insiders would bite the apple first.
1. The odds are better the closer it gets to the bet's expiry. "Maduro will be ousted sometime in the next few weeks" has a relatively high probability, so a low payout. "Maduro will be ousted in the next few hours" is a jackpot.
2. Operations like these aren't set in stone weeks in advance. There may be general planning, but the exact hour is only decided at the last moment.
How? Then why would non-insiders bet? The classic prediction market is guessing the weight of an elephant (or some animal) at a circus. The average guess of the crowd will actually get very close. But if someone knows the actual weight, no one would play.
The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling.
Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing. The insider whales are the only ones actually using it for its intended purpose.
No, the entire point is gambling. Yes there is insider trading mixed in as well, but the vast majority of events these markets are pushing and people are betting on don't have "insiders" at all. Sports, election winners, Bitcoin/stock/commodity prices, weather forecasts, movie box office receipts. None of this is about insider information, just pure gambling.
The real point of Polymarket is gambling, we agree. I'd extend that argument to every prediction market that is open to all comers in which people can meaningfully gamble. But that's not the original concept of a prediction market. I'm not here to defend Kalshi and Polymarket, both of which I think are pretty evil.
It's not 'predicting' when the outcome/answer is known. From the wiki entry on prediction markets "The main purpose of prediction markets are eliciting aggregating beliefs about an unknown future event."
I think you should probably read more about the background of prediction markets. Robin Hanson is a useful place to start. The whole concept of a prediction market is to convert private information into prices. That only works with "insider" information.
As I said in a parallel comment, Hanson was also thinking about scientific questions, where there are asymmetries in knowledge but people can often invest in research that improves their own knowledge (like by performing an experiment or a scientific expedition or something). So, Hanson believed that prediction markets could incentivize people to invest in scientific research in order to get an edge over other market participants in such questions. That doesn't exactly make them insiders, though.
Interestingly, it doesn't necessarily incentivize them to publish the detailed results of their investigations. They're incentivized to reveal what they expect to happen (based on how they bet), but not necessarily incentivized to reveal why they think so, or how they know. E.g. if you became able to predict the weather more accurately than other models over some timeframe, prediction markets would incentivize you to reveal (some aspects of) your predictions, but not your method for making those predictions.
It's OK, I didn't have it in cache either, I just remembered "people like Robin Hanson have said insider trading on prediction markets is a feature not a bug" and GPT5 tracked it down for me. :)
I don't know much, but I can't see why betting on a known outcome is good? Why not just ask the knower? Also, just because Robin Hanson says "it's about aggregating insider information" makes it true. He writes some stuff.....
The idea is that people have all sorts of fragmentary information about future events that they can't directly reveal, due to confidentiality or trade obligations (among other things), and that a prediction market effectively liberates the directional content of that information by converting it into prices.
Robin Hanson can credibly claim to have invented prediction markets as we understand them today.
"that a prediction market effectively liberates the directional content of that information by converting it into prices."
I can see this, and I guess maybe my issue is with the phrasing of "aggregating" insider information. Because you aren't just aggregating insider info, you are also aggregating non-insider information, but no one (but the insider) knows what is right.
Is there different types of prediction markets then? One where there is a true insider and one without? For example, you could take bets on weather it will rain on Saturday. People can make educated guesses, but no one really knows (no insider). On the flip side, Kanye could create a bet on whether he will run for president. He would be the only insider, so again, aggregating insider and non insider information.
> you are also aggregating non-insider information
You're not really aggregating non-insider information, because in these cases, it's not really "information", it's just (at best) rational guessing or (at worst) gambling.
But yes, Kalshi and Polymarket essentially aggregate gambling, rational guesses, and insider information that's likely to be correct. It's a losing game unless you're an insider, and these companies profit off of other people's addictions.
I would argue that a "market" in whether it will rain on Saturday isn't really a prediction market, or even a market, at all. It's just a bookmaking operation. The core function of any market, in anything, is price discovery.
What's the difference between a "Monday it will rain" market and a NCAAF prop bet on a team's rushing yards? I could argue that DraftKings prop bets are actually more like prediction markets than these "will it rain" bets. People actually do have directional information to contribute to sports propositions!
Tradeable risk is the difference between the ncaaf bet and rain futures. Levine has joked that perhaps there is some tenuous way that sports gambling is poolable risk to owners, players and coaches but there is real and obvious economic utility with rain. Neither get the advantages of prediction markets.
> would argue that a "market" in whether it will rain on Saturday isn't really a prediction market, or even a market, at all. It's just a bookmaking operation
How would you define the difference?
Cat bond premiums absolutely bet on near-term weather odds. I’d argue they’re prediction-esque.
You seem to be arguing that that's the canonical definition of a prediction market, and anything else, including markets merely aggregating non-insider beliefs about future events, should be called something else. Do you have a better proposal?
Sure, but then discussions about these types of markets are bound to become somewhat confusing for purely nominalistic reasons. (Turns out not every hard naming problem is automatically computer science :)
Well, it's confusing because you have markets on questions with very different characteristics in terms of whether they are exogenous or not (and whether they are exogenous from the perspective of particular groups), or just with different degrees of asymmetry regardless of whether there are literal "insiders".
Like, prediction markets have questions ranging from what the weather will be in a certain year, to who will win elections, to what stock prices or exchange rates will be, to whether companies will announce specific products, to whether particular people will start dating, to whether a specific person will say a specific word during a conference (some of the Manifold "prop bets" for Manifest).
These are not the same kinds of questions in terms of whether there are insiders at all or who the insiders are. Maybe we can't expect prediction markets to have the same dynamics in all of these cases.
Depending on what you want out of a prediction market, there's probably a sweet spot in terms of whom you should expect (or want) to be trading in it.
In the most exogenous events, those that are most outside of the control of individuals or groups, I think Robin Hanson hoped (in proposing "idea futures") that people would be incentivized to invest in research in order to gain a statistical edge in the market, but also assumed that there wasn't anyone who was inherently drastically better positioned to get information about the question than anyone else. E.g. "I will spend $X to get a better estimate of this probability (hopefully by otherwise ethical means?), and that will make my expected return from buying $Y worth of prediction contracts greater than $(X+Y)". Indeed not something retail investors or gamblers should probably participate in.
It's also true that in some cases where there are true insiders it can give the insiders a financial incentive to reveal confidential information. From the point of view of trying to get the most accurate possible estimate of the likelihood of future events, that would indeed also be a success, even if the process was "unfair" to non-insiders.
Yeah, I mean, they're a wretched hive of scum and villainy, I preemptively agree. I'm just saying, insider bets don't have the same ethical or legal valence on a prediction market that they do in the financial markets (even there, at least in the US, the principles underlying insider trading law are really poorly understood.)
It's funny to think that the most villainous markets might be some of the humorous prop bets where the person creating the market (or a friend of the person creating the market) literally completely controls the outcome. Like "will I say SOME_WEIRD_WORD on stage at the conference tomorrow?".
Although maybe the villainy would come in more from deceiving people about whether or not an event was under your control, more than merely encouraging people to bet on an event that was clearly and unambiguously under your control.
I agree that is funny and want to take this opportunity to say I think things like Polymarket are bad, a real corruption of the original idea. I'm not sticking up for them!
What uses or structures of prediction markets would you like to see? For things like Polymarket, are you more particularly concerned about the kinds of participants (e.g. people who really are just gambling for entertainment), or about the kinds of questions that are the subjects of contracts?
The original prediction markets were internal things at large companies, which I think are a great idea. I've flirted for a long time with doing a vulnerability prediction market. The good-faith incarnations of prediction markets aren't open to all comers; they're structured so you can't meaningfully gamble on them.
