OpenAI fires an employee for prediction market insider trading
wired.com
wired.com
https://news.kalshi.com/p/kalshi-trading-violation-enforceme...
https://x.com/polymarketmoney/status/2001056273500954784?s=4...
The vast majority of insider trading schemes are not prosecuted, many leave no evidence trail at all without going deep into black-op classified territory.
Your point stands, for now at least, since the CFTC seems entirely uninterested in prosecuting or regulating.
Seems to me prosecuting or regulating this sort of activity is futile, and pretty much serve only the interests of the mob. These markets make additional data open source, which otherwise might exclusively belong only to mob, so that's pretty cool. We democratized buying airstrikes.
It You may know how bad things really are, but if you don't, the lawboys are pretty much just playing pretend at this point, and have been for a while.
Mob wants me to add: if you try to buy an airstrike with our very based and functional cryptocurrency systems, you will probably just find mob. We have mob priced in, anybody with a significant amount of cryptocurrency knows this too.
It's not as simple as "buy an airstrike" comrade (we are referencing the person writing this post)
It makes you think that if you were able to surreptitiously add malicious side channel software into a popular npm package that you wouldn't just need to hunt for crypto wallets with balances.
You could also probably find a market for crypto wallets with small balances or zero balances. The history and date of creation would be the value to some.
This openai employee should have gone on the dark web to buy older addresses to cloak their activity.
It's sad to say that almost all crypto use cases point to fraud. I'm excited about crypto and there is some fascinating research around anonymous transactions (like zcash). But, that real utility is always overshadowed by the actions of charlatans or worse.
Although I would argue that even this doesn't have much value. It's not a big problem that people know "there exists an insider at OpenAI". There are plenty of employees there that shield you from being discovered.
In fact it would be so difficult to find this person among them, assuming the most basic opsec, that I'm highly skeptical they actually fired anyone. I would sooner assume this is just an announcement designed to discourage the behavior, since no specifics are provided.
Nonetheless, you can just be a pre-existing OpenAI employee. As long as you take basic precautions, they (as in, OpenAI), are not going to be able to find out it was you.
By talking about aged accounts and shell companies, I meant that there's black markets for aged accounts from social media platforms, and there's markets for shell companies (and to some extent warmed up emails). In both cases the age of the company gives it some value, as anyone doing due diligence on the accounts will weigh the age of the account as a positive signal.
Age of an account is a costly signal and significantly slows down Sybil attacks. Spammers pay some cost for aged accounts (even if it's just waiting and holding the inventory) and for defenders it works as a PoW system, they don't need to ignore the age signal, it works just fine.
tell me you don’t understand crypto without telling me you don’t understand crypto.
Yes, the old addresses will be compromised. That's fine. The point is that nobody can tell that you aren't actually using the same keys to generate new addresses anymore.
"Predicting" private, known information is the wrong use case.
Obviously, in a case like this, an individual would be violating the terms of their employment/non-disclosure agreement. I agree that is bad!
I don't think that damns the concept of "predicting known information".
I wrote about why prediction markets have a structural insider trading problem that nobody's solved yet: https://philippdubach.com/posts/the-absolute-insider-mess-of...
Betting and insider gambling wouldn’t work if people were educated and just didn’t gamble and so never used these platforms in the first place.
It’s an old question of whether government is responsible to protect people from themselves or should we give everyone freedom to go bankrupt in this specific way if they so desire.
I don’t know if there is a healthy way to gamble really. With drugs and substances at least there is some continuous spectrum but you either gamble your money or not.
The majority of gamblers keep it within limits, only a small minority lack that control and inevitably end up impoverishing themselves.
Prediction markets are very valuable because they provide information on issues that's generally much more accurate than alternative sources, such as polls. For instance Polymarket predicted 94% of the results for the 2024 election a month out, including the presidential. It can also provide more information than the news. For instance the chances of Khamenei being out as Supreme Leader of Iran by March 31st just skyrocketed up to 78%. That tells me far more than the various news sites minute by minute coverage.
When you bet on blackjack or the superbowl, you own nothing and are simply wagering on the outcome of an event.
