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Effort to prevent government officials from engaging in prediction markets
by stopbulying
Unfortunately, it's not just elected officials that are problematic for prediction markets. The Secretary of War, for instance is not an elected official nor are leaders of the armed forces and there is definitely a prediction market for war. Multiply this by every powerful appointee and every career bureaucrat and see what kind of picture that paints.
If we're not going to ban prediction markets, we could at least make it a requirement that all bets are public and associated with a real identity.
That'd go a long way towards curbing the corruption of these things, while preserving (or even greatly enhancing) their "predictive power."
Sounds like a lot of second cousins are going to make amazing predictions.
Seems like you’d get a secondary proxy market popping up overnight. Like domain privacy for degenerates.
That's why you make the regulations like AML regulations, where it's a crime to obfuscate the source of the wager too.
One of the worst regulations in existence, and you want more of it?
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Its not transparent to me? What are they trying to do?
Deputize prediction market providers to force people to self incriminate à la KYC/AML laws today
> self incriminate
well, if they weren't doing something that would've otherwise been deemed illegal, then why would they consider it self-incriminating to have to follow KYC/AML rules?
If you haven't broken the law, why would you be willing to come down to the jail and breakfast in a cell each morning?
only if you equate following a set of rules to being in jail.
Do you follow road rules? Why don't you apply that jail analogy to that?
You sound like a helpful world citizen. The other problem the US has is that it is illegal for a US Citizen to pay a bribe but there's no realistic enforcement. Luckily you can help solve this. Whenever and wherever you travel you can keep some forms with you and every time you are pulled over you can fill them out with the police in quadruplicate so that each of you can mail them to Washington. At some later point the US can try to cross reference and determine who didn't mail theirs and then whether anyone was actually under US jurisdiction during the incident.
The right to a fair trial fundamentally requires the government to do 100% of the job of proving you guilty, and it shouldn’t force you to generate evidence against yourself while going about perfectly legal things
Domain privacy isn't for degenerates.
They didn't say it was?
I’m not sure I agree - look at the crypto crime that happens as hackers breach databases and are able to link crypto holdings with human identities to target them.
Public trades will make people targets and that will create weird incentives.
https://apnews.com/article/crypto-bitcoin-kidnapping-wrench-...
There’s no one in the world that creating an alternate “real” identity would be easier for than someone who can influence or even determine military or covert actions. It’s probably even legal for them to do so.
THIS — make it transparent, not try to ban it.
And the transparency must be real-time and MUST include the full dox on beneficial owner of the contract/bet, with steep jailtime for falsification/fronting, etc.. They can even say it is for tax purposes — they win that bet, they should pay income tax (and be able to deduct the costs of their losing bets against that specific income type).
I want to know if a bunch of senators or DOD personnel bet on event X, and I want journalists and OSINT watchers to know it in realtime. That gives everyone information while naturally eliminating most of the advantage of insider trading, since nearly everyone will pile into the same trade and the odds/payoff will come closer to the reality.
Knowing who is making the bets doesn’t prevent mildly corrupt officials from driving the outcome that’s going to win them some cash.
Knowing that high-level DOD official were betting on us invading Iran does us no good if the only reason we invaded Iran was so they could win their long-odds bet. Sure, we can try and shame them, but now they're rich and we're fighting another middle-east war.
What is the current method that exists which stops CEO/executives from short selling their own company's stock, then driving that company's value down (which is easy to accomplish)?
Why can't that same method be used to prevent or indict gov't insiders who tries to do the same?
That same method is the SEC (Securities Exchange Commission) and is it widely regarded as simultaneously ineffective and heavy-handedly overreaching.
It is an inherently hard problem to identify insider trading when trading securities, or in this case, bets/contracts, doesn't have participant identification and transparency problems
The same solution would be best for both — everyone can trade freely with the sole caveat that all ultimately beneficial owners are fully identified and the trades are transparently published in real-time.
Braying about "free market" when in the actual market players can hide their identities and covertly manipulate it, while having an underfunded agency supposedly tracking them down after the fact, is just a farce.
A solution structured so it naturally and dynamically self-corrects is far better than an enforcement bolted-on after the fact. And yes, there would still be enforcement of requiring transparency to enforce proper identification.
