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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.
Post author here: To clarify, this is not a post from Polymarket.
This is talking about using Compound AI (product I'm working on) to query Polymarket data, including finding insiders, just as a fun example analysis you could do.
Often you need a well-calibrated probability of a future event to feed into some other analysis, and Polymarket is pretty great for that. An example is how much insurance (hedge) to buy for some disastrous event.
If I'm an insider with 100% confidence, I'll take all offers at a certain price as long as I can afford it. Similar story for lower levels of confidence (but still inside info). There won't necessarily be any left for you to copy at a viable price.
By slashdev 2026-02-2217:35 You might not have enough money to drain the order book.
And there's always a chance things go wrong, even with inside information. It would be unwise to go all in.
The examples didn’t look like they’ve completely emptied the orderbook
By 0x3f 2026-02-2117:06 Because there's always some uncertainty and capital limits. But the uncertainty about the outcome is itself inside info, and that's compounded with your own uncertainty about the insider as a copy trader. So the insider will empty out certain price levels only, and your certainty is strictly less than theirs, meaning you have even fewer viable levels to buy.
> Similar story for lower levels of confidence
therefore, the polymarket betting odds will reflect the truth - even if that info is a secret that nobody else but the insider knows. And if this is the case, then even an outsider could make use of the odds as a source of info which would ensure that market efficiency (which is about the flow of information) is high.
So what's wrong with insider trading again?
By a2128 2026-02-2212:41 If you believe Polymarket as a serious source of truth, consider that somebody manipulated "Will Jesus Christ return before 2027?" because there was a secondary market on whether that market will rise above 5%. Which defeats the whole idea that the betting odds will reflect the truth. Also even pre-manipulation I don't think a 2% chance that Jesus will return was reflective of truth.
https://gizmodo.com/checking-in-on-polymarket-bets-on-christ...
The issue comes from situations where the insiders can alter the answer to help their own bets. The simple example is the bet on how long a press conference will be: It's a ridiculous bet when the person giving said press conference can bet and fleece the market.
Will X country invade another before or after day X? A large enough market changes the answer, as the agent can change the decision. And we can see this kind of thing in many interesting questions.
By 0x3f 2026-02-2215:48 These are not secret divinations though, the participants know this and price it in or otherwise allow it to determine which markets they participate in.
That someone with inside information will e.g. make 500% while those late to the party e.g. only get 10%? (of course your example is not very realistic to begin with)
By nubg 2026-02-2122:09 So is any kind of business illegal? Making investments?
By yowayb 2026-02-222:30 How is this distinguishable from pump-dump?
It rewards blatant corruption? What's the benefit is the bigger question.
The benefit is that inside information becomes public information. The reward for the insider is just the necessary incentive for that to happen.
Has there ever been any documented circumstance where significant inside information became public and known thanks to a trade? Most often, the trade is made at the last minute, and the information gets subsequently revealed anyway. And it's impossible to tell whether somebody is an inside trader, a wealthy gambling addict making a stupid decision, or hypothetically a foreign agent pretending to be an inside trader to make people believe in a particular outcome.
By 0x3f 2026-02-2215:45 It's impossible to know anything for certain; almost everything is probabilistic.
Also I'm not sure how to interpret your criteria because timing matters, I don't think saying 'it gets revealed in the end' is very meaningful.
Anyway, on Polymarket specifically, sure, military strikes are a common one. Seems like a useful signal to go hide in the basement. Outside Polymarket, there were insider trades in 2008 that I'm sure were useful.
By MrMan 2026-02-225:36 [dead]
You can't be sure that they are an insider or lucky, just from onchain data.
If they make single market predictions with high accuracy it is very very likely they are
No vigilant insider is making a series of "single market predictions with high accuracy" on the same account. They would make unlinkable bets on fresh accounts.
By BoxFour 2026-02-2113:38 > No vigilant insider is making a series of "single market predictions with high accuracy" on the same account.
There seem to be quite a few non-vigilant insiders. That's the very premise of the post we're discussing.
This is unsurprising to anyone who's seen the various ways people get busted for insider trading in equities.
By meetingthrower 2026-02-2121:16 Also insider trading is A-OK on prediction markets!
