I apologize to staff of the White House.
For a while now, I’ve intimated that prediction markets inevitably engender public corruption. I have suggested that members of the White House staff might use insider knowledge to make bets on huge events, thereby earning a profit to make up for their lackluster public salaries.
We have no actual indication that any of them have done this! It’s just — y’know — believable. What with everything.
After all, it has sure looked like people with privileged information have been placing bets.
But it never occurred to me that it might maybe be members of the U.S. military that could be making bets on globally significant events. We expect soldiers to be honorable public servants with enormous discretion, but something in the system that inculcates honor among our warriors might have broken down.
The Department of Justice alleges that a member of Army special forces made bets on Polymarket ahead of the ouster of Nicolás Maduro in Argentina.
Someone made over $400,000 on that latest little enforcement of the Monroe Doctrine. U.S. Attorney Jay Clayton1 now thinks he knows who, and he’s not happy about it.
Yes, prediction markets have won, but why do they feel so gross? (with Kate Irwin)
I feel weird about prediction markets. I think a lot of us do?
One prediction down
Obviously, the accused is innocent until proven guilty.
But let’s just discuss this as if Clayton did really get the right guy, as the Southern District usually does.
One of my predictions for the year was that we’d all feel weird about prediction markets before we got to the end of the year. Here we are!
If it is really true that a member of the military was placing bets on prediction markets, that’s unsettling. We expect politicians and political employees to be a little corrupt. Political folks tend to be driven by narcissism and hubris.
Public servants are meant to be different, though. They are the ballast on the ship. We may or may not have crazy people captaining from time to time, but they come and go. It’s the career public servants we hope will balance their depredations.
Janus-face
The Greek god Janus didn’t just have two faces. They looked in two different directions.
Prediction markets may surface crucial information that would otherwise stay hidden. They may offer signals to people that would have otherwise stay hidden. This is one face.
But there’s another face. The money. The biggest problem of prediction markets is always their greatest asset: if you’ve got tea, the tea is much more tempting to sell than it is to tell.
And that’s why it’s far too facile to simply say prediction markets must be an unqualified good.
Here’s what’s tricky about this case: I’m not sure I really care about insider trading, as a rule. My personal ethical jury remains out on that question.
But here’s something I am sure about: I am sure I don’t want soldiers trading bets on military operations. That heuristic sits on solid ethical and pragmatic grounds.
Prediction markets might have been beneficial and, ultimately, inevitably, but let’s not put blinders on. Prediction markets also put corruption nothing but a click or two away.
Cue Al Pacino reference here.