77 suspicious positions across 60 wallets, 13 brand-new accounts appearing 40 hours before the browser launch. First confirmed case of a major tech company firing over prediction market trades.
Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
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.
The thing is you're still thinking of these insiders as someone who just got a juicy stock tip from a relative.
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?
Would you really like to live in a world where "Will we nuke Iran?" Is a bet you can make? Then someone in government sees how much money they could make if they bet yes & push the button?
This is the entire idea behind the concept of "assassination markets" - "prediction" markets on assassinations that are just thinly veiled ways to crowdsource murders by taking bets that you expect to lose against an "insider" (the killer).
It doesn’t need to be as high stakes as assassination. Any public figure could have a free-money loophole with all the stupid bets on things like whether a certain word would appear in a speech.
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
And we already have laws against this stuff when it is traditional gambling. For example, a couple MLB players[1] are currently facing 65 years in prison because they would occasionally waste a pitch at the directions of gamblers netting them a few thousand dollars each time they did it. For those not familiar with baseball, a starting pitcher generally throws between 80-100 pitches a game and a reliever throws roughly 10-30. This is basically as low stakes as a sports bet can get, so it makes it all the more attractive to attempt because it feels less like a compromising of morals with the less the participant actually needs to sacrifice.
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.
> Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
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.
>> 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!
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.
Okay, then imagine you overhear at a bar. Yes “anyone could have” theoretically, but not actually. In either case, you have material non-public information that your counterparty in the market does not.
you got that piece of non public information was not because you are an insider. As long as the bar is not exclusive to insider, i don't see any difference
Isn't it exclusive to people who live in the area of the bar?
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"?
Your comment seems to imply that trading based on material non-public information in prediction markets is always okay, which is not the case. The CFTC just made a press release detailing some instances of invalid use of nonpublic information on prediction markets: https://www.cftc.gov/PressRoom/PressReleases/9185-26
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.
In theory maybe, but in practice companies almost always do care about keeping things like release timing, product status or leadership decisions confidential. Even if they haven't publicly announced a policy about prediction markets specifically, it's usually covered under general confidentiality and acceptable use policies
I’m probably overlooking something, but if you have insider info, you just bet on that info with certainty. Why would you need to create a different outcome to bet on it?
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.
I think there is a society-level interest. It's very bad for the business environment if every employee of every company has monetary incentives to leak private information. It structurally encourages businesses to set up strict information silos where cross-team collaboration is hard no employee can ever be sure of the broader context of their work.
>Research shows prediction markets are often more accurate than experts, polls, and pundits. Traders aggregate news, polls, and expert opinions, making informed trades. Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join.
>If you’re an expert on a certain topic, Polymarket is your opportunity to profit from trading based on your knowledge, while improving the market’s accuracy.
You know what's a great knowledgeable participant? An insider.
I have come to the opinion that every successful tech company is basically just an arbitrage scheme to avoid regulations and extract value based on that advantage.
Airbnb for unlicensed hotels. Uber for unlicensed taxis. Amazon for whitewashing fraudulent products. Bitcoin for unlicensed securities and laundering money.
That's what happens when the majority of people don't actually support the regulations.
If people thought it was wrong to be an unlicensed airbnb or uber, they wouldn't use them. In reality, those regulations are mostly protection rackets and most people don't care about violating them.
I disagree. When you give people strong economic incentives to ignore morality, some people will. Not all, but enough to make a hash of things. In any population there will be some people who will do things they know are wrong just to get ahead.
For Airbnb landlords I'm sure the thought process goes like " I'm just one person so I can't be having enough of an impact to be a problem. And besides, I need the money." But then enough people pile on and in aggregate they ruin the local housing market. But nobody thinks that they themselves are culpable
Your taxi crashes because the driver skipped brake maintenance and his insurance doesn't reimburse you for your hospital costs because commercial transportation isn't covered. Sure would be nice to have some minimum requirements for taxis.
You have two parties who want to enter into a contract and a third party unrelated to the contract that doesn’t for whatever reason. Just based on contract law and common sense the unrelated party shouldn’t have standing. Now if there’s externalities to the contract that impact that unrelated party sure, but only insofar as to get those externalities addressed.
This is not the same as a robbery which involves no contract or a willing counterparty to the robbery.
Yeah, IME, if the guests of the rental acted exactly like locals, and the units were not removed from the local housing supply (not sure how that could be), or the local housing supply was in excess to the needs of the population (not sure where that is), it would be fine.
Noise, litter, etc, "nuisance" laws are on the books, but mostly depend on people following them voluntarily. The local authorities don't have the time/staff to investigate and resolve them all the time.
That's interpreting a failure to fight to preserve ethics as an internal rejection when it could be explained by a lack of fighting spirit, either because the fight seems impossible or the given hill not worth dying on. Another interpretation would be a comfort-oriented, avoidant, and possibly cynical culture facing a power imbalance.
This is certainly the most uncharitable way to think about it.
I see a prisoner’s dilemma where people often support regulations even if on an individual basis they would personally violate them, because they prefer living in a the less chaotic society. For example anti-dumping regulations… the expected value for any given individual is +EV, but when everyone is dumping, it’s a big -EV
The perfect example is speed limits: everybody thinks they're good and yet they all seem to classify all other drivers into two categories: slowpokes and maniacs.
Nobody seems to be able to agree on what a responsible set of rules is around the speed of vehicles.
