YOU BETCHA—A PATH TO INSIDER TRADING OR TO PENURY

I PREFACE THIS BY NOTING that I ignore lotteries, betting, and have no interest in participating in “prediction markets.” In fact, from what I’ve read, I fear their deleterious effect on society.

Full disclosure:  On the other hand, I should note that I won a Ford Ranch Wagon in 1967. As noted here previously, “This good fortune came through a local dealership celebrating its 13th anniversary. Why they chose this oddly numbered celebration I do not know. But I do recall when the guy called that I had won, he added, ‘Don’t get your hopes up because, like our dealership, the car is 13 year old.’ ”

Yes, my winner in 1967 was a 1954 Ford Customline Ranch Wagon, the same color as this one. 

“My ’54 had a V-8, a 3-speed stick, and sufficient gaps in its rusted door panels to allow a view of the street below. I commuted to grad school with it for a while, used it to move the family a few blocks, and then one day its left front suspension gave way as I entered a driveway. I got it towed away for free—and within a month found it back in use. Not, I would hope as another prize.

Prediction Markets. This charming automotive tale, however, has little to do with prediction markets such as Kalshi and Polymarket making all the headlines. 

Stanford University offers “Prediction Markets Are Surging—Here’s What You Need to Know,” by Melissa De Witte interviewing Joseph Grundfest, April 28, 2026. Grundfest, a former SEC commissioner, is the W.A. Franke Professor of Law and Business, Emeritus, at Stanford Law School (SLS) and is also a senior faculty member with the Arthur and Toni Rembe Rock Center for Corporate Governance. Here are tidbits gleaned from his article. Quotes are Professor Grundfest’s; other comments are mine or identified by source. 

Why the Recent Surge in Prediction Markets? “Money,” says Professor Grundgfest.

How Do Prediction Markets Differ from Online Gambling? “The answer depends entirely on whom you ask. Kalshi and Polymarket, the primary online event markets, claim their markets are fundamentally different from traditional gambling because there is no ‘house’ that sets the odds and acts as the counterparty to all positions.”

That is, they differ in concept from horse racing, for example, where the tracks (or bookies) set the odds. “Instead, prediction markets are structured more like traditional futures markets in which no wager exists unless a person on one side of the market is willing to do business with a person on the other side. The market sets the odds in the Kalshi and Polymarket models, not the casino, or ‘the House.’ The states respond that this is a distinction without a difference because the end result is functionally indistinguishable from a traditional sports betting market.”

Note, the traditional futures markets, such as those identifying bond rates and the like, are carefully monitored by government regulation. 

Differences of Opinion. “States like New Jersey and Washington contend that Kalshi’s sports-indexed markets are not legitimate contract markets of the sort that Congress intended to regulate under the Commodities Exchange Act (CEA). They urge that the CEA regulate financial and commercial contracts, contracts relating to interest rates, or currency prices, not traditional sports betting contracts that are ‘dolled up’ to look like financial instruments. In response, the markets point to the CEA’s very broad definitional language and assert that sports contracts clearly fall within those definitions.”

And, of course, those eager to profit (guess who?) get their political oars in the water. And it’s likely that these disagreements will eventually lead to being resolved by the Supreme Court. A scary prospect indeed, given its recent views on things like the Congressionally non-authorized Ballroom, Arch, Trump/Netanyahu/Iran war, and so many other injustices.

Very Specific Knowledge. “The precision of the contracts offered on these markets amplifies insider trading risk…. Prediction markets also proliferate contracts on ‘micro-decisions’ that are more directly related to very specific forms of knowledge. Two years ago, if you were a government official or military officer with knowledge of the plan to ‘extract’ Maduro from Venezuela, or of the attack on Iran, there were simply no markets on which you could easily attempt to trade on that very specific form of information. Today, you can make hundreds of thousands of dollars by misappropriating that information by trading event contracts.” 

Catching Some, Not Others. Sharon LaFraniere reports “Prediction Firms Are Flagging Insider Traders. Many Will Not Face Charges,” The New York Times, August 12, 2026. LaFraniere writes, “The spate of referrals suggests that the new online betting bazaars, where traders wager billions of dollars a month on everything from sports to politics, have opened the gates to possible manipulation by people with inside knowledge. That has exposed constraints in the federal response to an industry in which President Trump’s family is invested and which he has explicitly said he wants to thrive.” 

She notes as well that “Donald Trump Jr. is a paid adviser to Kalshi and an investor in Polymarket, the other leading prediction firm. Trump Media & Technology Group, the publicly traded social media platform the president co-founded, said this week that it is finalizing a marketing agreement with a third prediction market, Crypto.com, and plans to pursue deals with others.”

And to think that Trump is arranging to sell insider information on Truth Social is utterly reprehensible, even for this Queens Felon!

Professor Grundfest on Meaningful Oversight. “That’s a tough one. Ideally, we would replicate the systems that the SEC uses to monitor against insider trading in U.S. equity markets, but the real problems arise offshore and in crypto-native event markets. In particular, Polymarket is crypto-native, does not apply U.S.-style anti-money laundering or know-your-customer rules, and is technically closed to participation by U.S. persons. All that said, U.S. persons do use virtual private networks and other techniques to trade on Polymarket, and most of the troubling leaks related to national security events have appeared on Polymarket, not Kalshi, because of the relative ease of remaining anonymous.”

What About Those Without Insider Information? To quote Trump on another matter entirely, they’re “losers.” ds 

© Dennis Simanaitis, SimanaitisSays.com, 2026