I guess we shouldn't do this then. If it doesn't completely solve to problem.
> Knowing that high-level DOD official were betting on us invading Iran does us no good if the only reason we invaded Iran was so they could win their long-odds bet.
Of course it does, if we’re willing to do ever-so-slightly more than jerk off on TikTok about it.
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And maybe you can start by mandating age verification?
It's always a good idea to disguise your identity collection as "age verification".
We already do this with Congress, and there’s still insider trading
Another step would be to find ways to discourage bets on outcomes that the bettors participate in.
I doubt that would change anything, in this era of shamelessness. Being corrupt has become a virtue, and winning lots of money is cool, doesn't matter if it was from gambling on war with insider trading.
I believe prediction markets and sports betting apps are societal failures that only serve to alienate the masses and further extract wealth to the top. Let's ban them all, we're not losing anything.
The bill also prevents senior government officials from betting on prediction markets if they are participating personally in the event on which they are betting.
https://www.merkley.senate.gov/wp-content/uploads/End-Predic...
It's also low-ranking members of the armed forces that have a lot more information than you'd expect. If you just banned the high ranking members from prediction markets, I actually don't think very much would change. (There would just be slightly more delay.)
Very few armed forces members have enough information to make actual meaningful trades. The low ranking ones do not have enough money to make meaningful trades even if they did.
> if you just banned the high ranking members from prediction markets, I actually don't think very much would change
Good behavior starts at the top. It becomes a lot easier to crack down on low-level corruption if the guys at the top aren't doing it.
If I was a NOAA meteorologist I'd be making bank insider trading temperature prediction markets.
Maybe this could be an alternative funding source for weather prediction, haha.
How can prediction markets be priced with continuous instead of discrete predictions?
They usually divide into buckets
But wouldn’t that be a feature of the prediction market, not a bug?
If someone really smart knows what will happen, that will make the market’s predictive ability more accurate.
That's always been a just-so story invented to justify insider trading. If weather predictors always bet on a weather prediction market, why would anyone else? They'd be guaranteed to lose money.
1) Not all expert weather predictors agree. They can bet against each other.
2) retail traders lose money and know far less than institutional investors, but do retail traders participate in the stock market? Of course they do.
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> The Secretary of War
There's no such position. You may be referring to the Secretary of Defense.
It’s a secondary title [1].
POTUS also does not have the authority to rename the department, so not sure that this EO is meaningful.
They do what they can. It won’t matter. But the point at this point is to call out the grift. To make plain for at least the rest of you outside our borders that America died of grifters squeezing dollars out of some weird machine that we couldn’t or wouldn’t shut off.
This machine kills hope.
Congress was not even notified in advance of the wars on Iraq or Venezuela. Any leaks came from the executive branch.
I mean, North Korea has some very deadly incentives if this whole "buy your prediction" market is brought online.
Don't forget relatives, useful idiots, and billionaire special envoys!
The latter two groups often overlap, even
Making insider/true expert information public more quickly in the form of influencing prices in a toy market is THE ENTIRE POINT of prediction markets.
Read the original papers on them.
http://li.mit.edu/Stuff/CNSE/Paper/Hanson90.pdf
It might've been the original purpose but in practice prediction markets have turned into a tool for gambling.
It also creates weird incentives. If I want to pay a politician to do something, bribing them would generally be illegal. But what if I instead bet lots of money that they won't do it?
> a tool for gambling
they require liquidity from people that are not in the know for adequate price discovery and exit liquidity worthwhile for participation
You need liquidity but there is no requirement that it comes from gamblers
If only people with accurate information bet, they wouldn't make any money so they'd stop betting.
Betting on imperfect information is not the same thing as gambling
Tell that to the gamblers? like be for real right now
This may be the purpose of a prediction market for an outside observer. But the outside observer and the US government (or any org that holds private information) have different purposes - it's an adversarial mechanism.
In particular: the government is free to just publish any insider/true information that it wants the public to know about. If it shared that purpose then the market wouldn't need to exist.