That's because they are slowpokes and maniacs: In a decently flowing road, the majority of distinct cars you see are either moving significantly faster or slower than you (and the more extreme the difference the more likely you are to see them). Of cars that go at a similar speed to you, they approach you / you approach them more slowly so you'll see fewer of them.
From an economic perspective the majority of those regulations destroy economic value and those companies are unlocking value by finding clever ways around them.
No, they just shift the economic downsides to someone else so they can collect the difference. That's what I mean by arbitrage. Someone always pays the price, and now it's you and I.
That's not always true. Regulations increase the cost of transacting and make ranges of transactions non-viable, just like a tax.
So there is "dead weight loss", where transactions that would have been mutually beneficially and socially productive are eliminated by the regulation, and restored when somebody finds a loophole, restoring the individual and social benefit.
I agree, once they have bypassed regulations, they use that to essentially rent-seek from their monopoly/their unique position where the rent is paid by us public.
Their behaviour is very rent-seeking imo and at moments like these, its best to remind us that even the father of Capitalism, Adam Smith didn't like landlords
Had to search up some quotes from adam smith right now but here's a relevant one (imo) to this discussion:
"[the landlord leaves the worker] with the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more." - Adam smith
I can't say this for the companies listed above but atleast within the realm of social media, they also want to bypass regulations and well, we all know how's it going.
On a long term, I do feel like there will be a drop in producitivity, thus destruction of economic value because of lack of enforcement of policies/such companies having reckless attitude about them.
Many of the products listed above actually seem to be very rent-seeking in my opinion (IIRC Someone on HN once said that from their personal experience talking to drivers, uber takes an approximate at the very least 40% cut or more)
(This might be a little off-topic?_ but one thing I think about tech regulations is that Facebook used to see if a young girl/minor girl took a selfie and then if they don't upload it, detect that she was insecure and then try to show them face beauty recommendations.
These girls can be our sisters/daughters fwiw. Facebook profits from insecurity/rage-bait and I would say that many social medias are the same as well, its just that the facebook example to me feels so eggregious and should be a uniting front for many to agree that there's a problem indeed.
You will be right when you say economical value is generated from profiting from insecurity/bypassing regulations but at what cost?
you might have been an insider working on the Apple Newton, and being enthusiastic about it you might have broken the rules and traded on your "knowledge"... and you would have lost your shirt. Same with your very knowledgeable enthusiasm about myriad other technologies. Ever wonder why Wall St doesn't show up at HN asking everybody's opinion about AI in order to leverage that info into billions?
an important element of "the wisdom of crowds" is many bits of microknowledge. How many Teslas will be sold next year is very dependent on how much the people who buy Teslas will earn next year (or how secure they will feel in their jobs) working in myriad other industries that have nothing to do with Tesla, along with the price of lithium, tires, and even ... wait for it... gasoline.
Polymarket's words you quote can just as likely refer to the wisdom of crowds. Or even, and this is the subtle part: Polymarket's insiders may believe, like you, that they are creating a market to trade on inside information, and yet they, like you, could be made wrong by the superior sum knowledge of the crowd exerting its invisible hands all together to tank your Apple Newtons.
Yes they are. Polymarket has an ad glorifying a "fictional" scenario where someone gets a job as a janitor in a video game company to bet on related events in polymarket
It's interesting that the both replies under this comment are saying exact same thing, with the exact same term ("raison d'etre"... how often do you hear two random people think of this phrase at the same time?).
It might be nothing, but it'd be funny if karma farming bots are doing some 'reply frontrunning' over the internet.
I don’t consider “raison d'etre" a suspicious phrase. It’s not something people use multiple times a day, but I’d consider it common enough that when I hear someone say it, or in this case I suppose type it, that I would give it a second thought.
Yeah but someone has to give the money to the insider traders.
Betting and insider gambling wouldn’t work if people were educated and just didn’t gamble and so never used these platforms in the first place.
It’s an old question of whether government is responsible to protect people from themselves or should we give everyone freedom to go bankrupt in this specific way if they so desire.
I don’t know if there is a healthy way to gamble really. With drugs and substances at least there is some continuous spectrum but you either gamble your money or not.
Many, I suspect the overwhelming majority, of the markets are impossible to engage in insider trading in. So it's genuinely just an interesting way to monetize expertise. Chess is a great example. A lot of the money in that market is people turning on the latest chess engines and betting in accordance to position evals, but skilled players can see much more - like how a position that the computer gives as a dead drawn is, in reality, extremely difficult for one side to hold. So the market might give near 50% when it's perhaps more like 65/35. That's quite a large edge. There's also quite a lot of opportunities for arbitrage betting, which is by definition risk free.
The majority of people can’t even control their daily screen time, yet we are supposed to believe they can masterfully restrain their urges when money and dopamine are on the line? Nothing I’ve seen indicates human impulse control is that bulletproof. Furthermore, the 'I have it under control' narrative isn't proof of a healthy habit; it’s practically the universal slogan of active addiction.
Would you not say that somebody could equally cynically describe options trading in this way?
Prediction markets are very valuable because they provide information on issues that's generally much more accurate than alternative sources, such as polls. For instance Polymarket predicted 94% of the results for the 2024 election a month out, including the presidential. It can also provide more information than the news. For instance the chances of Khamenei being out as Supreme Leader of Iran by March 31st just skyrocketed up to 78%. That tells me far more than the various news sites minute by minute coverage.
