OpenAI fires an employee for prediction market insider trading

https://www.wired.com/story/openai-fires-employee-insider-trading-polymarket-kalshi/

by bookofjoe • 5 months ago

295 153 5 months ago

wired.com

bookofjoe• 5 months ago

https://archive.ph/FOet2

xrd3• 5 months ago

A fun aside: this person obviously created a bunch of new Bitcoin accounts to hide their activity.

It makes you think that if you were able to surreptitiously add malicious side channel software into a popular npm package that you wouldn't just need to hunt for crypto wallets with balances.

You could also probably find a market for crypto wallets with small balances or zero balances. The history and date of creation would be the value to some.

This openai employee should have gone on the dark web to buy older addresses to cloak their activity.

It's sad to say that almost all crypto use cases point to fraud. I'm excited about crypto and there is some fascinating research around anonymous transactions (like zcash). But, that real utility is always overshadowed by the actions of charlatans or worse.

0x3f5• 5 months ago

I don't really understand. You can create wallets at will. What would be the value of one that someone else happened to create?

xrd3• 5 months ago

If it has a small transaction history it obscure the owners intentions. An address created right before a wager is obviously for one purpose.

TZubiri2• 5 months ago

Aged accounts, shell companies, it's a market

dontknowbtc• 5 months ago

created a bunch of new Bitcoin accounts to hide their activity

tell me you don’t understand crypto without telling me you don’t understand crypto.

ruined• 5 months ago

you can't "change the password" on a wallet, so a "used" wallet is highly unattractive. anything you put in it could be taken by the original keyholder who sold it to you.

asah• 5 months ago

just move it to a new wallet

JasonADrury3• 5 months ago

Oh but you can. You can swap out the seed and generate any new addresses using that.

Yes, the old addresses will be compromised. That's fine. The point is that nobody can tell that you aren't actually using the same keys to generate new addresses anymore.

MarceliusK5• 5 months ago

What investigators often look for isn't just wallet age, but funding patterns, timing, and linkages between wallets

chazftw• 5 months ago

That’s pretty common, you may think you own the data you work on, but you don’t. It’s proprietary confidential.

re-thc• 5 months ago

you may think you own the data you work on, but you don’t

It's called <open>AI.

dgellow• 5 months ago

why would you think you own data you work on

0xTJ• 5 months ago

Who would think that? At every corporation where I've worked it's been explicit in both the contract and in HR training that this is explicitly not allowed.

cjonas2• 5 months ago

Insider trading is so trivial on the prediction markets. I'd guess that it's actually the "feature" that results in the outcomes being so accurate.

crazygringo3• 5 months ago

Yup. There are good reasons why it's a problem in financial markets but NOT usually a problem in prediction markets:

https://www.economist.com/leaders/2026/02/18/why-insider-tra...

In prediction markets, informed trading is not a crime or an injustice—it is a valuable service.

A big exception, however, is using prediction markets to make predictions on events regarding publicly traded companies.

rfv6723• 5 months ago

The concept of a valuable service falls apart if players can influence the actual event. Without equal footing and basic honesty, you aren't measuring reality so much as you are subsidizing those with the power to manipulate it.

notepad0x902• 5 months ago

why are publicly traded companies special? The speculation is not on securities.

You're not participating in a "market" (even though they call it that), you're purely gambling and speculating. People have been doing this since currency was a thing. Even gambling laws don't apply in my opinion. If I told you the government will publish evidence of aliens existing tomorrow, and we make a bet on it, that's not really gambling, it's not so much a game of choice as it is a competition of who can predict things better. The other person might have insider knowledge, but it's up to you to either take on that risk or assume despite that your knowledge about the topic will overcome their potential insider knowledge.

mlsu• 5 months ago

Prediction markets have only events whose outcome is eventually publically resolved, by design. With insider trading, the trader is incentivized to release the information as late as possible, as close as possible to the events.

Why are these big insider bets being placed within hours of the event actually occurring? The insiders are doing the equivalent of bid sniping — waiting until the last possible moment to exercise.

This is how inside info works in trading markets in general. And again this is inevitable and by design.

It also makes them largely useless, because the timeline for which useful position is shared is compressed to the point where nothing useful can be gleaned from the information.

The thing is a “lie incentiviser” — a market entirely for suckers. That’s why 95% of volume is sports betting.

That’s setting aside insider positions having an influence on the outcome of events which is a whole separate problem.

tyre4• 5 months ago

Yes and no.

If you see prediction markets as how they were originally pitched (price ~approximating likelihood), then insider trading is good. It provides discovery.

If you look at what prediction markets are today (gambling, especially on sports, especially in states that have banned it), then insider trading is bad. Particularly when the people trading can influence the outcome (e.g. a pitcher purposefully throwing into the dirt.)

idiotsecant2• 5 months ago

Of course. The point is not to make individual players money (that does sometimes happen as a side effect) it's to leverage their greed to find truth.

ambicapter2• 5 months ago

Except it's not "truth" as much as it is whatever has the most financial incentive to happen.

