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?
If I were famous I could start a pool betting on whether I would post a picture of a my lunch this week. I could stake whichever side has the biggest payout and then just make it happen
These prediction markets are now giving even more people the opportunity to make a small ethical compromise in exchange for non-trivial amounts of money without any of the potential legal repercussions of traditional markets or gambling. That type of ubiquitous corrupting influence can't be good for the health of society.
[1] - https://www.cbssports.com/mlb/news/guardians-closer-emmanuel...
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.
Not necessarily. Just because you accidentally left your S3 bucket open and I brute force my way to the link by guessing doesn’t make it legal. It can still be insider information. Insider information is not limited to people who have a duty to the company. If I break into the companies office and steal information and trade on it then it can be insider trading.
The first case is completely fair because anybody else could have done the same thing without any special access required.
The second case is unfair because you had to work at the company to get access.
What if the bar has a cover charge, so only those who pay get in?
What if the cover charge is $10,000 and the bar is advertised as "the place where public company execs love to come talk to each other about private deals"?
Interestingly, the CFTC objects to a political candidate trading on their own candidacy on the grounds that it is fraudulent. So it looks like they could attempt to regulate self-trading quite strictly, at least if that theory holds up after a court challenge.
I can argue it is fair - anybody can try guessing the url, you don't have to be an insider to guess it
To the company? Or to the stock market, as a participant in it?
Allowing information asymmetry, like insider trading, undermines the regulatory argument that keeps these markets legal.
If I know my company is going to do something on March 16th, I can bet against it happening until that day, and then bet big it will happen that day. I don’t need to influence the company to change what it’s going to do to make money on it.
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.