An editor for MrBeast was suspended from Kalshi and reported to the feds for insider trading, NPR reported Wednesday. According to NPR, Artem Kaptur “traded around $4,000 on markets related to” the popular streamer, and that “Kaptur had ‘near-perfect trading success’ on bets about the YouTuber's videos with low odds, making the wagers appear suspicious.” Let me be the first to say: lmao, what did you think would happen.
Kaptur was reportedly barred from withdrawing his winnings, fined $20k, and reported to the Commodity Futures Trading Commission. In a statement to NPR, a spokesperson for Beast Industries, James “MrBeast” Donaldson’s company, said the company has “a longstanding policy in place against employees using proprietary company information” and that employees are not allowed to bet on markets relating to MrBeast.
According to NPR, this marks “the first time [Kalshi] has publicly revealed the results of an investigation into market manipulation,” though “Kalshi says in the past year it has opened 200 investigations into insider trading, 12 of which are still ongoing.”
Insider trading isn’t allowed on Kalshi or similar prediction market Polymarket, but this rule seems to fly in direct contrast to these companies’ promotions of themselves as sources of legitimate data. Prediction markets have been getting in bed with news outlets lately, most recently with Polymarket’s increased involvement with Substack, in which it wrote in an announcement that “data produced on our exchange has value for everyone on earth, especially for news readers who might never make a single trade.” This quote has been haunting me since I read it last week: what news or informational value is there in a bunch of manosphere-pilled randos betting on what might happen except through insider trading? The only thing that makes any of this “data” in a journalistic sense is if people placing bets have some unique insight into the outcome; otherwise it’s just vibes. Several high-profile instances of suspicious bets have already emerged from these markets: a Polymarket user won $400k on a bet related to Venezuelan president Nicolás Maduro, and Israeli authorities have arrested and charged several people on suspicion of betting on military operations.
Betting on MrBeast’s subscriber numbers or what he might say in an upcoming video, as NPR describes the market around the YouTuber, is far less consequential than international military moves. But it’s precisely these kinds of low-stakes situations that are the lifeblood of these prediction markets, and that are ripe for insider trading. At The Verge, Elizabeth Lopatto called them “pseudo-events… planned events that can be repeated, such as awards shows, press conferences, political conventions, and earnings calls.” They’re minor and, to some extent, predictable in their flow, and scores of everyday people are involved in their planning, production, and rollout. That makes them the perfect place for both outsiders and insiders to seize a chance to make a quick buck.
In December, Coinbase CEO Brian Armstrong rattled off a list of words Polymarket users had bets that he would say at the end of an earnings call. He claimed he was “just having a little bit of fun” and that he didn’t bet on the outcome himself, but the situation perfectly highlights the insider trading risk of these markets, especially surrounding minor events that can be pre-planned and manipulated. Armstrong himself even gets it, noting in a conversation with a nominee to the Commodity Futures Trading Commission that "You actually want insider trading [on these markets]... You want [someone]... who has really good information to be trading so you get better, higher quality signal out of them, right? Now, if you want to preserve the integrity of those markets, maybe you don't want insider trading, right?"
But Polymarket and Kalshi can’t have both “higher quality signal” and “integrity.” Unlike regular gambling, where bettors wager against the house, prediction markets make their money off transaction fees. So they need a high volume of transactions; they need people betting on everything and anything, the novelty of bets that are basically glorified shitposts to get people into their apps. They need those big, headline-making payouts to attract people to the service with the promise of cashing out, the kinds of wins only an insider trader can achieve. They need the idea that bettors have unique knowledge to make their markets seem valuable to people not placing bets, to get investments and news outlet money and for what happens in their markets to show up on TV–but they also need the whole thing to seem fair. Their quest to paint themselves as legitimate sources of information needs people like Kaptur and other insider traders, as much as the companies might make a show otherwise.
And the insider traders need this too. Lopatto writes that insider trading
doesn’t matter much to the purveyors of gambling-addiction-as-a-service; because contracts are peer-to-peer, the house isn’t getting ripped off. It’s only the punters dumb enough to enter the bet without insider information who’ll lose their shirts…
For the insiders to make their money, there must be a steady supply of suckers. And there is! Only about a third of traders actually make profits, and “a large number of traders systematically lose money to a small minority of skilled participants.”
If these markets are going to embrace nihilism, financializing everything to turn their owners into billionaires, they have no incentive for “deterring and finding the bad actors, manipulators, and those who willingly cheat,” as Kalshi head of enforcement Robert DeNault told NPR. The whole system is manipulators and bad actors–not just insider traders, but the markets themselves, luring people into their apps with the false promise of an easy payday.
