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Post author here: To clarify, this is not a post from Polymarket.

This is talking about using Compound AI (product I'm working on) to query Polymarket data, including finding insiders, just as a fun example analysis you could do.

Often you need a well-calibrated probability of a future event to feed into some other analysis, and Polymarket is pretty great for that. An example is how much insurance (hedge) to buy for some disastrous event.

This is largely the classical objection to prediction markets. But prediction markets do have value to outside of the markets because people want to know the future.

I think you might misunderstand the value preposition. Polymarket wants insider trading. That's the whole point. They'll eventually cave in to PR pressure and deviate from the original purpose, though.

yes, they allow you to pay people who have information about the future for that information, in a distributed manner. this is great if, like many people, you want information about the future.

It's not just a gambling addiction, but many people consider themselves smarter than the average person, and nature's way of punishing these people is creating things like stock markets and polymarkets.

It’s a gambling site. The motivation behind it is to make money through transaction fees. You can bet on sports games too.

Some people have better data, like insiders.

Some have better models that predict with higher accuracy, given the same data.

There’s also a vague argument around hedging some actual risks that some market participants genuinely want to hedge… which depends a lot on the specific bet. Eg hedging exposure to specific political events, wars or even company announcements can be relevant and worth a premium for non-insiders. Where there’s a premium to be collected there are speculators to do so.

Because taking high variance slightly negative EV shots is not a terrible strategy when you have a long time horizon.

It is for people like me. I'm usually right about things before other people even know about them. Bought BTC in 2011, ETH in 2014 (funded the IPO), Tesla in 2013, Microsoft right when they replaced Ballmer (at $30 I think), Nvidia on the Covid crash day in 2020, learned Rust in 2017, took AI seriously two weeks after ChatGPT 3.5 launched. I never had any insider information. I typically have a good feeling for things.

An agricultural company hedging the price of soybeans is precisely hedging, not speculation. The insider information they have is their supply/demand/pricing picture. That's different than the colloquial definition of insider information which I've always taken to tie to event occurrence (or not).

Bribing employees to disclose confidential information entrusted to them is not kosher nor wholesome. I consider corporate insider trading on these markets to be analogous - if you're an employee and you trade, you are selling your employer's info for money. Nearly every employer would fire employees caught giving away confidential information for personal bribes.

In the stock market, Matt Levine likes to say that insider training is about theft, not fairness. You can be prosecuted for merely sharing info with a friend on a golf course who then proceeds to trade. Your crime is not trading (you didn't even trade), but misappropriating information you were entrusted with and not authorized to sell.

What about bets without insider participation, where you want the market to function as an aggregator of educated guesses? OP has one reaction to insider trading, but I imagine a very common alternative would be "those insiders make their money off of bettors like me, I shouldn't participate." Some questions are clearly insider-proof, but I imagine many questions have insiders who don't bet on Polymarket. If Polymarket is going to be a good prediction market, surely it should incentivize people to make predictions on those questions too?

Indeed. For those of us not gambling, it's really quite beneficial.

It's not that it's cheating _in the market_, but if people have an obligation to their employers, etc, to keep information confidential, then they are stealing from their employer by cashing in on it, as sure as if they had taken money from the till.

Because its an event contract with a defined upside/downside and time horizon. You know exactly what you stand to lose and gain and when. Makes it a valuable part of some intricate financial strategies.

"the dumb money"

Because you think you can predict the probability of the insider insidering each way and place a bet before they insider

I'm very tempted to agree that those markets are not providing a positive force, given the focus on questions for which a small group of people know the answer ahead of time. They are not sharing that information because it is not in their interest, and insiders likely won’t have a great time for long.

However, there is large value for some people in knowing when a country will be invaded: if you live there, you know when to leave; if you are an airline, when to stop scheduling flights there, or, if a lot of people are in the first group, up until when to schedule many more flights to get them out. But I’m positive the invading army would prefer some kid in a basement didn’t make one Lieutenant General on the committee obscenely rich overnight.

I wished the focused on markets where many people are part of the decision, like elections. There, the wisdom of the crowds would add some value.

> neither does the law

I don’t think that’s right. Prediction markets fall under CFTC oversight, and the CFTC absolutely has insider trading rules. We just haven’t seen any enforcement yet. Partly because the space is still new, and partly because enforcement priorities have been uneven lately (to put it mildly).

The CFTC has already signaled it’s starting to look more closely at insider trading in prediction markets. It's almost certainly just a matter of time. It's pretty likely a future administration will clamp down on this, if the current one doesn't.

I would go even further and say that it's a vital part of prediction markets as the intended theoretical goal is accuracy of predictions.

You can see when they buy or sell a position. It's on the blockchain so it's all public. And yes, copying positions is called copy-trading and it's extremely popular.

Orders aren't public though. Only the actual trades. This is important because by the time the trade is known by others very often the edge is gone. Especially if you have other people watching the same trader and they all try to copy the trade at the same time.

The returns on [1] seem to be worse than CDs, and with no government insurance, so it's not worth it at the current payout. But if a religious event spikes the odds, it'll be worth taking the other side of this bet.

Polymarket's legality has not yet been tested in many places, although I don't personally object to it being legal, there's a chance it might not be.

Also, I'd advise against betting on the Jesus market. You can't actually read the price as a probability here due to time value of money, opportunity cost, etc. So you'd lose money (or at best, gain nothing) by betting against it. It's priced correctly.

You can just stand near the stadium during practice and glean this info. I believe people did exactly that.