“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.
No, I was commenting on the current administration's corruption. I don't think most previous Republican administrations would have tolerated the type of insider trading we have seen from people close to the administration. It goes beyond ideology, turning a blind eye to this behavior among your subordinates is a sign of weak leadership and poor management.
What proof do you have that there is a difference between the Team Red and Team Blue, other than your not on the team you’re railing against.
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.
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.
Even if you buy the idea that Kalshi is a prediction market whose mechanism is gambling but whose product is accurate predictions, you don't have to buy the idea that insider trading is a good thing. Yes, in the rare occasion there exists someone with (a) insider information (b) confidence their actions won't impact their insider position and (c) access to capital - then you get extremely accurate predictions.
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.
Courts have ruled that these markets are regulated under the CFTC. So they are regulated. Now as to whether it is properly regulated, thats a different matter.
> “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 don't think he's saying people who do that right now will be prosecuted. I think he's just saying that it will become illegal so anyone doing it then runs the risk of being prosecuted.
> 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.
It is a federal crime, but one could be forgiven for assuming federal crimes committed by this administration will not be prosecuted while this administration is in power.
IANAL but a proud American haha, and we're very specific on not allowing ex post facto laws per our constitution. It would be a huge avenue for abuse of power by the government against the people.
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.
The executive branch executes laws (prosecutes crime) under its own interpretation of the law. It's the supreme court that determines if that interpretation is acceptable or fair. I.e. you could be prosecuted under an executive's interpretation of an existing law when the crime was committed and if the court deems it acceptable you could be found guilty by a jury. (In the USA)
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.
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?
Yes. This argument doesn't even apprehend insider trading laws on regulated securities markets in the US, where the crime is about theft, not fairness.
If all one cares about is the accuracy of predictions (i.e. setting aside value judgements vis-a-vis society or fairness), it does seem like "insider trading" should make prediction markets more accurate.
It makes them more accurate at the time the insider places the bet. But to maximise profit, they are incentivised to misdirect before they place the bet (and worse still from society's perspective, are incentivised to take counter-intuitive or downright harmful actions to profit at the expense of people who bet on the view that it made no sense for them to do that)
You are a spokesperson or decision maker for an entity which is bet on, like a sports team or the government. You publicly indicate that you are going to do one thing (probably the thing that makes most sense), so the market bakes that into their assumptions and offers favourable odds for bets on doing the other thing. Then you place your bet shortly before you do the other thing.
(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)
Agreed. So who are the outsider chumps taking the other ends of these bets? At this point, it doesn’t make sense to participate unless you’re an insider.
Prediction Markets, unlike many gambling sites, create a marketplace for odds. There's no house taking positions like in certain casinos or on DraftKings. Market makers offer shares in Yes and No while bettors buy and sell these odds to each other or to market makers.
when have we ever defined gaming/gambling as 'a thing where the house takes a rake' ? I don't understand this argument and it always feels disingenuous when brought up.
I'm not really sure what position you're taking but taking a rake can certainly change the legality of an activity; in California, playing poker in private is considered a social game and is legal, _except_ if party is taking a rake.
Er it's not. Gambling where the house takes a cut is considered a form of commercial gambling and is often made illegal or has stipulations applied to it.
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.
On the Polymarket homepage right now, one of the featured markets is whether or not Bitcoin will be up or down over the next 5 minutes. It's hard to justify that as anything more than illegal gambling.
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.
Polymarket is not CFTC regulated, it's considered illegal in the US. CFTC does not allow betting on securities prices. Cryptocurrency is a bit of a gray area because it's not considered a registered security.
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.
> Cryptocurrency is a bit of a gray area because it's not considered a registered security
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.
> Their defense is that they are a gamified futures contracts and hence should fall under CFTC regulation.
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.
Prediction markets don’t need to surface private knowledge, they can surface sophisticated interpretations of public knowledge. They are certainly gambling if you’re an unsophisticated rube (which is most of the users).
I mean that's why insiders are being investigated right?
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?
First, you’re describing the insider trading that is not permitted.
Second, the majority of prediction markets are predicting utterly mundane things like sports. The tiny number of news grabbing markets are not representative.
“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.
You give the Dems too much credit.
No, I was commenting on the current administration's corruption. I don't think most previous Republican administrations would have tolerated the type of insider trading we have seen from people close to the administration. It goes beyond ideology, turning a blind eye to this behavior among your subordinates is a sign of weak leadership and poor management.
If they’ve been fine with Congress trading stocks on insider knowledge forever why would this be any different?
Because the law protects members of Congress, not
>people close to the administration.
What proof do you have that there is a difference between the Team Red and Team Blue, other than your not on the team you’re railing against.
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.
There was a downward trend during the Biden years [1] but "both sides same" is not even a little bit true.
[1] https://www.citizen.org/article/biden-doj-2024-corporate-cri...
Hey now, you don't to be divisive do you?
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.
