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Comment by c7b | Hacker News Reader

Where do you see a difference? Like you said, there is a libertarian argument that can be made for why insider trading is desirable. If the bet is easily manipulable, like how many times someone will visit a place, then the rational response is for others not to bet on that market. The same argument still holds.

You can disagree with the libertarian argument, but I don't see how you can say that Polymarket et al. are something other than a prediction market. Can you explain where you see the difference?

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I'm not a libertarian. My basic policy take on these "markets" is that they should be outlawed.

It’s not a libertarian argument for prediction markets that they should have insider trading, it’s the point of the exercise. The way they work is to incentivize people with knowledge to externalize the knowledge to the market. The concept of fairness doesn’t even make sense in that context.

So if a market is trying to maintain a veneer of fairness it’s just using a prediction market as cover and is something else.

So the difference between a theoretically pure prediction market and Kalshi is ... this interview? The CEO saying that he thinks others, who do not answer to him in any way, will be doing something to enforce some notion of fairness.

If you're being that puritan about the definition, then having a "real" prediction market is completely impossible. Because actors like the DOJ do not wait for a statement by the Kalshi CEO to bring charges. And rational actors will know and anticipate that, and hence preemptively comply. So you never get the unfettered version of a prediction market.

I don't think it makes sense to be that puritan about a definition that the thing it's trying to define becomes an impossibility. Polymarket, Kalshi et al are clearly prediction markets in the messy reality that we live in, and we're figuring out as we go what the legal reality of a real-world prediction market is and should be.

Kalshi is in fact more strict, both defining and punishing insider trading, than CFTC/DOJ. Kalshi is perfectly happy to hand out bans and fines for activity the government doesn't care about. Every Kalshi market has a button on it, "report insider trading" which I'm sure is clicked a zillion times a day by gamblers who are upset they lost.

The reason they do these things is that their first priority is to keep the gamblers happy, and the gamblers hate to think they got cheated.

This just gestures at the meta-problem with prediction markets, who pays for the alpha? With stocks, companies generate returns to capital. With commodities, there are buyers and sellers of the underlying. But there is very little economic usefulness about most prediction markets, especially by volume. The only way to get enough users to justify the effort to figure out accurate prices, is to turn it into an entertainment product. And in an entertainment product, if the customer doesn't like X, then you crack down on X.

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