Gambling = investing. Buying stocks is also gambling. Share buybacks, dividends, fancy words for forking money from workers to some joe schmoe that bought a lottery ticket, i.e., a stock.
The concept of a valuable service falls apart if players can influence the actual event. Without equal footing and basic honesty, you aren't measuring reality so much as you are subsidizing those with the power to manipulate it.
There's a feel good story where a parent can't afford a very expensive medical procedure to save a child, so someone tells them to place a massive bet in a prediction market for a certain event that may happen, and then they make it happen, therefore siphoning off money from the other gamblers for a good cause. Just a small way everyday people use the system against itself as a way to survive.
Prediction markets have only events whose outcome is eventually publically resolved, by design. With insider trading, the trader is incentivized to release the information as late as possible, as close as possible to the events.
Why are these big insider bets being placed within hours of the event actually occurring? The insiders are doing the equivalent of bid sniping — waiting until the last possible moment to exercise.
This is how inside info works in trading markets in general. And again this is inevitable and by design.
It also makes them largely useless, because the timeline for which useful position is shared is compressed to the point where nothing useful can be gleaned from the information.
The thing is a “lie incentiviser” — a market entirely for suckers. That’s why 95% of volume is sports betting.
That’s setting aside insider positions having an influence on the outcome of events which is a whole separate problem.
> Why are these big insider bets being placed within hours of the event actually occurring?... It also makes them largely useless
They're not, usually. The more the outcome seems unlikely at first, the more you're incentivized to place your big bet earlier, when the odds seem worse, because you'll make a ton more money.
When these bets are placed only a few hours beforehand, that's often because the actual decision hasn't actually been made until then.
And there are plenty of areas where having notice of an hour or two is still hugely vulnerable.
why are publicly traded companies special? The speculation is not on securities.
You're not participating in a "market" (even though they call it that), you're purely gambling and speculating. People have been doing this since currency was a thing. Even gambling laws don't apply in my opinion. If I told you the government will publish evidence of aliens existing tomorrow, and we make a bet on it, that's not really gambling, it's not so much a game of choice as it is a competition of who can predict things better. The other person might have insider knowledge, but it's up to you to either take on that risk or assume despite that your knowledge about the topic will overcome their potential insider knowledge.
If you see prediction markets as how they were originally pitched (price ~approximating likelihood), then insider trading is good. It provides discovery.
If you look at what prediction markets are today (gambling, especially on sports, especially in states that have banned it), then insider trading is bad. Particularly when the people trading can influence the outcome (e.g. a pitcher purposefully throwing into the dirt.)
I mentioned a potential OpenAI insider in https://x.com/peterjliu/status/2024901585806225723, that was from 5 minutes of investigation. There are probably more. And then there's a lot of other companies.
Manifold actually explicitly encourages insider trading, arguing that it leads to more accurate pricing. This was possibly defensible back when it was a cute funtime project run by a Bay Area polycule, but it’s probably going to get them in deep shit sooner or later, even though they don’t even use real-money betting.
The vast majority of insider trading schemes are not prosecuted, many leave no evidence trail at all without going deep into black-op classified territory.
Thanks for making me aware of another federal agency :)
Seems to me prosecuting or regulating this sort of activity is futile, and pretty much serve only the interests of the mob. These markets make additional data open source, which otherwise might exclusively belong only to mob, so that's pretty cool. We democratized buying airstrikes.
It You may know how bad things really are, but if you don't, the lawboys are pretty much just playing pretend at this point, and have been for a while.
Mob wants me to add: if you try to buy an airstrike with our very based and functional cryptocurrency systems, you will probably just find mob. We have mob priced in, anybody with a significant amount of cryptocurrency knows this too.
It's not as simple as "buy an airstrike" comrade (we are referencing the person writing this post)
A fun aside: this person obviously created a bunch of new Bitcoin accounts to hide their activity.
It makes you think that if you were able to surreptitiously add malicious side channel software into a popular npm package that you wouldn't just need to hunt for crypto wallets with balances.
You could also probably find a market for crypto wallets with small balances or zero balances. The history and date of creation would be the value to some.
This openai employee should have gone on the dark web to buy older addresses to cloak their activity.
It's sad to say that almost all crypto use cases point to fraud. I'm excited about crypto and there is some fascinating research around anonymous transactions (like zcash). But, that real utility is always overshadowed by the actions of charlatans or worse.
you can't "change the password" on a wallet, so a "used" wallet is highly unattractive. anything you put in it could be taken by the original keyholder who sold it to you.
Oh but you can. You can swap out the seed and generate any new addresses using that.
Yes, the old addresses will be compromised. That's fine. The point is that nobody can tell that you aren't actually using the same keys to generate new addresses anymore.
Right but if you have the forethought to go buy such a wallet, you could just make one yourself in advance and create a transaction history.
Although I would argue that even this doesn't have much value. It's not a big problem that people know "there exists an insider at OpenAI". There are plenty of employees there that shield you from being discovered.
In fact it would be so difficult to find this person among them, assuming the most basic opsec, that I'm highly skeptical they actually fired anyone. I would sooner assume this is just an announcement designed to discourage the behavior, since no specifics are provided.
You are giving a lot of credit to this criminal. I really doubt they thought about this long in advance of the crime. Are you suggesting they got hired at openai so they could make calculated wagers at Kalshi? This was more likely a crime made impulsively.
First of all I'm not sure what they did is criminal. And it would have been Polymarket.
