When the Prediction Market Becomes a "Leak and Monetization Tool": The Truth Crisis in Crypto Casinos

Market Data Snapshot: Bitcoin struggles around the $94,000 mark, Ethereum staking queue backlog reaches $8 billion, and spot ETF funds have flowed out $1.2 billion for four consecutive weeks. As this $3.2 trillion market attempts to prove itself as "digital gold," another more secretive battleground is tearing apart the narrative of the crypto world—the prediction markets.

Every time prediction markets become controversial, we keep circling around one question but never truly face it:

Are prediction markets really about the truth?

Not accuracy, not practicality, nor whether they outperform polls, journalists, or social media trends. It’s about the truth itself.

Prediction markets price events that have not yet occurred. They are not reporting facts but assigning probabilities to those still open, uncertain, and unknowable futures. At some point, we began treating these probabilities as a form of truth.

For most of the past year, prediction markets have been immersed in their victory parade. They have beaten polls, cable news, and experts holding PhDs and PowerPoint decks. During the 2024 US election cycle, platforms like Polymarket reflect reality at a speed nearly faster than all mainstream prediction tools. This success has gradually solidified into a narrative: prediction markets are not only accurate but superior—a purer way to aggregate truth, a more genuine signal reflecting people's beliefs.

Then, January arrived.

A new account appeared on Polymarket, betting about $30,000 that Venezuelan President Nicolás Maduro would be ousted before the end of the month. At the time, the market considered this outcome highly unlikely—single-digit probability. It looked like a bad trade.

A few hours later, the US military arrested Maduro and charged him with criminal offenses in New York. The account closed its position, making over $400,000 in profit.

The market was right, and that’s the problem.

The Unique Mutation of Crypto Markets

Unlike traditional prediction markets, crypto prediction markets have a unique "advantage": on-chain transparency has become an advertisement for insider trading. According to the latest data, Polymarket’s daily trading volume in 2025 surpassed $700 million, with a total trading volume reaching $24 billion. But behind these numbers lie unsettling details.

Voron23 @0xVoron disclosed on X: "Confirmed insider wallets on Polymarket. They profit over $1 million daily on the Maduro event. I’ve seen this pattern too many times—undeniably, insiders are always winners."

Wallet 0x31a5 turned $34,000 into $410,000 within three hours. This is not analysis; it’s precise insider trading.

The current structure of the crypto market exacerbates this situation:

• Bitcoin oscillates above $94,000, institutional funds continue to flow via ETFs, but on-chain whale holdings reach record highs

• Ethereum staking backlog hits $8 billion, validators wait over 44 days in line, enabling large holders to lock in voting rights

• Stablecoin daily trading volume exceeds $18 billion, providing a perfect channel for rapid fund transfers

When State Street attempts to transform traditional finance with blockchain, platforms like Polymarket are automating, scaling, and legitimizing insider trading through blockchain.

Reward proximity, not insight

People often tell a comforting story about prediction markets: they aggregate dispersed information. People with different views support their beliefs with money. As evidence accumulates, prices fluctuate. The crowd gradually approaches the truth.

This story assumes an important premise: that the information entering the market is public, noisy, and probabilistic—such as tightening polls, candidate missteps, storm turns, or companies missing earnings.

But the Maduro trade was not like that. It’s less reasoning and more precise timing. At this moment, prediction markets no longer seem like smart forecasting tools but rather something else: a place where proximity beats insight, channels beat interpretation.

If markets are accurate because someone holds information about the world that others do not and cannot know, then markets are not discovering the truth—they are monetizing asymmetric information.

The importance of this distinction far exceeds what the industry is willing to admit.

Accuracy might serve as a warning. When supporters of prediction markets face criticism, they often repeat the same argument: if insiders trade, the market will react earlier, helping others. Insider trading accelerates the emergence of truth.

This argument sounds clear in theory, but in practice, its logic often collapses.

