TechFlow News, April 26: According to Fortune magazine, as Kalshi and Polymarket accelerate collaboration with the U.S. Commodity Futures Trading Commission (CFTC) to crack down on insider trading, Robin Hanson—economist at George Mason University and one of the founding theorists of prediction markets—publicly voiced opposition, stating that “insider participation in trading” is precisely the core value underpinning prediction markets. Earlier, the U.S. Department of Justice charged a U.S. military servicemember with using classified intelligence to place bets on a Venezuelan raid on Polymarket, illegally profiting approximately $400,000. In response, Robin Hanson remarked: “You want them to trade. You want prices to be as accurate as possible—the market’s purpose is to aid decision-making.”
Hanson argues that, like all economic models, insiders will trade: informed participants buy “yes” contracts, thereby pushing prices toward the truth. If insiders refrain from betting, the information-discovery function of prediction markets would be significantly weakened, and such markets would no longer outperform news media or opinion polls in reflecting real-world outcomes. Insider trading is likewise widespread in traditional financial markets, yet regulators typically address only a tiny fraction of cases. Prediction markets, like investigative journalism, are mechanisms designed to surface information more rapidly—and thus should not be categorically banned. As a compromise, Hanson proposes: any legislation prohibiting government employees from participating in prediction market trading should, by the same logic, also prohibit them from speaking with journalists.
