I don't understand why insider trading would only happen as something becomes news. The inside knowledge haver is risking the information leaking some other way before they make their bet. Some very risk averse insider traders (lol?) may do so, but others are going to make their bets when they learn their information.
Assuming that they don't though, and every insider trader only ever makes their bets right before an event, I don't see how that changes anything? People working with non-insider knowledge are still going to be betting against each other before that point. They are still going to establish a likelihood of a thing happening that's more accurate than I would by myself.
The potential for scamming is high at low dollar figures sure. At some point of volume though, it's going to become too expensive to do.
> People working with non-insider knowledge are still going to be betting against each other before that point. They are still going to establish a likelihood of a thing happening that's more accurate than I would by myself.
How is this useful information at all? Other than to sate your curiosity and undiagnosed gambling problem.
Price discovery in capital markets is useful because, well, there is no other way to discover price. By definition, the price of an asset is what someone is willing to pay for it.
Event discovery in prediction markets is throwing your money away hoping you guessed right, despite the fact that the biggest markets have insiders who are always going to outperform you. It's a sucker's game.
In other terms, it allows people to transfer risk to money , or information for money.
