No. of Recommendations: 3
Yes, which begs the question (not you personally) about what the information Santos used was not his, especially when he was no longer part of the government.I
suspect that this might be an expansion of the legal theory applied in the NBA "insider trading" indictments that were made late last year. Namely, that if you violate the prediction market's Terms of Service, you are somehow committing commodities fraud. The argument raised in that case was discussed in this column (Bolded language the quote from the indictment):
The defendants and their co-conspirators made and caused others to make materially false and misleading statements and representations to the Betting Companies, and to omit to state one or more material facts which made what was represented under the circumstances misleading, including that the wagers were placed in accordance with the Betting Companies’ terms and conditions and house rules prohibiting, among other things, wagering based on non-public information and straw betting.
I think that says that insider betting is a crime if a sportsbook’s house rules say “you can’t insider bet.” That is considerably broader than the rule in the stock market. (If the sportsbook’s terms of service said “you can’t bet if you have a good statistical model of basketball games,” would doing so be a crime?) But, as I often write, everything is sports gambling now, and I suppose this is the rule. Insider betting is about fairness (to the sportsbook!), so if you know something that the sportsbook doesn’t you can’t bet.https://archive.ph/vv5NOBut...that's kind of weird, right? One of the things that prediction markets are
supposed to do is incorporate knowledge about the subject of the prediction into the market price. That's (presumably) why some of these market prices are arguably better predictors of future events - people that know important stuff about the subject will have an incentive to make trades, and the resultant shifts in price convey that information to the rest of the world.
That's what's supposed to happen in things like commodities markets: all the companies that will need to buy jet fuel in 2027 (for example) will use their internal projections for future jet fuel demand to determine their purchases to hedge that risk, and sellers of jet fuel will do the same for what they think their production will involve, and that allows the market to have a pretty good view into what
current conditions say about the 2027 jet fuel market. It's fraud for individuals who
work for those companies to make insider bets on jet fuel futures, because they're stealing proprietary information from their firms - but not fraud for the companies themselves to look at the non-public information they have about their own future jet fuel needs when making decisions on buying jet fuel futures.
So when Santos is trading on his own personal information that he didn't obtain from anyone else and has no duty to keep secret...how is that insider trading?
