The debate around prediction markets has often surrounded issues such as whether they constitute gambling, and whether they are fair, i.e., whether insiders are abusing their knowledge to “fade the crowd” and secure a financial outcome by abusing their privileged information.
ACDC Report Warns about Dangers of Military Insider Trading
Yet the Anti-Corruption Data Collective (ACDC) has shone a fresh light on some of the less prominent issues that remain tied to prediction markets, the fact that government and military insiders may use information to get rich while also alerting foreign adversaries.
The report has already specifically identified at least 152 cryptocurrency wallets that have used Polymarket to trade on contracts tied to US military action that is not publicly disclosed.
The problem is at least three-fold. First, there is doubt about where the information is coming from: is it being abused by government insiders? Second, by having accounts that are capable of “guessing” an outcome correctly every time, US military secrets are exposed to adversaries and could cost servicemen and women’s lives.
Last but hardly least is the question of whether the information is being leaked by foreign adversaries themselves to undermine military operations, and if so, what is the source? Whatever the reason, this is a legitimate national security risk, argues the ACDC, which calls the suspicious accounts that have correctly guessed outcomes of US military interventions time and again “Orcas.”
“Darting through this feeding frenzy are the Orcas, highly specialized, incredibly successful bettors who appear, strike their target, then, often, disappear again into the depths of the blockchain,” the report said.
While the ACDC acknowledges the inherent difficulties of tracking the origins of these accounts and their owners, the military would do well to try and achieve this, much like it did in the case of a US soldier who used his privileged information to trade on the capture of Venezuelan President Nicolás Maduro.
Win Rate of Suspected Accounts Defies Any Expectations
“Only unmasking the true identity of the users with the subpoena power held by law enforcement agencies can definitively identify the true insiders,” the ACDC explained.
ACDC has been able to track the specific win rate of the suspected accounts, posting more than 97.2% and averaging wins of $52,514 per wallet. The total amount won by these accounts is about $8 million, while they have risked about 2 million collectively.
The ACDC has also identified “whales,” the types of gamblers who bet big, and bots. However, Orcas continue to bet earlier than the second group, further indicative that there is most likely a leak of insider information that is leading to earlier trades.