How do you prevent insider trading? Does your regulation account for that? For example how would you prevent an high ranking NASA employee who knows and/or influences the decision of a moon landing from misusing the platform?
1. we spent years working with the regulators on defining and building our surveillance systems. They basically ingest data from the exchange and run stats/some ML to flag suspicious trading patterns to an investigation team in our compliance department (similar to when NYSE flags a Goldman trader for insider trading) -- our systems have gotten really sophisticated and you'd be surprised by the amount of commonality there is in cases of fraud/insider trading/manipulation/collusion and so on...
2. we tie people's trading activity to KYC we run at signup. We also pass people through Politically Exposed Persons (PEP) lists, that flag anyone that works in gov and their relatives etc.
3. when we investigate cases of inappropriate behaviors, the consequences can range from fines to criminal prosecution by the CFTC (similar to stock trading)
4. obv all the above are not a single hammer solution, they're heuristics, but people generally don't commit a federal crime to trade with $100, they tend to trade with much more meaningful sums, which fortunately and intuitively is much easier for our oversight programs to flag.
Overall, this question presents a number of fascinating challenges/questions, but it's not a more difficult problem than flagging insider trading/market manipulation in traditional markets like stocks and commodities.
No. Some people have information that they are not fiduciarilly bound to keep secret but they may still know things that would allow them to make a profit. That’s not insider trading, that’s knowing private information that isn’t reflected in market prices. That’s the point of a prediction market as an information aggregator.
