[wmorgan]

Kalshi is in fact more strict, both defining and punishing insider trading, than CFTC/DOJ. Kalshi is perfectly happy to hand out bans and fines for activity the government doesn't care about. Every Kalshi market has a button on it, "report insider trading" which I'm sure is clicked a zillion times a day by gamblers who are upset they lost.

The reason they do these things is that their first priority is to keep the gamblers happy, and the gamblers hate to think they got cheated.

This just gestures at the meta-problem with prediction markets, who pays for the alpha? With stocks, companies generate returns to capital. With commodities, there are buyers and sellers of the underlying. But there is very little economic usefulness about most prediction markets, especially by volume. The only way to get enough users to justify the effort to figure out accurate prices, is to turn it into an entertainment product. And in an entertainment product, if the customer doesn't like X, then you crack down on X.