The point of prediction markets isn't to be fair. They are not the stock market. The point of prediction markets is to predict. They provide a monetary incentive for people who are good at predicting stuff. Whether that's due to luck, analysis, insider knowledge, or the ability to influence the result is irrelevant. If you don't want to participate in an unfair market, don't participate in prediction markets.
But what's the point of predicting how many times Elon will say "Trump" on an earnings call (or some random event Kalshi or Polymarket make up)? At least the stock market serves a purpose. People will claim "prediction markets are great for price discovery!" Ok. I'm so glad we found out the chance of Nicki Minaj saying "Bible" during some recent remarks. In case you were wondering, the chance peaked at around 45% and she did not say 'bible'! She passed up a great opportunity to buy the "yes" and make a ton of money!
I agree that the "will [person] say [word]" markets are stupid. "Will Brian Armstrong say the word 'Bitcoin' in the Q4 earnings call" is a stupid market because nobody a actually cares whether or not he actually says 'Bitcoin', they care about whether or not Coinbase is focusing on Bitcoin. If Armstrong manipulates the market by saying the words without actually doing anything, nobody wins except Armstrong. "Will Coinbase process $10B in Bitcoin transactions in Q4" is a much better market because, though Armstrong could still manipulate the market's outcome, his manipulation would influence a result that people actually care about. The existence of stupid markets doesn't invalidate the concept.
And? Insider trading is bad because it's unfair, and the stock market is supposed to be fair. Prediction markets are not fair. If you are looking for a fair market, prediction markets are not that. Insider trading is accepted and encouraged in prediction markets because it makes the predictions more accurate, which is the entire point.
By 'fair', I mean 'all parties have access to the same information'. The stock market is supposed to give everyone the same information. Trading with privileged information (insider trading), is illegal. Publicly traded companies are required to file 10-Qs and 10-Ks. SEC rule 10b5-1 prohibits trading with material non-public information. There are measures and regulations in place to try to make the stock market fair. There are, by design, zero such measures with prediction markets. Insider trading improves the accuracy of prediction markets, which is their whole purpose to begin with.
