Uncovering insiders and alpha on Polymarket with AI(twitter.com) |
Uncovering insiders and alpha on Polymarket with AI(twitter.com) |
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.
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.
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.
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.
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.
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.
That sounds like "insider trading" machines, or "scam" machines, rather than truth machines.
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.
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.
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?
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.
To the extent that the value of prediction markets is in their power to predict, insider trading is kosher. Wholesome even.
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.
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.
However, there is large value for some people in knowing when a country will be invaded: if you live there, you know when to leave; if you are an airline, when to stop scheduling flights there, or, if a lot of people are in the first group, up until when to schedule many more flights to get them out. But I’m positive the invading army would prefer some kid in a basement didn’t make one Lieutenant General on the committee obscenely rich overnight.
I wished the focused on markets where many people are part of the decision, like elections. There, the wisdom of the crowds would add some value.
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.
It's also not on archive.org Wayback Machine it seems.
So can anyone please copy and paste the article contents here? Thanks.
I don’t think that’s right. Prediction markets fall under CFTC oversight, and the CFTC absolutely has insider trading rules. We just haven’t seen any enforcement yet. Partly because the space is still new, and partly because enforcement priorities have been uneven lately (to put it mildly).
The CFTC has already signaled it’s starting to look more closely at insider trading in prediction markets. It's almost certainly just a matter of time. It's pretty likely a future administration will clamp down on this, if the current one doesn't.
It’s an interesting question, my hunch is that for now “in-distribution reasoning” is going to be much more effective than custom data query APIs. But perhaps not! I’d read that paper.
Or is the info only available later?
I'm guessing that bots predicting insiders and copying positions is already a thing.
Orders aren't public though. Only the actual trades. This is important because by the time the trade is known by others very often the edge is gone. Especially if you have other people watching the same trader and they all try to copy the trade at the same time.
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...
Also, I'd advise against betting on the Jesus market. You can't actually read the price as a probability here due to time value of money, opportunity cost, etc. So you'd lose money (or at best, gain nothing) by betting against it. It's priced correctly.
Yeah, and assuming Jesus doesn't come back that's only about a 3.6% return rate, which is what Treasury Bills are getting right now [1]. At that point I might as well do that and avoid paying state tax on my interest.
[1] https://home.treasury.gov/resource-center/data-chart-center/...
https://www.reuters.com/investigations/inside-trump-familys-...
Some have better models that predict with higher accuracy, given the same data.
I bought one lottery ticket, I don't think my odds are gonna get any better than that.
Some might even say Dirac like but I so NO, this simply does not go far enough.
I will remember this moment for the remainder of my life. Thank you.
Seems more like a hobby activity than a decision that would lead to any practically meaningful outcome. Since as you said, you were already a billionaire in 2017 any money you could make by writing software yourself seems insignificant
In the stock market, Matt Levine likes to say that insider training is about theft, not fairness. You can be prosecuted for merely sharing info with a friend on a golf course who then proceeds to trade. Your crime is not trading (you didn't even trade), but misappropriating information you were entrusted with and not authorized to sell.
The worlds most influential people demonstrate that only power matters; that the world order we built last century through unimaginable suffering and violence matters less than securing their own personal gain; that law, morals, and order were just dreams of the weak
Are there any examples of people/companies trusting degenerate gamblers on prediction markets and making real life-changing decisions?
All the examples I’ve seen are exactly what I started in my original post - the insider circle opening a massive position on the right invasion date mere minutes/hours before they actually do it. This is useful to precisely nobody! And it happens because they are insiders, who want to avoid risk of exposure. Not to share their godly wisdom with the world for others benefit.
Aside from those tertiary effects, perhaps people would pay Google to know this information ahead of time but previously lacked the coordination to make a deal directly.
I'm sure people with business (plans) in country X question your sanity too. Markets create value, not postitve force. Only people can do that.
Of course you DONT want to repeatedly take -EV bets. That would reduce variance and converge you to the mean which is negative by the central limit theorem.
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.
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.
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....
A strategy that works for a non-trivial amount of startups.
The idea is that if you play incorrectly long enough eventually a bigger better that's more wrong then you will come along.
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.
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.
Still, I just find the idea of turning everything in politics into a casino kind of gross. Taken to the extreme it can get pretty disgusting.
Like, imagine that there were a Polymarket of "Will COVID deaths break 1 million?" or "Will <Insert Serial Killer> Take His Fifth Victim?".
These are hyperbolic examples and I'm not saying that anything on Polymarket is that bad, but even the stuff that's currently on there right now like "Khamenei out as Supreme Leader of Iran by March 31?" [1] or "Israel strikes Iran by February 28, 2026?" [2] seems kind of crass. These are real issues that have real consequences that affect many real humans (who are no less valuable than me) and people are treating this shit like a fucking game.
