Prediction markets are incentivizing insider knowledge

[alani123]

I just saw this video and found it very thought provoking:
Polymarket Asked To Work With Us. We Exposed Their Scam Instead. | by
More Perfect Union

I'd recommend everyone interested in prediction market activity to take a look because it goes through some things I hadn't considered even though I like to observe what's going on with this subject almost daily. If you'd like to watch something thought provoking you can actually go watch the video before reading the rest of my thoughts to avoid spoilers.

Basically prediction markets are inclined to work better in actually aligning more with likely outcomes only if people with insider knowledge also participate. The video even went through how Polymarket founders consider a certain academic as their inspiration, and that very academic says for prediction markets there's no such thing as insider trading from their perspective. His name is Dr Robin Hanson btw if anyone wants to look up his work.

Polymarket CEO even admitted to this saying that insider traders help better align the markets with reality. So even their stated goal is to be close to reality at all costs. The costs in fact are that through all their advertising, they attract liquidity for the insiders to extract value from...

So at the end of the day, gambling on a prediction market as a mere mortal is like offering your tokens to the big fish to nib on freely.

[Hispo]

Wait a minute. Let me get this...
Are people within the administration of Polymarket actively seeking holders of privileged information in order to "work with them"? (Whatever that means, sounds like an euphemism).

I knew there were very well informed people making a lot of money on Polymarket, but I thought the administration of the website had nothing to do with that, and those people doing inside-trading were lone-wolves. If it can be proven Polymarket itself is actively trafficking inside information in order to make a profit or change the odds of their most important markets then I believe it would be enough reason to sue then or fine them heavily...

One cannot be the arbiter and trade with privilege information at the same time. It goes against common sense, the same common sense it was used to forge laws in wall street against inside trading.

[alani123]

Wait a minute. Let me get this...
Are people within the administration of Polymarket actively seeking holders of privileged information in order to "work with them"? (Whatever that means, sounds like an euphemism).

I knew there were very well informed people making a lot of money on Polymarket, but I thought the administration of the website had nothing to do with that, and those people doing inside-trading were lone-wolves. If it can be proven Polymarket itself is actively trafficking inside information in order to make a profit or change the odds of their most important markets then I believe it would be enough reason to sue then or fine them heavily...

One cannot be the arbiter and trade with privilege information at the same time. It goes against common sense, the same common sense it was used to forge laws in wall street against inside trading.

Polymarket hosts so many markets that it can't actively seek out insiders on all of them.
But the premise here is that merely having privileged information on anything AND having a market exist for it, then you have an automatic incentive to bet on it because you can monetize your knowledge.

But there's also documented examples of polymarkets seeking out to work with people who are relevant to markets they host.
Here's a good example with them and popular streamer clavicular:
https://www.youtube.com/watch?v=LBMA8u4Qhqo

[Davidvictorson]

On X there were accounts that have accused poly market of insider trading and they have cited concrete examples which I don’t want to mention here. While there may be some truth to it, we can’t be too certain. Polymarket as well as other predictions markets are not perfect and as such even when insider traders enter there may not be much that the platform can do. However calling them an outright scam is hasty generalization. The rules of gambling also in my estimation applies here, gamble/ make predictions with what you can afford to lose.

[Mia Chloe]

I just saw this video and found it very thought provoking:
Polymarket Asked To Work With Us. We Exposed Their Scam Instead. | by
More Perfect Union

I'd recommend everyone interested in prediction market activity to take a look because it goes through some things I hadn't considered even though I like to observe what's going on with this subject almost daily. If you'd like to watch something thought provoking you can actually go watch the video before reading the rest of my thoughts to avoid spoilers.

Well this is probably one of the major reasons why I don't fancy anything that has to do with gambling channels for sports predictions and other types of prediction markets including casino related games like crash. Most times people don't even mind paying to enter these scam groups.

At the end of the day they would wan to join the crowd to say gambling is fun but in reality why would you go to that extent if you really considered it fun? I always emphasize on the fact that these kind of information is near impossible to even acquire in reality.

[goldkingcoiner]

Prediction markets are 100% gambling and should be regulated as such. It is absolutely OBSCENE that just because it is new and currently in a law loophole of not being classified and regulated as it should be, people are going to throw their money away into the pockets of the corrupt people behind this scam. And it is a scam until they become regulated. I do not advise anyone use prediction markets.