Yeah, sorry for not being clear enough. I just struggle how a good faith market can even exist. I immediately start thinking how participants would be incentivized to cheat by neglecting or even introducing vulnerabilities to win. Maybe I’m just a bit too cynical and/or should do more reading on the topic.
If you don't have insiders, you're not doing predictions, you're just doing gambling.
Non-insiders can't make predictions? I'm not into betting as a hobby but I make minor bets with myself or friends on topics with clear win-loss conditions in areas of politics where I consider myself knowledgeable. I'm pretty good at it since I find it easy to distinguish between results I'd like to see vs what I expect to actually happen.
I don't think you have a real point here, and are just using pejorative language about gambling to suggest one. Your thesis seems to be that only insiders can make valid predictions, which is nonsense.
I'm saying that most people --- and functionally all the people who feel victimized by insiders --- on Polymarket are gambling, not predicting. I feel pretty comfortable with how sound that argument is. I agree that there are users of prediction markets who are neither "insiders" (for whatever definition of that you want to use) nor gamblers, but they're participating with the understanding that they're bidding alongside insiders. And they're a tiny cohort.
If it helps, draw a line between "entertainment" and "enterprise", and use whatever term you like for uses on the "entertainment" side of the line. Either way: it has stark implications for the notion of insider impropriety.
This is just redefinition to belabor your insiders point (which I am not disagreeing with). Non-insiders are gambling, but they are also making predictions, with varying degrees of skill
Some kinds of gambling are truly random (unless they are scams) and no prediction is possible. Other kinds involve some degree of skill and predictive power. For example, people can make predictions on races based on past form, even though the element of chance can't be eliminated. It seems like you're trying to redefine 'prediction' to mean 'anticipated outcome as assessed by the most informed' in order to disqualify the validity of any opinions held by non-insiders.
I get that you want everyone to be aware of how prediction arguments were originally a fun way for experts to drive decision making without writing ever-longer arguments for their position. But you seem to be overlooking the the fact that objections are not so much to insiders disrupting hte prediction market as the impropriety of government officials or their special friends cashing in on military adventurism. Said government officials defend engaging military adventures without consent or even notice to Congress by citing security, yet placing big bets on markets to make a quick profit is highly insecure.
I don't care about insiders cashing on on adventurism. Or, rather, I care about the adventurism, but I do not care even a little bit about the impact of it on gambling platforms like Polymarket. I think I'm on reasonably firm footing when I say that (a) the inventors and popularizers of modern prediction markets and (b) US law doesn't care either.
The irony here is that the one bank-shot argument I'd see in the medium term for "insider trading" enforcement at places like Polymarket is Nevada Gaming Commission-style gambling regulation.
I would say that the popular conception of insider trading as a problem of fairness to other traders on financial markets is misapprehended, but no, it's not at all true that the only rational actors on financial markets are insiders.
> the popular conception of insider trading as a problem of fairness to other traders on financial markets is misapprehended
Well, it's the legal theory underpinning insider trading laws in much (all?) of the EU.
And the US might have a different legal theory underpinning their regulations, but practically, it largely amounts to the same effect, so under POSIWID, it's questionable whether the difference matters much.
> no, it's not at all true that the only rational actors on financial markets are insiders.
Then a non-insider-trading prediction market should be possible and at least somewhat useful too, no? You'd essentially create incentives to do thorough research and analysis of public information and publish the results.
Whether it's practically possible to enforce is a different question.
Non insiders would be if they think the odds are in their favor or that they predict that the market's opinion will shift.
>But if someone knows the actual weight, no one would play.
Now what if someone in the audience knew the weight of an average elephant, giving them an advantage. Would people still bet. I would guess yes, but they wouldn't bet as much as the person who did because they have less information.
While having better information may make it more likely for you to win, it is not surefire. Things can change last minute.
One way to use a market rationally as a non-insider is to bet big against something you want to happen. You've just set a bounty for someone to do it. Presumably for some reason this is even more in your favor outside the betting market.
Isn’t this a classic fool’s money game. The betting markets have a strong incentive to pretend it isn’t an insider’s game.
Honestly, of all the vices, I think I pity gamblers a lot. It’s just so visible and understandable to see the harm. Something like being too into porn or drink, those are less visible harm. Where running out of money is comprehensible to even a child.
It could reasonably be a non-insider, just someone monitoring comms activity, ship movement, pentagon pizza and parking indexes, and other open sources.
They won't collapse, but they won't reach their full potential. I would hate to be a16z sitting on their $10B post-money valuation Kalshi bags, that's for sure.
This is such a small amount that either this is one of many accounts the user made in order to mask said activity or this was just a lucky bet (people make stupid lucky bets on hunches all the time).
Imagine the massive value of having such a world changing event in advance (the search volume alone probably affected an order of magnitude more in online advertising revenue at least). $430k?! Are you F’ing serious?
There were hundreds, maybe thousands of people involved in the operation. They weren't all millionaires. It could have been any random soldier, CIA/DEA agent, politicial aide, journalist or really any low-mid level operative with $30K available to them at the time.
To be fair, insider trading for a prediction market doesn’t really seem like a bad thing. It’s arguably the entire point (to incentivize the aggregation of all relevant information on the topic) and, unlike securities markets, there’s no equivalent of “but it’s unfair to normal traders using the markets as investments.”
The problem with prediction markets is not purely insiders but that they interface with the real world, so they encourage bettors not just to predict an outcome but to bring it into being.
You are a poorly paid Russian commander. You open an account on polymarket or Kalshi and place a bet about specific Russian troop movements, perhaps ones that would be disastrous to your war effort even, to up the leverage. When you’ve accumulated a sufficient position, you order the troops to be moved, perhaps even out of accord with orders from above. Your front collapses, your soldiers are routed, and you get rich.
These markets are dangerous. We will learn this lesson eventually.
Your example assumes there would be sufficient liquidity on that bet. The existing platforms aren’t houses or market makers that just provide functionally infinite liquidity on any bets. The “win” criteria on this example is so specific that verification becomes its own problem.
In theory a fun example, but practically it doesn’t play out the way you’re describing.
I'm aware of the assassination market concept, but there's nothing particularly unique about prediction markets. Nearly any conceivable market can be influenced by someone willing to commit violent crime. That obviously includes many normal securities markets.
Legal systems certainly should restrict markets where the incentivize is sufficiently direct (e.g. actual date of death prediction markets). There's a blurry line between what constitutes a sufficiently direct incentive, sure, but there are lots of blurry lines when it comes to legal systems.
Does happen any other aggregation than taking the average though? The whole point of this is that the average believe is not an accurate representation of reality.
Only certain limited forms of insider trading are federal crimes. The insider trading laws don't really cover this type of prediction market. But depending on the facts of the case it's possible that the trader or related parties committed some other crime such as wire fraud or improper release of classified information.
It's not illegal, period, because this isn't a regulated security. Prediction markets don't fall under these laws; in fact, insider trading is seen as a feature of these markets.
They took off from many different places so you'd have to somehow know that ~150 aircraft were taking off. If you happen to just see one spot, you'd likely just assume it was another bombing of a boat or a dock.
Or… someone seeing a bunch of commercial flights over the Caribbean getting cancelled. Could be anyone from airline ops to frustrated travelers stranded in Boston.
I guess... but I still think first thought would be just some more bombing. It's a big step to go from bombing boats, a dock, arresting and extraditing a foreign leader in the middle of the night.
I highly doubt that that's the case, given that taking a large and publicly visible financial position based on confidential information still amounts to disclosing information.
Using insider information is how you are supposed to win these. Otherwise it's just random gambling.
This is not the stock market. There are no public reporting rules for the weather, song lyrics, what Kim Kardashian eats tomorrow.
Well, better synthesis of public information is also a way to win. Some people think of that as more fair.