> Regardless, polymarket seems to be on balance corrupting, by monetizing and normalizing use of inside information,
This is a common take on "inside information", but for most people this opinion is totally unaligned with their own goals. The people who benefit from "no insider trading" in any market, are a small group of active traders, some institutional, some not.
For literally everyone else, insider trading is a net win. Insider trading improves price discovery. If you passively invest then you benefit from the price being more accurate when whatever fraction of your paycheck goes into the market.
I don't know your own situation, maybe you are one of those few traders who needs information to spread a certain way in order to make money. For everyone else, don't be fooled into promoting an idea against your own interests.
By DennisP 2026-02-220:04 In fact, a lot of people claim that the main point of prediction markets is to give the general public better predictions, and insider participation actually helps with that.
By Veedrac 2026-02-2223:22 This is missing the primary reasons insider trading is bad, which are that it's an information theft incentive against employers, and worse, that it's a sabotage incentive.
I'm honestly puzzled by this take.
Clearly the people who benefit from insider trading in any market are those doing the insider trading, not all market participants.
The argument is not that Polymarket et al are "insider trading only" but rather that insider trading in those markets is not regulated so people can get ahead of trades based on confidential information and make a lot of money off of all the suckers gambling their money away on ridiculously frivolous bets.
If you don't see the problem with that, you're complicit, misinformed or brainwashed.
A similar issue is that of market manipulation, since many markets in these platforms can be directly manipulated by participants in manners as easily as spamming some words on an earnings call.
> If you don't see the problem with that, you're complicit, misinformed or brainwashed.
The problem that I imagine you see with this, is that it doesn't conform to a particular, special, notion of fairness that you think the market should have.
Informed parties have an edge over uninformed parties. This edge is "unfair" if you believe the market should be a lottery. The market is designed to pay people with accurate beliefs, by taking from people with inaccurate beliefs. Everyone's belief is valued based on its accuracy, and the market is fair in that sense. Fairness is actually irrelevant to the societal good the market provides, which is to produce accurate prices. A third party, who doesn't participate, shouldn't care about the market being "fair", they should care about it giving good information.
> A similar issue is that of market manipulation, since many markets in these platforms can be directly manipulated by participants in manners as easily as spamming some words on an earnings call.
If you are betting on what a person will say, and the person knows about the market, that is a chaotic system. If you bid the price away from max entropy then you deserve the outcome.
By airstrike 2026-02-2214:52 This has nothing to do with fairness of outcomes but with defrauding naive investors of their money.
For context, I'm a former Investment Banker so this isn't coming from a place of naivete but an informed view. I did have to study SEC regulations for those FINRA examinations....
I think you might misunderstand the value preposition. Polymarket wants insider trading. That's the whole point. They'll eventually cave in to PR pressure and deviate from the original purpose, though.
By ses1984 2026-02-224:17 Some of the things people bet on can be decided by a single person.
The more accurate the markets get, the greater the incentive for insiders to spoil it.
That doesn’t benefit anyone but the insider and probably has a net negative on everyone else.
>But when there's a public prediction market, the only benefit is to the insiders.
false.
all the conclusions economists draw in microeconomic theory about efficient markets are based on pricing that reflects symmetric information. secrets are asymmetric. trading on inside information drives the market price in the direction it should be moving, making the market more efficient, a benefit to all participants in the market.
this is not a defense of trading on inside information, simply pointing out the mechanics.
We're not solving for efficient pricing at the expense of one insider reaping all the benefits because they already either knew or set the price before hand.
if you have no knowledge of any inside information and you are trying to make a buy/sell investment decision, your decision benefits from the price being as accurate as possible. That is what every individual is "trying to solve" so it's a net benefit.
By airstrike 2026-02-2712:11 except there is nothing to buy/sell here other than the prediction itself.
Or do you also think it would make sense, in a hypothetical scenario, to buy options on a stock price that is already known by some in advance? There’s a reason you’re not allowed to trade on insider information. You’re totally missing the point here.
By _alternator_ 2026-02-2023:51 This is largely the classical objection to prediction markets. But prediction markets do have value to outside of the markets because people want to know the future.
Yep it's rotten. I think the intuitive revulsion many feel toward the Polymarket is simply due to the unfairness of it.