MarceliusK5• 5 months ago

Prediction markets are probably most "accurate" when at least some participants have genuinely superior information

rapind• 5 months ago

Bad leaders get bad followers.

helsinkiandrew• 5 months ago

Interestingly Kalshi has ‘banned’ insider trading, whilst polymarkets often tweets that some of their users must have inside information

https://news.kalshi.com/p/kalshi-trading-violation-enforceme...

https://x.com/polymarketmoney/status/2001056273500954784?s=4...

Analemma_• 5 months ago

Manifold actually explicitly encourages insider trading, arguing that it leads to more accurate pricing. This was possibly defensible back when it was a cute funtime project run by a Bay Area polycule, but it’s probably going to get them in deep shit sooner or later, even though they don’t even use real-money betting.

sir0010010• 5 months ago

Though Manifold only uses their non-withdrawable play currency Mana.

cc-d2• 5 months ago

The SEC only exists for dad to frame people.

The vast majority of insider trading schemes are not prosecuted, many leave no evidence trail at all without going deep into black-op classified territory.

seydor• 5 months ago

I can't believe these markets are still legal

morkalork• 5 months ago

Why would Washington ban their staffers' bonus program?

senkora• 5 months ago

EDIT: I am wrong, see children

The employee, she said, “used confidential OpenAI information in connection with external prediction markets (e.g. Polymarket).”

Note that “insider trading” is not illegal on prediction markets. The particular issue here is that the employee “disclosed” confidential information on a public forum by influencing the prices assigned to certain outcomes by prediction markets.

agency• 5 months ago

I don't think this is true, though enforcement is another thing and the standard is different than in securities markets. Prediction markets are regulated by the CFTC and the insider trading standard is “misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information” (vs any “material non-public information” for securities) https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstateme...

qoez• 5 months ago

It is most definitely against the rules of the sites and illegal, especially on kalshi

7777777phil• 5 months ago

77 suspicious positions across 60 wallets, 13 brand-new accounts appearing 40 hours before the browser launch. First confirmed case of a major tech company firing over prediction market trades.

I wrote about why prediction markets have a structural insider trading problem that nobody's solved yet: https://philippdubach.com/posts/the-absolute-insider-mess-of...

throwaway57522• 5 months ago

Prediction markets exist to bypass gambling restrictions and monetize insider trading. It isn't a problem, it is their raison d'etre.

gtowey8• 5 months ago

Jinx!

juleiie2• 5 months ago

Yeah but someone has to give the money to the insider traders.

Betting and insider gambling wouldn’t work if people were educated and just didn’t gamble and so never used these platforms in the first place.

It’s an old question of whether government is responsible to protect people from themselves or should we give everyone freedom to go bankrupt in this specific way if they so desire.

I don’t know if there is a healthy way to gamble really. With drugs and substances at least there is some continuous spectrum but you either gamble your money or not.

somenameforme2• 5 months ago

Would you not say that somebody could equally cynically describe options trading in this way?

Prediction markets are very valuable because they provide information on issues that's generally much more accurate than alternative sources, such as polls. For instance Polymarket predicted 94% of the results for the 2024 election a month out, including the presidential. It can also provide more information than the news. For instance the chances of Khamenei being out as Supreme Leader of Iran by March 31st just skyrocketed up to 78%. That tells me far more than the various news sites minute by minute coverage.

ThePowerOfDirge• 5 months ago

Gambling = investing. Buying stocks is also gambling. Share buybacks, dividends, fancy words for forking money from workers to some joe schmoe that bought a lottery ticket, i.e., a stock.

gtowey8• 5 months ago

Insider trading is the raison d'etre of these products.

Hamuko• 5 months ago

Yeah, Polymarket is explicitly advertising this.

Research shows prediction markets are often more accurate than experts, polls, and pundits. Traders aggregate news, polls, and expert opinions, making informed trades. Their economic incentives ensure market prices adjust to reflect true odds as more knowledgeable participants join.
If you’re an expert on a certain topic, Polymarket is your opportunity to profit from trading based on your knowledge, while improving the market’s accuracy.

You know what's a great knowledgeable participant? An insider.

holmesworcester2• 5 months ago

Isn't insider trading on a prediction market only wrong to the extent the insider is violating some duty of secrecy to the company?

And isn't that just between them and their company in a case-by-case sense?

If there was some valuable-to-the-public information that the company did not care about keeping private but just hadn't bothered to make public, for whatever reason, and an insider traded on it on a prediction market, that would only benefit the public's interest in information and would not violate any duty to the company. It'd be a pure win for everyone.

It seems unfair to other traders, the way it would be in the stock market, but in prediction markets (unlike the stock market) all participants are explicitly taking on the risk that somebody else might have better access to information than they do. So it's not subverting the system in the way we have decided it does in stock markets.

