Source: Fortune
Summary
Prediction markets are facing increased scrutiny as insider trading and other issues come to light. Robin Hanson, an economist who helped develop the market scoring rule used by many prediction markets, argues that insiders should be allowed to trade, as it leads to more accurate prices. However, others, including policymakers and President Donald Trump, have expressed concerns about the markets, likening them to gambling. Hanson notes that insider trading is also rampant in traditional financial markets and that the SEC only prosecutes a small fraction of cases.
Our Reading
The announcement sounds familiar.
Kalshi and Polymarket have rolled out new restrictions barring politicians from trading on their own campaigns, athletes from trading in their own leagues, and employees from trading on contracts tied to their employers. Robin Hanson argues that insiders should be allowed to trade, as it leads to more accurate prices. He notes that insider trading is also rampant in traditional financial markets and that the SEC only prosecutes a small fraction of cases. Hanson’s suggested test for legislation is that it should bar government employees from talking to reporters if it bars them from trading on prediction markets.
Hanson thinks that individuals should recognize their odds and get out of the market if they don’t want to take the risk. He views prediction markets as a “great democratic institution” that allows everyone to participate, but notes that not everyone is recommended to participate.
Author: Evan Null