Another way to win is to use them for hedging exposure elsewhere. That also doesn't require inside information.
Why should we want prediction markets to be fair? I want them to reveal facts about the world.
They only need to be fair inasmuch as it serves that goal. I don't think it wouldn serve that goal to forbid insider trading?
(Why do we forbid insider trading in the stock market? Not because it's unfair. Because it makes the market worse at doing what we want it to do, which is funding the most productive enterprises).
>Why should we want prediction markets to be fair? I want them to reveal facts about the world.
I do not think this is a reasonable position. The problem is that predicting "real facts about the world" creates a situation where you could take out an place a sizable bet on your neighbors house burning down. Allowing prediction markets is, thusly, inherently problematic. Allowing them to be anonymized with insider information, and you've a recipe for disastrous externalities.
And to spell it out, you can then go burn your neighbours house down and profit from it. Predictions markets don't just predict, they can cause "unlikely" things to happen because they give a way of profiting from making "unlikely" things happen. This is a problem with plain old stock market insider trading too, and with sports betting when the participants take out bets on themselves.
You can say you don't want prediction markets and that's fine. It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world.
If you think prediction or stock markets should be "fair" then you have a very bizarre definition of fair (one that's compatible with a game that only rich people can win).
Also desiring "fairness" implies that to imply the market's primary purpose is as a game. If it's just a game, it's nothing but toxic gambling.
ANYWAY: pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO. Hopefully you can tell I'm not a prediction market booster, there's a lot about them that I think it's pretty suspect. But this is a pretty lame line of reasoning IMO.
"Someone might shoot people with it" -> valid reason for gun control. Guns are for shooting people.
"Someone might stab someone with it" -> not a valid reason to ban knives. We already ban stabbing people. We take precautions to try and mitigate the dangers of knives, because they have a very big upside.
> It's not responding to my comment though which is saying that if we have prediction markets, the goal should be for them to reveal facts about the world.
My point is you can’t have this without creating a massive incentive for people to create events, and it’s inherently easier to create disorder, which hurts everyone in a free society.
> pointing to one possible case of misuse and then leaping to "inherently problematic" is pretty weak IMO.
This is like saying nuclear weapons are “one possible case of misuse of nuclear technology.” Yes, obviously, but it’s serious enough to justify massive regulation of nuclear technology.
I’m not saying prediction markets should be illegal. I’m saying that they should have a very small maximum wager, require public disclosure of who is taking which bets, and it should not pay out if the actor has any connection to agents that create the change in the world.
Sports gamblers have known about how problematic this concern is forever. Organized crime used predictions markets they could influence (sports betting) as a major source of revenue throughout history.
Reveal facts about the world while influencing it as little as possible.
Otherwise, you're arguing that a gun is functionally a blood pressure monitor.
They aren’t predicting anything if the result is known a priori.
Words matter - “prediction markets” just smooths over grift by making it sound reasonable.
The result was not, and could never have been, known a priori. All sorts of random things could have gone wrong with the operation causing the raid to fail and Maduro to remain in power. Trump could have just randomly changed his mind, or postponed the raid to beyond the end of January (the cutoff for the betting market). The person placing the bet was still taking a chance, but it was an informed chance that shifted the market probability more in line with reality.
If it helps, you can think of the money made as the payment to a confidential informant for information that contributed to a more complete picture of the world. It just happens via a distributed algorithm, using market forces, rather than at the discretion of some intelligence officer or whoever. The more important the information you have to share, the more it moves the market and the bigger your "fee". It's not being a "grifter" to provide true information that moves the market correctly. In fact, this mechanism filters out the actual grifters - you can't make money (in expectation) by providing false information, like traditional informants sometimes can.
This "intelligence gathering" function is the primary goal of a prediction market. It's the only reason it makes sense to even have them. If you turn it into some parlor game where everybody who participates has access to all the same information, then what are we even doing here?
> This "intelligence gathering" function is the primary goal of a prediction market. It's the only reason it makes sense to even have them. If you turn it into some parlor game where everybody who participates has access to all the same information, then what are we even doing here?
If everyone has the same information, then whoever does better analysis wins. That's far from a parlor game.
Ideally people with good info and people with good analysis can both make money. (And ideally nobody takes real-world actions to make their bet come true.)
> you can't make money (in expectation) by providing false information
You certainly can, but that's usually called market manipulation, not insider trading.
Would love to know your proposed mechanism here.
> The result was not, and could never have been, known a priori.
This is a level of solipsism not worth discussing.
Yes, Superman could be a real person and we all had our minds altered to think he’s a superhero.
Yes, when someone pulls the trigger of a gun pointed at someone’s head, it could misfire and explode in their hand.
The point is that someone influencing prediction markets can push this probability to very, very near zero. So much so, as to make the outcome effectively certain for all intents and purposes.
Which makes their information much more valuable than most people's.
>more valuable than most people's
Literally everyone can burn their neighbor's house down! Everyone has access to "valuable predictive information" when that information is being created by the person making the bet.
Get the last word in if you must. We're going in circles.
OK, I see now that you're specifically referring to the case where someone places a bet and then actively goes out and causes the event to happen themselves. I was specifically replying to the people who were saying it was unfair for insiders to profit on the information they already possess.
I agree, I can see how that's a potential edge case, though I don't think it's as likely to happen in practice as you do. Certainly, anybody who commits a crime to cause a payout should be barred from receiving that payout, though you can tell a plausible story where someone manages to conceal it. I also really really doubt that that's what happened in this particular case.
Wasn't a guy at google seeing the top seach result before publication and bet on those? That's also intelligence gathering, so i guess that's okay?
I mean, yes, unironically. If the goal of a prediction market is to find out the truth about the world, that's what will get you there faster.
Google might feel differently about whether it's OK in that case, but that's their prerogative.
Ask yourself: If the CIA really needed to know in advance what the top search result was going to be with as much accuracy as possible (for some weird reason, doesn't matter why), how would they go about doing it? Would they spend a bunch of time evaluating all of the public information, or would they just bribe (or otherwise convince) an insider at Google to tell them?
> Why should we want prediction markets to be fair? I want them to reveal facts about the world.
Nice in theory,
in practice, the money begins creating the facts about the world.
Sometimes to the detriment of innocents.
Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate?
If, say, Enron insiders could've shorted their own stock, that would have improved accuracy and thereby diverted more funding to more productive enterprises.
I guess there could be second-order effects when insiders can actually change the outcome, which is why athletes aren't allowed to bet on their own games.
> I guess there could be second-order effects when insiders can actually change the outcome
You don't need to guess. That's exactly why it's illegal: It creates bad incentives, similarly to e.g. taking out a life insurance policy on a random person you have no financial dependence on.
Didn’t Walmart (and perhaps others) used to do that?
May even have been referred to as Dead Peasants Insurance.
In the US insider trading is typically illegal because you're misappropriating that information from someone else.
For example, if you happen to be a bartender or a waiter who accidentally overhears material non-public information, you're free to trade on that.
> Given that inside information makes prediction markets more accurate, why do you believe it doesn't make stock markets more accurate?
He didn't say that it doesn't. It obviously does make stock markets more accurate.
But it tends to drive down the total amount of money available to be invested in stocks, which is compatible with the claim that it makes the market worse at funding productive enterprises.
> But it tends to drive down the total amount of money available to be invested in stocks
That seems like a big claim. For most market participants, there's always a counterparty that's so much more sophisticated that it doesn't make a difference if they're an insider or not.
Yeah exactly. Allowing insider trading makes adverse selection too high.
The only "facts about the world" revealed by prediction markets are facts about what people betting in prediction markets believe. Which I guess is interesting in itself if you're a sociologist. Otherwise, not so much.
In this case the insiders only made their bets a few hours before the kidnapping was publicly announced, so it's not clear whether the betting "revealed facts about the world" in any publicly useful way.
