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Uncovering insiders and alpha on Polymarket with AI

110 points by somerandomness

by seydor

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In many ways this gambling infatuation is worse than cryptocurrency, and with possibly more damaging externalities

by w10-1

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Speculation and concern from a naive observer:
Is it polymarket presenting this ability to detect insiders? Or is someone trying to sell the service of detecting insiders to those wanting to know if bets are on equal footing? (or wanting to follow insiders? or wanting to hide your identity by making multiple accounts? Are there per-account fees, when polymarket might encourage people to make multiple accounts?)
Regardless, polymarket seems to be on balance corrupting, by monetizing and normalizing use of inside information, which violates agency principles. It's not clear that it really offers hedging or predictive benefits.
When trading firms do better (after data discovery and analysis), there's some evidence they're better than other firms, and you can trust them with some money. But when there's a public prediction market, the only benefit is to the insiders.

by ttul

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Trading on non-public information in prediction markets is illegal (in the United States) if the information was obtained through fraud, deception, a breach of trust—such as compromising a position of privilege—or from a confidential government source. For example, if you work at Google and know that Gemini 3 will be released on a certain date, trading on that insight is illegal because you are legally misappropriating your employer’s proprietary information. Furthermore, even if you did not personally breach a position of privilege to get the information, executing the trade can still be prosecuted as federal wire fraud if doing so violates the prediction platform's terms of service.
However, if you trade on prediction markets using insider information that was gained WITHOUT fraud, deception, or a breach of trust, then so long as the market's terms of service allow it, you can go ahead and trade on that information. Polymarket is a prime example of this: unlike traditional financial exchanges, its Terms of Service do not explicitly forbid everyday users from trading on inside information. Instead, the platform relies on a catch-all rule prohibiting activity that violates "applicable laws." This means that as long as you acquired the inside information legally—without hacking, stealing, or breaching a duty of confidentiality—Polymarket permits you to capitalize on it, treating your informational advantage as a feature that ultimately makes the market's odds more accurate.

by coldtea

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>Prediction markets have been called "truth machines" because anyone who has information missing from the market can profit.
That sounds like "insider trading" machines, or "scam" machines, rather than truth machines.

by syntaxing

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Isn’t this the motivation behind polymarket? To incentivize those that have information to bet as a signal of “truth”. What I don’t get is why would anyone bet on this stuff that don’t have insider information besides those with gambling addiction.

by currymj

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there is some inevitable "insider trading" in commodities markets. for example if you're a giant agricultural company, and you want to hedge the price of soybeans, you have some extremely relevant insider information about the soybean market. but you're still allowed to trade soybean futures. very different than securities.
if prediction market contracts really are regulated as commodities, then presumably a lot of insider trading must be legal, although there must be limits of one kind or another and probably if you do something really egregious you might be prosecuted under some legal theory.

by delichon

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> Clearly, these insiders have figured out a way to cash in on information. Whether that's kosher is out-of-scope here
To the extent that the value of prediction markets is in their power to predict, insider trading is kosher. Wholesome even.

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by ralph84

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Not sure why the dumb money keeps playing. If you're not the insider the person you're trading against is.

by bstsb

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iirc polymarket doesn't explicitly rule against this, and neither does the law. prediction trading like this operates as "commodities" trading, so they have no obligation to prevent this, and indeed they have an financial incentive to let it continue (assuming others don't leave the platform!)

by conformist

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> “Hedge funds invest a ton in "alternative data", like credit card transaction data or satellite-imagery (are Walmart's parking lots full?) and need to process as much relevant information as possible to make predictions that are relevant to investments. “
Ah yes the famous credit card data and Walmart parking lots example that hedge funds were giving a few years ago in every interview and news article. Safe to assume that specifically these data sets are not what you should look at to make money.

by aleksiy123

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Out of curiosity, is it possible to see everyone's bets and positions in real time?
Or is the info only available later?
I'm guessing that bots predicting insiders and copying positions is already a thing.

by yunohn

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> it's clear prediction markets like Polymarket incentivize sharing information
I severely dislike these euphemisms used by prediction market enthusiasts. What exactly is the value of information like “most searched person on Google in year N”? Creating 10s of options to answer this question via gambling on Polymarket/Kalshi does not help anyone except their fellow degenerates. Heck, even events like “by N date the USA invade country X” also offer no real value, except for the insider circle to front run their own invasion and profit from it. Even worse, apparently they provide anonymity and cover to illegal participants (eg obviously US citizens) just like crypto exchanges like Binance did.
I truly question the sanity of those who believe that prediction markets are providing a positive force in this world.

by tombert

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It baffles me that Polymarket is legal.
Even if there wasn't any kind of insider betting going on, it just seems so disgusting to turn literally everything into a casino.
There's a bet going on right now about Jesus coming back before 2027 [1], and a part of me wants to do it because I'm pretty confident Jesus isn't coming back by the end of the year (or any year), but it seems kind of wrong to try and extract money out of people who are gambling away their money.
[1] https://polymarket.com/event/will-jesus-christ-return-before...

by nodesocket

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There is 100% insider-trading and manipulation of prediction markets. It's absurd some of the markets that are created. The most glaring example was this years super bowl halftime show. They had markets on songs Bad Bunny would sing, which song he would sing first, etc. You're telling me the thousands of people who had access to practices and information would not wager on this?