[AmoreJaz]

Prediction markets are 100% gambling and should be regulated as such. It is absolutely OBSCENE that just because it is new and currently in a law loophole of not being classified and regulated as it should be, people are going to throw their money away into the pockets of the corrupt people behind this scam. And it is a scam until they become regulated. I do not advise anyone use prediction markets.

Definitely, they should be under the regulation or protocols of the gambling industry as well. If not, this will be chaos considering that a huge amount of money is involved in this market already. So without proper regulation, this can easily escalate into something messy. Inside job and all. So if they won't observe the legalities of their platform, I would say, a lot of authorities will be after them not only those countries which will issue the ban for this site.

And with the nature of this platform, I can say that it is indeed prone to possible manipulation or insider betting. Wonder if you've seen a large chunk of money or unusual betting amount in some of the lines. Check the logic of why betting such huge amount into something unpredictable. Doubt the motive.

[d5000]

I've watched the video. I think in general they're correct that insider trading is a problem that's incentived by prediction markets. But do they need additional incentives to attract insiders? I think the incentives are naturally there: if you know, for certain, for example a release date of a product, then you will make profit (as long as you aren't caught and disqualified or banned) on that market.

But there is probably only a minority of markets where insiders can really predict a certain outcome with such precision like a product launch. Sports (which make up for the majority of prediction markets) for example are quite unpredictable, at least the result of games and tournaments. Elections are almost as unpredictable as sports, and while access to nationwide exit polls (e.g. as employee of a polling company) can indeed give a definitive advantage, exit polls are normally too uncertain to really provide a "totally safe" answer and they also only are a thing at the very end of the betting phase.

I also think the guy who was cited as an example trying to get the national anthem rehearsal time from outside the stadium is a type of "insider" that deserves respect for his creativity

So my conclusion would be:

- Prediction market gamblers should avoid any market where insiders with exact information can exist, for example product launches or other news related to particular decisions of companies or other organizations, including governments.
- Platforms that allow this type of markets despite of these problems, should be regulated as gambling platforms and provide the standard preventive measures like "common" online casinos.

[alegotardo]

There is one thing I do not understand in all of this...
Unlike casino games where we bet against the house, in the prediction market we are betting against other people and the "house" takes a percentage from everyone, right? So why would they need to somehow "manipulate" the market or work with insider information?
What do they gain in exchange for the risk of losing credibility?

But, regardless of whether Polymarket actually engages in this type of "partnership", one thing I am sure of... many people with insider information take advantage of some bets to make a lot of money, because if even in the highly regulated stock market they ca not completely curb these problems, imagine then in a prediction market where regulation is practically non existent.

[viljy]

This confirms my long-held hunch that prediction markets were created for insiders. But I don't quite agree with the statement about the big fish. A mere mortal is free to choose his bets carefully. For example, choose to bet on the actions of Xi or Putin or the government of Iran. These politicians are completely indifferent to the bets on the Polymarket. By definition, there can be no insider or manipulation here.

[swogerino]

Not at all surprised. Presidents of Football Federations in different countries are well known to have inside info and to corrupt officials of their leagues to get the results they want and for a long time this is reality happening. Sure some of them are well known in different scandals that erupted just because of this yet most of them have become billionaires just by betting and winning every time thanks to their insider information. So nothing to be surprised here for polymarket also.

[giammangiato]

So at the end of the day, gambling on a prediction market as a mere mortal is like offering your tokens to the big fish to nib on freely.

Honestly, regardless of what they say, my thinking remains unchanged. The only way to consider the "advice" of people with inside information is to be sure of what's happening, like the example of the guy who went with the hair dryer to heat the temperatures to win the bet (in which case it's a sure win). It's dishonest but sure.
Insider information based on studies and assumptions, even by professionals in the sector, does not give me mathematical certainty, because it is not 100% predictable.
If the same people then influence the market in some way then the conversation changes.
I don't trade, and Polymarket, as much as I like the idea of the platform, I'm not convinced enough to place bets in some truly absurd cases.

[TedMosby]

So insider trading comes with both good and bad? Like a conflict between fairness and market efficiency? I don’t get it. When the outcome is still dependent on the real-life event, why does inaccurate probability still matter? Is it just to make the probability in the markets align better with reality? What problems can be caused by inaccurate probability in the prediction market? Isn’t it also a chance to make money too?

