#625
The Oracle has a Bid Ask Spread
Published:
Jan 17, 2026
Author:
Sarah Parsons Wolter
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In traditional finance, trading on non-public information gets you a visit from the SEC; in the booming world of prediction markets, it apparently makes you a highly efficient oracle. The recent uproar over prescient bets on Venezuelan regime changes and OpenAI product launches has highlighted a feature, not a bug, of these platforms: insider trading accelerates the truth. Tools like Tre Upshaw’s “Insider Finder” actively scour blockchains for anomalous whale activity flagging accounts that bet big on Nicolás Maduro’s ouster or Sam Altman’s announcements moments before they happen. While regulators like the CFTC scratch their heads over this legal gray zone, the market has decided that if someone knows the future, we might as well let them price it in.
Where there is mispriced risk, Wall Street is sure to follow and hedge funds are bringing algorithms to the prediction market party. Major trading houses like DRW and Susquehanna are actively building dedicated desks to arbitrage “fleeting price discrepancies” between platforms like Polymarket and Kalshi. With monthly volumes rocketing from under $100m in early 2024 to over $8b by December 2025, smart money is no longer content to watch from the sidelines. Instead of throwing darts at geopolitical outcome, these firms are hunting for spread inefficiencies, because why bet on a coup when you can bet on the math?
All the while, regulators like the CFTC scratch their heads over this legal gray zone. The Trump administration’s light-touch approach has emboldened firms to dive in, despite the gray zones inhabited by offshore platforms like Polymarket, which technically bans US residents but lacks the strict identity checks of its regulated rival, Kalshi. This discrepancy hasn't stopped U.S. Congressman Ritchie Torres from proposing legislation to ban insiders from trading on policy outcomes. Though enforcement in a decentralized, crypto-based market remains a novel concept for regulators accustomed to traditional equities.
Ultimately, the line between financial hedging and political gambling is blurring fast as hedge funds hunt for traders capable of running sophisticated strategies on event outcomes. Whether it’s high-frequency traders exploiting arbitrage or data terminals tracking specific wallet addresses for alpha, the prediction economy has evolved beyond mere novelty. As portfolio managers begin to view these markets as tools to hedge investments with higher specificity, it seems the most predictable outcome of all is that Wall Street will find a way to monetize uncertainty - regardless of who buys Greenland or wins an Oscar.
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The Oracle has a Bid Ask Spread
The man betting on insider trading as prediction markets boom - The ouster of Nicolás Maduro has sparked an uproar over insider trading on prediction markets, with lawmakers questioning whether some participants are acting on confidential knowledge. Tre Upshaw has created a tool called Insider Finder, which monitors for large anomalous transactions on the prediction platform Polymarket and flags dozens of suspect moves made on the exchange every day. Read more
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