If you think this through, while "fairness" might not be an end itself, it's extremely hard to imagine a market that's both unfair and efficient.
> I want them to reveal facts about the world.
What facts were revealed here?
Lol. Why should we make car ownership fair? I want cars to reveal facts about the world. I don't think it would serve that goal to forbid people from stealing your car.
[dead]
We are all in the same world. Go find the information you need to make informed choices.
Betting on the weather? Go build weather stations. Betting on Kim Kardashian? Go interview her.
This "go find valuable information" approach is broadly applicable to making money.
pro insider trading is an odd position to defend
No need to limit yourself to "trading". You can use this approach to buy real estate, build products, companies.
This private info is often even considered "trade secret", which is protected against being stolen and spread.
> Using insider information is how you are supposed to win these. Otherwise it's just random gambling.
Not nearly. If nothing else, there's still time arbitrage and at least some amount of information processing required.
Even efficient markets need somebody doing the leg work and making them so, especially when unsophisticated traders are participating too.
How have we regressed to the point of forgetting that you don't let athletes and referees gamble?
Getting close to Jim Bell's assassination politics
https://news.ycombinator.com/item?id=32790951
I have to imagine governments are closely monitoring prediction markets as part of their intelligence apparatus. But then you just add another layer of subterfuge. Imagine a D-Day prediction market... "Will the Allies Land in Normandy, Pas-de-Calais, or somewhere else?" The US might buy a major position on Pas-de-Calais the night before as a decoy!
These prediction markets were proposed by DARPA iirc
https://www.cia.gov/resources/csi/static/Prediction-Markets-...
I imagine how few incumbents can take advantage of prediction markets.
It's really hard to understate how brazenly corrupt it all is.
These guys arent even trying to hide their tracks anymore, and polymarket/kalshi are well aware of this
Insider trading is a feature, not a bug, say Shayne and Tarek, stupidly.
You can't have this amount of obvious manipulation and expect the average retail consumer to join. Same reason why there hasn't been mass consumer adoption of crypto. People just don't feel safe.
Even without insider trading it's a negative-sum game. Every dollar won is a dollar lost, and the platform takes a cut. Like all negative-sum games you should only participate if it's purely for entertainment or you have a clearly definable edge over the other players. If you can't spot the sucker, you are the sucker.
People like to gamble. I expect that the vast majority of interaction with these systems is seen by participants as gambling. "Who will win the presidential election" and "who will win the jets game" are similar kinds of questions. Both are negative sum.
And people do get upset and feel cheated when the bet isn't "fair." We just saw a big scandal where various athletes are changing their behavior in order to enable their buddies to win big in sports betting.
I really don't think that "well, we should just educate people about the fact that prediction markets are actually battlefields of insider information and their purpose is not to enable gambling on the future but instead to give society some model of future outcomes" is going to stick.
To be clear, Polymarket has no fees on markets, only 15-minute crypto markets. That's probably temporary, but makes it a zero sum game at present.
There has been virtually no adoption at all regarding crypto, except for being a financial product and in that regard it has already been adopted by people.
The average consumer is easily manipulated so there's not really a contradiction.
> Same reason why there hasn't been mass consumer adoption of crypto. People just don't feel safe.
The volatility and wild swings are a feature, not a bug, to retail investors who like this stuff. Investing in crypto is mainstream now. It's been advertised on TV for years. Download Robinhood, put money in, and trade the swings.
It's popular to "trade" crypto. The retail investors aren't buying to use it. They're not even doing crypto things with it, they're just getting an entry in the database of their investment platform. Everyone knows it's heavily manipulated and gamed, but they want to come along for the ride and make some money with the manipulators.
Prediction markets are exciting to the same audience for the same reason: Maybe outlier things can happen and you'll guess correctly ahead of time. That's the draw.
If you think Polymarket wants retail customers to join, you're misunderstanding the point of Polymarket.
Retail consumers shouldn't be joining.
From the BBC article: "Insider trading is illegal in the stock market"
Not for members of the US Congress.
I think it genuinely does not matter whether it is legal or not. No one will prosecute them. Legal system was berarely capable of prosecuting rich people crimes and generally unwilling to do so. And the capable parts were dismantled last year.
It would take years to rebuild them. And even if they do by some miracle, next republican president will issue pardons like Trump did.
This sort of activity is illegal only in theory.
At least in the US, you are highly likely to be prosecuted if you engage in any profitable insider trading. Those patterns get automatically flagged and you will be investigated.
Insider trading was notoriously difficult to prosecute even when the law trying. It involves a lot of grey areas and is not something you can just easily automatically flag. We kind of know it is going on, because people in positions to have insider information are disproportionally "winning" those bets, but that all that goes about it.
And current administration removed people and groups capable to handle difficult convoluted white collar cases, so the best bet is that law enforcement will ignore these and will go only after simple low level frauds - because that is all they are competent to do now.
I don't think this is true. A lot of crime happens, most criminals don't get caught.
> It involves a lot of grey areas and is not something you can just easily automatically flag.
Successful, high confidence trades by traders who do not make them frequently are trivial to detect statistically. There exist automated systems which detect this. It's extremely difficult to make highly profitable trades based on insider information without making abnormally confident trades.
I suppose a big fund that frequently makes high confidence bets based on legitimate, deep, research could theoretically hide such activity, but I don't see that as a ver realistic option.
>so the best bet is that law enforcement will ignore these and will go only after simple low level frauds - because that is all they are competent to do now.
Insider trading is often one of the simplest white collar crimes to pursue, and it's just good PR because the public always likes it when the feds are going after rich corporate types.
The reason it's so simple is because you can automatically get a very high-confidence list of targets who are likely engaged in insider trading, it's also feasible to link many of the traders to insiders in an automated manner using tools like accurint. Even doing this manually makes your life really easy, you start by doing things like checking who each of these individuals follows on social media.
A very sophisticated operation could hide this better, but any highly lucrative trades will fundamentally stand out. Any particularly profitable insider trading will be detected and eventually investigated.
>We kind of know it is going on, because people in positions to have insider information are disproportionally "winning" those bets, but that all that goes about it.
This sentence kind of suggests to me that you might be thinking of some atypical case of insider trading, perhaps involving politicians rather than corporate insiders?
What you are saying is that it is possible to catch the most blatant and frequent inside traders. Insider information does not have to be "frequent" to be profitable "insider information" situation.
Which is specifically unlikely to cover senate people or even most people having access to inside information in this or that special circumstances.
> This sentence kind of suggests to me that you might be thinking of some atypical case of insider trading, perhaps involving politicians rather than corporate insiders?
The OP specified "members of the US Congress" as his group of interest. However, I think that yours "it is atypical to be engaged in insider trading that does not involve high frequency of trades" is just incorrect.
You're completely misunderstanding me.
You don't have to be a frequent trader to make a lot of money insider trading, you do have to make very high confidence (i.e. risky) trades though. A single one of those will stand out, not the frequency. Unless you're a habitual options trader or something, such trades will instantly be a huge red flag.
>The OP specified "members of the US Congress" as his group of interest. However, I think that yours "it is atypical to be engaged in insider trading that does not involve high frequency of trades" is just incorrect.
My bad, I missed that. I suspect it's inherently harder to investigate members of congress for anything, but I also suspect that there's far less illegal insider trading happening by members of congress than people often suggest. I'm not sure there's really any very good evidence that congresspeople are beating the market, someone tried to look at the numbers here https://www.maximum-progress.com/p/congressional-insider-tra...
It seems to have been outlawed ~13 years ago.
And that certainly seems to have solved the problem...
https://theonion.com/proposed-bill-would-bring-4-000-troops-...