True experts need not be the people with the ultimate ability to effect change. Professional sports organizations ban their players from betting on games because it creates bad incentives to throw a winnable game. Banning elected representatives from gambling on prediction markets doesn’t make it impossible for insider information to surface, but it does prevent the governance equivalent of match fixing.
EXACTLY! We want insiders to participate in prediction markets and profit!
profit is the participation incentive
> Making insider/true expert information public more quickly in the form of influencing prices in a toy market is THE ENTIRE POINT of prediction markets
American taxpayers pay a lot of money for a military and intelligence advantage. It's not clear it's in our interest for that knowledge to be made "public more quickly."
Exactly.
What we don’t want, and what we should enforce, is participants in prediction markets influencing the events they’re betting on (like the recent basketball betting scandal).
I recall a few finance papers saying (paraphrasing) "approximately all private info is reflected in stock prices". The same is obviously true of prediction markets. If government officials are banned, they'll just give a little wink to a relative or friend, and the prediction markets will reflect the private information.
On a personal note, I find these markets incredibly useful in day to day life. There's been a joke for a while that putting site:reddit.com in your google search is the only way to get (some) real information. It's becoming true that putting <search terms> AND (kalshi OR polymarket) is how to get accurate info.
I think you're thinking of the efficient-market hypothesis. The hypothesis is that prices reflect all available information, and "available information" is the key part. The "strong form" includes private information, but research has not found support for this. And even the "semi-strong form" falls apart. For instance, the market for small cap stocks is not as efficient as the market for large cap stocks.
You need a market that has enough people paying attention and doing the work, and you also need a market that has enough liquidity.
Source: I have a PhD in capital markets.
>Source: I have a PhD in capital markets.
Sort of on-topic Q for you: What is your general take on HN discussion on finance markets/technology. They don't come up often, but when they do, I find a majority of the comments show that people have very limited understanding of traditional capital markets (non VC).
I don't have a PhD but have worked in the industry for 20+ years mostly in trading technology across fixed income and equities.
Accurate info on what? Most markets have almost no liquidity, outside of sports and crypto
Political outcomes is the biggest. Businesses (and individuals) can be strongly (financially) affected by who's elected. I'd been very curious in the past about political outcomes but had never used prediction markets, so I built a little tracker that inputed the probabilities based on scraping ~14 betting sites. I had to do it on a market-by-market basis, and there were lots of edgecases. Having them all in one place (or two; kalshi and polymarket) makes life much simpler.
Prediction markets have also directly affected my travel planning, helping me avoid a country that wasn't at war at the time but had (in my judgement) a too-high risk of war.
You're completely right about thinly traded markets; those are way, way less accurate. But they also offer the greatest opportunity for someone to bet the other way, which has the effect of 'correcting' the market.
Elections usually also have good liquidity.
I’m still calibrating my expectations on the accuracy of Polymarket.
For example, I’m guessing more liquidity in a market means a signal is more predictive. But how much volume is enough to make a signal reliable? What’s the scale? Is $100k unreliable and $100m really good?
Are there other factors that impact a signal’s predictive strength?
It makes sense to ban government officials from betting. It's hard enough to enforce insider trading. With legal betting, it's literally impossible.
Another worrying issue with betting is just how prevalent the last election was in betting markets. In elections won by thousands or even just hundreds of votes, betting markets can skew results where betters vote for someone just purely for the bet and persuade, shill for the person they bet on.
I can imagine betters placing a bet on a candidate and then launching a defamation campaign against the other.
Or campaigns could hedge their risk by buying the other guy. They either win the election or get all their expenses refunded.
That's like "South Park" S01E10 (1998);
Damien (South Park) - Wikipedia https://en.wikipedia.org/wiki/Damien_(South_Park) :
> The majority of South Park's residents bet on Satan to win the match due to his enormous size and muscular physique, but Satan ultimately throws the fight and reveals he bet on Jesus, thus winning everybody's money.
> They either win the election or get all their expenses refunded.
How would that work with something like the WH Press Secretary who has refused to give back some $350K in campaign donations (though currently FEC can't prosecute any campaign finance violations because they don't have a quorum because Trump has not nominated and confirmed enough FEC commissioners.)
