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.
At most some low-level flunkie will get named and slapped on the wrist.
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.
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.
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.
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...
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.
Why should my tax dollars be spent on helping a bookie run their gambling business? Insider trading laws and prosecution in the financial markets makes sense, because the fair and impartial enforcement helps all of our economy, and allows capital to do its job investing in productive ventures.
These prediction markets are not that. They aren’t sources of investment for a productive enterprise, it is pure gambling.
Why should the US government spend money making sure people can gamble? If people want their gambling to be fair, they can pay for their own enforcement.
I like the idea of insider trading running rampant on these platforms. Once people realize that the other side of their bet knows the outcomes in advance, maybe they will stop betting their money on these platforms and they can just die.
> 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.
Fully agree, especially since Kalshi just caught one of the editors of MrBeast's videos red handed (he was betting on the "What words will MrBeast say in his next video" market with 100% accuracy) and while Kalshi banned the guy the DOJ has shown 0 interest in doing anything with that.
So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?
You can disagree with the libertarian argument, but I don't see how you can say that Polymarket et al. are something other than a prediction market. Can you explain where you see the difference?
In every other case you get worse predictions. Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. So in the general case it reduces the ability of the predictors to push the market in the right direction, because they always have to risk manage the fact that someone out there might run them over with insider information.
So if a market is trying to maintain a veneer of fairness it’s just using a prediction market as cover and is something else.
No. Their defense is that they are a gamified platform for futures contracts and hence should fall under CFTC regulation.
The CFTC also cracks down on insider trading, but it took time for them to write regulations to catch up with prediction markets.
It is now a priority [0] and they have just started a paid whistleblower [1] programs specifically to catch insider traders within prediction markets.
[0] - https://www.lw.com/en/insights/new-cftc-enforcement-director...
[1] - https://www.whistleblower.gov/whistleblower-alerts/Insider_T...
[1] https://www.citizen.org/article/biden-doj-2024-corporate-cri...
Don't assume safety.
Edit - was curious:
https://en.wikipedia.org/wiki/Ex_post_facto_law
So maybe not?
I'd love a judicial scholar's input.
So now who are the non-expert outsiders and why would they bet? Outsiders who think they are experts but are wrong.
That might be the defense. They are inherently designed to leverage insider trading though. I made a top level comment with links/resources that argues why.
Just because there is less reports of corruption in the past by dems doesn't change anything. Corruption extends beyond parties, its not a political problem. Its a human problem.
I don't expect to see much change when the dems come back into power, albeit, it be less apparent and of a different nature, I.E more indiscriminate surveillance and less racial profiling ..
There is some kind of cultural thing going on that transcends the party's IMHO that's keeping this problem going.
The average person does not do this. People trade individual stocks all the time, despite every other market participant (banks, hedge funds, etc.) having better information and technology.
It's why institutions like Citadel pay for retail order flow. They know that retail traders don't have an edge and, if anything, often end up being negative signal.
The caveat I added to my initial comment that you also mentioned was that they could try to find a relevant existing law and retrofit it, e.g. general securities laws, and say that this is a securities market and so this has always been illegal — but it's very unlikely and I doubt it would work. Far, far more likely that we pass explicit laws about this.
For example, given Nancy Pelosi’s effectiveness as an investor, she was effectively a highly successful day trader with a side hustle as a representative of her constituents.
Framing this as a Left v Right, is at best, naive.
I find prediction markets to be interesting on two fronts:
1) They like a really good way to determine the probability of something happening, which is interesting for events like elections
2) It provides an avenue for smart bettors to take advantage and sharpen their skill, whereas they get severely limited or banned from traditional sports books
However, it seems like all incentive structures for the markets and consumer behavior will steer these things to degenerate gambling.
Nobody in this administration is going to be prosecuted no matter who is in power.
Second, the majority of prediction markets are predicting utterly mundane things like sports. The tiny number of news grabbing markets are not representative.
But sometimes the answer is more difficult than it seems. Is a mid level military officer an insider? If you overheard a conversation on Capitol Hill are you an insider?
You're responding to a comment that explicitly said I wasn't doing that. This is not Left vs Right, it's Trump vs everyone else.
These pardons go to convicted criminals who have ties to Trump and his administration, or who have donated significant sums to Trump.
It is very obvious the current administrating is the most corrupt administration in modern history by several orders of magnitude.
If you're asking about why prediction markets fall under the CFTC, this is actively evolving but generally prediction markets are considered to be under the CFTC because they can be used to hedge against events.
For example if you're trying to do business in Oman but you're worried about Iran tensions spilling over, you could take a Yes position on an Iran conflict bet as a hedge. You may lose business but can make some of it up in the hedge.
"Gambling" the concept legally is very complicated and has a lot to be understood, so I'd suggest doing some searching or LLM asking if you want an intro on philosophical definitions or the legal landscape.
N.B. it becomes a bit frustrating to talk about financial and regulatory things on this site because the level of knowledge is generally "I read some articles on social media about markets" level.
That way lies madness.
If the govt could do that, they could arrest anyone, anytime simply by making whatever they did yesterday retroactively illegal.
(it's true that low level insiders might have limited influence on the actual outcome, but the current suspicion with prediction markets is that some of the participants do have that influence, or are being intentionally helped by people that can)
I'm also not going to defend Congressional stock trading. I think it should be banned. But there are some differences about who is doing the trading/betting, what specifically they are trading/betting on, and what that information communicates to the public. There's a fundamental difference between a random staffer betting the US will attack Iran on a certain date which becomes public immediately compared to a Congressperson themselves buying stock in a weapon manufacturer in the leadup to an attack knowing the purchase won't be disclosed to the public for up to 45 days.
Like I said, I would be against both, but it's much easier to justify Congressional stock trading than the insider trading we see on these prediction markets. Afterall, it isn't like Congress is moving to remove all insider trading legislation, so there is some recognition of nuance here even if they give themselves more leeway than we would want.
>people close to the administration.
Additionally, the SEC and CFTC guidance on what digital asset can be treated as a security and what can be treated as a commodity was only released a couple weeks ago [0].
Stuff is changing rapidly so it's best to keep an experienced regulatory lawyer on retainer.
> N.B. it becomes a bit frustrating to talk about financial and regulatory things on this site because the level of knowledge is generally "I read some articles on social media about markets" level.
Yep. It is what it is.
[0] - https://www.morganlewis.com/pubs/2026/03/crypto-clarity-sec-...
There's a body of legislation and legal precedent that actually defines gambling and how that's distinct from markets.
The CEO of Kalshi on Wednesday said he expects the US Department of Justice to prosecute cases of insider trading on prediction markets like his own platform.
“If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,” Tarek Mansour said at Semafor World Economy. “I actually do expect the DOJ to prosecute some of these cases,” he added.
Prediction markets like Kalshi and rival Polymarket have been facing public outcry over concerns about insider trading, spurred by large, suspiciously timed bets on public events.
The concern is that people who already know the answers to questions — for example, how many times US President Donald Trump will visit his Mar-a-Lago estate in April, or when SpaceX will announce its IPO — might trade on those markets, and make an easy buck. Companies have been slow to catch up and implement their own rules preventing it, Semafor reported last month.
Mansour said Kalshi’s view is that insider trading “should absolutely be banned.”
“We can impose fines all the way to criminal prosecution,” he said. “We’ve released some cases. There’s more coming. But over time, it’s going to be a bit of a chicken and the egg. There’s always going to be bad actors. The goal is to just squash them, like find them and deter them.”