Even if you buy the idea that Kalshi is a prediction market whose mechanism is gambling but whose product is accurate predictions, you don't have to buy the idea that insider trading is a good thing. Yes, in the rare occasion there exists someone with (a) insider information (b) confidence their actions won't impact their insider position and (c) access to capital - then you get extremely accurate predictions.

In every other case you get worse predictions. Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider. So in the general case it reduces the ability of the predictors to push the market in the right direction, because they always have to risk manage the fact that someone out there might run them over with insider information.

Not just insider information, but insider access. If the outcome of some prop bet is under the control of a handful of people, those people can trivially conspire to produce whatever outcome is most profitable to them.

If people with more information profit at the expense of people with less information, isn't that exactly how things are supposed to work?

If you're approaching a market with hard facts, detailed comparisons and solid evidence; while I'm trading in the same market based on vibes and intuition, surely it's expected that your returns would be better, and mine worse?

If an insider with large amounts of capital makes a big trade, they also end up discouraging other trades. Once you see a huge position taken, LPs are going to scale back their liquidity in other positions to manage risk that the insider is going to stomp them. Any trader monitoring position sizes is going to probably scale back their trading. All of this contributes to less trading and less commission on these markets.

Sports betting is so profitable for prediction markets because they're mostly unsophisticated retail flow making lots and lots of trades, giving the platforms commission. If an insider just pushes market prices in their direction the platforms are going to lose on volume.

> Since those who are predicting have to now construct their bets such that they know they can always get run over by an insider.

The average person does not do this. People trade individual stocks all the time, despite every other market participant (banks, hedge funds, etc.) having better information and technology.

It's why institutions like Citadel pay for retail order flow. They know that retail traders don't have an edge and, if anything, often end up being negative signal.

You can see all across the responses here the encoded premise that the point of a prediction market is to enable people to profit from making accurate predictions. No. The point is for the price to be accurate; for the market to make an accurate prediction. That someone with a P1 prediction can roll over people with less confidence is a feature.