Regardless of what happens, it is not the case that insider trading isn't illegal for members of Congress, except for some technicalities:
- The act of 2012 does not purport to make insider trading by congressmen illegal. Rather, it purports to make explicit that insider trading by congressmen was illegal before it was passed.
- Insider trading isn't illegal for anyone, in the particular sense that there is no law making it a crime (or any other kind of violation). It exists purely as a construct of the SEC's interpretation of a law that doesn't mention it.
How often are these prediction markets "correct"? Has this been studied?
It absolutely has been!
In general prediction markets can’t be “correct” or “incorrect” - for instance if a prediction market says there’s a 60% chance of an event occurring, and it doesn’t occur, was the market right or wrong? Well it’s hard to say - certainly the market said the event was more likely to occur than not, but only just, and who knows? Maybe the event _only just_ occurred, and very nearly didn’t!
So generally we say a prediction market is “correct” if it is “well calibrated”, which is to say that if we took all the events that the market said had a 60% chance of occurring, then approximately 60% percent of these events occurred (with the same holding true for all other percentages).
On this note, an interesting phenomenon that used to occur was “favorite-longshot bias”, where markets would consistently overestimate the likelihood of longshot events occurring - so events that the market predicted would occur 10% of the time would only occur 5% of the time. What’s fascinating is that once people realized that this bias exited, they began to exploit it by making bets against longshots, which had the effect of moving the market and removing the biases, making the markets well calibrated. It’s a pretty neat example of the efficient market hypothesis in action!
Some of the longshot biases still exists and can't be removed due to technical constraints on the platforms. A lot of times there is a minimum contract price, which effectively means the probability of unlikely events cannot be modeled as lower than 1% or 0.1% or whatever. But there are contracts for events much less likely than that.
There are also issues with the time value of money for long-shot events. Someone has to be willing to buy a share of "No", and if that works out to a return lower than the risk-free rate (eg. buying t-bills) there will be no incentive to take the "No" position. That makes anything roughly under 3-4% per year pretty unreliable.
Polymarket and Kalshi both pay interest on long term bets around the same as the risk free rate.
> for instance if a prediction market says there’s a 60% chance of an event occurring, and it doesn’t occur, was the market right or wrong? Well it’s hard to say - certainly the market said the event was more likely to occur than not, but only just, and who knows? Maybe the event _only just_ occurred, and very nearly didn’t!
For most events like this, you'd want to see the market spike to 0% or 100% as the deadline approached. And in particular for an event that happens, you want to see the spike to 100% before it happens. Remaining at 60% until after the fact is wrong because the occurrence of the event becomes more certain as it gets closer.
Being "well-calibrated" as you describe is a very bad quality metric in the sense that two sets of predictions can achieve the same calibration profile while differing markedly in quality. The farther the predictions are from 50%, the better they are, but your calibration metric doesn't take this into account.
Charlie Kirk has a 3% chance of winning a Nobel Peace Prize right now according to Polymarket. He's climbed from 1% since Maduro was arrested.
It seems unlikely since Nobels aren't awarded posthumously.
The issue there is time. The Nobel prizes will be announced in around 9 months. Buying a share of "No" would currently cost 98.2 cents, working out to a (basically) risk-free return of around 2.4%. Alternatively someone who wants a very low-risk investment product could just buy 1-year t-bills with a return of... ~3.5%. And that doesn't require messing around with buying crypto and the inherent risk of trusting Polymarket with your money.
Anything under 3%/year of time until decision is going to have pretty limited predictive value within that range. Anything starting above that range will end up hitting that floor rather than going to zero because of the difficulty of finding a counterparty.
Are t-bills accessible for anyone, especially loaded with crypto?
AFAIK there are coins that pay better (some give you exposure to t-bills).
Polymarket pays interest on those bets about the same as the risk free rate.
It doesn't, or where do you think those 3% are coming from?
While Polymarket does offer holding rewards interest, it looks like it doesn't for this particular market.
That doesn't mean there aren't other explanations. It could mean that No holders expect to incur an opportunity cost greater than the risk free rate. Combine that with how there's low liquidity (there's less than $300 on the book buying Yes, and at 2 cents or less), and so we could just be seeing the effect of random fish temporarily distorting the price. It could also mean that the risk of a smart contract failing is making it not worth the hassle for a market maker to come in at such a slim margin and low volume.
They're offering interest on roughly a dozen hand-picked markets, according to their documentation. (I wasn't aware of that, so I stand corrected on the general assertion that they never do.)
> That doesn't mean there aren't other explanations.
Why do you need other explanations, when the observed probability can be precisely and fully explained by opportunity cost?
I don't have to "need" other explanations in order for them to exist. The current price does happen to accurately reflect what the risk free rate would imply. But look at the graph history: it hovered around 1% for a large chunk of December.
How much volume on this bet? Let's ignore black swan events and say it's a guaranteed 3% return. On how much? $1? $10? $1m?
I'd weigh the accuracy by how much money is at stake...
Even then, a "perfect" prediction market need not be accurate, if people use it for hedging. If some low probability event is really bad for me, I may pay over odds (pushing the implied probability up) to get paid if it happens. The equilibrium probability may be efficient, reasonable and biased.
Nobel Peace Prizes are Peace Prizes as much as they are Nobel Prizes.
I'm not sure the same(any) rules apply.
They would be a better prize if the word ‘Peace’ was removed from the title.
It would make the likes of Kissinger getting it easier to understand.
Well, Nobel peace prizes aren't usually awarded to people calling for invasions of their home country either, or cheering for the extrajudicial double-tap killing of smugglers/random fishermen.
Who's to say a dead person can't have done the most to "promote peace conferences" as mentioned in Nobel's will? These days, I'd say dead people make a larger net contribution to peace than most politicians.
Normally they aren't, but maybe the US will take over Sweden and the Nobel Foundation and make it happen.
...only to find out they invaded the wrong country! (Nobel peace prizes are awarded in Oslo)
To be fair, it would bw totally on brand. They would not admit mistake tho declare it a success and award own nobel price.
Ooops. I thought something was off when I looked it up (headquarters of Nobel Foundation are in Sweden).
To be fair you’re not really providing a hard stance against the estimate. You say it is unlikely, and indeed the prediction is a 3% chance. That’s unlikely.
No, markets are evaluated on accuracy, not calibration
Well markets are evaluated on a number of different metrics depending on what you’re trying to determine.
If you want to go be pedantic about it and select one metric, markets are evaluated on their Brier Score or some other Proper Scoring Rule, not accuracy.
However, I prefer calibration as a high level way to explain prediction market performance to people, as it’s more intuitive.
Yeah it's a good way to introduce the idea. But I don't think someone would really grasp it until they understand why both calibration and "discrimination" are necessary in determining if a prediction market is accurate.
Proper scoring rules measure accuracy
I suspect that you are arguing semantics, where parent and grandparent focus on the nuance of what is ACTUALLY being measured. I am saying it like this, because while I never used prediction markets, I briefly looked into them to see if I could use them well. The question of accuracy came up, which is why I happen to align with posters above.
With that in mind, what do mean exactly.
Noob question from me: what’s the difference between accuracy and calibration? A well calibrated market would be more accurate and vice versa, not?
Edit: just found the answer myself: “accuracy measures the percentage of correct predictions out of total predictions, while calibration assesses whether a prediction market's assigned probabilities align with the actual observed frequency of those outcomes”
Suppose there are 1000 events and 500 will have outcome A and 500 will have outcome B. If you predict a 50% chance of A for every event you'll be perfectly calibrated. On the other hand, if you predict a 90% chance of a certain outcome and you're right for 800 events, you're not perfectly calibrated but you have a lower Brier score (lower is better).
A forecaster can be calibrated but almost only assign probabilities in the 40--60 % range. This is not as ueful as one assiging calibrated probabilities in the full range.