Nonetheless, you can just be a pre-existing OpenAI employee. As long as you take basic precautions, they (as in, OpenAI), are not going to be able to find out it was you.
Not in this context it's not. Companies can't create Polymarket accounts. Polymarket accounts are just email addresses or alternatively crypto wallets. And there's no purpose I can imagine to aging them.
I do hope corporations in general take a harder stance on this. From a society perspective people with inside knowledge fleecing randoms is not a win. We've got that somewhat under control on the stock exchange, but have this absurd situation where on prediction markets it is a free for all and everyone pretends this is fine.
I also think corporations should distance themselves from individuals willing to fleece randoms. Trading in general is very wild west survival of the fittest but active exploitation of insider knowledge speak of very poor morale character
Honestly it seems stupid but fine to me. Like if someone random comes up to me on the sidewalk and says hey if OpenAI announces a browser tomorrow, you give me $100. If not I'll give you $1000. Obviously I'm not going to take them up on it, they clearly have inside information.
If you're betting on a prediction market without insider information then you're just... The fool who is soon parted from his money one way or another.
I generally feel like people should be free to do whatever insane stuff they want with their own lives.
> I generally feel like people should be free to do whatever insane stuff they want with their own lives.
The problem with people doing insane stuff with their "own money" is the burden they often exact on their family or society.
Perhaps the realm of independence starts when loans are reasonable and current, there is sufficient child support, and they are meeting a base savings rate for their retirement.
Speaking of which, perhaps any UBI could also use a minimal criteria, reviewed annually but without any barriers on first year eligibility.
I find it absurd that someone can create an unregulated market like Kalshi, and then all of us need to be beholden to it, even though the idea is stupid. How is it possible that someone can create a product that none of us agree on, and now everyone else has to conform to the rules around it because of the problems that it creates. I would rather Kalshi get shut down than the precedent of allowing this to control employees or people.
> The employee, she said, “used confidential OpenAI information in connection with external prediction markets (e.g. Polymarket).”
Note that “insider trading” is not illegal on prediction markets. The particular issue here is that the employee “disclosed” confidential information on a public forum by influencing the prices assigned to certain outcomes by prediction markets.
I don't think this is true, though enforcement is another thing and the standard is different than in securities markets. Prediction markets are regulated by the CFTC and the insider trading standard is “misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information” (vs any “material non-public information” for securities) https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstateme...
Who would think that? At every corporation where I've worked it's been explicit in both the contract and in HR training that this is explicitly not allowed.
77 suspicious positions across 60 wallets, 13 brand-new accounts appearing 40 hours before the browser launch. First confirmed case of a major tech company firing over prediction market trades.
I wrote about why prediction markets have a structural insider trading problem that nobody's solved yet: https://philippdubach.com/posts/the-absolute-insider-mess-of...
Insider trading is the raison d'etre of these products.
Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
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.
The thing is you're still thinking of these insiders as someone who just got a juicy stock tip from a relative.
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?
Would you really like to live in a world where "Will we nuke Iran?" Is a bet you can make? Then someone in government sees how much money they could make if they bet yes & push the button?
This is the entire idea behind the concept of "assassination markets" - "prediction" markets on assassinations that are just thinly veiled ways to crowdsource murders by taking bets that you expect to lose against an "insider" (the killer).
It doesn’t need to be as high stakes as assassination. Any public figure could have a free-money loophole with all the stupid bets on things like whether a certain word would appear in a speech.
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
And we already have laws against this stuff when it is traditional gambling. For example, a couple MLB players[1] are currently facing 65 years in prison because they would occasionally waste a pitch at the directions of gamblers netting them a few thousand dollars each time they did it. For those not familiar with baseball, a starting pitcher generally throws between 80-100 pitches a game and a reliever throws roughly 10-30. This is basically as low stakes as a sports bet can get, so it makes it all the more attractive to attempt because it feels less like a compromising of morals with the less the participant actually needs to sacrifice.
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...
Futures contracts were a mistake, god damn
I think this is mixing up two different things: influence and knowledge
> Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?
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.
>> 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!
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.
I don't think your example refutes the fairness heuristic at all.
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.
Okay, then imagine you overhear at a bar. Yes “anyone could have” theoretically, but not actually. In either case, you have material non-public information that your counterparty in the market does not.
you got that piece of non public information was not because you are an insider. As long as the bar is not exclusive to insider, i don't see any difference
Isn't it exclusive to people who live in the area of the bar?
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"?
Your comment seems to imply that trading based on material non-public information in prediction markets is always okay, which is not the case. The CFTC just made a press release detailing some instances of invalid use of nonpublic information on prediction markets: https://www.cftc.gov/PressRoom/PressReleases/9185-26
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 happen to guess the URL, and then I trade on it: Unfair
I can argue it is fair - anybody can try guessing the url, you don't have to be an insider to guess it
> I have a duty to the company not to trade on it.
To the company? Or to the stock market, as a participant in it?
In theory maybe, but in practice companies almost always do care about keeping things like release timing, product status or leadership decisions confidential. Even if they haven't publicly announced a policy about prediction markets specifically, it's usually covered under general confidentiality and acceptable use policies
No, commenters here simply take into account that predictions markets have historically classified themselves as futures markets and not as gambling.
Allowing information asymmetry, like insider trading, undermines the regulatory argument that keeps these markets legal.
The insider has perverse incentives as an employee.
