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Kalshi CEO expects US DOJ to prosecute insider trading cases

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Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#111

Post by vkou »

usrusr wrote: post #99

In stock markets, insider trading is a big no not because it ruins someone's gambling habit, but because the entire concept of the corporation requires a certain amount of trust of financiers in financees. That whole pooling of capital thing, to do stuff that has too high a capital requirement to start individually. When shares are publicly traded, that trust is impossible when holders have to assume that they will b…

> Prediction markets don't have any "natural" reason like that for excluding insider trading.

No, they have a different reason. Consider the consequences of a sufficiently large prediction market bet on whether or not will be assassinated this year.

Consider also the consequences of insiders and decisionmakers having an immediate financial incentive to take the other side of a bet whose outcome they control.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#112

Post by wutwutwat »

tptacek wrote: post #97
stouset wrote: post #89

Earlier quoted context omitted.

Not just insider information, but insider access . If the outcome of some prop bet is under the control of a handful of people, those people can trivially conspire to produce whatever outcome is most profitable to them.

If the outcome of a prop bet really is fully controlled by insiders, so that those insiders are making decisions based on betting outcomes, then allowing that betting to occur seems antisocial and counterproductive to begin with. This is another problem with the Polymarket/Kalshi species of "prediction market".

> This is another problem

It is insider trading, the thing everyone here is talking about

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#113

Post by 0xbadcafebee »

Donald Trump Jr. is a "strategic advisor" to Kalshi, and is on the advisory board of Polymarket. Fed chair nominee Kevin Warsh holds a stake in Polymarket. CFTC Chairman Michael Selig, a Trump appointee, has advocated for prediction markets, and wants to put the CEO of Polymarket on an advisory committee. David Urban, a lobbyist who worked for Trump, was hired by Polymarket.

If there are any prosecutions, it won't be anyone in or connected to the administration. Even if these groups weren't in bed together, the fact that the administration has obviously been engaging in insider trading, and the DoJ hasn't done anything about it, makes it clear nothing will happen to them in the future either. The door to the vault is open and they're casually walking out with the public's money falling out their pockets.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#114

Post by tptacek »

AnthonyMouse wrote: post #109
tptacek wrote: post #36

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…

> 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. That depends on what the effects are. Suppose that predicting things well requires both information and analysis. Early access to information is therefore a competitive advantage: Even if you're not as good at a…

At the point where you're arguing that it's better for a prediction market's prices to be less accurate, I think we've departed the original premise.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#115

Post by mlmonkey »

bradleybuda wrote: post #12
mlmonkey wrote: post #7

Earlier quoted context omitted.

You give the Dems too much credit.

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...

How many people were jailed by Obama's DOJ for 2008 crash?

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#118

Post by AnthonyMouse »

tptacek wrote: post #114
AnthonyMouse wrote: post #109

Earlier quoted context omitted.

> 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. That depends on what the effects are. Suppose that predicting things well requires both information and analysis. Early access to information is therefore a competitive advantage: Even if you're not as good at a…

At the point where you're arguing that it's better for a prediction market's prices to be less accurate, I think we've departed the original premise.

You're predicting something which is happening in six months but is affected by data which is being published today. Do you want a more accurate price that comes in the afternoon, or a less accurate price that comes in the morning and then stays less accurate for months because the insiders ate too much of the expected profit margin to justify more expensive analysis?

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#119

Post by miohtama »

vkou wrote: post #111
usrusr wrote: post #99

In stock markets, insider trading is a big no not because it ruins someone's gambling habit, but because the entire concept of the corporation requires a certain amount of trust of financiers in financees. That whole pooling of capital thing, to do stuff that has too high a capital requirement to start individually. When shares are publicly traded, that trust is impossible when holders have to assume that they will b…

> Prediction markets don't have any "natural" reason like that for excluding insider trading. No, they have a different reason. Consider the consequences of a sufficiently large prediction market bet on whether or not will be assassinated this year. Consider also the consequences of insiders and decisionmakers having an immediate financial incentive to take the other side of a bet whose outcome they control.

It's called assassination markets.

There is a RFC on Bitcoin talk from 2011 https://bitcointalk.org/index.php?topic=26350.0

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#120

Post by AnthonyMouse »

tptacek wrote: post #97
stouset wrote: post #89

Earlier quoted context omitted.

Not just insider information, but insider access . If the outcome of some prop bet is under the control of a handful of people, those people can trivially conspire to produce whatever outcome is most profitable to them.

If the outcome of a prop bet really is fully controlled by insiders, so that those insiders are making decisions based on betting outcomes, then allowing that betting to occur seems antisocial and counterproductive to begin with. This is another problem with the Polymarket/Kalshi species of "prediction market".

The problem is it's pretty hard to tell ahead of time whether that's what happens.

Suppose some large private company has to decide whether they're going to build a new facility in city A or city B. This is useful information for all kinds of reasons. If you're a vendor then you need to start making preparations to set up shop in the city where your big customer is moving etc.

The company's analysis shows it would derive a $10M advantage from building in city A. The prediction market is correctly leaning that way. If there are only enough counterparties that someone who now bets on city B and wins would make $5M, everything works the way it should and the company goes with city A. But if there are enough counterparties that a winning bet on city B would net you $25M then the company can place the bet, eat the $10M loss by choosing city B and come out $15M ahead.

But the $10M number isn't public. It's essentially the thing you wanted the market to predict and it could be arbitrarily larger or smaller than that. So how are you supposed to know if the prediction market will be predicting the result or determining it?

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