Even if you buy the idea that Kalshi is a prediction market whose mechanism is gambling but whose product is accurate predictions, you don't have to buy the idea that insider trading is a good thing. Yes, in the rare occasion there exists someone with (a) insider information (b) confidence their actions won't impact their insider position and (c) access to capital - then you get extremely accurate predictions.
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.
Courts have ruled that these markets are regulated under the CFTC. So they are regulated. Now as to whether it is properly regulated, thats a different matter.
Zero chance. This country has become an absolute joke of corruption, especially anything related to insider trading.
> “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 don't think he's saying people who do that right now will be prosecuted. I think he's just saying that it will become illegal so anyone doing it then runs the risk of being prosecuted.
> 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.
It is a federal crime, but one could be forgiven for assuming federal crimes committed by this administration will not be prosecuted while this administration is in power.
IANAL, but my understanding is that they can make it a retroactive crime or clarify existing laws in ways that include prediction markets.
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.
IANAL but a proud American haha, and we're very specific on not allowing ex post facto laws per our constitution. It would be a huge avenue for abuse of power by the government against the people.
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.
The executive branch executes laws (prosecutes crime) under its own interpretation of the law. It's the supreme court that determines if that interpretation is acceptable or fair. I.e. you could be prosecuted under an executive's interpretation of an existing law when the crime was committed and if the court deems it acceptable you could be found guilty by a jury. (In the USA)
They absolutely cannot make it a retroactive crime. This isn't so much con law as high school civics in the US.
A couple decades ago I would have agreed with you. But the United States today does not have rule of law, only the pretense of it.
“Retroactive” crime is as you say, ex post facto, and specifically disallowed by the US Constitution.
No, you cannot retroactively make something a crime as you have found.
That way lies madness.
If the govt could do that, they could arrest anyone, anytime simply by making whatever they did yesterday retroactively illegal.
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...
This is a case where normal people's ideas of fairness may never agree with the experts.
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.
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?
Yes. This argument doesn't even apprehend insider trading laws on regulated securities markets in the US, where the crime is about theft, not fairness.
If all one cares about is the accuracy of predictions (i.e. setting aside value judgements vis-a-vis society or fairness), it does seem like "insider trading" should make prediction markets more accurate.
It makes them more accurate at the time the insider places the bet. But to maximise profit, they are incentivised to misdirect before they place the bet (and worse still from society's perspective, are incentivised to take counter-intuitive or downright harmful actions to profit at the expense of people who bet on the view that it made no sense for them to do that)
How does this trade work? Nobody knows who the insider is, they only see market direction.
You are a spokesperson or decision maker for an entity which is bet on, like a sports team or the government. You publicly indicate that you are going to do one thing (probably the thing that makes most sense), so the market bakes that into their assumptions and offers favourable odds for bets on doing the other thing. Then you place your bet shortly before you do the other thing.
(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)
Agreed. So who are the outsider chumps taking the other ends of these bets? At this point, it doesn’t make sense to participate unless you’re an insider.
You can be an outsider with expertise, in which case you can still beat the non-expert outsiders.
So now who are the non-expert outsiders and why would they bet? Outsiders who think they are experts but are wrong.
Prediction Markets, unlike many gambling sites, create a marketplace for odds. There's no house taking positions like in certain casinos or on DraftKings. Market makers offer shares in Yes and No while bettors buy and sell these odds to each other or to market makers.
when have we ever defined gaming/gambling as 'a thing where the house takes a rake' ? I don't understand this argument and it always feels disingenuous when brought up.
I'm not really sure what position you're taking but taking a rake can certainly change the legality of an activity; in California, playing poker in private is considered a social game and is legal, _except_ if party is taking a rake.
Legally, they have to disclose all their probabilities (under most regulatory regimes).
Er it's not. Gambling where the house takes a cut is considered a form of commercial gambling and is often made illegal or has stipulations applied to it.
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.
You have managed to conjure a definition of "gambling" that excludes casino blackjack.
This is gibberish.
> 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
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...
On the Polymarket homepage right now, one of the featured markets is whether or not Bitcoin will be up or down over the next 5 minutes. It's hard to justify that as anything more than illegal gambling.
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.
Polymarket is not CFTC regulated, it's considered illegal in the US. CFTC does not allow betting on securities prices. Cryptocurrency is a bit of a gray area because it's not considered a registered security.
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.
> Cryptocurrency is a bit of a gray area because it's not considered a registered security
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-...
> Their defense is that they are a gamified futures contracts and hence should fall under CFTC regulation.
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.
Prediction markets don’t need to surface private knowledge, they can surface sophisticated interpretations of public knowledge. They are certainly gambling if you’re an unsophisticated rube (which is most of the users).
How does one "interpret" public knowledge to time bets so accurately right before Trump's announcements?
I mean that's why insiders are being investigated right?
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?
First, you’re describing the insider trading that is not permitted.
Second, the majority of prediction markets are predicting utterly mundane things like sports. The tiny number of news grabbing markets are not representative.
Translation: "it's not our problem"