Europe's regulator says it out loud

In its biannual risk report on Thursday, the European Securities and Markets Authority said what traders had been muttering for months.

“A growing number of incidents illustrates that prediction markets are rife with insider trading.”

The promoters are the insiders

Backers of prediction markets include President Trump and Donald Trump Jr. So does Michael S. Selig, chairman of the CFTC, the agency meant to regulate them.

“Talk about a fox in the hen house.”

Prices as pipelines to truth

The pitch is that market prices reveal real probabilities. That holds up for weather, where no trader can nudge whether a hurricane hits Hawaii.

“The champions of prediction markets portray them as pipelines to the truth.”

Now imagine the Fed trading

On Polymarket you can buy a dollar payout if the Fed holds rates in September. If FOMC members trade that contract, the price stops describing the world.

It already happened in 2020

Two Fed officials did extensive stock trading in 2020 while the Fed poured trillions into markets. One held funds owning the same mortgage-backed bonds the Fed was buying.

“They were influencing the policies that determined the value of their investments.”

A billion to twenty-one

After the 2024 election, Donald Trump Jr.'s 1789 Capital bought into Polymarket when it was worth under a billion. A federal regulator then licensed it for U.S. users. It is now valued at $21 billion.

“This is naked Big Playerism.”

Small players stop chasing truth

Once a Big Player can move the outcome, everyone else rationally studies the Big Player instead of the facts. That makes the future murkier and planning harder.

“Welcome to the age of Big Players. They run the show. We pay the price.”