By cowthulhu 2026-02-226:43 Prediction markets should be accurate, not fair. If people want to gamble without doing the work of finding some alpha, they should head to a casino, not a prediction market.
By sharp_runner_84 2026-03-0613:41 The real alpha on Polymarket isn't in trying to predict events better than the market -- it's in the market microstructure. Price discrepancies between Kalshi and Polymarket on the same event can persist for minutes because the two venues have different participant bases and settlement rules. Kalshi is USD-settled with KYC, Polymarket is USDC on Polygon with pseudonymous wallets. And because Polymarket's CLOB runs on-chain, you can literally watch competing bots' strategies by tracing their contract interactions.
>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 testaccount28 2026-02-211:105 reply yes, they allow you to pay people who have information about the future for that information, in a distributed manner. this is great if, like many people, you want information about the future.
The prediction market itself is a ouija board. You're given a number. You don't know who's moving the needle or why. You don't know what you're paying for. Maybe you're paying for information from people who are breaking someone's trust by giving it to you? Or maybe you're paying them to make it happen?
Although, sometimes a market provides incentive to publish information that's associated with the market being influenced. For example, someone can do an investigation, short the stock, then publish it.
By testaccount28 2026-02-2121:301 reply but like, here in the real world, farmers use weather derivatives. so the technology works, has a use case, is proven.
if your point is that one should not treat the market's number as some oracular probability, then... of course i agree! there is no such thing. the market provides a signal, like any other.
Not a farmer, but I believe they use weather derivatives to hedge and weather forecasts for predictions? Going through markets for weather forecasts is adding a level of indirection that generates a noisier signal.
The idea when hedging isn't to win on expected value. It's to reduce risk. You're paying the market to provide insurance.
As a side effect, insurance does sometimes generate interesting data. The insurance industry generates good data about life expectancy. But it doesn't tell you when you're going to die.
Good points, but commodity futures and stock prices take into account all sorts of information. They go haywire sometimes but given how hard it is to beat the market, they seem to do a pretty good job of aggregating it all.
As we learn from reading Matt Levine, they might also be taking into account signals that are irrelevant to you for technical reasons, or just nonsense. Often it works well but sometimes you get meme stocks.
By DennisP 2026-02-2214:13 Which is why I said "they go haywire sometimes." But in most cases, they work well enough that very few professional investors are able to consistently beat the judgement of the market.
By testaccount28 2026-02-2322:56 just to be clear about what you're saying, you would predict that the implied probabilities from weather derivative prices are often very different than what is forecasted, and, when those differences occur, it is the forecast that is more likely to be right?
...would you like to make a bet to this effect?
you dont need to pay to access the odds - it's public info.
There are people who pay to make bets on it (if they think the odds are wrong). But you don't have to be a betting participant to access the betting odds. You simply use the betting odds as a prediction of a future outcome, and you take your action/planning accordingly.
By BoorishBears 2026-02-2121:46 But usually when prediction markets have shown interesting predictions, it's by odds taking large swings then collapsing to the correct outcome relatively shortly before the event right?
I assume because even if you know the future perfectly, putting up large lump sums early could cap your upside if people take your large sum as a signal (like OP is doing)
As a viewer you can take your own short-term "actions" (gambles) outside the market using the brief advanced notice I guess, but I'm not sure planning works like that.
In other words, what happens to the accuracy of prediction markets if we're including the discrete odds that occured along the way to the final odds? It's not better than random chance or public sentiment for large events is it?
Sure, but I meant it in the sense that someone needs to lose money or there's no point in smarter or more well-informed people playing. Their profits have to come from somewhere.
These could be (a) people who aren't as smart as they think they are (b) people who subsidize the market in order to get good predictions (c) people who are hedging (essentially, buying insurance). Perhaps other possibilities.
> the sense that someone needs to lose money
yep, and that's fine because they did so voluntarily.
If there were no stakes on the line, the information in the odds will also not have any real meaning.
By skybrian 2026-02-2118:21 It’s good that it’s voluntary, but that’s not really what I’m getting at. People voluntarily spend money in Vegas and buy meme coins too.
This doesn’t tell us all that much about whether a price signal is a valuable source of information. Often, people have varied interpretations of what a price movement means. The price doesn’t tell you how to interpret it. The obvious interpretation can be wrong.