I’m probably overlooking something, but if you have insider info, you just bet on that info with certainty. Why would you need to create a different outcome to bet on it?
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.
I think there is a society-level interest. It's very bad for the business environment if every employee of every company has monetary incentives to leak private information. It structurally encourages businesses to set up strict information silos where cross-team collaboration is hard no employee can ever be sure of the broader context of their work.
Excuse me it's called price discovery.
Could also make a case for incentivizing destructive actions by insiders as well. You’re saying I could sabotage my project and make a quick buck?
That's basically what the current US admin is doing.
Yeah, Polymarket is explicitly advertising this.
>Research shows prediction markets are often more accurate than experts, polls, and pundits. Traders aggregate news, polls, and expert opinions, making informed trades. Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join.
>If you’re an expert on a certain topic, Polymarket is your opportunity to profit from trading based on your knowledge, while improving the market’s accuracy.
You know what's a great knowledgeable participant? An insider.
I have come to the opinion that every successful tech company is basically just an arbitrage scheme to avoid regulations and extract value based on that advantage.
Airbnb for unlicensed hotels. Uber for unlicensed taxis. Amazon for whitewashing fraudulent products. Bitcoin for unlicensed securities and laundering money.
The pattern is upsetting.
Bitcoin is not a company
That's what happens when the majority of people don't actually support the regulations.
If people thought it was wrong to be an unlicensed airbnb or uber, they wouldn't use them. In reality, those regulations are mostly protection rackets and most people don't care about violating them.
I disagree. When you give people strong economic incentives to ignore morality, some people will. Not all, but enough to make a hash of things. In any population there will be some people who will do things they know are wrong just to get ahead.
For Airbnb landlords I'm sure the thought process goes like " I'm just one person so I can't be having enough of an impact to be a problem. And besides, I need the money." But then enough people pile on and in aggregate they ruin the local housing market. But nobody thinks that they themselves are culpable
I’m struggling to understand the moral character of taxi service regulatory capture and monopolization.
Your taxi crashes because the driver skipped brake maintenance and his insurance doesn't reimburse you for your hospital costs because commercial transportation isn't covered. Sure would be nice to have some minimum requirements for taxis.
If maintenance schedules and insurance regulations are “moral” issues, what isn’t?
People were (and mostly still are) very opposed to Airbnb rentals in their neighborhood.
... but the customers of these Airbnb rentals are not. :-)
that's the point of the regulations...
People whose houses are robbed are against robbery, people who rob houses are very much for it.
That’s a false analogy.
You have two parties who want to enter into a contract and a third party unrelated to the contract that doesn’t for whatever reason. Just based on contract law and common sense the unrelated party shouldn’t have standing. Now if there’s externalities to the contract that impact that unrelated party sure, but only insofar as to get those externalities addressed.
This is not the same as a robbery which involves no contract or a willing counterparty to the robbery.
Yeah, IME, if the guests of the rental acted exactly like locals, and the units were not removed from the local housing supply (not sure how that could be), or the local housing supply was in excess to the needs of the population (not sure where that is), it would be fine.
People support anti-pollution measures yet corporations still choose to pollute. Curious.
That's none of their business.
There are already laws in place against the kinds of behavior that neighbors are afraid will happen.
Noise, litter, etc, "nuisance" laws are on the books, but mostly depend on people following them voluntarily. The local authorities don't have the time/staff to investigate and resolve them all the time.
That's interpreting a failure to fight to preserve ethics as an internal rejection when it could be explained by a lack of fighting spirit, either because the fight seems impossible or the given hill not worth dying on. Another interpretation would be a comfort-oriented, avoidant, and possibly cynical culture facing a power imbalance.
that can't be right. If 90% of people are anti-airbnb and the other 10% are pro-airbnb then the 10% just open all the airbnbs.
This is certainly the most uncharitable way to think about it.
I see a prisoner’s dilemma where people often support regulations even if on an individual basis they would personally violate them, because they prefer living in a the less chaotic society. For example anti-dumping regulations… the expected value for any given individual is +EV, but when everyone is dumping, it’s a big -EV
The perfect example is speed limits: everybody thinks they're good and yet they all seem to classify all other drivers into two categories: slowpokes and maniacs.
Nobody seems to be able to agree on what a responsible set of rules is around the speed of vehicles.
That's because they are slowpokes and maniacs: In a decently flowing road, the majority of distinct cars you see are either moving significantly faster or slower than you (and the more extreme the difference the more likely you are to see them). Of cars that go at a similar speed to you, they approach you / you approach them more slowly so you'll see fewer of them.
This is entirely made up? Most people are totally fine with speed limits being what they are and don't say anything about it.
In the sense that they don't care what the sign says when it comes to their own driving? Sure.
Oh, that explains the massive difference in speed limits from one country to another then, especially if they're next door neighbors.
From an economic perspective the majority of those regulations destroy economic value and those companies are unlocking value by finding clever ways around them.
No, they just shift the economic downsides to someone else so they can collect the difference. That's what I mean by arbitrage. Someone always pays the price, and now it's you and I.
That's not always true. Regulations increase the cost of transacting and make ranges of transactions non-viable, just like a tax.
So there is "dead weight loss", where transactions that would have been mutually beneficially and socially productive are eliminated by the regulation, and restored when somebody finds a loophole, restoring the individual and social benefit.
The world is not zero sum!
I agree, once they have bypassed regulations, they use that to essentially rent-seek from their monopoly/their unique position where the rent is paid by us public.
