An Prediction Market Participant Earned $Nearly Half a Million on Bets Predicting Venezuela's Political Shift.
A bettor made nearly half a million dollars on the ouster of the Venezuelan leader immediately preceding it was made public, leading to inquiries about potential gains made from confidential information of the US operation.
Sudden Shift in Wagers
Predictions made on the forecasting site, a blockchain-based service, that the Venezuelan president would be no longer in control by the end of January rose in the hours before former President Trump announced on Saturday that the president had been seized.
A particular user, which became a member last month and made four bets, all on Venezuela, earned over $436K from a modest bet of $32.5K.
Who placed the bet is a mystery. This unidentified trader had only a blockchain identifier for identification.
Market Signals Before Public Statement
Market statistics shows that traders estimated the likelihood of Maduro's exit at just a low 6.5 percent in the afternoon of the Friday before the event.
Yet the odds had increased to over 10% by the end of the day and spiked dramatically in the first hours of the next day, suggesting a sudden change in market sentiment immediately prior to the social media post was made.
"That trade has all the characteristics of a trade based on confidential knowledge," said a financial reform advocate.
A small number of other individuals also made significant sums from bets on the same outcome.
Legal Questions Emerges
Some lawmakers are starting to take note.
Proposed legislation introduced on the start of the week aims to prohibit government employees from making trades on forecasting platforms if they have "material nonpublic information" related to a market.
Market Background
Prediction markets have grown significantly in recent years, with participants able to predict everything from sports to politics.
This sector encountered regulatory challenges under the last presidential term. Yet it has received a warmer welcome during the present political climate.
Trading on insider information is a crime in the traditional financial markets, but there are less oversight in the forecasting arena.
An official representative for a competing service said their site "explicitly prohibits such activities of any form."