We try to measure the increased usefulness of the latter with proper scoring rules.
"Correct" is hard to define with prediction markets as likelihood often increases/decreases in the hours before a market is actually called or confirmed. i can't speak for the methodology here, but i remember this data report from a user: https://dune.com/alexmccullough/polymarket-brier-score
This was probably Barron Trump
Silicon Valley and other so-called "tech" commpanies, along with "tech journalists" and other online commentators (prognosticators) who presumably work for such companies, are a never-ending source of "predictions" (promises) that never hold true
One longstanding example is "vapourware", but the deception carried out today goes even further, IMHO
What if the non-believers and realists could use "prediction markets", in addition to short selling, to bet against them
Maybe they are already doing so, but I have not seen any examples
Where's the evidence for this?
Note the lack of links and that all of these Maduro reports originate from X which is rampant with polymarket grifters claiming secret insights into how the big bets are made.
Perhaps somebody here can provide a Polymarket link (not screenshots) to the proof?
I'm not saying the BBC has been scammed here but the only link I've found to the alleged account 404s. Perhaps its been taken down by Polymarket?
Anyway for anybody new to this, even if this checks out please - as ever - be cautious about the claims of easy money.
https://web.archive.org/web/20260104031407/https://polymarke...
Looks like Polymarket took the profile down but it’s still available on the Internet Archive
Thank you! Should have thought to check the archive myself. The link I'd found before also had a referrer on it from the X account which also made me suspicious.
How long before the government intentionally does something stupid so that a Prediction Market pays off?
Probably won't happen actually, since they can just do blatant insider trading on the stock market instead.
The money involved in prediction markets at present isn't enough for governments to bother. $436k is a nice windfall for your average individual, but that's peanuts for anyone at a level to influence government actions.
The attitude of powerful politicians to money is more, "if I can get the milk, why should I keep a cow". You don't actually need billions in your bank account, there's not so much you need to spend it on anyway and it's more trouble than it's worth. The real power is in your network. You can move money to where you want it via that - even to yourself in the form of speaking fees, if you should need some change.
You should tell this to the current administration. They all seem to be lining their pockets.
Fair point. It's gotten worse lately. I wonder if it's because of doomerism (not necessarily unjustified): they maybe don't trust their support networks to be around much longer.
The Venezuela operation is estimated to have cost around $250,000,000. Big actions require a big payoff.
Additionally, they can leverage crypto which is much less regulated and has already been publicly exploited for personal benefit by Musk and Trump.
But you don't become a Billionaire by having a risk averse "well, that's enough" mindset.
I would think the biggest question is if it's worth exploiting poly market. Getting 400k out of such an event sounds as peanuts and I am not so sure that scales to 4m+.
Just a casual $32,537 bet a few hours before the secret operation. Nothing to see here.
It's my understanding a couple news agencies knew before everyone else but held off publishing. Seems like a good opportunity for nephew of someone in the media if not directly one of an official.
https://www.thewrap.com/media-platforms/journalism/nyt-wapo-...
Trump himself said that he informed oil companies beforehand, so it really could be just about anyone.
https://www.newsweek.com/donald-trump-oil-companies-venezuel...
However his mind is so far gone it's hard to be sure he actually knows what he's saying.
Let's not forget
> Donald Trump Jr, the president's son, serves in advisory roles at Kalshi and Polymarket.
Absolutely possible but if you were the presidents son I do think you'd be more likely to slowly buy in over 1+ weeks. If you were media related you'd want to do a giant bet before anybody else as you know lots of other people know and it's only a matter of time when someone else exploits it, and you only know slightly ahead of time.
When you have insider information it's typically most profitable or at the very least less risky to exploit it at the earliest moment, but if you know you have a long head start you can do it slowly to keep from bidding up the price. In either case a giant bet only hour before tells me it's someone who only found out about the operation shortly before it happened.
------- re: below due to throttling ----------
(1) Is an excellent point but they bought "will happen in the month of January" for something that occurred at the beginning of January, so basically the worst case scenario for exploiting bet expiry.
(2) Makes sense on face but I had read elsewhere there was a 2 week window. So at no point would it go outside the January window of the bet, there was no point in waiting once January 1st hit.
In this case a rational insider with a priori knowledge far ahead of time would have either placed a large bet first thing January 1st or started to ease in first thing on January 1st, as waiting would convey ~no advantage and only present risk other insiders would bite the apple first.
> Absolutely possible but if you were the presidents son I do think you'd be more likely to slowly buy in over 1+ weeks.
If you're the president's son, ~$400k is probably not worth your time.
If you are conservative or republican presidents son. Lets not loose the sight of highly assymetric corruption levels.
1. The odds are better the closer it gets to the bet's expiry. "Maduro will be ousted sometime in the next few weeks" has a relatively high probability, so a low payout. "Maduro will be ousted in the next few hours" is a jackpot.
2. Operations like these aren't set in stone weeks in advance. There may be general planning, but the exact hour is only decided at the last moment.
I believe there are way better opportunities than making 400k with a bet on an app. Could have been for fun though.
This is literally half a million dollars for clicking a button. You can take this opportunity and every other opportunity.
Tom Homan took $50k from the FBI and he's the border czar. You can win on either margin or volume. It looks like these guys operate on volume.
There are so many obvious grifts happening inside the administrations, $400k hardly seems worth the effort for the top dogs.
What effort?
can i bet on when prediction markets will collapse due to rampant insider bets?
Insider bets are literally the purpose of prediction markets.
How? Then why would non-insiders bet? The classic prediction market is guessing the weight of an elephant (or some animal) at a circus. The average guess of the crowd will actually get very close. But if someone knows the actual weight, no one would play.
The entire idea of a prediction market is to aggregate insider information. If you don't have insiders, you're not doing predictions, you're just doing gambling.
Granted: that's what almost every Polymarket user is actually doing. But that's a bad thing. The insider whales are the only ones actually using it for its intended purpose.
No, the entire point is gambling. Yes there is insider trading mixed in as well, but the vast majority of events these markets are pushing and people are betting on don't have "insiders" at all. Sports, election winners, Bitcoin/stock/commodity prices, weather forecasts, movie box office receipts. None of this is about insider information, just pure gambling.
The real point of Polymarket is gambling, we agree. I'd extend that argument to every prediction market that is open to all comers in which people can meaningfully gamble. But that's not the original concept of a prediction market. I'm not here to defend Kalshi and Polymarket, both of which I think are pretty evil.
It's not 'predicting' when the outcome/answer is known. From the wiki entry on prediction markets "The main purpose of prediction markets are eliciting aggregating beliefs about an unknown future event."
I think you should probably read more about the background of prediction markets. Robin Hanson is a useful place to start. The whole concept of a prediction market is to convert private information into prices. That only works with "insider" information.
As I said in a parallel comment, Hanson was also thinking about scientific questions, where there are asymmetries in knowledge but people can often invest in research that improves their own knowledge (like by performing an experiment or a scientific expedition or something). So, Hanson believed that prediction markets could incentivize people to invest in scientific research in order to get an edge over other market participants in such questions. That doesn't exactly make them insiders, though.
Interestingly, it doesn't necessarily incentivize them to publish the detailed results of their investigations. They're incentivized to reveal what they expect to happen (based on how they bet), but not necessarily incentivized to reveal why they think so, or how they know. E.g. if you became able to predict the weather more accurately than other models over some timeframe, prediction markets would incentivize you to reveal (some aspects of) your predictions, but not your method for making those predictions.
He wrote a whole paper on this.
https://mason.gmu.edu/~rhanson/insiderbet.pdf
Thanks, I forgot about that one. I've read some of his other writing on this subject and I didn't remember this paper.