[rbynxx]

Polymarket CEO even admitted to this saying that insider traders help better align the markets with reality. So even their stated goal is to be close to reality at all costs. The costs in fact are that through all their advertising, they attract liquidity for the insiders to extract value from...

So at the end of the day, gambling on a prediction market as a mere mortal is like offering your tokens to the big fish to nib on freely.

I don't know how weird he is in level but that's literally weird for him to say. Even their advertising stunt is cringe that they really don't want to admit that they are promoting gambling and yet even the CFTC are on their back. It's really news to me that Trump Jr. was strategic advisor the competitor Kalshi and Polymarket, they really want to monopolize it. I'm not fan of it and will never be I guess.

[Somegory]

Me thinking deeply about the relationship between the house and game providers, aren't you people looking at this from a different place? Am I the only one? Prediction market likes stricter regulation or their days will be outnumbered.

This is not my problem, maybe people who favoured prediction market do, I don't like the idea behind prediction market, every little ones behind them, either polymarket or others.

I am here to have a good time and I tend to keep it this way, it's not a must to risk money on such predictions, I am more than satisfied with sports betting and casino games.

But God damn, thanks for sharing OP.

[Alpha Marine]

First of all, I bet against what I believe will happen sometimes or what I want to happen, so if there are more people like me, I guess it would make the claim that the prediction market shows what the larger public really wants or thinks is not entirely true.

Nothing in the video is new to me, aside from the fact that prediction markets actually want insider trading. I did'nt know that, but it makes sense.
Why would anybody think betting on outcomes is not gambling? This is a no-brainer. The only difference between an online casino and a prediction market is that the prediction market gambles on real-life events, which online casinos do these days. Casinos have bets on the Oscars and other events like that, too. 

On this forum, I have often talked about the potential for insider trading in Polymarket. It is too easy to have insider knowledge and use it. People know almost all the outcomes of the options in prediction markets. What is stopping them from telling someone who would tell someone, and they all bet on it?
What about the Super Bowl one, where the MVP first gave thanks to God in his speech, and a couple of guys made money out of it? He could simply tell his friends, and they would tell their friends to bet on it.
It has never made sense to me, and there is simply no way to regulate it even if they wanted to.

Somebody made a post about a Jounerlist that was getting death threat because he reported a news and people lost money because of it. So what about situations where the jounerlist hold on to the news and many partake in the profit?
To be honest, I uderstand why some EU countries banned prediction market. It's too predicted to regualte and too easy to exploit for people who have the means.

[Mhizlove]

Prediction markets are 100% gambling and should be regulated as such. It is absolutely OBSCENE that just because it is new and currently in a law loophole of not being classified and regulated as it should be, people are going to throw their money away into the pockets of the corrupt people behind this scam. And it is a scam until they become regulated. I do not advise anyone use prediction markets.

I see where you're coming from because when regulations isn't that clear, people will be afraid of manipulation and lack of accountability. Alot of prediction markets really looks like gambling since it involves money and people are predicting the outcome. However, at the same time some people do see it as info markets instead of pure gambling. The main issue is proper oversight and transparency because once regulations becomes unclear trust naturally will become low. So whether you're in support or not the thing is that caution is still much very important because anything that involves money or uncertainty, then it's attached to risk or risk is attached to it

[danherbias07]

I've read something about this on X. I don't really want to judge them, but we can always just avoid.

Up until now, I have not been using the said service because I am really in doubt about their reputation. Not just about the inside traders, but also about the way they make absurd predictions. Well, we have our own point of view when it comes to this, but OP may be right.
We may just be feeding them with money that they make it look like we will be the ones making it in the long run. Still, this is a choice individually and I believe some would disagree and never believe the said claim.

[Dunamisx]

Was it not until we play prediction market before we becomes a victim of any unfortunate circumstances in such regards, in gambling, everyone of us is expected to make his personal research about the kind of bet to take and also understand the risk and consider the chances of winning to that of losing, if you don't want to put yourself into unnecessary headache don't go for prediction market.

[leea-1334]

OP,,, you post a lot but you know this is really just gambling on a different platform right? Practical sense I mean,,, there is no difference using these Kalshi and what not, or putting your bet on a sportsbook.

Anyone who thinks they can profit from prediction markets probably thinks they can profit from those fake 'insider' tips on sports. People are so easy to fool when you dress things up