Gambling and equity ownership are not the same.
>Research shows prediction markets are often more accurate than experts, polls, and pundits. Traders aggregate news, polls, and expert opinions, making informed trades. Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join.
>If you’re an expert on a certain topic, Polymarket is your opportunity to profit from trading based on your knowledge, while improving the market’s accuracy.
You know what's a great knowledgeable participant? An insider.
Airbnb for unlicensed hotels. Uber for unlicensed taxis. Amazon for whitewashing fraudulent products. Bitcoin for unlicensed securities and laundering money.
The pattern is upsetting.
Their behaviour is very rent-seeking imo and at moments like these, its best to remind us that even the father of Capitalism, Adam Smith didn't like landlords
Had to search up some quotes from adam smith right now but here's a relevant one (imo) to this discussion:
"[the landlord leaves the worker] with the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more." - Adam smith
So there is "dead weight loss", where transactions that would have been mutually beneficially and socially productive are eliminated by the regulation, and restored when somebody finds a loophole, restoring the individual and social benefit.
The world is not zero sum!
On a long term, I do feel like there will be a drop in producitivity, thus destruction of economic value because of lack of enforcement of policies/such companies having reckless attitude about them.
Many of the products listed above actually seem to be very rent-seeking in my opinion (IIRC Someone on HN once said that from their personal experience talking to drivers, uber takes an approximate at the very least 40% cut or more)
(This might be a little off-topic?_ but one thing I think about tech regulations is that Facebook used to see if a young girl/minor girl took a selfie and then if they don't upload it, detect that she was insecure and then try to show them face beauty recommendations.
These girls can be our sisters/daughters fwiw. Facebook profits from insecurity/rage-bait and I would say that many social medias are the same as well, its just that the facebook example to me feels so eggregious and should be a uniting front for many to agree that there's a problem indeed.
You will be right when you say economical value is generated from profiting from insecurity/bypassing regulations but at what cost?
If people thought it was wrong to be an unlicensed airbnb or uber, they wouldn't use them. In reality, those regulations are mostly protection rackets and most people don't care about violating them.
You have two parties who want to enter into a contract and a third party unrelated to the contract that doesn’t for whatever reason. Just based on contract law and common sense the unrelated party shouldn’t have standing. Now if there’s externalities to the contract that impact that unrelated party sure, but only insofar as to get those externalities addressed.
This is not the same as a robbery which involves no contract or a willing counterparty to the robbery.
There are already laws in place against the kinds of behavior that neighbors are afraid will happen.
For Airbnb landlords I'm sure the thought process goes like " I'm just one person so I can't be having enough of an impact to be a problem. And besides, I need the money." But then enough people pile on and in aggregate they ruin the local housing market. But nobody thinks that they themselves are culpable
Much in the same way tobacco companies knew for a long time how addictive and harmful smoking was.
And how Facebook knows they let their advertisers scam their users, and the way social media was pushing teen suicides higher. They knew and kept pushing policies which made the problem worse. All so they could collect bigger compensation packages.
Lead in gasoline is bad, but in general I think individuals are perfectly capable of determining whether they are willing to risk a taxi ride.
I see a prisoner’s dilemma where people often support regulations even if on an individual basis they would personally violate them, because they prefer living in a the less chaotic society. For example anti-dumping regulations… the expected value for any given individual is +EV, but when everyone is dumping, it’s a big -EV
Nobody seems to be able to agree on what a responsible set of rules is around the speed of vehicles.
no, they are not.
you might have been an insider working on the Apple Newton, and being enthusiastic about it you might have broken the rules and traded on your "knowledge"... and you would have lost your shirt. Same with your very knowledgeable enthusiasm about myriad other technologies. Ever wonder why Wall St doesn't show up at HN asking everybody's opinion about AI in order to leverage that info into billions?
an important element of "the wisdom of crowds" is many bits of microknowledge. How many Teslas will be sold next year is very dependent on how much the people who buy Teslas will earn next year (or how secure they will feel in their jobs) working in myriad other industries that have nothing to do with Tesla, along with the price of lithium, tires, and even ... wait for it... gasoline.