I'm not accusing you of that, to be clear, it's just why I find Polymarket to be gross and I'm not sure it should be legal.
[1] https://polymarket.com/event/khamenei-out-as-supreme-leader-...
[2] https://polymarket.com/event/israel-strikes-iran-by-february...
I would say the average person is terrible at aggregating media and making predictions, at least this way they can access expert opinion for free.
Of course as yet it's still niche nerd stuff but if I were in Iran, I'd probably find a signal about imminent strikes or future regime change quite useful.
If "real life-changing decisions" includes deciding to take a flight based on polymarket placing a low price on war breaking out, then yes.
I'd also challenge you to outperform "Degenerate gamblers"
I missed a link to any source for this claim?
> I'd also challenge you to outperform
I wasn't making a competition out of this - rather I'm questioning the fundamental basis of this.
> questioning the fundamental basis of this.
Empirically, you can look at https://calibration.city/ (among other such trackers) look at polymarket, filter by market midpoint and you'll see that if a market resolves in a year, and 6 months in it's at 30%, the actual event happens at (remarkably close) to 30% of the time.
Theoretically, it relies on standard market theories, like efficient markets hypothesis etc. Basically, however corn comes ot be valued correctly, much of the same mechanisms are present here
This is the theoretical underpinning of prediction markets.
"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.
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).
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.
Obvious example: Polymarket now has 69(!) markets involving Iran: https://polymarket.com/predictions/iran
Consider the timing of those markets wrt 2026 national elections in US, Israel, also Sweden, legislative elections in France, Germany (as canaries for their next general elections) plus a possible change in UK PM, plus any possible Ukraine or Venezuela outcomes. And of course events in the stock market or energy markets make certain outcomes more/less likely.
Also, on Polymarket traders often buy and sell before a market resolves, to exploit patterns in other traders.
And consider what happens at major media e.g. CNN now they've partnered with Kalshi, wrt whether the broadcasting certain predictions/viewpoints/interviewees get boosted/suppressed.
Yes, and surely you see that the inability to distinguish between true signal and deliberate countersignal until after the bet has resolved is an indictment of the very model of predictions markets. Like a qubit, you must collapse the waveform to extract the information.
Certainly the platform itself can.
You have not conveyed what information is thought by insiders in your example
I agree it's not perfect, but I think you're underplaying a lot of the value.
I can't do anything about this, except decide when it's time to pack my go-bag and leave it near the door so I'm ready to go to the bomb shelter in middle of the night. To that end, polymarket odds are helpful. I'd never bet any money myself, of course.
In related news, I read recently that the IDF is currently investigating some personnel who evidently made money predicting the last Israel-Iran flare up using inside information. Naturally this is quite unlawful.
Even if you can derive some utility out of the metrics doesn't mean it's good. One can find silver linings in many illegal things but that doesn't imply that it should be legal.
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.
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.
...would you like to make a bet to this effect?
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.
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?
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.
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.
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.
And there's always a chance things go wrong, even with inside information. It would be unwise to go all in.
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?
https://gizmodo.com/checking-in-on-polymarket-bets-on-christ...
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.
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.
Doesn’t Orthodox Judaism (like all religions) look quite harshly upon all forms of gambling? How is Polymarket kosher?
To be clear, I didn’t question efficient market hypotheses - my stance has been pretty clear along the thread, questioning the value of the kind of information gambled upon in popular prediction markets.
I thought I explained the value quite clearly. ~10 years ago if you wanted to know the odds your flight will get canceled due to war, you had to trust the hyperventilating talking head on your favorite cable news channel (who's job it was to keep you watching...). Now you get basically the actual odds. If that's not value, I don't know what is.
I find the way you operate - supporting and benefitting from Polymarket - to be equally disdainful from the same moralistic standpoint that gambling is banned from, but I guess even in orthodoxy one can bend the rules to their liking.
> Now you get basically the actual odds.
But that's the thing - insiders bet & trade at the very last minute, and thus are not supporting the /just cause/ of "information sharing", rather just plain, old front-running and racketeering. The odds you see when booking your flight are not the real odds - when the actual action happens just before event takes place.
https://ritchietorres.house.gov/posts/in-response-to-suspici...
I don't know which religion/s you're familiar with but I bet you don't know the reason gambling is prohibited in Judaism. It doesn't carry the moral stench you think it does. I've been studying Talmudic law for a very very long time and am confident there is no issue with using polymarket to get the odds on anything.
> The odds you see when booking your flight are not the real odds
In my previous comment I shared a link with you (https://calibration.city/) I told you to filter by market midpoint.
I don't know if you didn't see it or you are being obtuse but between repeating something I disproved and lecturing me about my religion, I have my suspicions...
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.
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.