I think trump has identified the inefficacy of our supposed checks and balances. In school, we were taught that the 3 branches of government protect against a rogue leader, which is obviously not true. After he is removed or ends his term, I hope the weaknesses in the system are fixed. Yeah I hate him, but the system was supposed to protect us from this outcome.
"David Letterman Was DISGUSTED When Trump Showed His True Character" in re: to promoting professional boxing and boxers: https://youtube.com/watch?v=E9MB4CUraGc :
> As soon as he gets out, he's going to fight in my casinos
> With legal betting, it's literally impossible.
Murphy v. National Collegiate Athletic Association https://en.wikipedia.org/wiki/Murphy_v._National_Collegiate_... :
> State of New Jersey, represented by Governor [Chris Christie], sought to have the Professional and Amateur Sports Protection Act (PASPA) overturned to allow state-sponsored sports betting.
How does Murphy v. National Collegiate Athletic Association affect or affirm states' rights on cannabis regulation and legalization?
Wasn't Christie against Medicalization and Legalization?
IMO it's less fun to see scared gamblers at sporting events.
A quote from the film "Two for the Money":
"See, most gamblers, when they go to gamble, they go to win. When we go to gamble, we go to lose."
Not just insider info. Folks in the government can make those things happen, making the payout for super rare events even higher and more catastrophic. It is obvious how prediction markets could be used to put blind hits out on people.
that’s kind of the point, everyone is just cooperating right now unless you are a head of state
it’s what the crypto anarchist paper Assassination Markets described in the 90s
freaked the FBI out at the time, I think that guy just got out of prison for “unrelated” reasons
That was an interesting read on Jim Bell.
https://www.motherjones.com/politics/2026/03/at-largest-ice-...
> Staff at the nation’s largest Immigration and Customs Enforcement detention facility have placed bets on which detainee will be the next to die by suicide, according to new reporting from the Associated Press based on 911 calls and detainee accounts.
> Owen Ramsingh, a legal permanent resident who spent several weeks at the Camp East Montana detention facility in Texas, told AP that he overheard a security guard talking about a betting pool for which detainee would next die by suicide. The guard said he had paid $500 into the pot, which would all go to the winner with the most accurate predictions on detainees harming themselves.
> A Mystery Trader Made $400,000 Betting on Maduro’s Downfall
> Prediction market trader 'Magamyman' made $553,000 on death of Iran's supreme leader
You can review that user’s trade history. It’s a bit weird for sure, but they didn’t just stop in to bet on those. They’ve bet huge sums on every prediction relating to Iran, Israel, sp500, recessions, etc.
They’ve been betting for 2 years but only recently starting profiting a lot.
If they're smart they'll have multiple accounts with bets each way netting to ~0 on all kinds of topics, and just omit the losing trade on the information they actually have.
Insider trading has been a staple of making money in US politics for a long time, it's just more transparent now.
I don't believe a targeted ban on participating in prediction markets would do much to weed out corruption while "predictions" hide behind government officials pumping memecoins, buying stocks, using proxies, or simply sharing war plans over messaging apps. The floodgates are already open, prediction markets are just the most honest and obvious version of the corruption.
This approach to legislation is an interesting contrast to the CCP's supposed 2.3 million people prosecuted for corruption, if you believe Wikipedia [1].
[1] https://en.wikipedia.org/wiki/Anti-corruption_campaign_under...
Prediction markets should just be globally illegal. Nothing good can come from them. Public identity is not a solution, proxies would be used.
> Prediction markets should just be globally illegal.
100%. But you’ll get yelled at by the “freedom to do literally anything I want, no matter how detrimental to everyone else it is” crowd.
> Following multiple public reports on the growing influence of prediction markets and their potential for corruption, Merkley and Klobuchar introduced the End Prediction Market Corruption Act — a new bill to ban the President, Vice President, Members of Congress, and other public officials from trading event contracts. The bill will ensure that federal elected officials maintain their oath of office to serve the people by preventing them from trading on information that they gained through their role.
Aren't there already basic laws against officials profiting from their role?
Anyone in the financial industry is required to report their brokerage accounts to their employer.