Their behaviour is very rent-seeking imo and at moments like these, its best to remind us that even the father of Capitalism, Adam Smith didn't like landlords
Had to search up some quotes from adam smith right now but here's a relevant one (imo) to this discussion:
"[the landlord leaves the worker] with the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more." - Adam smith
i can find clever ways around d crippling debt, its called robbing a bank at gunpoint
I can't say this for the companies listed above but atleast within the realm of social media, they also want to bypass regulations and well, we all know how's it going.
On a long term, I do feel like there will be a drop in producitivity, thus destruction of economic value because of lack of enforcement of policies/such companies having reckless attitude about them.
Many of the products listed above actually seem to be very rent-seeking in my opinion (IIRC Someone on HN once said that from their personal experience talking to drivers, uber takes an approximate at the very least 40% cut or more)
(This might be a little off-topic?_ but one thing I think about tech regulations is that Facebook used to see if a young girl/minor girl took a selfie and then if they don't upload it, detect that she was insecure and then try to show them face beauty recommendations.
These girls can be our sisters/daughters fwiw. Facebook profits from insecurity/rage-bait and I would say that many social medias are the same as well, its just that the facebook example to me feels so eggregious and should be a uniting front for many to agree that there's a problem indeed.
You will be right when you say economical value is generated from profiting from insecurity/bypassing regulations but at what cost?
>Yeah, Polymarket is explicitly advertising this
no, they are not.
you might have been an insider working on the Apple Newton, and being enthusiastic about it you might have broken the rules and traded on your "knowledge"... and you would have lost your shirt. Same with your very knowledgeable enthusiasm about myriad other technologies. Ever wonder why Wall St doesn't show up at HN asking everybody's opinion about AI in order to leverage that info into billions?
an important element of "the wisdom of crowds" is many bits of microknowledge. How many Teslas will be sold next year is very dependent on how much the people who buy Teslas will earn next year (or how secure they will feel in their jobs) working in myriad other industries that have nothing to do with Tesla, along with the price of lithium, tires, and even ... wait for it... gasoline.
Polymarket's words you quote can just as likely refer to the wisdom of crowds. Or even, and this is the subtle part: Polymarket's insiders may believe, like you, that they are creating a market to trade on inside information, and yet they, like you, could be made wrong by the superior sum knowledge of the crowd exerting its invisible hands all together to tank your Apple Newtons.
>Yeah, Polymarket is explicitly advertising this
Yes they are. Polymarket has an ad glorifying a "fictional" scenario where someone gets a job as a janitor in a video game company to bet on related events in polymarket
It's interesting that the both replies under this comment are saying exact same thing, with the exact same term ("raison d'etre"... how often do you hear two random people think of this phrase at the same time?).
It might be nothing, but it'd be funny if karma farming bots are doing some 'reply frontrunning' over the internet.
I don’t consider “raison d'etre" a suspicious phrase. It’s not something people use multiple times a day, but I’d consider it common enough that when I hear someone say it, or in this case I suppose type it, that I would give it a second thought.
I don't think that two 13 and 14 years old accounts with not that many comment per week are bots.
Prediction markets exist to bypass gambling restrictions and monetize insider trading. It isn't a problem, it is their raison d'etre.
Yeah but someone has to give the money to the insider traders.
Betting and insider gambling wouldn’t work if people were educated and just didn’t gamble and so never used these platforms in the first place.
It’s an old question of whether government is responsible to protect people from themselves or should we give everyone freedom to go bankrupt in this specific way if they so desire.
I don’t know if there is a healthy way to gamble really. With drugs and substances at least there is some continuous spectrum but you either gamble your money or not.
Many, I suspect the overwhelming majority, of the markets are impossible to engage in insider trading in. So it's genuinely just an interesting way to monetize expertise. Chess is a great example. A lot of the money in that market is people turning on the latest chess engines and betting in accordance to position evals, but skilled players can see much more - like how a position that the computer gives as a dead drawn is, in reality, extremely difficult for one side to hold. So the market might give near 50% when it's perhaps more like 65/35. That's quite a large edge. There's also quite a lot of opportunities for arbitrage betting, which is by definition risk free.
>I don’t know if there is a healthy way to gamble really.
The majority of gamblers keep it within limits, only a small minority lack that control and inevitably end up impoverishing themselves.
The majority of people can’t even control their daily screen time, yet we are supposed to believe they can masterfully restrain their urges when money and dopamine are on the line? Nothing I’ve seen indicates human impulse control is that bulletproof. Furthermore, the 'I have it under control' narrative isn't proof of a healthy habit; it’s practically the universal slogan of active addiction.
Would you not say that somebody could equally cynically describe options trading in this way?
Prediction markets are very valuable because they provide information on issues that's generally much more accurate than alternative sources, such as polls. For instance Polymarket predicted 94% of the results for the 2024 election a month out, including the presidential. It can also provide more information than the news. For instance the chances of Khamenei being out as Supreme Leader of Iran by March 31st just skyrocketed up to 78%. That tells me far more than the various news sites minute by minute coverage.
Help me understand the relatively regulatory frameworks around each activity.
Jinx!
Gambling = investing. Buying stocks is also gambling. Share buybacks, dividends, fancy words for forking money from workers to some joe schmoe that bought a lottery ticket, i.e., a stock.
A stock is ownership in a business, same as ownership in a house. It is an asset that you own.
