[0x3f]

If I'm an insider with 100% confidence, I'll take all offers at a certain price as long as I can afford it. Similar story for lower levels of confidence (but still inside info). There won't necessarily be any left for you to copy at a viable price.

[slashdev]

You might not have enough money to drain the order book.

And there's always a chance things go wrong, even with inside information. It would be unwise to go all in.

[jwpapi]

The examples didn’t look like they’ve completely emptied the orderbook

[0x3f]

Because there's always some uncertainty and capital limits. But the uncertainty about the outcome is itself inside info, and that's compounded with your own uncertainty about the insider as a copy trader. So the insider will empty out certain price levels only, and your certainty is strictly less than theirs, meaning you have even fewer viable levels to buy.

[chii]

> Similar story for lower levels of confidence

therefore, the polymarket betting odds will reflect the truth - even if that info is a secret that nobody else but the insider knows. And if this is the case, then even an outsider could make use of the odds as a source of info which would ensure that market efficiency (which is about the flow of information) is high.

So what's wrong with insider trading again?

[a2128]

If you believe Polymarket as a serious source of truth, consider that somebody manipulated "Will Jesus Christ return before 2027?" because there was a secondary market on whether that market will rise above 5%. Which defeats the whole idea that the betting odds will reflect the truth. Also even pre-manipulation I don't think a 2% chance that Jesus will return was reflective of truth.

https://gizmodo.com/checking-in-on-polymarket-bets-on-christ...

[hibikir]

The issue comes from situations where the insiders can alter the answer to help their own bets. The simple example is the bet on how long a press conference will be: It's a ridiculous bet when the person giving said press conference can bet and fleece the market.

Will X country invade another before or after day X? A large enough market changes the answer, as the agent can change the decision. And we can see this kind of thing in many interesting questions.

[0x3f]

These are not secret divinations though, the participants know this and price it in or otherwise allow it to determine which markets they participate in.

[wqaatwt]

That someone with inside information will e.g. make 500% while those late to the party e.g. only get 10%? (of course your example is not very realistic to begin with)

[nubg]

So is any kind of business illegal? Making investments?

[yowayb]

How is this distinguishable from pump-dump?

[mminer237]

It rewards blatant corruption? What's the benefit is the bigger question.

[0x3f]

The benefit is that inside information becomes public information. The reward for the insider is just the necessary incentive for that to happen.

[a2128]

Has there ever been any documented circumstance where significant inside information became public and known thanks to a trade? Most often, the trade is made at the last minute, and the information gets subsequently revealed anyway. And it's impossible to tell whether somebody is an inside trader, a wealthy gambling addict making a stupid decision, or hypothetically a foreign agent pretending to be an inside trader to make people believe in a particular outcome.

[0x3f]

It's impossible to know anything for certain; almost everything is probabilistic.

Also I'm not sure how to interpret your criteria because timing matters, I don't think saying 'it gets revealed in the end' is very meaningful.

Anyway, on Polymarket specifically, sure, military strikes are a common one. Seems like a useful signal to go hide in the basement. Outside Polymarket, there were insider trades in 2008 that I'm sure were useful.