Comment by 7777777phil
14 hours ago
77 suspicious positions across 60 wallets, 13 brand-new accounts appearing 40 hours before the browser launch. First confirmed case of a major tech company firing over prediction market trades.
I wrote about why prediction markets have a structural insider trading problem that nobody's solved yet: https://philippdubach.com/posts/the-absolute-insider-mess-of...
It's interesting that the both replies under this comment are saying exact same thing, with the exact same term ("raison d'etre"... how often do you hear two random people think of this phrase at the same time?).
It might be nothing, but it'd be funny if karma farming bots are doing some 'reply frontrunning' over the internet.
I don’t consider “raison d'etre" a suspicious phrase. It’s not something people use multiple times a day, but I’d consider it common enough that when I hear someone say it, or in this case I suppose type it, that I would give it a second thought.
I don't think that two 13 and 14 years old accounts with not that many comment per week are bots.
Jia Tan says hi.
Archived version: https://archive.ph/XWrTA
Insider trading is the raison d'etre of these products.
Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
And isn't that just between them and their company in a case-by-case sense?
If there was some valuable-to-the-public information that the company did not care about keeping private but just hadn't bothered to make public, for whatever reason, and an insider traded on it on a prediction market, that would only benefit the public's interest in information and would not violate any duty to the company. It'd be a pure win for everyone.
It seems unfair to other traders, the way it would be in the stock market, but in prediction markets (unlike the stock market) all participants are explicitly taking on the risk that somebody else might have better access to information than they do. So it's not subverting the system in the way we have decided it does in stock markets.
A lot of commenters are getting the wrong take here by looking at this like it's a stock market where there is some society-level interest in giving participants protection from having less information than insiders. It's just a different thing.
The thing is you're still thinking of these insiders as someone who just got a juicy stock tip from a relative.
The much more serious problem is when these insiders actually have their hands on the levers which decide the outcome. It's really no different than a mobster who bets a bunch on money on an unlikely outcome then threatens one side to throw the match.
What possible economic benefit is there to society to allow ordinary people to bet in markets like that?
Would you really like to live in a world where "Will we nuke Iran?" Is a bet you can make? Then someone in government sees how much money they could make if they bet yes & push the button?
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> Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
Yes.
Prediction markets, for corruption reasons, are regulated by the CFTC. In commodities markets, actors are assumed to be making trades based on propriety information. Hedging is the whole purpose!
> …like it's a stock market where there is some society-level interest in giving participants protection from having less information than insiders.
Ah, no!
Insider trading in the stock market is (usually) only illegal in your first case: when the person trading is violating confidentiality.
It is not about fairness.
Fairness is a poor proxy for whether specific trading is illegal.
For example:
If a company accidentally leaves a press release for a merger publicly available, I happen to guess the URL, and then I trade on it: Unfair (I have access to insider information that other market participants do not) but legal!
If I work at the company, am sent the press release to copy edit, and then trade on it: Illegal. I have a duty to the company not to trade on it.
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No, commenters here simply take into account that predictions markets have historically classified themselves as futures markets and not as gambling.
Allowing information asymmetry, like insider trading, undermines the regulatory argument that keeps these markets legal.
In theory maybe, but in practice companies almost always do care about keeping things like release timing, product status or leadership decisions confidential. Even if they haven't publicly announced a policy about prediction markets specifically, it's usually covered under general confidentiality and acceptable use policies
The insider has perverse incentives as an employee.
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I think there is a society-level interest. It's very bad for the business environment if every employee of every company has monetary incentives to leak private information. It structurally encourages businesses to set up strict information silos where cross-team collaboration is hard no employee can ever be sure of the broader context of their work.
Could also make a case for incentivizing destructive actions by insiders as well. You’re saying I could sabotage my project and make a quick buck?
That's basically what the current US admin is doing.
Excuse me it's called price discovery.
Yeah, Polymarket is explicitly advertising this.
>Research shows prediction markets are often more accurate than experts, polls, and pundits. Traders aggregate news, polls, and expert opinions, making informed trades. Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join.
>If you’re an expert on a certain topic, Polymarket is your opportunity to profit from trading based on your knowledge, while improving the market’s accuracy.
You know what's a great knowledgeable participant? An insider.
I have come to the opinion that every successful tech company is basically just an arbitrage scheme to avoid regulations and extract value based on that advantage.
Airbnb for unlicensed hotels. Uber for unlicensed taxis. Amazon for whitewashing fraudulent products. Bitcoin for unlicensed securities and laundering money.
The pattern is upsetting.
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>Yeah, Polymarket is explicitly advertising this
no, they are not.
you might have been an insider working on the Apple Newton, and being enthusiastic about it you might have broken the rules and traded on your "knowledge"... and you would have lost your shirt. Same with your very knowledgeable enthusiasm about myriad other technologies. Ever wonder why Wall St doesn't show up at HN asking everybody's opinion about AI in order to leverage that info into billions?
an important element of "the wisdom of crowds" is many bits of microknowledge. How many Teslas will be sold next year is very dependent on how much the people who buy Teslas will earn next year (or how secure they will feel in their jobs) working in myriad other industries that have nothing to do with Tesla, along with the price of lithium, tires, and even ... wait for it... gasoline.
Polymarket's words you quote can just as likely refer to the wisdom of crowds. Or even, and this is the subtle part: Polymarket's insiders may believe, like you, that they are creating a market to trade on inside information, and yet they, like you, could be made wrong by the superior sum knowledge of the crowd exerting its invisible hands all together to tank your Apple Newtons.
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Prediction markets exist to bypass gambling restrictions and monetize insider trading. It isn't a problem, it is their raison d'etre.
Yeah but someone has to give the money to the insider traders.
Betting and insider gambling wouldn’t work if people were educated and just didn’t gamble and so never used these platforms in the first place.
It’s an old question of whether government is responsible to protect people from themselves or should we give everyone freedom to go bankrupt in this specific way if they so desire.
I don’t know if there is a healthy way to gamble really. With drugs and substances at least there is some continuous spectrum but you either gamble your money or not.
Many, I suspect the overwhelming majority, of the markets are impossible to engage in insider trading in. So it's genuinely just an interesting way to monetize expertise. Chess is a great example. A lot of the money in that market is people turning on the latest chess engines and betting in accordance to position evals, but skilled players can see much more - like how a position that the computer gives as a dead drawn is, in reality, extremely difficult for one side to hold. So the market might give near 50% when it's perhaps more like 65/35. That's quite a large edge. There's also quite a lot of opportunities for arbitrage betting, which is by definition risk free.
>I don’t know if there is a healthy way to gamble really.
The majority of gamblers keep it within limits, only a small minority lack that control and inevitably end up impoverishing themselves.
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Would you not say that somebody could equally cynically describe options trading in this way?
Prediction markets are very valuable because they provide information on issues that's generally much more accurate than alternative sources, such as polls. For instance Polymarket predicted 94% of the results for the 2024 election a month out, including the presidential. It can also provide more information than the news. For instance the chances of Khamenei being out as Supreme Leader of Iran by March 31st just skyrocketed up to 78%. That tells me far more than the various news sites minute by minute coverage.
Help me understand the relatively regulatory frameworks around each activity.
Jinx!
Gambling = investing. Buying stocks is also gambling. Share buybacks, dividends, fancy words for forking money from workers to some joe schmoe that bought a lottery ticket, i.e., a stock.
A stock is ownership in a business, same as ownership in a house. It is an asset that you own.
When you bet on blackjack or the superbowl, you own nothing and are simply wagering on the outcome of an event.
Gambling and equity ownership are not the same.
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