[w10-1]

Speculation and concern from a naive observer:

Is it polymarket presenting this ability to detect insiders? Or is someone trying to sell the service of detecting insiders to those wanting to know if bets are on equal footing? (or wanting to follow insiders? or wanting to hide your identity by making multiple accounts? Are there per-account fees, when polymarket might encourage people to make multiple accounts?)

Regardless, polymarket seems to be on balance corrupting, by monetizing and normalizing use of inside information, which violates agency principles. It's not clear that it really offers hedging or predictive benefits.

When trading firms do better (after data discovery and analysis), there's some evidence they're better than other firms, and you can trust them with some money. But when there's a public prediction market, the only benefit is to the insiders.

[peterjliu]

Post author here: To clarify, this is not a post from Polymarket.

This is talking about using Compound AI (product I'm working on) to query Polymarket data, including finding insiders, just as a fun example analysis you could do.

Often you need a well-calibrated probability of a future event to feed into some other analysis, and Polymarket is pretty great for that. An example is how much insurance (hedge) to buy for some disastrous event.

[jwpapi]

Why dont you just copy the trades?

[alphazard]

> Regardless, polymarket seems to be on balance corrupting, by monetizing and normalizing use of inside information,

This is a common take on "inside information", but for most people this opinion is totally unaligned with their own goals. The people who benefit from "no insider trading" in any market, are a small group of active traders, some institutional, some not.

For literally everyone else, insider trading is a net win. Insider trading improves price discovery. If you passively invest then you benefit from the price being more accurate when whatever fraction of your paycheck goes into the market.

I don't know your own situation, maybe you are one of those few traders who needs information to spread a certain way in order to make money. For everyone else, don't be fooled into promoting an idea against your own interests.

[DennisP]

In fact, a lot of people claim that the main point of prediction markets is to give the general public better predictions, and insider participation actually helps with that.

[Veedrac]

This is missing the primary reasons insider trading is bad, which are that it's an information theft incentive against employers, and worse, that it's a sabotage incentive.

[airstrike]

I'm honestly puzzled by this take.

Clearly the people who benefit from insider trading in any market are those doing the insider trading, not all market participants.

The argument is not that Polymarket et al are "insider trading only" but rather that insider trading in those markets is not regulated so people can get ahead of trades based on confidential information and make a lot of money off of all the suckers gambling their money away on ridiculously frivolous bets.

If you don't see the problem with that, you're complicit, misinformed or brainwashed.

A similar issue is that of market manipulation, since many markets in these platforms can be directly manipulated by participants in manners as easily as spamming some words on an earnings call.

[raincole]

I think you might misunderstand the value preposition. Polymarket wants insider trading. That's the whole point. They'll eventually cave in to PR pressure and deviate from the original purpose, though.

[ses1984]

Some of the things people bet on can be decided by a single person.

The more accurate the markets get, the greater the incentive for insiders to spoil it.

That doesn’t benefit anyone but the insider and probably has a net negative on everyone else.

[fsckboy]

>But when there's a public prediction market, the only benefit is to the insiders.

false.

all the conclusions economists draw in microeconomic theory about efficient markets are based on pricing that reflects symmetric information. secrets are asymmetric. trading on inside information drives the market price in the direction it should be moving, making the market more efficient, a benefit to all participants in the market.

this is not a defense of trading on inside information, simply pointing out the mechanics.

[airstrike]

We're not solving for efficient pricing at the expense of one insider reaping all the benefits because they already either knew or set the price before hand.

[_alternator_]

This is largely the classical objection to prediction markets. But prediction markets do have value to outside of the markets because people want to know the future.

[Lu2025]

Yep it's rotten. I think the intuitive revulsion many feel toward the Polymarket is simply due to the unfairness of it.

[cowthulhu]

Prediction markets should be accurate, not fair. If people want to gamble without doing the work of finding some alpha, they should head to a casino, not a prediction market.