It's OK, I didn't have it in cache either, I just remembered "people like Robin Hanson have said insider trading on prediction markets is a feature not a bug" and GPT5 tracked it down for me. :)
I don't know much, but I can't see why betting on a known outcome is good? Why not just ask the knower? Also, just because Robin Hanson says "it's about aggregating insider information" makes it true. He writes some stuff.....
The idea is that people have all sorts of fragmentary information about future events that they can't directly reveal, due to confidentiality or trade obligations (among other things), and that a prediction market effectively liberates the directional content of that information by converting it into prices.
Robin Hanson can credibly claim to have invented prediction markets as we understand them today.
"that a prediction market effectively liberates the directional content of that information by converting it into prices."
I can see this, and I guess maybe my issue is with the phrasing of "aggregating" insider information. Because you aren't just aggregating insider info, you are also aggregating non-insider information, but no one (but the insider) knows what is right.
Is there different types of prediction markets then? One where there is a true insider and one without? For example, you could take bets on weather it will rain on Saturday. People can make educated guesses, but no one really knows (no insider). On the flip side, Kanye could create a bet on whether he will run for president. He would be the only insider, so again, aggregating insider and non insider information.
> you are also aggregating non-insider information
You're not really aggregating non-insider information, because in these cases, it's not really "information", it's just (at best) rational guessing or (at worst) gambling.
But yes, Kalshi and Polymarket essentially aggregate gambling, rational guesses, and insider information that's likely to be correct. It's a losing game unless you're an insider, and these companies profit off of other people's addictions.
I would argue that a "market" in whether it will rain on Saturday isn't really a prediction market, or even a market, at all. It's just a bookmaking operation. The core function of any market, in anything, is price discovery.
What's the difference between a "Monday it will rain" market and a NCAAF prop bet on a team's rushing yards? I could argue that DraftKings prop bets are actually more like prediction markets than these "will it rain" bets. People actually do have directional information to contribute to sports propositions!
(I think online sports betting is evil.)
Tradeable risk is the difference between the ncaaf bet and rain futures. Levine has joked that perhaps there is some tenuous way that sports gambling is poolable risk to owners, players and coaches but there is real and obvious economic utility with rain. Neither get the advantages of prediction markets.
> would argue that a "market" in whether it will rain on Saturday isn't really a prediction market, or even a market, at all. It's just a bookmaking operation
How would you define the difference?
Cat bond premiums absolutely bet on near-term weather odds. I’d argue they’re prediction-esque.
What would you then call, for example, the markets for weather futures on the CME? https://www.cmegroup.com/markets/weather.html
Are you arguing that weather forecasts (based on either sophisticated modeling or just extrapolating average historical data) are not a thing?
You seem to be arguing that that's the canonical definition of a prediction market, and anything else, including markets merely aggregating non-insider beliefs about future events, should be called something else. Do you have a better proposal?
I don't need one.
Sure, but then discussions about these types of markets are bound to become somewhat confusing for purely nominalistic reasons. (Turns out not every hard naming problem is automatically computer science :)
Well, it's confusing because you have markets on questions with very different characteristics in terms of whether they are exogenous or not (and whether they are exogenous from the perspective of particular groups), or just with different degrees of asymmetry regardless of whether there are literal "insiders".
Like, prediction markets have questions ranging from what the weather will be in a certain year, to who will win elections, to what stock prices or exchange rates will be, to whether companies will announce specific products, to whether particular people will start dating, to whether a specific person will say a specific word during a conference (some of the Manifold "prop bets" for Manifest).
These are not the same kinds of questions in terms of whether there are insiders at all or who the insiders are. Maybe we can't expect prediction markets to have the same dynamics in all of these cases.
Depending on what you want out of a prediction market, there's probably a sweet spot in terms of whom you should expect (or want) to be trading in it.
In the most exogenous events, those that are most outside of the control of individuals or groups, I think Robin Hanson hoped (in proposing "idea futures") that people would be incentivized to invest in research in order to gain a statistical edge in the market, but also assumed that there wasn't anyone who was inherently drastically better positioned to get information about the question than anyone else. E.g. "I will spend $X to get a better estimate of this probability (hopefully by otherwise ethical means?), and that will make my expected return from buying $Y worth of prediction contracts greater than $(X+Y)". Indeed not something retail investors or gamblers should probably participate in.
It's also true that in some cases where there are true insiders it can give the insiders a financial incentive to reveal confidential information. From the point of view of trying to get the most accurate possible estimate of the likelihood of future events, that would indeed also be a success, even if the process was "unfair" to non-insiders.
Yeah, I mean, they're a wretched hive of scum and villainy, I preemptively agree. I'm just saying, insider bets don't have the same ethical or legal valence on a prediction market that they do in the financial markets (even there, at least in the US, the principles underlying insider trading law are really poorly understood.)
It's funny to think that the most villainous markets might be some of the humorous prop bets where the person creating the market (or a friend of the person creating the market) literally completely controls the outcome. Like "will I say SOME_WEIRD_WORD on stage at the conference tomorrow?".
Although maybe the villainy would come in more from deceiving people about whether or not an event was under your control, more than merely encouraging people to bet on an event that was clearly and unambiguously under your control.
I agree that is funny and want to take this opportunity to say I think things like Polymarket are bad, a real corruption of the original idea. I'm not sticking up for them!
What uses or structures of prediction markets would you like to see? For things like Polymarket, are you more particularly concerned about the kinds of participants (e.g. people who really are just gambling for entertainment), or about the kinds of questions that are the subjects of contracts?
The original prediction markets were internal things at large companies, which I think are a great idea. I've flirted for a long time with doing a vulnerability prediction market. The good-faith incarnations of prediction markets aren't open to all comers; they're structured so you can't meaningfully gamble on them.
How isn’t a knowledgeable person incentivized to find vulnerabilities but not disclose them?
I don't understand your question, sorry.
Yeah, sorry for not being clear enough. I just struggle how a good faith market can even exist. I immediately start thinking how participants would be incentivized to cheat by neglecting or even introducing vulnerabilities to win. Maybe I’m just a bit too cynical and/or should do more reading on the topic.
If you don't have insiders, you're not doing predictions, you're just doing gambling.
Non-insiders can't make predictions? I'm not into betting as a hobby but I make minor bets with myself or friends on topics with clear win-loss conditions in areas of politics where I consider myself knowledgeable. I'm pretty good at it since I find it easy to distinguish between results I'd like to see vs what I expect to actually happen.
They can, they're just not doing anything they couldn't do at a blackjack table.
I don't think you have a real point here, and are just using pejorative language about gambling to suggest one. Your thesis seems to be that only insiders can make valid predictions, which is nonsense.
I'm saying that most people --- and functionally all the people who feel victimized by insiders --- on Polymarket are gambling, not predicting. I feel pretty comfortable with how sound that argument is. I agree that there are users of prediction markets who are neither "insiders" (for whatever definition of that you want to use) nor gamblers, but they're participating with the understanding that they're bidding alongside insiders. And they're a tiny cohort.
If it helps, draw a line between "entertainment" and "enterprise", and use whatever term you like for uses on the "entertainment" side of the line. Either way: it has stark implications for the notion of insider impropriety.
This is just redefinition to belabor your insiders point (which I am not disagreeing with). Non-insiders are gambling, but they are also making predictions, with varying degrees of skill
Some kinds of gambling are truly random (unless they are scams) and no prediction is possible. Other kinds involve some degree of skill and predictive power. For example, people can make predictions on races based on past form, even though the element of chance can't be eliminated. It seems like you're trying to redefine 'prediction' to mean 'anticipated outcome as assessed by the most informed' in order to disqualify the validity of any opinions held by non-insiders.
