Nobel Peace Prize 2025: María Corina Machado

~10 hours or so before the announcement bets on her skyrocketed on Polymarket

https://x.com/polymarket/status/1976434242386317640

Someone without any history whatsoever put 70k on her 5 hours before the announcement

https://x.com/polywhalewatch/status/1976499384373121488

Trump was never above 5-10% and out of nowhere she was the winner (see the 1 day market view) https://polymarket.com/event/nobel-peace-prize-winner-2025?t...

This isn't illegal but feels like it should be illegal. You don't see corporate officers trade their stocks right before a big announcement, because there are laws on it.

Other than the fact that polymarket is legally not a stock market, what really is the difference between insider trading on a stock market vs insider trading on polymarket? Does anyone have a good argument for why one should be illegal while the other is legal?

It's to the benefit of the market to have such rules, so it's likely a matter of time, assuming growth continues.

The argument goes, the purpose of prediction markets is not to be fair, it's to provide information. Allowing insider trading benefits that purpose. And I think that's fair - this is not a place to invest your retirement savings, it's essentially gambling.

> This isn't illegal but feels like it should be illegal.

Why?

Is someone forcing you to place bets at gunpoint?

> You don't see corporate officers trade their stocks right before a big announcement, because there are laws on it.

Depends on jurisdiction.

Just the opposite. It's to the 'benefit of the market' to let insiders trade. That is, if you think that the point of a prediction market is to get accurate predictions (and the point of a financial market is to get accurate prices).

However, I agree that they might get rules against this. But not to benefit the market, just because people think this would be proper. Social desirability bias is strong.

If you actually want to know 'why' people think so, have a look at all the discussions around insider trading in financial markets. No one is forcing you to buy stocks at gunpoint, either.

(And, yes, there are good arguments in favour of allowing insider trading in all markets, and a few against.)

If the goal is accurate predictions, then the market works much better with insider trading like this.

In the UK some MPs and police officers put bets on the date of the next general election on the basis of inside information. Apparently you can be prosecuted for cheating in a bet:

"The investigation, initiated in June 2024, focused on individuals suspected of using confidential information - specifically advance knowledge of the proposed election date - to gain an unfair advantage in betting markets. Such actions constitute an offence of cheating under Section 42 of the Gambling Act 2005, a criminal offence."

https://www.gamblingcommission.gov.uk/news/article/gambling-...

> Does anyone have a good argument for why one should be illegal while the other is legal?

I don't care either way but for the sake of argument:

Stock market is something you can't avoid (ignoring hermits), so an insider trade can ruin your pension fund or other financial wellbeing with you having no way to opt out of the risk, so the government protects you. (This is good!)

Polymarket is more like a bet between friends. You don't have to play but if you do understand it's unregulated and someone can cheat.

It would be interesting to see if someone can develop insider trading tracking algorithms to uncover highly probable useful information out of prediction markets before major public announcements. It would be unfair to people involved in markets, but highly beneficial to everyone else, at least so long as prediction markets remain relatively niche.

I kind of feel like abusing the information asymmetry when doing insider trading in a betting market should be illegal regardless if the purpose is to provide information or not, or if it's considered gambling or not. Just like doing so with stocks is illegal today.

In the long run, if participants feel they can't ever win because there's always an insider taking advantage, then participants might leave and that's to the detriment of the market. So it might be in the interest of the market to make sure everyone has a fair enough chance. Finding the right balance here is somewhat of an art.

This is similar to the way all football teams benefit from fair referees and even matches, even if sometimes it means they lose.

Also: the point of an exchange is to make money. Different types of exchanges have different fee structures, but generally their profit is a function of volume, so there primary objective is to attract volume. Since every trade / bet requires two participants, they need to balance the needs of both participants to make it work. Price discovery is a positive side effect of efficient and fair markets, which is why as a society we like them and encourage them, but it isn't what they are trying to achieve except inasmuch as it encourages participation.

why? The purpose of the prediction market is not to be fair to market participants, it's to aggregate information regarding an event. There is a public benefit to allowing participants to bet on insider information. It could be even argued there is nothing unfair about it if everyone is free to do it/can anticipate others might have insider info. If we actually limited the market to participants who have insider information(not feasible because we can't verify), that'd be a great public utility. this is the next best thing for all those who don't participate in it. These are specialized markets and we shouldn't rush to 'protect' people who bet on very technical events happening.

It's easier to justify stock markets banning insider information because there are ignorant participants through their investment funds who we would like to protect. Why would we protect willing participants betting on arbitrary events? Even if we ban on this one too, should we in general be able to create a market that explicitly allows insider information for some arbitrary thing, insideinformationverywelcomemarket, where everyone is aware it's the main point of the market or shall we just protect these people from themselves?

The purpose of the stock market is to play matchmaker between companies and capital. Insider trading erodes trust of unaffiliated capital owners and thus hurts the purpose.

A prediction market, on the other hand, aims to provide the best possible probabilities on events (arguably), and "insider trading" helps that purpose.

Why? This net saves people money, because it makes markets reflect reality faster.

Other than a vague sense of "fairness", can you articulate why insider trading should be illegal?

The purpose of banning insider trading in markets is not "fairness". The purpose is to encourage participation. We want to promote investment in the stock market by the general public who don't have insider information, because that stimulates the economy by providing capital for productive businesses.

Prediction markets don't provide capital for productive businesses. The only purpose of a prediction market is to get accurate predictions. Insider information makes the predictions more accurate. Unlike the stock market, we don't need to encourage public participation in prediction markets. In fact we might want to discourage it because it's essentially gambling. Therefore, we should definitely not outlaw insider trading in prediction markets.

It being unfair might dissuade people from using it, that would kinda compromise the goal of helping markets reflect reality

Are you suggesting that an unregulated gambling system primarily advocated for by gamblers in an ecosystem rife with degenerate gambling and outright fraud that advertises itself with an entirely theoretical and vibes based theory of "better information" that is primarily filled with people desperate to make gambling a "good thing" and provides ample opportunity for the incestuous and deeply connected crypto community to fleece people who have repeatedly demonstrated themselves to be delicious targets...

You think maybe that might not be on the straight and narrow?

Maybe we should get people to bet on it! Gamblers routinely show that they have a strong understanding of the world, right? What? No I don't have a problem. Hey do you have a few dollars I can borrow?

But no one is actually hurt by it.

(I'm not saying you're wrong, btw. People aren't always rational.)