Historical records, notably by Herodotus, confirm that the Persian Empire used gold to bribe Greek Oracles, turning "divine prophecy" into a psychological warfare tool.
This mirrors a core flaw in Polymarket: profit maximization is not truth-seeking. Just as Persian bribes manipulated ancient morale, modern "whales" can distort market odds to manufacture narratives or hedge external interests. In both cases, the prediction is a commodity sold to the highest bidder rather than an objective forecast of reality.
By testaccount28 2026-02-227:001 reply and newspapers are owned by fatcats. but we are still interested in what they have to say.
This comparison is flawed because accountability creates a structural divide. A newspaper has a visible masthead and named editors, creating a reputational stake where consistent bias leads to institutional ruin.
In contrast, Polymarket relies on pseudonymous liquidity. A "whale" can use a "Persian bribe" to distort odds and then vanish without consequence. While a newspaper offers a testable argument, Polymarket provides a "math-washed" price signal that allows financial manipulation to masquerade as objective probability.
By testaccount28 2026-02-2322:571 reply > objective probability.
i don't believe such a concept exists. if you do, then you have greater epistemic problems that should be resolved first, before reading either the newspaper, or the prediction market.
Dismissing "objective probability" is a convenient philosophical retreat that strips Polymarket of its only legitimate function. If the market isn’t an attempt to aggregate information toward a binary, external "ground truth," then it isn't a forecasting tool—it’s a "Keynesian Beauty Contest" where people bet on what they think others believe rather than what will actually happen.
Without an objective anchor to measure against, concepts like "mispricing" or "alpha" become logically impossible; you cannot have a "wrong" price if you don't believe a "right" probability exists. If we accept that the market signal is just a reflection of whale liquidity and "Persian bribes" rather than a calculated proximity to reality, then the platform is merely a math-washed gambling hall. Ultimately, a prediction market that abandons the pursuit of objective truth loses its epistemic utility and its entire reason to exist.
By testaccount28 2026-02-253:47 prediction markets are a useful tool for aggregating information about uncertain events.
Information about the future without power to do anything about it (except bet on it), like is the case for most information and most people, is useless.
By testaccount28 2026-02-2121:22 surely this criticism applies as well to... any information.
That sounds cool and fancy in theory, but how do you find that information among the noise?
like if 50 ppl vote A, 45 people vote B and 1 person who actually knows their shit votes B?
How do you find it? By amount?
Because the people who are consistently right will consistently win money and will make bigger bets which move the price more, in the limit case making the price converge on the true probability of the outcome.
This is the theoretical underpinning of prediction markets.
Equating being "consistently right" with having a sufficiently large stash of capital is ludicrous.
"right" people will wisely take most their winnings out of a high-variance market. "wrong" people with deep pockets (or lots of wrong people with shallow pockets) will continue to distort the market.
> will continue to distort the market.
they can only do so as long as they have enough capital to lose. Because every time they try to move the betting markets against the truth, they will simply lose that money when the event happens (and turns out they were wrong).
So any distortion will merely be temporary. Unless they have access to unlimited capital of course - which is not true yet for anyone (but the US gov't).
That only makes sense in a hermetically sealed system, which this is very much not.
By SauntSolaire 2026-02-214:20 Well, the more often you're right, the more capital you will be able to accrue to bet with next time.
By 0x3f 2026-02-211:47 Apart from minor effects, the price is the probability. If you 'know your shit', you have more confidence and thus bid up or down until there are no more counterparties willing to accept your price, and thus the price settles at approximately the expert/insider probability.
By testaccount28 2026-02-2121:26 what do you think you're asking?
like any signal, you reflect on it, integrate it into your belief, think through the consequences, etc.
we all want mr. delphi to tell us exactly what will happen. but without such a friend, we reason under uncertainty. markets are one tool we've found to coordinate such signals.
would you ask the same of hiring a private investigator, or paying for the new york times? there is no authority with your interests but yourself; you must choose who to trust.
By FergusArgyll 2026-02-2122:39 It's not voting, it's a market
They also allow people to convince those who trust that prediction markets are accurate barometers of likeliness that certain events will be likely with a meager amount of money.
By DennisP 2026-02-220:05 The amount of money depends on how big the markets are.
