Insider trading is so trivial on the prediction markets. I'd guess that it's actually the "feature" that results in the outcomes being so accurate.
Insider trading is so trivial on the prediction markets. I'd guess that it's actually the "feature" that results in the outcomes being so accurate.
Yup. There are good reasons why it's a problem in financial markets but NOT usually a problem in prediction markets:
https://www.economist.com/leaders/2026/02/18/why-insider-tra...
> In prediction markets, informed trading is not a crime or an injustice—it is a valuable service.
A big exception, however, is using prediction markets to make predictions on events regarding publicly traded companies.
The concept of a valuable service falls apart if players can influence the actual event. Without equal footing and basic honesty, you aren't measuring reality so much as you are subsidizing those with the power to manipulate it.
Yup. That is the other big exception described in the article.
There's a feel good story where a parent can't afford a very expensive medical procedure to save a child, so someone tells them to place a massive bet in a prediction market for a certain event that may happen, and then they make it happen, therefore siphoning off money from the other gamblers for a good cause. Just a small way everyday people use the system against itself as a way to survive.
Seems pretty naive to think that this type of thing is happening in favor of the "everyday person".
Prediction markets have only events whose outcome is eventually publically resolved, by design. With insider trading, the trader is incentivized to release the information as late as possible, as close as possible to the events.
Why are these big insider bets being placed within hours of the event actually occurring? The insiders are doing the equivalent of bid sniping — waiting until the last possible moment to exercise.
This is how inside info works in trading markets in general. And again this is inevitable and by design.
It also makes them largely useless, because the timeline for which useful position is shared is compressed to the point where nothing useful can be gleaned from the information.
The thing is a “lie incentiviser” — a market entirely for suckers. That’s why 95% of volume is sports betting.
That’s setting aside insider positions having an influence on the outcome of events which is a whole separate problem.
> Why are these big insider bets being placed within hours of the event actually occurring?... It also makes them largely useless
They're not, usually. The more the outcome seems unlikely at first, the more you're incentivized to place your big bet earlier, when the odds seem worse, because you'll make a ton more money.
When these bets are placed only a few hours beforehand, that's often because the actual decision hasn't actually been made until then.
And there are plenty of areas where having notice of an hour or two is still hugely vulnerable.
why are publicly traded companies special? The speculation is not on securities.
You're not participating in a "market" (even though they call it that), you're purely gambling and speculating. People have been doing this since currency was a thing. Even gambling laws don't apply in my opinion. If I told you the government will publish evidence of aliens existing tomorrow, and we make a bet on it, that's not really gambling, it's not so much a game of choice as it is a competition of who can predict things better. The other person might have insider knowledge, but it's up to you to either take on that risk or assume despite that your knowledge about the topic will overcome their potential insider knowledge.
It’s literally gambling what are you talking about
if you call all betting gambling, then sure. but gambling in legal terms has definitions like "a game of chance". For example, poker is gambling but it isn't necessarily a game of chance, you can win it by skill (some consider it a sport). Rolling dice isn't the same as sports betting. It is similar to sports betting, except even in sports betting there are enough variables for outcomes to be very unpredictable. This is more like insider trading, except it insider trading is a feature, except you can also roll dice and play a pure game of chance.
Maybe it can fall under gambling laws, but not under securities laws.
I don't agree with any gambling laws whatsoever, so I can't say I'm the right person to comment on the subject of how to classify this sort of betting. The entire concept of individual liberty is a farce if you can't gamble without restriction. People have been betting on who would kill the prey or gather the most fruits since their hunter & gatherer days. Gambling and freely sharing what you posses (copyright is illegitimate) are fundamental human rights.
Prediction markets are probably most "accurate" when at least some participants have genuinely superior information
Yes and no.
If you see prediction markets as how they were originally pitched (price ~approximating likelihood), then insider trading is good. It provides discovery.
If you look at what prediction markets are today (gambling, especially on sports, especially in states that have banned it), then insider trading is bad. Particularly when the people trading can influence the outcome (e.g. a pitcher purposefully throwing into the dirt.)
Of course. The point is not to make individual players money (that does sometimes happen as a side effect) it's to leverage their greed to find truth.
Except it's not "truth" as much as it is whatever has the most financial incentive to happen.
To some approximation, the two are the same.