The Democratization of Insider Trading

A few hours before Donald Trump's State of the Union address, Lisa Desjardins from PBS received a tip that would set off a chain reaction across the internet's newest gambling frontier. Republican sources told her the president would speak for more than two hours—possibly even 180 minutes.

The moment she posted this on X, something interesting happened on Kalshi, an online prediction market where people bet real money on news events. Forecasts for "How long will Trump speak?" jumped up by 10 minutes. Users, armed with what they believed was insider information, thought they'd found easy money.

But one Bluesky user saw a different angle: "They're leaking a bunch of stuff about a super long speech and he'll go about 2 minutes short of the supposed mark and everyone in the white house will make $200k on it." Maybe the sources weren't just sharing information—maybe they were manipulating the market for profit.

Trump spoke for 1 hour and 47 minutes. Anyone who bet based on Desjardins' reporting lost money.

When Information Becomes Weaponized

This wasn't an isolated incident. In January, a Polymarket user bet more than $30,000 on Venezuelan President Nicolás Maduro being ousted—just hours before he was captured by the U.S. military. The bet paid out $400,000 and prompted Representative Ritchie Torres to introduce legislation banning federal workers from prediction markets.

Last month, Israeli authorities charged two people with using classified information to bet on military operations on Polymarket. This past weekend, an anonymous trader called Magamyman made more than $550,000 by betting on U.S. and Israeli strikes on Iran and the fate of its supreme leader.

Welcome to the democratization of insider trading, courtesy of platforms that let people wager on everything from elections to "Taylor Swift pregnant before marriage?" These markets frame bets as tradable "shares" that rise and fall like stocks, turning every current event into a financial instrument.

Kalshi and Polymarket claim they harness the "wisdom of crowds" to provide reliable public data. Since people put real money behind their opinions, the theory goes, they're expressing what they actually believe will happen. Some news organizations have partnerships with these platforms, treating them as a form of news-gathering.

The Truth Paradox

But prediction markets produce the opposite of accurate, unbiased information. They encourage anyone with an informational edge to exploit it for personal gain. This makes them perfect technology for a low-trust society—simultaneously exploiting and reinforcing an environment where believing anyone's motives becomes harder.

Tarek Mansour, Kalshi's CEO, says his company is "replacing debate, subjectivity, and talk with markets, accuracy, and truth." Shayne Coplan of Polymarket calls his platform "the most accurate thing we have as mankind right now."

Yet their X accounts function like news feeds, posting engagement-baiting headlines and speculating about world events that, conveniently, you can bet on through their platforms. Tuesday morning, Polymarket posted: "BREAKING: Ken Paxton projected to win today's Texas Republican Senate Primary" with 83% odds. Paxton ended up with about 40% of the vote, slightly less than John Cornyn, who was polling at just 18% on Polymarket.

The Meta-Game Trap

The markets also encourage bizarre meta-games. This winter, the "Will Jesus Christ return before 2027?" market climbed from 1.8% to roughly 4% in one month. The spike made rounds online before someone realized traders had created a secondary market betting on whether the Christ odds would climb above 5%—then manipulated the original market to profit on their side bets.

This means markets don't always reflect what people think will happen as much as what people think other people think will happen. When markets are manipulated by those with exclusive information, they can't provide clear intelligence to everyone else.

Commodifying Human Suffering

Beyond their dubious forecasting value, prediction markets funnel gamblers toward betting on human suffering and acts of war. As I write this, the top market on Polymarket's homepage asks "Will the Iranian regime fall by June 30?" More than $6.7 million has been wagered on it.

Betting on geopolitics and military operations lets traders profit from death, transforming people, politics, trauma—everything—into commodities. After the first strikes on Iran, Polymarket briefly allowed trades on when a nuclear weapon might be detonated. Current events, no matter how heinous, become entertainment or business plans—what Jason Koebler of 404 Media calls a "depravity economy."

The Insider's Dividend

As this economy grows, it breaks whatever trust we have left. If prop bets make athletes play differently, that threatens the integrity of live sports. If people believe anonymous government insiders are profiting off classified information, why trust anything the administration says?

There's a concept called the "insider's dividend"—an environment where prediction markets and insider trading become so prevalent that everyone assumes decisions are made to enrich those with an edge.

This is prediction markets' central lie: They claim to get us closer to truth but make us less certain about the world. Yet this erosion of trust isn't a bug—it's a feature. A world where people suspect every motive is one where gambling's cold logic feels more rational.