Polymarket's words you quote can just as likely refer to the wisdom of crowds. Or even, and this is the subtle part: Polymarket's insiders may believe, like you, that they are creating a market to trade on inside information, and yet they, like you, could be made wrong by the superior sum knowledge of the crowd exerting its invisible hands all together to tank your Apple Newtons.
Yes they are. Polymarket has an ad glorifying a "fictional" scenario where someone gets a job as a janitor in a video game company to bet on related events in polymarket
And isn't that just between them and their company in a case-by-case sense?
If there was some valuable-to-the-public information that the company did not care about keeping private but just hadn't bothered to make public, for whatever reason, and an insider traded on it on a prediction market, that would only benefit the public's interest in information and would not violate any duty to the company. It'd be a pure win for everyone.
It seems unfair to other traders, the way it would be in the stock market, but in prediction markets (unlike the stock market) all participants are explicitly taking on the risk that somebody else might have better access to information than they do. So it's not subverting the system in the way we have decided it does in stock markets.
A lot of commenters are getting the wrong take here by looking at this like it's a stock market where there is some society-level interest in giving participants protection from having less information than insiders. It's just a different thing.
The much more serious problem is when these insiders actually have their hands on the levers which decide the outcome. It's really no different than a mobster who bets a bunch on money on an unlikely outcome then threatens one side to throw the match.
What possible economic benefit is there to society to allow ordinary people to bet in markets like that?
Would you really like to live in a world where "Will we nuke Iran?" Is a bet you can make? Then someone in government sees how much money they could make if they bet yes & push the button?
If I were famous I could start a pool betting on whether I would post a picture of a my lunch this week. I could stake whichever side has the biggest payout and then just make it happen
These prediction markets are now giving even more people the opportunity to make a small ethical compromise in exchange for non-trivial amounts of money without any of the potential legal repercussions of traditional markets or gambling. That type of ubiquitous corrupting influence can't be good for the health of society.
[1] - https://www.cbssports.com/mlb/news/guardians-closer-emmanuel...
Yes.
Prediction markets, for corruption reasons, are regulated by the CFTC. In commodities markets, actors are assumed to be making trades based on propriety information. Hedging is the whole purpose!
> …like it's a stock market where there is some society-level interest in giving participants protection from having less information than insiders.
Ah, no!
Insider trading in the stock market is (usually) only illegal in your first case: when the person trading is violating confidentiality.
It is not about fairness.
Fairness is a poor proxy for whether specific trading is illegal.
For example:
If a company accidentally leaves a press release for a merger publicly available, I happen to guess the URL, and then I trade on it: Unfair (I have access to insider information that other market participants do not) but legal!
If I work at the company, am sent the press release to copy edit, and then trade on it: Illegal. I have a duty to the company not to trade on it.
The first case is completely fair because anybody else could have done the same thing without any special access required.
The second case is unfair because you had to work at the company to get access.
What if the bar has a cover charge, so only those who pay get in?
What if the cover charge is $10,000 and the bar is advertised as "the place where public company execs love to come talk to each other about private deals"?
I can argue it is fair - anybody can try guessing the url, you don't have to be an insider to guess it
To the company? Or to the stock market, as a participant in it?
Interestingly, the CFTC objects to a political candidate trading on their own candidacy on the grounds that it is fraudulent. So it looks like they could attempt to regulate self-trading quite strictly, at least if that theory holds up after a court challenge.
Not necessarily. Just because you accidentally left your S3 bucket open and I brute force my way to the link by guessing doesn’t make it legal. It can still be insider information. Insider information is not limited to people who have a duty to the company. If I break into the companies office and steal information and trade on it then it can be insider trading.
Allowing information asymmetry, like insider trading, undermines the regulatory argument that keeps these markets legal.
If I know my company is going to do something on March 16th, I can bet against it happening until that day, and then bet big it will happen that day. I don’t need to influence the company to change what it’s going to do to make money on it.
