alt Hacker NewsPrediction markets have an alluring quality that they become a pulse-check on what humanity believes is going to happen, putting your money where your mouth is, and when they work like this they work pretty well and are an interesting instrument. Brian Armstrong, the CEO of Coinbase, has even gone so far as to say that Insider Trading is a necessary source of data for prediction markets, if the goal of prediction markets is to be an accurate prediction of the future [1]. However, it seems increasingly clear that even this function of prediction markets doesn't behave how the silicon valley elite seem to think it does. In multiple markets throughout 2025, we saw insiders "snipe" correct predictions at the last minute, while odds were still against the correct outcome, moments before some finalizing event or news became public.
In theory, insiders give correct signal. But in practice, their volume is often too low to meaningfully move the market in the correct direction, and the timing of their order flow can be too late for that signal to actually be useful as a tool for predicting the future.
Its also critical to note that insider trading laws don't just exist to protect investors. They exist to protect the organizations the insiders belong to. The order flow on both prediction markets and the stock market is public information. Its one thing to short the company you work at because you know they're going to announce bad earnings. Its another thing entirely to take out a million-dollar position on "US Strikes Venezuela before Jan 3: Yes" on January 2nd. Sophisticated geopolitical opponents are monitoring these order flow feeds, and it begins to become a genuine matter of national security.
Overall, I am fine with prediction markets. I think they're an improvement over sports betting in the sense that they better-align incentives between the participants and the market-maker. In typical sports betting, the casinos running them set the odds, and participants take out positions against the casino; which means the casinos are incentivized against allowing anyone to actually make money on their platforms. This has surfaced many times in "professional sports betters" getting blacklisted. In comparison, PMs are a contract between participants, and the market-maker only takes a fee on each transaction (Robinhood's is 2.5%; quite high), which means the market-maker is only incentivized to increase PM order book volume and provide interesting markets. There's more opportunity for actual skill and dedication to shine through.
But, KYC is critical.