But, but, insider information is the very point of prediction markets

The efficient markets hypothesis says that markets are efficient at processing the information about what prices should be in a market. Which is fun, if a little tautologous perhaps. At one end of the spectrum, the “weak” form, this is generally accepted by all but dunderheads and socialists - but we repeat ourselves. The semi-strong version, that all public information is perfectly incorporated is more contentious and the strong, that all - public and private - is already in prices is, well, hmm.

But this is the point about prediction markets, that we gain more of that private information into current prices. We all thus know more about the world, prices are more efficient:

Several accounts on the online platform Polymarket laid bets on a US-Iran ceasefire over the weekend that appeared to show signs of insider knowledge, according to experts.

Eight accounts, all newly created around 21 March, bet a total of nearly $70,000 (£52,000) on there being a ceasefire. They stand to make nearly $820,000 if such a deal is reached before 31 March.

An account that made the same bet was created shortly before the US struck Iran on 28 February. It also placed a winning bet on those strikes, which raised similar questions around insider trading, and so far has bet on nothing else.

We tend to say - there have been extremists even recently, the Swiss Exchanges perhaps, who disagreed - that the benefit of getting that private information into prices is not worth the potential for misleading the investing public when on public stock exchanges and so on. Thus that very definition of insider information, in the legal sense, which you are not allowed to use to fatten your own bank account by breaching your fiduciary duty.

On the other hand, we do want as much of that private information incorporated into prices as we can manage. So, in a prediction market - which is speculation, betting, froth - we allow it. In fact, one of the points of such markets is that those with the insider information trade upon it, move prices and so inform everyone else.

Here, for example, if a ceasefire is actually to happen then oil prices will decline. It’s better that we all know that earlier rather than later - eeevil capitalist oil company profits will be lower the sooner oil prices fall for example.

As we say, people trading upon inside information in prediction markets is not some horror to mither and wibble about. It’s wholly and entirely the point of having such markets in the first place.

But, you know, The Guardian and matters economic…..

Tim Worstall