DEX in the City: Why Prediction Market 'Insider Trading' Isn't Illegal — Yet - Unchained Recap

Podcast: Unchained

Published: 2026-01-12

Duration: 44 minutes

Guests: Jessi Brooks, Vy Le

Summary

The episode discusses the legality of insider trading in prediction markets, Canton's collaboration with Nasdaq, and Google's DeepMind paper on AI agents in economic transactions.

What Happened

Katherine Kirkpatrick Bos, Jessi Brooks, and Vy Le examine why insider trading in prediction markets remains legal, emphasizing that these markets are seen as event derivatives rather than securities. This distinction allows activities that would be illegal in stock markets to occur in prediction markets without legal repercussions.

Vy Le delves into Canton's recent deal with Nasdaq, noting that Nasdaq's role as a super validator on the Canton network led to an 18% increase in Canton's price. This partnership highlights the growing interest of traditional financial institutions in blockchain technology.

Jessi Brooks discusses the implications of Google's DeepMind paper, which suggests that AI agents will require machine-readable money and programmable payments for economic transactions. This aligns with the potential use of blockchain technology to support such agentic economies, with stablecoins playing a crucial role in facilitating micropayments.

The episode also touches on the potential regulation of prediction markets, particularly concerning federal officials. Draft legislation aims to prevent these officials from engaging in prediction markets, citing the risk of insider information leading to unfair advantages.

Katherine and Jessi consider the potential impact of prediction markets if they become more liquid. However, they raise concerns about market liquidity and trust, emphasizing the need for regulated markets to ensure public participation.

The hosts discuss the broader implications for the credibility of both the crypto industry and government if insider trading in prediction markets continues unregulated. They point out the need for the crypto industry to demonstrate responsibility to gain trust and support for its market structures.

Key Insights

• Insider trading in prediction markets remains legal because these markets are classified as event derivatives rather than securities, allowing activities that would be illegal in stock markets to occur without legal repercussions.
• Nasdaq's involvement as a super validator on the Canton network resulted in an 18% increase in Canton's price, indicating traditional financial institutions' growing interest in blockchain technology.
• Google's DeepMind paper suggests AI agents will require machine-readable money and programmable payments, aligning with blockchain technology's potential to support agentic economies through stablecoins and micropayments.
• Draft legislation aims to prevent federal officials from participating in prediction markets due to concerns about insider information creating unfair advantages, highlighting potential regulatory changes.