Wouldn't the counterargument to this be that if the poor grunt is willing to betray his country for money in the prediction market, he would also be willing to take money from enemy x to do the same thing?

With the prediction market, there is a financial incentive for people on the opposite side of the bet being motivated to uncover the malfeasance.

Pizza orders are also an indicator https://en.wikipedia.org/wiki/Pentagon_pizza_theory

That person is reportedly in jail and facing serious time.

https://finance.yahoo.com/news/trump-jails-venezuela-leaker-...

Anyone with a security clearance making bets like this is not a smart person.

This is fascinating.

I'd just like to make the distinction between:

1- Making a bet with privileged information. 2- Creating the event and making the bet.

2 would be a war crime, 1 would be a probabilistic leak.

Trump claimed they didn't want to pass through congress because they leak, and there were no leaks about the event. But if any personnel made a polymarket bet, that would constitute a leak. It wasn't acted upon, but if personnel continues to leak information in this manner, it is possible that an adversary will eventually listen to this signal, and that it was just ignored because it is too fresh.

This analysis would also make it clear why it would be immoral to participate in such markets as a civilian. Because if it is your country you might be compensating an insider for information, benefitting the enemy. And if you are not, you might be harming the enemy, but you would be an unlawful belligerent.

> POSIWID

Everyone can make up a silly purpose.

Against POSIWID: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...

The market can only resolve based on public information, so it could only incentivize revealing information that is already destined to be imminently revealed. Furthermore, it doesn't incentivize sharing that information with enough lead time to actually take action based on that information; the opposite is actually true, insiders are incentivized to wait until just before the event to make their trade, meaning that the public gets no actionable information in practice. And that's assuming that you can distinguish an insider from someone lying for the sake of market manipulation.

(The Purpose Of a System Is What It Does)

Without additional signals, you can just as well use it to manipulate markets.

E.g. there's a 1-to-1000 bet for $1m today on Trump falling down the staircase. So markets read this and go crazy, buying up the stock. The next day, nothing happens and the markets go down. But somebody could have made billions betting on that.

All of these things are much more subject to the problem that effects policy generally: the law of unintended consequences. Betting on the policy, rather than an intended/expected longer-term outcome that is easily derailed by intervening events outside of your direct control is much more direct (plus, if you are corrupt enough to bet on policy you control, that policy is probably already seeking a longer-term aim that serves your existing financial interests, so the ability to bet on the policy itself makes the corruption more attractive by providing a more immediate and certain payoff on top of the longer-term, less certain one.)

You are not wrong, and I should clarify I also have a big problem with the current state of legal insider trading of elected officials, but this polymarket problem is much more extreme. You can get a guaranteed 100-1 payout by blowing up some random people on the other side of the planet. Way worse than making even 2-5x on a leveraged futures bet with insider info. In that example, the victim is usually just other rich people.

Prediction markets don't uniquely enable it, but they make it far more effective and easy.

Insider trading is illegal. And for trades that aren't technically insider trading, often having some information ahead of time isn't as useful as it seems. Markets are known to react unpredictably to news; sometimes they move the opposite way from what you'd think, especially over the mid-long term, and there are many other influences on the price.

With a prediction market though, if you know what'll happen in the world, you know exactly what you'll win in the market.

You can also just... not place bets on completely bizarre prediction markets like "how many times this person says this word". The market can sort it out, etc.

It is. https://en.wikipedia.org/wiki/2024_United_Kingdom_general_el...

> During the 2024 general election campaign, allegations were made that illicit bets were placed by political party members and police officers, some of whom may have had insider knowledge of the date of the general election before Rishi Sunak, the Prime Minister at the time, publicly announced when it would be held.

> ...

> In April 2025, the Gambling Commission charged 15 people with offences under Section 42 of the Gambling Act 2005, including Russell George, Tony Lee, Nick Mason, Laura Saunders, and Craig Williams. Trials are not expected to begin until September 2027 or January 2028.

Again - Its not the money I care about, its what people are willing to do to make it.

Parent comment has a strong implication that the bets will impact their decisions, and invariably for the worse.

If "Politician XYZ takes the day off and sits on the couch" were paying 100-1 odds, it wouldn't be such a big drama (although, again, the existence of the bet would still impact their behaviour)

First - I can not comprehend how you could possibly have a charitable interpretation on the war point and how it might have a net positive. I'm not trying to be condescending or anything, I would like to hear a single positive for being able to make BTC bets on killing people.

Second - even if you are not one of the millions of Americans that give a shit about sports, there is still a massive fraud implications just by the existence of crypto prediction markets. All it takes is one bad call to changed the outcome of game. The Superbowl last year had over $1 billion wagered on it.

I have occasionally tried checking Polymarket and Kalshi to get an idea of the general political/cultural/technological consensus on various issues that are difficult to research otherwise, eg. "what are the chances that the Senate changes hands in the 2026 midterms?" People have thought about it enough to wager a million dollars and the consensus is at about 1/3. I have this abstract prediction market in my head, each bet placed by some statistically average person with diverse experiences and exposures from my own bubble, who carefully considers their information and puts their two cents into the pot, and I assume that by adding all our ideas together we form some sort of combined intelligence which is more insightful and reliable together than any individual pundit could be.

And then I go back to the home page, and see all the rabid sports fans, and realize that these bets are not being placed by deep thinkers.

It’s not really margin since there’s no leverage: the potential loss associated with the bet has to be deposited, so it’s fully collateralised.

True, but from the pdf it seems like the fee charged of market makers is 1.75¢ × P × (1-P) per contract. Near P=0 that's approximately 1.75% of the notional amount invested, but near P=1 that's approximately 1.75% of the potential gain.

As I read it, the implication is that a market maker in the high-P regime needs to still have an expected edge of 1.75% to profit net of fees, which means that the 'maker return' table in this article is net negative after fees for all categories save for entertainment, media, and world events.

The way I imagined it, the maintainers wouldn't be considering a commit whose author was not willing to bet on its success.

This thought experiment took part in a world where the web was significantly worse than our own: hoards of malicious AI's and precious few humans trying to not be mistaken for a malicious AI. Of course a pre-existing trust relationship is much better, but ideally there'd be a way for untrusted authors to make it through to a real human somehow. Attaching money to the commit would be one way to do that.

That is what I meant to say, that you'd inform the maintainers along with your bet against the commit. In this thought experiment I assumed that the maintainers are already being spammed by AI so heavily that the bet is necessary to get their attention. (Neal Stephenson had something similar going in in Anathem, he called them "bogons".)

In the case where you're betting heavily in favor of a commit, maybe because you've reviewed it and think it's good, maybe because it contains malware you want to inject... you'd be attracting reviewer attention to that commit because if they can talk the maintainers out of it they end up with more of your money.

Probably the best strategy for a malicious committer would be to sneak through a low value nothing-to-see-here commit, because the low bet would not attract extra reviewer attention, so the maintainers have to set it high enough that it still incentivizes review.

I don't want to live in this world, by the way, I'm just afraid we might have to.

that's correct. Also Kalshi does pay out interest on, and Poly does on a few markets

> but i did find that politics was actually one of the most efficient categories (only ~1% maker/taker gap)

I confess I'm surprised by that result in particular. I realize your results are for Kalshi, but ISTR some reports from the presidential elections on Polymarket.

But more generally: When you say there is "only a ~1% maker/taker gap", is that weighted by the size of the bets? or is it averaged over the number of bets placed?

In any case: Thanks for a very interesting paper!