When you bet on blackjack or the superbowl, you own nothing and are simply wagering on the outcome of an event.
Gambling and equity ownership are not the same.
There's more to stock trading than just "buy and hold". Not all investing has gambling motivations but it is absolutely used as gambling tool by many
Archived version: https://archive.ph/XWrTA
Insider trading is so trivial on the prediction markets. I'd guess that it's actually the "feature" that results in the outcomes being so accurate.
Yup. There are good reasons why it's a problem in financial markets but NOT usually a problem in prediction markets:
https://www.economist.com/leaders/2026/02/18/why-insider-tra...
> In prediction markets, informed trading is not a crime or an injustice—it is a valuable service.
A big exception, however, is using prediction markets to make predictions on events regarding publicly traded companies.
The concept of a valuable service falls apart if players can influence the actual event. Without equal footing and basic honesty, you aren't measuring reality so much as you are subsidizing those with the power to manipulate it.
There's a feel good story where a parent can't afford a very expensive medical procedure to save a child, so someone tells them to place a massive bet in a prediction market for a certain event that may happen, and then they make it happen, therefore siphoning off money from the other gamblers for a good cause. Just a small way everyday people use the system against itself as a way to survive.
Yup. That is the other big exception described in the article.
Prediction markets have only events whose outcome is eventually publically resolved, by design. With insider trading, the trader is incentivized to release the information as late as possible, as close as possible to the events.
Why are these big insider bets being placed within hours of the event actually occurring? The insiders are doing the equivalent of bid sniping — waiting until the last possible moment to exercise.
This is how inside info works in trading markets in general. And again this is inevitable and by design.
It also makes them largely useless, because the timeline for which useful position is shared is compressed to the point where nothing useful can be gleaned from the information.
The thing is a “lie incentiviser” — a market entirely for suckers. That’s why 95% of volume is sports betting.
That’s setting aside insider positions having an influence on the outcome of events which is a whole separate problem.
> Why are these big insider bets being placed within hours of the event actually occurring?... It also makes them largely useless
They're not, usually. The more the outcome seems unlikely at first, the more you're incentivized to place your big bet earlier, when the odds seem worse, because you'll make a ton more money.
When these bets are placed only a few hours beforehand, that's often because the actual decision hasn't actually been made until then.
And there are plenty of areas where having notice of an hour or two is still hugely vulnerable.
why are publicly traded companies special? The speculation is not on securities.
You're not participating in a "market" (even though they call it that), you're purely gambling and speculating. People have been doing this since currency was a thing. Even gambling laws don't apply in my opinion. If I told you the government will publish evidence of aliens existing tomorrow, and we make a bet on it, that's not really gambling, it's not so much a game of choice as it is a competition of who can predict things better. The other person might have insider knowledge, but it's up to you to either take on that risk or assume despite that your knowledge about the topic will overcome their potential insider knowledge.
It’s literally gambling what are you talking about
Prediction markets are probably most "accurate" when at least some participants have genuinely superior information
Yes and no.
If you see prediction markets as how they were originally pitched (price ~approximating likelihood), then insider trading is good. It provides discovery.
If you look at what prediction markets are today (gambling, especially on sports, especially in states that have banned it), then insider trading is bad. Particularly when the people trading can influence the outcome (e.g. a pitcher purposefully throwing into the dirt.)
Of course. The point is not to make individual players money (that does sometimes happen as a side effect) it's to leverage their greed to find truth.
Except it's not "truth" as much as it is whatever has the most financial incentive to happen.
I mentioned a potential OpenAI insider in https://x.com/peterjliu/status/2024901585806225723, that was from 5 minutes of investigation. There are probably more. And then there's a lot of other companies.
Interestingly Kalshi has ‘banned’ insider trading, whilst polymarkets often tweets that some of their users must have inside information
https://news.kalshi.com/p/kalshi-trading-violation-enforceme...
https://x.com/polymarketmoney/status/2001056273500954784?s=4...
Manifold actually explicitly encourages insider trading, arguing that it leads to more accurate pricing. This was possibly defensible back when it was a cute funtime project run by a Bay Area polycule, but it’s probably going to get them in deep shit sooner or later, even though they don’t even use real-money betting.
The SEC only exists for dad to frame people.
The vast majority of insider trading schemes are not prosecuted, many leave no evidence trail at all without going deep into black-op classified territory.
Prediction markets are regulated by the CFTC in the US.
Your point stands, for now at least, since the CFTC seems entirely uninterested in prosecuting or regulating.
Thanks for making me aware of another federal agency :)
Seems to me prosecuting or regulating this sort of activity is futile, and pretty much serve only the interests of the mob. These markets make additional data open source, which otherwise might exclusively belong only to mob, so that's pretty cool. We democratized buying airstrikes.
It You may know how bad things really are, but if you don't, the lawboys are pretty much just playing pretend at this point, and have been for a while.
Mob wants me to add: if you try to buy an airstrike with our very based and functional cryptocurrency systems, you will probably just find mob. We have mob priced in, anybody with a significant amount of cryptocurrency knows this too.
It's not as simple as "buy an airstrike" comrade (we are referencing the person writing this post)
Though Manifold only uses their non-withdrawable play currency Mana.
A fun aside: this person obviously created a bunch of new Bitcoin accounts to hide their activity.
It makes you think that if you were able to surreptitiously add malicious side channel software into a popular npm package that you wouldn't just need to hunt for crypto wallets with balances.
