This issue reveals the gap between the prediction market premise and what these things actually are, which is: unregulated prop gambling venues.

If things like Kalshi and Polymarket are prediction markets, then, at least as far as the intrinsic concerns of the market itself are concerned, insider trading is a good thing; literally part of the point.

If they are instead how they function today, then insider trading is a game-breaking fairness issue, like having a device to read your opponents cards in a poker game, and then they're a real problem.

You can tell what these businesses think their platforms are for by how they handle these issues.

I don't understand why it is a crime under current US law.

Prediction markets can only do sports gambling (the vast majority of their volume) because they self-certify under the CFTC. The CFTC doesn't have the same standards of "insider trading" as the stock market, because insider trading is the entire point of business at the CFTC!

If you're trading, like, oil futures or wheat futures or whatever, you are likely doing so specifically because you have inside information about your business needs or production that you want to hedge.

I understand why people are mad about gambling versus someone who has insider information, but under current US law I'm not sure that there is a case to be made.

> “If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,”

Am I misunderstanding? It seems like two different statements he always conflates.

If it becomes a federal crime at some point, it will become illegal from that point — you can't prosecute people for acts committed before they were crimes.

The only way that this could be a federal crime right now is if the government starts prosecuting it under existing laws without any changes. I don't see that as likely.

I understand he wants to deflect liability from his platform, but I guess I have to concede that it seems like a legitimate defense. We allow the stock market to exist even though insider trading can happen and it's (I think?) not Nasdaq's or NYSE's responsibility to pursue that. We have a legal system for that.

I think there is still the debate to be had whether prediction market enable too much criminal activity and insider trading compared to traditional stock markets and therefore need to be limited for pragmatic reasons (i.e. the legal system can't keep up), but that's a different discussion.

Well... it is a felony.

Can I bet on this?

Isn't the entire point of prediction markets to surface insider trading as a feature and not a bug?

Short, casual reads

- https://jamaalglenn.substack.com/p/prediction-markets-were-d... - https://money.com/prediction-markets-insider-trading/

More academic?

- https://mason.gmu.edu/~rhanson/insiderbet.pdf AND - https://www.youtube.com/watch?v=4yZKGbq1YmA

Discussion on possible solutions that references the academic view

- https://www.dopaminemarkets.com/p/how-to-solve-insider-tradi...

Ok, but isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling?

So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?

The Kalshi CEO should put their considerable wealth into bets on Kalshi that this will happen. I'll wait.

We have a situation where selective prosecution is used to command loyalty while the ringleader has been immunized from any kind of legal consequences by the Supreme Court, 6 of whom were appointed by said ringleader. Pardons are pretty openly sold now. It's cheaper to rip off the government then pay a fraction for a pardon, erasing any fine or repayment.

I bet there are lower level staffers who are profiting off inside information on prediction markets. Maybe some will be made an example of. I won't hold my breath.

But all the big insider trading is occurring in securities markets, particularly with oil futures and SPY futures. It's reached the point where no professionals trust the futre oil prices at all and and the physical oil prices differ from the future price by as much as $60/barrel. We've had $1b+ bets on SPY futures minutes before market-changing news. We don't know for sure who's doing this but my guess is that it's at the highest levels of the administration.

I'm guessing it's Trump insiders who are busy making bank on inside info. Some of them just happen to be big investors in Polymarket and Kalshi. There's no way they are getting investigated, let alone prosecuted, by this DOJ.

At most some low-level flunkie will get named and slapped on the wrist.

“If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime, I actually do expect the DOJ to prosecute some of these cases”. I'm guessing that “some point” is sometime after Jan 20th 2029.

Translation: "it's not our problem"

Zero chance. This country has become an absolute joke of corruption, especially anything related to insider trading.