Making insider/true expert information public more quickly in the form of influencing prices in a toy market is THE ENTIRE POINT of prediction markets.
Read the original papers on them.
http://li.mit.edu/Stuff/CNSE/Paper/Hanson90.pdf
Read the original papers on them.
http://li.mit.edu/Stuff/CNSE/Paper/Hanson90.pdf
It also creates weird incentives. If I want to pay a politician to do something, bribing them would generally be illegal. But what if I instead bet lots of money that they won't do it?
they require liquidity from people that are not in the know for adequate price discovery and exit liquidity worthwhile for participation
In particular: the government is free to just publish any insider/true information that it wants the public to know about. If it shared that purpose then the market wouldn't need to exist.
American taxpayers pay a lot of money for a military and intelligence advantage. It's not clear it's in our interest for that knowledge to be made "public more quickly."
What we don’t want, and what we should enforce, is participants in prediction markets influencing the events they’re betting on (like the recent basketball betting scandal).