The Polymarket Bets on Maduro Are a Warning

Will Gottsegen: “When U.S. Delta Force commandos slipped into Venezuelan airspace over the weekend, they did so in secrecy. And yet, in the hours before President Donald Trump gave the final order for the strike, someone bet more than $20,000 that Nicolás Maduro would be ousted as the country’s leader by the end of January.

“On Polymarket, the online platform that lets people wager on almost anything, an anonymous trader somewhere in the world placed a series of suspiciously well-timed bets. Using a fresh account created last month, the individual made just a few bets in the days leading up to the raid, according to *The Wall Street Journal*—all on the possibility of imminent regime change in Venezuela—and appeared to come away with more than $400,000.

“Perhaps the bettor just got phenomenally lucky. Or perhaps they knew about the raid ahead of time and leveraged it for a quick payout. We can’t know, because Polymarket, a so-called prediction market where people turn their idle hunches into real cash, allows some of its customers to remain anonymous. Traders place their bets using crypto, which could provide  another layer of cover. The Maduro trade has generated a huge amount of speculation and controversy; the internet is now full of jokes that Barron Trump, hunched behind dual monitors in his NYU dorm room, may have been behind it … 

“Traditional financial markets have clear-cut rules around insider trading: Capitalizing on nonpublic information is plainly illegal. Polymarket seems to have no such policies in its terms of use (although it does ban activity that violates ‘applicable laws’). The company’s CEO, Shayne Coplan, has also explicitly said that Polymarket creates a ‘financial incentive for people to go and divulge’ new information. The thinking is that, if the function of these tools is to predict the future, then rewarding people for leaking information could be seen as a positive. When insiders push markets toward what’s actually going to happen, they can hypothetically turn prediction markets into a source of real-time unfiltered news. There are legal ways to find and divulge new information—say, in scraping publicly available data for an edge over other traders—but Coplan did not draw that distinction. (Polymarket did not respond to a request for comment.)”

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If someone made $400000 on a $20000 bet that implies that the odds were about 20 to 1. If I understand the mechanism correctly, this would imply that the opposing side was paying about 5 cents How does someone manage to bet this much money without massively affecting the odds.