I get that you want everyone to be aware of how prediction arguments were originally a fun way for experts to drive decision making without writing ever-longer arguments for their position. But you seem to be overlooking the the fact that objections are not so much to insiders disrupting hte prediction market as the impropriety of government officials or their special friends cashing in on military adventurism. Said government officials defend engaging military adventures without consent or even notice to Congress by citing security, yet placing big bets on markets to make a quick profit is highly insecure.
I don't care about insiders cashing on on adventurism. Or, rather, I care about the adventurism, but I do not care even a little bit about the impact of it on gambling platforms like Polymarket. I think I'm on reasonably firm footing when I say that (a) the inventors and popularizers of modern prediction markets and (b) US law doesn't care either.
The irony here is that the one bank-shot argument I'd see in the medium term for "insider trading" enforcement at places like Polymarket is Nevada Gaming Commission-style gambling regulation.
Would you argue the same for the stock market, i.e., that the only rational active market participants are insider traders? If not, why not?
I would say that the popular conception of insider trading as a problem of fairness to other traders on financial markets is misapprehended, but no, it's not at all true that the only rational actors on financial markets are insiders.
> the popular conception of insider trading as a problem of fairness to other traders on financial markets is misapprehended
Well, it's the legal theory underpinning insider trading laws in much (all?) of the EU.
And the US might have a different legal theory underpinning their regulations, but practically, it largely amounts to the same effect, so under POSIWID, it's questionable whether the difference matters much.
> no, it's not at all true that the only rational actors on financial markets are insiders.
Then a non-insider-trading prediction market should be possible and at least somewhat useful too, no? You'd essentially create incentives to do thorough research and analysis of public information and publish the results.
Whether it's practically possible to enforce is a different question.
As a philosophical idea, yes. In practice something else is happening. The purpose of a thing is what it does.
Non insiders would be if they think the odds are in their favor or that they predict that the market's opinion will shift.
>But if someone knows the actual weight, no one would play.
Now what if someone in the audience knew the weight of an average elephant, giving them an advantage. Would people still bet. I would guess yes, but they wouldn't bet as much as the person who did because they have less information.
While having better information may make it more likely for you to win, it is not surefire. Things can change last minute.
One way to use a market rationally as a non-insider is to bet big against something you want to happen. You've just set a bounty for someone to do it. Presumably for some reason this is even more in your favor outside the betting market.
Do you think people betting on things are generally rational actors?
Because they are, to use a technical term, "dumb as a stump". That's why they would participate despite not having any inside knowledge.
Or they are hedging their exposure to an unknown by betting in favor of an event that would be harmful/costly to them.
Those people want prices to accurately track risk, which is what insiders allow.
Right but they themselves are non-insiders who are rationally betting.
It doesn't matter if insiders are betting as long as the end result is in your favor.
Isn’t this a classic fool’s money game. The betting markets have a strong incentive to pretend it isn’t an insider’s game.
Honestly, of all the vices, I think I pity gamblers a lot. It’s just so visible and understandable to see the harm. Something like being too into porn or drink, those are less visible harm. Where running out of money is comprehensible to even a child.
It could reasonably be a non-insider, just someone monitoring comms activity, ship movement, pentagon pizza and parking indexes, and other open sources.
They won't collapse, but they won't reach their full potential. I would hate to be a16z sitting on their $10B post-money valuation Kalshi bags, that's for sure.
Why would the markets collapse due to insider trading?
That said, at some point it would then be more accurate to call them reality modification bounty markets.
they'll collapse due to oracle bias before anyone cares about the insider trading
Polymarket needs a second and third oracle network
This is such a small amount that either this is one of many accounts the user made in order to mask said activity or this was just a lucky bet (people make stupid lucky bets on hunches all the time).
Imagine the massive value of having such a world changing event in advance (the search volume alone probably affected an order of magnitude more in online advertising revenue at least). $430k?! Are you F’ing serious?
There were hundreds, maybe thousands of people involved in the operation. They weren't all millionaires. It could have been any random soldier, CIA/DEA agent, politicial aide, journalist or really any low-mid level operative with $30K available to them at the time.
Don't gamble on this crap. Just...don't.
Insider trading is legal.
Crime is legal.
You shouldn't be surprised though, name any market, all markets are full of manipulation and insiders.
To be fair, insider trading for a prediction market doesn’t really seem like a bad thing. It’s arguably the entire point (to incentivize the aggregation of all relevant information on the topic) and, unlike securities markets, there’s no equivalent of “but it’s unfair to normal traders using the markets as investments.”
The problem with prediction markets is not purely insiders but that they interface with the real world, so they encourage bettors not just to predict an outcome but to bring it into being.
You are a poorly paid Russian commander. You open an account on polymarket or Kalshi and place a bet about specific Russian troop movements, perhaps ones that would be disastrous to your war effort even, to up the leverage. When you’ve accumulated a sufficient position, you order the troops to be moved, perhaps even out of accord with orders from above. Your front collapses, your soldiers are routed, and you get rich.
These markets are dangerous. We will learn this lesson eventually.
Your example assumes there would be sufficient liquidity on that bet. The existing platforms aren’t houses or market makers that just provide functionally infinite liquidity on any bets. The “win” criteria on this example is so specific that verification becomes its own problem.
In theory a fun example, but practically it doesn’t play out the way you’re describing.
I'm aware of the assassination market concept, but there's nothing particularly unique about prediction markets. Nearly any conceivable market can be influenced by someone willing to commit violent crime. That obviously includes many normal securities markets.
Legal systems certainly should restrict markets where the incentivize is sufficiently direct (e.g. actual date of death prediction markets). There's a blurry line between what constitutes a sufficiently direct incentive, sure, but there are lots of blurry lines when it comes to legal systems.
That is called treason, already illegal in every country.
We don't need new laws to solve your putative problem.
Does happen any other aggregation than taking the average though? The whole point of this is that the average believe is not an accurate representation of reality.
I feel like these types of markets exist purely for arbitraging information asymmetry. You have to know what game you're playing.
Only certain limited forms of insider trading are federal crimes. The insider trading laws don't really cover this type of prediction market. But depending on the facts of the case it's possible that the trader or related parties committed some other crime such as wire fraud or improper release of classified information.
George Carlin: "You and I are not in the Big Club"
hey now, Insider trading is legal if you're the right Insider, and so is crime, which means not so much for you and I.
In US shoplifting and car theft are also legal for everyone.
So what about all the bets for other dates? Who's an insider and who isn't? You're just making up nonsense.
https://polymarket.com/event/maduro-out-in-2025
Serious question, was there ever another (new) bettor placing $30k on a 6.5% chance outcome?
It's technically not illegal if someone was able to observe the planes flying and place the bets accordingly. Public info is legal to trade on.
But it's obviously also ripe for abuse. Any govt. employee can start trading on the side, 100% untraceable.
It's not illegal, period, because this isn't a regulated security. Prediction markets don't fall under these laws; in fact, insider trading is seen as a feature of these markets.
>It's not illegal, period, because
My editor just turned in her grave. And she's still alive.
They took off from many different places so you'd have to somehow know that ~150 aircraft were taking off. If you happen to just see one spot, you'd likely just assume it was another bombing of a boat or a dock.
Or… someone seeing a bunch of commercial flights over the Caribbean getting cancelled. Could be anyone from airline ops to frustrated travelers stranded in Boston.
I guess... but I still think first thought would be just some more bombing. It's a big step to go from bombing boats, a dock, arresting and extraditing a foreign leader in the middle of the night.
What are the laws around polymarket?
I've never used it, but continue to see posts about employees making bets on privileged information and that being legal.
I highly doubt that that's the case, given that taking a large and publicly visible financial position based on confidential information still amounts to disclosing information.
Yeah I don't understand why it would be the case. How is it any different? It's trading on privileged information.
It is also not illegal to bet on insider information. This isn't the stock market.