It might be nothing, but it'd be funny if karma farming bots are doing some 'reply frontrunning' over the internet.
https://www.economist.com/leaders/2026/02/18/why-insider-tra...
> In prediction markets, informed trading is not a crime or an injustice—it is a valuable service.
A big exception, however, is using prediction markets to make predictions on events regarding publicly traded companies.
You're not participating in a "market" (even though they call it that), you're purely gambling and speculating. People have been doing this since currency was a thing. Even gambling laws don't apply in my opinion. If I told you the government will publish evidence of aliens existing tomorrow, and we make a bet on it, that's not really gambling, it's not so much a game of choice as it is a competition of who can predict things better. The other person might have insider knowledge, but it's up to you to either take on that risk or assume despite that your knowledge about the topic will overcome their potential insider knowledge.
Maybe it can fall under gambling laws, but not under securities laws.
I don't agree with any gambling laws whatsoever, so I can't say I'm the right person to comment on the subject of how to classify this sort of betting. The entire concept of individual liberty is a farce if you can't gamble without restriction. People have been betting on who would kill the prey or gather the most fruits since their hunter & gatherer days. Gambling and freely sharing what you posses (copyright is illegitimate) are fundamental human rights.
Why are these big insider bets being placed within hours of the event actually occurring? The insiders are doing the equivalent of bid sniping — waiting until the last possible moment to exercise.
This is how inside info works in trading markets in general. And again this is inevitable and by design.
It also makes them largely useless, because the timeline for which useful position is shared is compressed to the point where nothing useful can be gleaned from the information.
The thing is a “lie incentiviser” — a market entirely for suckers. That’s why 95% of volume is sports betting.
That’s setting aside insider positions having an influence on the outcome of events which is a whole separate problem.
They're not, usually. The more the outcome seems unlikely at first, the more you're incentivized to place your big bet earlier, when the odds seem worse, because you'll make a ton more money.
When these bets are placed only a few hours beforehand, that's often because the actual decision hasn't actually been made until then.
And there are plenty of areas where having notice of an hour or two is still hugely vulnerable.
If you see prediction markets as how they were originally pitched (price ~approximating likelihood), then insider trading is good. It provides discovery.
If you look at what prediction markets are today (gambling, especially on sports, especially in states that have banned it), then insider trading is bad. Particularly when the people trading can influence the outcome (e.g. a pitcher purposefully throwing into the dirt.)
Like, a 100k wager from a finance dude carries some information, but a 10k wager from a staffer says a lot more!
I would understand a low salaried person doing this, but not someone from a really high paying org
Given what OpenAI does, what kind of person, and with what moral character, do you think works there?
EDIT: AI in general seems to attract bad actors, for whatever reason. Remember Anthony Levandowski or Marvin Minsky?
I do hope corporations in general take a harder stance on this. From a society perspective people with inside knowledge fleecing randoms is not a win. We've got that somewhat under control on the stock exchange, but have this absurd situation where on prediction markets it is a free for all and everyone pretends this is fine.
I also think corporations should distance themselves from individuals willing to fleece randoms. Trading in general is very wild west survival of the fittest but active exploitation of insider knowledge speak of very poor morale character
If you're betting on a prediction market without insider information then you're just... The fool who is soon parted from his money one way or another.
I generally feel like people should be free to do whatever insane stuff they want with their own lives.
The problem with people doing insane stuff with their "own money" is the burden they often exact on their family or society.
Perhaps the realm of independence starts when loans are reasonable and current, there is sufficient child support, and they are meeting a base savings rate for their retirement.
Speaking of which, perhaps any UBI could also use a minimal criteria, reviewed annually but without any barriers on first year eligibility.
Then you hopefully understand that randoms approaching you is no equal to reality.
(a) how did they identify the employee, and (b) how come they weren't sent to jail
It's called <open>AI.
> The employee, she said, “used confidential OpenAI information in connection with external prediction markets (e.g. Polymarket).”
Note that “insider trading” is not illegal on prediction markets. The particular issue here is that the employee “disclosed” confidential information on a public forum by influencing the prices assigned to certain outcomes by prediction markets.