A lot of commenters are getting the wrong take here by looking at this like it's a stock market where there is some society-level interest in giving participants protection from having less information than insiders. It's just a different thing.

datsci_est_2015• 5 months ago

Could also make a case for incentivizing destructive actions by insiders as well. You’re saying I could sabotage my project and make a quick buck?

ekjhgkejhgk• 5 months ago

Excuse me it's called price discovery.

ohyoutravel• 5 months ago

Archived version: https://archive.ph/XWrTA

raincole• 5 months ago

It's interesting that the both replies under this comment are saying exact same thing, with the exact same term ("raison d'etre"... how often do you hear two random people think of this phrase at the same time?).

It might be nothing, but it'd be funny if karma farming bots are doing some 'reply frontrunning' over the internet.

kennyadam• 5 months ago

I don’t consider “raison d'etre" a suspicious phrase. It’s not something people use multiple times a day, but I’d consider it common enough that when I hear someone say it, or in this case I suppose type it, that I would give it a second thought.

Rexxar• 5 months ago

I don't think that two 13 and 14 years old accounts with not that many comment per week are bots.

croes• 5 months ago

Prediction market, either gambling or inside trading.

Havoc2• 5 months ago

Good.

I do hope corporations in general take a harder stance on this. From a society perspective people with inside knowledge fleecing randoms is not a win. We've got that somewhat under control on the stock exchange, but have this absurd situation where on prediction markets it is a free for all and everyone pretends this is fine.

I also think corporations should distance themselves from individuals willing to fleece randoms. Trading in general is very wild west survival of the fittest but active exploitation of insider knowledge speak of very poor morale character

strix_varius• 5 months ago

Honestly it seems stupid but fine to me. Like if someone random comes up to me on the sidewalk and says hey if OpenAI announces a browser tomorrow, you give me $100. If not I'll give you $1000. Obviously I'm not going to take them up on it, they clearly have inside information.

If you're betting on a prediction market without insider information then you're just... The fool who is soon parted from his money one way or another.

I generally feel like people should be free to do whatever insane stuff they want with their own lives.

clcaev• 5 months ago

I generally feel like people should be free to do whatever insane stuff they want with their own lives.

The problem with people doing insane stuff with their "own money" is the burden they often exact on their family or society.

Perhaps the realm of independence starts when loans are reasonable and current, there is sufficient child support, and they are meeting a base savings rate for their retirement.

Speaking of which, perhaps any UBI could also use a minimal criteria, reviewed annually but without any barriers on first year eligibility.

Havoc2• 5 months ago

Like if someone random comes up to me on the sidewalk and says hey if OpenAI announces

Then you hopefully understand that randoms approaching you is no equal to reality.

MengerSponge• 5 months ago

Wouldn't those prediction markets be more efficient if positions were associated with people's real names?

Like, a 100k wager from a finance dude carries some information, but a 10k wager from a staffer says a lot more!

peterjliu• 5 months ago

I mentioned a potential OpenAI insider in https://x.com/peterjliu/status/2024901585806225723, that was from 5 minutes of investigation. There are probably more. And then there's a lot of other companies.

ddp26• 5 months ago

Prediction markets are interesting when they are predicting future things nobody knows for sure.

"Predicting" private, known information is the wrong use case.

hephaes7us• 5 months ago

This is just one way information goes from being private to being public. It is sensible that people who provide intelligence to the market be compensated, whether they're better at inferring/predicting or whether they just know something we don't.

Obviously, in a case like this, an individual would be violating the terms of their employment/non-disclosure agreement. I agree that is bad!

I don't think that damns the concept of "predicting known information".

mrkramer• 5 months ago

Inside trading on the public market and on the public blockchain, that's smart!

shevy-java• 5 months ago

We can not trust these AI corporations and organisations.

djohnston• 5 months ago

that's right prole! only Congress has that privilege!

blindriver• 5 months ago

I find it absurd that someone can create an unregulated market like Kalshi, and then all of us need to be beholden to it, even though the idea is stupid. How is it possible that someone can create a product that none of us agree on, and now everyone else has to conform to the rules around it because of the problems that it creates. I would rather Kalshi get shut down than the precedent of allowing this to control employees or people.

MarceliusK5• 5 months ago

Makes you wonder how much "market accuracy" on these platforms is actually just leakage

rohitpaulk• 5 months ago

Two questions I'd have expected the article to answer:

(a) how did they identify the employee, and (b) how come they weren't sent to jail

tabs_or_spaces• 5 months ago

Openai employees already get crazy salaries. What motivates someone to do this?

I would understand a low salaried person doing this, but not someone from a really high paying org

_zagj• 5 months ago

Openai employees already get crazy salaries. What motivates someone to do this?

Given what OpenAI does, what kind of person, and with what moral character, do you think works there?

EDIT: AI in general seems to attract bad actors, for whatever reason. Remember Anthony Levandowski or Marvin Minsky?

blitzar• 5 months ago

They bet "no" on AGI this year?

sharp_runner_84• 5 months ago

The real issue here isn't just the insider trading -- it's how thin Kalshi and Polymarket orderbooks are on niche events. You can move the price 10-15 cents on a binary contract with a few thousand dollars. That makes insider trading on these platforms both incredibly easy and incredibly profitable compared to traditional securities markets where you'd need serious capital to materially move the price.

OpenAI fires an employee for prediction market insider trading

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