Chapter 1: What are prediction markets and how do they work?
Shortly before the Super Bowl, someone went on Polymarket, that site where you can bet on everything from sports to politics to the weather, and placed 19 very specific bets. I sat down with our colleague Keelan Ostroff to take a look at that person's account. All the trades on Polymarket are public, but users can be anonymous. I want you to just walk us through what we're looking at here.
This is the guy who's the Super Bowl guy.
Yeah, so this page is the page of someone who bet very, very well on who would be performing at the Super Bowl halftime show.
The person bet around $19,000 that Lady Gaga would have a surprise performance. They bet $3,000 that Cardi B would, too. They bet $10,000 that Travis Scott would not perform. And they bet $200 that the headliner, Bad Bunny, would open with the song, Titi Me Pregunto, And 17 of those 19 bets were correct. The person won almost $17,000.
Yeah, and scroll up because I'm curious at one more thing. So this shows that the first trades that they made were right before the Super Bowl. So they had not traded on anything before this. And if you scroll down, you'll notice that there's no other trades after the Super Bowl ones. So there's no other types of markets that they've traded on.
So based on what you are seeing here on this person's account, what can you deduce about what's going on here?
So they are either a really, really lucky trader, or they knew something ahead of time.
As prediction markets explode in popularity, bets like these, from people who appear to have inside information, are getting a lot of attention and raising a lot of eyebrows.
People have the ability to put money down on things they couldn't historically, and it's way more accessible than it's ever been. And so you have people who can just take their inside information and make a ton of money off of it in a way that you've never really had before.
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Chapter 2: How did a user profit from Super Bowl performance bets?
Where will Giannis be traded? Anyone jailed over Epstein? Iranian Supreme Leader out. Will the U.S. acquire part of Greenland?
All right, so I've got the Polymarket website up to its homepage here, and I'm seeing you can bet on politics, sports, crypto. You can bet on how many times Elon Musk will tweet in a given time period, what the next jobs report will show, who's going to win the most medals at the Summer Olympics. There's a ton of stuff on here.
Yeah, so polymarket, especially in Kalshi to some degree, you can bet on, like, everything. And so there's some markets that kind of make no sense and are kind of almost just there as a joke. Everyone's favorite market is the Jesus market, which you can bet whether Jesus Christ will return by the end of 2027. If he doesn't come by 2027, they're going to make money on that prediction.
I don't know what the odds are right now, but the last time I looked, it was like a 95% chance that he won't return, which implied like a 5% chance that he will.
The second coming of Christ aside, these prediction markets have actually been pretty accurate when it comes to elections and economic indicators.
So take the election, for example, the 2024 presidential election. The polls were very close between Donald Trump and Kamala Harris, with the slight exception of on Polymarket, where the people who were putting down money were betting more than the polls that Donald Trump would win.
And so that was kind of one of the major inflection points where you saw prediction market be more accurate than traditional polls.
And the idea behind that is that if you have to put money on the line that you think this is going to be the outcome, that's different than just telling a pollster who you're going to vote for because you don't have much of an incentive to be honest.
Right, exactly.
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Chapter 3: What makes prediction markets more accessible to users?
But it is fairly well known that it's not that hard to do that with a VPN. You just change the country where you appear to be located and you can make all sorts of bets.
A spokeswoman for Polymarket didn't comment on U.S. customers using VPNs to place bets. The other platform, Kalshi, has taken a different approach. It's legal and regulated in the U.S., and CEO Tarek Mansour says insider trading is banned on the platform.
Kalshi has always very much maintained that they want to be regulated, that they are trying to be the most secure, most in-line prediction market platform that people can trade on. And so Kalshi, when you sign up, you have to say who you are. They collect information on your name, where you live, other basic identifying information that helps clamp down on some of that.
Right, so they could potentially see, oh, these bets that you're making may actually be something that you work in or would have inside knowledge of.
Right, in some cases. But that being said, it's still really hard to track this. I mean, if your best friend is, you know, the head of marketing for the company handling the Super Bowl halftime show, like, they wouldn't have a way to know that. So there's the limits as to what they can actually easily figure out in terms of who has insider information and who doesn't.
Mansour also said that new customers go through a vetting process, and that once on the platform, there are surveillance teams that track trading behavior, among other efforts, to police for insider trading. Still, it can be hard to figure out what's insider trading and what isn't.
Recently, Mansoor went on CNBC and was asked about a theoretical situation in which a dancer for Bad Bunny made bets about the Super Bowl halftime performance.
It sounds like that would be considered insider trading, right? So that's a great question, and it is a little bit of a philosophical question. What is information and what is insider information, right?
If people can trade on Bad Bunny's Super Bowl halftime performance, then does Bad Bunny have an obligation to keep that information secret?
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