Elected officials, servants of the public, should be required to make public their trades in public securities and on prediction markets. Public servants, elected or not, should have to disclose this to their relevant inspector general. (Yes, I know. We fired them.)
Why do “prediction” markets benefit from bets over nominal sums? Isn’t the power of them based on the wisdom of crowds? Wouldn’t capping bets at say $1 be better than trying to hunt down cheaters?
Seems like they actually are less predictive if you can get more votes with larger amounts of money.
If the bets on a prediction market are capped, then even if you have a better-than-average prediction (for example, if are an expert on the topic the prediction market is about), you can't bet any more than a layman. So a prediction market with capped bets will always be less accurate.
Or taking a longer timeframe: if you think you are a great forecaster but aren't, and are very stubborn, with capped bets you might get to keep trading forever. With uncapped bets you lose all your money and can't trade anymore, leaving the markets to the people who are better than you at forecasting.
The interesting side effect of officials being banned is it reduces liquidity on geopolitical contracts, which makes the remaining prices less informative. Right now on Kalshi, some policy contracts have so little depth that a single 5k order can move the price 10+ cents. That thinness already makes the prices unreliable as forecasts — banning one of the most informed participant classes just makes it worse.
The prediction market trend will "work itself out".
It will become common knowledge that these platforms are exploited by insiders so people "trust" apparent flagged insider bets, so people will try to piggyback insiders, then it will be revealed that a sophisticated party with infinitely deep pockets burns massive amounts of cash to manipulate odds and these piggybackers will be burned badly, so in the end classical gambling and sports betting will resume as preferred ways for gamblers to lose money because of their disgust with the manipulation.
People give plenty of money to mobsters who are running illegal gambling operations (This used to be common in the US). Unsurprisingly, those mobsters cheat people, but they keep doing it.
Prediction markets do seem basically corrupting. So yeah, maybe the winning move for society is to just not regulate them at all so they just become obvious “cheaters only” leagues.
I agree. The market is flawed because there isn’t a guaranteed entropy.
Because of this, the prediction market will remain niche.
Even in the presence of insiders, these markets may still function well as hedges.
Having to put this much effort everytime a new technology comes out is so unproductive. How about have standards for elected officials not to abuse their power? Maybe have an ethics comittee or something? In academia, there's not a rule for every situation; ethics comittee handle this
How about stopping politicians from engaging in stock markets first.
this is important from an operational security perspective and hence will probably pass. if they cared about actual insider trading they'd close that gap years ago.
Can't individuals just avoid participating, knowing that there's always someone who knows more than you?
Predictions markets need to be outlawed, no exceptions, just erased from existence.
If we can't ban them from trading stocks, good luck with this.
Don't be needlessly cynical.
This is a good effort. So is the ban on stock trading. This administration is such that it is bringing corruption to the fore in a way not seen in generations. Things are always hard to pass at the start. Keep pushing and this administration will create a massive opportunity to swing the pendulum if we can (as hard as it is now) retain some optimism.
To the people downvoting you, you just said the administration is bringing corruption into the public view. Some people believe they are exposing and some believe they are currently doing it. Either way, corruption and profiting off of a political position is certainly top of mind for many Americans atm.
Ah interesting thanks for pointing out the ambiguity in my statement. I definitely did not intend that ambiguity but you also rightly point out it sort of works either way. I would think this would lead to more upvotes than downvotes but perhaps a trend of cynicism also is reflected in assuming the least favorable interpretation.
Thanks for pointing that out.
For the record, I meant the latter. Let the downvotes commence!
Blindly trying things without taking signals from outcomes of the past seems like madness. If you have evidence you have failed at walking many times, should you be putting your energy and efforts into running and jumping instead of continuing to pursue walking?
That's not what I'm doing and I think you know that. Reform takes time. If everyone gave up just because things were difficult n times nothing in government would ever change. The state is not a startup. Behind every significant piece of legislation is a battle.
It's easier to ban things before they become entrenched than after. Banning stock trading is hard today because most senators have been doing it for years before getting elected.
I'd be in favor of senators doing prediction markets, just limited to small dollar trades so they can get better at predicting.
Most criminal activity is hard to change when it's already happening. There is no reason to mollify the problem further.