You could also probably find a market for crypto wallets with small balances or zero balances. The history and date of creation would be the value to some.
This openai employee should have gone on the dark web to buy older addresses to cloak their activity.
It's sad to say that almost all crypto use cases point to fraud. I'm excited about crypto and there is some fascinating research around anonymous transactions (like zcash). But, that real utility is always overshadowed by the actions of charlatans or worse.
you can't "change the password" on a wallet, so a "used" wallet is highly unattractive. anything you put in it could be taken by the original keyholder who sold it to you.
Oh but you can. You can swap out the seed and generate any new addresses using that.
Yes, the old addresses will be compromised. That's fine. The point is that nobody can tell that you aren't actually using the same keys to generate new addresses anymore.
just move it to a new wallet
What investigators often look for isn't just wallet age, but funding patterns, timing, and linkages between wallets
I don't really understand. You can create wallets at will. What would be the value of one that someone else happened to create?
If it has a small transaction history it obscure the owners intentions. An address created right before a wager is obviously for one purpose.
Right but if you have the forethought to go buy such a wallet, you could just make one yourself in advance and create a transaction history.
Although I would argue that even this doesn't have much value. It's not a big problem that people know "there exists an insider at OpenAI". There are plenty of employees there that shield you from being discovered.
In fact it would be so difficult to find this person among them, assuming the most basic opsec, that I'm highly skeptical they actually fired anyone. I would sooner assume this is just an announcement designed to discourage the behavior, since no specifics are provided.
You are giving a lot of credit to this criminal. I really doubt they thought about this long in advance of the crime. Are you suggesting they got hired at openai so they could make calculated wagers at Kalshi? This was more likely a crime made impulsively.
First of all I'm not sure what they did is criminal. And it would have been Polymarket.
Nonetheless, you can just be a pre-existing OpenAI employee. As long as you take basic precautions, they (as in, OpenAI), are not going to be able to find out it was you.
Aged accounts, shell companies, it's a market
Not in this context it's not. Companies can't create Polymarket accounts. Polymarket accounts are just email addresses or alternatively crypto wallets. And there's no purpose I can imagine to aging them.
> created a bunch of new Bitcoin accounts to hide their activity
tell me you don’t understand crypto without telling me you don’t understand crypto.
Prediction markets are interesting when they are predicting future things nobody knows for sure.
"Predicting" private, known information is the wrong use case.
I can't believe these markets are still legal
Why would Washington ban their staffers' bonus program?
Inside trading on the public market and on the public blockchain, that's smart!
Makes you wonder how much "market accuracy" on these platforms is actually just leakage
Bad leaders get bad followers.
https://archive.ph/FOet2
We can not trust these AI corporations and organisations.
Good.
I do hope corporations in general take a harder stance on this. From a society perspective people with inside knowledge fleecing randoms is not a win. We've got that somewhat under control on the stock exchange, but have this absurd situation where on prediction markets it is a free for all and everyone pretends this is fine.
I also think corporations should distance themselves from individuals willing to fleece randoms. Trading in general is very wild west survival of the fittest but active exploitation of insider knowledge speak of very poor morale character
Honestly it seems stupid but fine to me. Like if someone random comes up to me on the sidewalk and says hey if OpenAI announces a browser tomorrow, you give me $100. If not I'll give you $1000. Obviously I'm not going to take them up on it, they clearly have inside information.
If you're betting on a prediction market without insider information then you're just... The fool who is soon parted from his money one way or another.
I generally feel like people should be free to do whatever insane stuff they want with their own lives.
> I generally feel like people should be free to do whatever insane stuff they want with their own lives.
The problem with people doing insane stuff with their "own money" is the burden they often exact on their family or society.
Perhaps the realm of independence starts when loans are reasonable and current, there is sufficient child support, and they are meeting a base savings rate for their retirement.
Speaking of which, perhaps any UBI could also use a minimal criteria, reviewed annually but without any barriers on first year eligibility.
I find it absurd that someone can create an unregulated market like Kalshi, and then all of us need to be beholden to it, even though the idea is stupid. How is it possible that someone can create a product that none of us agree on, and now everyone else has to conform to the rules around it because of the problems that it creates. I would rather Kalshi get shut down than the precedent of allowing this to control employees or people.
EDIT: I am wrong, see children
> The employee, she said, “used confidential OpenAI information in connection with external prediction markets (e.g. Polymarket).”
Note that “insider trading” is not illegal on prediction markets. The particular issue here is that the employee “disclosed” confidential information on a public forum by influencing the prices assigned to certain outcomes by prediction markets.
I don't think this is true, though enforcement is another thing and the standard is different than in securities markets. Prediction markets are regulated by the CFTC and the insider trading standard is “misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information” (vs any “material non-public information” for securities) https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstateme...
It is most definitely against the rules of the sites and illegal, especially on kalshi
That’s pretty common, you may think you own the data you work on, but you don’t. It’s proprietary confidential.
Who would think that? At every corporation where I've worked it's been explicit in both the contract and in HR training that this is explicitly not allowed.
why would you think you own data you work on
> you may think you own the data you work on, but you don’t
It's called <open>AI.
Wouldn't those prediction markets be more efficient if positions were associated with people's real names?
Like, a 100k wager from a finance dude carries some information, but a 10k wager from a staffer says a lot more!
that's right prole! only Congress has that privilege!
Prediction market, either gambling or inside trading.