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And the CIA was specifically established to coordinate government efforts to gather information. Which is vast majority of its personnel ever do, too. But it is famous for the activities committed based on the information gathered.
It's (only) an "information gathering tool" should not be a thoughtstop. If liquid prediction markets enable insider trading and other undesirable defect actions, then their purpose becomes insider trading and other undesirable defect actions.
Defect from what? Prediction markets are about accuracy and truth, insider trading increases accuracy. It may be "defect" action when it comes to some NDAs or some sense of fairness - but again these are orthogonal to the purpose of prediction market which is accuracy of prediction.
Also the whole defect thing is stupid in my eyes. For instance apparently some analyst companies employ fleet of drones and satellites to monitor parking lots in front of Walmart to predict their sales numbers. Not every individual investor has access to these satellites. These analysts waste money and time to "outcompete" and scalp average trader Joes in this useless information gathering competition. What if I purchase data from ramps regarding number of cars from somebody inside the company or even better, purchase camera footage and employ AI algorithm to calculate how full are the carts thus showing the middle finger to drone/satellite losers. It is the same stupid information game. What is the defection here?
See my reply to WandererintheWilderness. Accuracy for whom? Why? Prediction markets are not a neutral technology.
So you can construct a scenario that sounds relatively innocuous. What about the real event? If I were an American serviceman, I would be worried that someone in the loop of secret military operations is perhaps in the business of making personal profit by trading on knowledge of military secrets. If I were an American government official or lawmaker, I would be looking for ways to cost0efficiently stop or neutralize it.
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But that's just circular. Why is insider trading "undesirable"? It's undesirable on the stock market and in sports betting because it's an unfair advantage. But that's only because part of the point of the stock market and sports betting pools is that they're meant to be fair to the people investing/betting. If we stipulate that the point of prediction markets is, exclusively, to generate maximally accurate information about the future, then there's nothing inherently wrong with it being less than maximally "fair" to betters: no one promised it would be.
And my point is that we should not grant that premise. In this discussion I feel like its 2010, and I am arguing against someone who claims "point of Uber is just to be an app for ridesharing". technically true, but that was only a technical goal, the point of the app was to provide service that could circumvent the existing taxicab service regulations by becoming too popular to sue effectively.
Similarly, the point of prediction markets is not to max an abstract "maximum information accuracy points" of the universe, it is to provide accurate information about multitude of things to various people for a price. Some can be fun and inconsequential ("who will be the mayor of $InsertGenericLocality"), but some will have consequences. C-suite executives and knowledgeable employees can absolutely make a profit (and make investors in their employer lose money) by trading secret information on a prediction market concerning to their employer. A government official or military personnel can absolutely make a profit and kill a military operation (and kill some people too) by trading secret information on a prediction market concerning geopolitically relevant outcomes.
In case of Uber one can argue that achieving the ultimate purpose was a net good for consumers (especially in major metropolitan areas, but perhaps not-so-good for would-be taxi drivers). If you want to make a case for a prediction market for financial or military secrets, you have to make a case that availability of such information for a price is a net good.
I grant that I was not really defining "insider trading" and "defections" in my reply, and using it vaguely, but everyone participating here can peruse all the sibling comment threads for a more detailed discussion about various scenarios.
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