On 15 September 2026, the compliance newsletter Compliance+More published “The truth machine’s corruption problem”, an interview by Scott Longley with Émile Servan-Schreiber, co-founder of The Forecasting Machine and head of Hypermind. Servan-Schreiber shared it the same morning. For 25 years he has argued that prediction markets can forecast accurately without people risking their own money. In this interview he turned to what can go wrong when they do.
Once everything becomes tradable and a money-making opportunity, then it’s super-dangerous territory
Émile Servan-Schreiber to Compliance+More
Why insiders kill a market
Insider trading is usually treated as an enforcement and consumer-protection issue. Servan-Schreiber’s point is that it also destroys the product. His example is markets on what Donald Trump will say in his next speech. “If I’m a trader, I will never touch again a market on what Trump is going to say in the next speech,” he said. “Those markets are killed forever.”
The example was not hypothetical. In July, PBS reported that the President’s teleprompter operator had been placed on unpaid leave. He was alleged to have won more than $100,000 betting on Kalshi markets about which words Trump would use, including in the State of the Union. Kalshi said its surveillance team flagged the trades and referred them to the Commodity Futures Trading Commission (CFTC).
Longley extends the argument to contracts on military decisions, corporate announcements and personnel changes. In each case, traders weighing the public evidence may be trading against someone who already knows the answer. Once traders suspect that, Servan-Schreiber said, the smart ones stop participating, and “all the smart money goes out of these markets very quickly.” The article describes the loop that follows. Honest, informed traders leave, liquidity falls, prices become easier to move, and the forecast gets worse, which gives the remaining traders another reason to go.
If you cannot stop insider trading, it kills your product because it makes trading untrustworthy
Émile Servan-Schreiber to Compliance+More
Betting on your own game
The second risk is worse than trading on secrets: someone changing the outcome they have bet on. “If you can bet on your own – or have a friend bet on the fact that you’re going to lose the game – the temptation is huge to just lose the game,” Servan-Schreiber said. On Hypermind, players can lose virtual capital, status and influence, but they cannot profit by rigging the event. “If you can make a million points on Hypermind, you’re not going to try to lose the game,” he said.
He acknowledged that sport has built defences: monitoring of betting patterns, shared alerts and integrity units working with leagues. He said this field is “sufficiently circumscribed that you can manage that”. But when the same logic spreads to areas of life that are hard to formalise or standardise, “you cannot manage it anymore.” Longley adds that many event contracts have no governing body, no official data and no integrity unit, and some are decided by a handful of people or a single person.
Research and caveats
In the comments, Kim Kaivanto of Lancaster University pointed to a recent working paper by Siyang Liu on insider trading on Polymarket. According to its abstract, the paper analyses on-chain data. It reports that profits are concentrated among insiders and market makers, that market makers lose more per dollar traded in compromised markets, and that insiders use clusters of accounts that funnel winnings to a single withdrawal address. Servan-Schreiber called it a very interesting article.
Longley’s piece is careful about the limits. A well-timed trade can reflect research, skill or luck rather than inside knowledge. One suspected insider does not discredit every market on a platform, and liquid markets with many different participants should hold up better than thin ones. Financial exchanges have rules on material non-public information and extensive surveillance, and they still see insider cases.
The same edition reported that the NFL had asked Polymarket and Kalshi to remove contracts on player participation, which both platforms did. It also reported that the European Securities and Markets Authority (ESMA) had warned of growing investor-protection and integrity risks.
