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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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