Does this include the stock market?
Related:
War Prediction Markets Are a National-Security Threat https://www.theatlantic.com/technology/2026/03/polymarket-in...
The answer is simple - you price in the chance that an insider could have an edge on you when making your prediction. It's all part of the game.
Or, and I beg you to consider this radical position: we arrest people who break the law (insider trading is illegal) and those who knowingly help them to do so (the operators of the prediction markets).
How quickly we accept the death of even the ideal of rule of law in favor of embracing a return to an explicit rule by might, fuck-you-got-mine mentality.
It doesn't break the law.
From Wikipedia[0] because I can't be bothered to read more than a few paragraphs:
> In 1909, well before the Securities Exchange Act was passed, the United States Supreme Court ruled that a corporate director who bought that company's stock when he knew the stock's price was about to increase committed fraud by buying but not disclosing his inside information.
Based on anti-fraud common law alone the court decided it was illegal for an insider to trade stocks with non-public information. An explicit law would be nice, but a reasonable interpretation of basic law would see most of our ruling class behind bars. This is only highly-contested and technical because we've let our standards slip so far.
If it doesn’t then it should.
Comment was deleted :(
We also care about the world outside the prediction markets. If decision-makers have an incentive to "throw the match" by making surprising decisions, that will impair the decision-making, which will affect the rest of us. Likewise, sufficiently-wealthy actors will be able to manipulate the behaviour of officials by betting against the behaviour they want to see, much like an assassination market.
> manipulate the behaviour of officials by betting against
Right, it becomes regular bribery with middleman and a funny hat.
"I didn't pay the judge to dismiss the case against me, I just hedged by betting I'd be convicted and he just happened to be betting I'd go free, and now my money is coincidentally in his pocket.
If you price that in then the best course of action would be not to bet unless you have insider info yourself. You cant win a game against players that already know the outcome.
All this focus on some insiders who made thousands on betting markets to distract from those who made billions on Wall Street or the oil markets this week.
Both should face consequences but only one will.
Prediction markets and crypto will continue to ride the wave while this administration is in office. But I expect prediction markets will come to be thought of as slimy gambling dens ridden with fraud no different than crypto. The cancerous "greed is good/gamble on everything" attitude prevalent today in America will come crashing down at some point. When? Who knows. The sooner the better.
But for now, make sure you get in your bets er i mean predictions on this mega important market: "Elon Musk # tweets March 3 - March 10, 2026?"[1]
[1] https://polymarket.com/event/elon-musk-of-tweets-march-3-mar...
It wouldn't be a problem if the law was actually applied to prediction markets. If crime is de facto already legal, more laws seems like the least of ones worries.
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This is a bot account
What's the HN policy on LLM-generated comments and linked content? There's so much of it on the front page and in threads that I feel increasingly like I'm in a crowd of machines chasing karma points rather than seeing what people think or care about. Is the engagement also botted? Or can people just not tell? Or do they not care and reply to the obvious robot anyway?
Downvote it, flag it and if you want to be super-helpful, email us about it (hn@ycombinator.com).
We want HN to be free of generated articles and comments, and will kill such submissions/comments and ban accounts that do it repeatedly.
We also ask commenters not to make accusations in the discussion threads, because it's off topic. Please just flag generated content and email us if you really want to.
gotcha, apologies for my comment! will do in the future, appreciate the response
Is there anything we can do to make it better?
Strict regulations around prediction markets for everyone. Incentives around politics, war/killing, etc need to be tightly restricted.
All of these things were managed by the SEC before it was defanged. You don't need 47 laws, you just have to enforce the basic behavior ones. We don't. Nothing else will fix this.
> you have the perfect recipe to undermine the public’s belief that government officials are working for the public good
The public already does not believe this. Less than 25% approve of your work.
> This legislation strengthens the Commodity Futures Trading Commission’s ability to go after bad actors
And this is designed to "increase trust?"
How is any of this going to get passed without enforcement of anti-trust and an end to citizen united?
What does anti-trust enforcement and citizens united have to do with being able to pass laws on insider trading?
Money in politics which causes politicians to be biased on the passing of legislation?
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