Though I think where things start to get a bit more insidious is when the "insiders" have access not merely to inside information, but the ability to change the outcome. That type of insider trading should be banned IMO because it works against the purpose of prediction markets as a tool. (Though the extent to which banning that is possible though is debatable.)
Accurately predicting the outcome of a war, election, or other nationally important event though can potentially have immense value.
I don't contest that, but again, you haven't explained why "predictions" is the point of prediction markets. People place bets on things they want to be true as much as things they believe to be true. They can market themselves as whatever they like but no one has made a case that this is any different from sports betting.
Polymarket, for example, makes money on the data. So it must be worth something because people are paying for that predication data. They don’t take a slice of the winnings.
They don’t make money by taking a spread, they make it by providing information.
And people bet on emotion for sure, but “wisdom of crowds” suggests that generally that will balance out to somewhat accurate odds.
For that very reason, insider knowledge, and especially the ability to influence future outcomes, become the subject of heavy regulation. And, the lack of such regulation for congressional members is also why their net worth tends to skyrocket once entering office.
But I think the way our current system solves this is by forcing companies to disclose important insider information to shareholders all at once, rather than by letting insiders profit by leaking the information through their market transactions. (The one possibly being related to the other, because insiders who could legally profit by keeping information secret rather than disclose it would be incentivised to do so.) I don't think a similar restriction is feasible for prediction markets, because often the thing you're trying to predict is not something that can be legally cajoled into giving up its secrets.
Before Salman vs US (2016) it basically was, how do you think the oracle made bank?
With prediction markets, the "purpose" is information discovery, and "insider trading" actually helps (=> via information from insiders).
Disclaimer: I'm somewhat playing devils advocate here, I personally think that prediction markets are for now mostly an ineffective zero-sum game (and legalized gambling with all the drawbacks that brings).
But you don't usually buy the stocks from the company itself, do you? Unless there is some shenanigans with buyouts going on...
If I work at the company and count the inputs and outputs, and trade on it, I am a morally bankrupt scumbag and I have hurt society and all of the traders in the market.
Hmmmmmmm
If you hold a position of fiduciary responsibility within the company (or gain information from someone who does) that's a different matter. But the analogy there would be hacking into the company to read internal records, not just looking over a fence. in both cases, it's a crime.
The reason insider trading is illegal is because it undermines confidence in the markets by establishing a pattern by which insiders with privileged, secret information leverage it to profit off people who cannot access this information.
It also incentivizes insiders to leverage their position within a company to manipulate the business in order to profit. This also undermines integrity of markets.
Your second example, setting aside all your troll bait inflammatory verbiage about moral bankruptcy, is an illustration of this risk. I don't care if it rises to the level of moral bankruptcy, it is harmful to a capitalist society in a serious way.
Your first example is a depiction of someone leveraging information that anyone can gather. It does not undermine the integrity of markets because it is just an investor acting on publicly-accessible information.
Consider the case where a company knows that the drug they are selling is dangerous but keeps it a secret. Insiders know of the dangers and so bet against the company in the market (obviously this is illegal right now). The insiders make a profit in the short term, and investors also in the short term lose out (which they were going to do anyway, the losses come sooner), but in the long term the secret information is revealed to the benefit of everybody.
But I never said insider trading was bad because it caused people to keep information a secret. You're responding to an argument I didn't make.
> “The point of these markets is to get information, so the only reason you should ever be trading on them is if you think you have some information,” said Hanson, a professor of economics at George Mason University whose academic work inspired the founders of prediction markets Polymarket and Kalshi. “People with more information should trade more and get more money because that's how they get paid for the information they contribute.”
https://www.forbes.com/sites/aliciapark/2026/01/09/why-predi...
Seems like you should read more about these markets.
What you are describing is governmental corruption and that should be handled via corruption laws not insider trading laws.
Simultaneously: Insiders have power to coerce an outcome, the market creates a corrupt payoff for them to abuse that power.
Says who?