If a market becomes accurate because it contains leaks of military operations, classified intelligence, or government schedules, then it is no longer an information market at any publicly meaningful level. It becomes a shadow arena for secret trading. There is an essential difference between rewarding better analysis and rewarding proximity to power. Markets that blur this line will inevitably attract regulatory scrutiny—not because they are inaccurate, but because they are overly precise in the wrong way.

The Crisis of Oracles: When "Truth" Can Be Bought

If the Maduro incident exposed insider issues, then the Zelensky suit incident revealed a deeper problem.

In mid-2025, Polymarket launched a market betting whether Ukrainian President Volodymyr Zelensky would wear a suit before July. It attracted hundreds of millions in trading volume. It seemed like a joke market but evolved into a governance crisis.

Zelensky appeared in a black coat and trousers designed by a well-known fashion designer. Media called it a suit; fashion experts also called it a suit. Anyone with eyes could see what was happening.

But the oracle’s vote determined: not a suit.

Why? Because a few large token holders bet huge sums on the opposite outcome, and they held enough voting power to push through a resolution favorable to themselves. The cost to buy the oracle was even lower than what they might gain from the payoff.

This is not a failure of decentralization but a failure of incentive design. The system operates strictly according to preset rules—human-led oracles whose honesty depends entirely on the "cost of lying." In this case, lying is clearly more profitable.

Current crypto market data makes this problem even sharper:

• The Gini coefficient of governance tokens on Ethereum is as high as 0.85, meaning a tiny number of addresses control the vast majority of voting power

• The top 100 holders on Polymarket control 67% of liquidity

• Average oracle voting participation is only 12%, far below the "security threshold" of DeFi governance

When giants like BitMine hold 3% of the Ethereum staking supply, the oligarchic nature of oracle governance is already a fact.

Regulatory Iron Fist and Institutional Gold Rush

The unsettling aspect of the Maduro incident is not just the scale of returns but the backdrop of these market eruptions. Prediction markets have evolved from fringe novelties into an independent financial ecosystem Wall Street takes seriously.

According to a Bloomberg survey last December, traditional traders and financial institutions see prediction markets as a durable financial product, even though they admit these platforms expose the blurred line between gambling and investing.

Reality is accelerating:

• NYSE owner ICE promises up to $2 billion in strategic deals with Polymarket, valuing it at about $9 billion

• Kalshi processed nearly $24 billion in trades in 2025, with daily records continuously broken

• Riot Platforms and AMD signed a $1 billion AI infrastructure deal, showing traditional capital is entering the crypto ecosystem

Alongside this, broader regulatory awakening is underway, parallel to the bill proposed by Congressman Ritchie Torres to ban insider trading by government insiders. The CFTC’s $1.4 million fine on Polymarket is just the appetizer; the main course is the "Prediction Market Integrity Act"—which will require all prediction markets to register as designated contract markets (DCMs) and implement information barriers similar to futures markets.

Ironically, when PNC Bank’s CEO calls for stablecoins to "choose whether to be a payment tool or a money market fund," prediction markets face the same identity crisis: are you an information aggregator or a disguised casino?

Honest admission: we are just betting on the future

I think we overcomplicate this.

Prediction markets are places where people bet on outcomes that have not yet happened. If events go in the direction they bet on, they make money; if not, they lose. Everything else we say about them is just afterward.

They won’t become something else just because the interface is sleeker or odds are expressed as probabilities. They won’t become more serious just because they run on blockchain or economists find the data interesting.

What matters is incentives. You get paid not because you have insight but because you correctly predicted what will happen next.

In the current environment, this kind of prediction has a dangerous correlation with mainstream crypto assets:

• Bitcoin volatility index (BVOL) remains high at 75, while the implied volatility of the "Can BTC break $100K in Q2?" contract on Polymarket hits 120%

• Ethereum gas costs make small predictions uneconomical, with oracle verification costs possibly reaching $50 per transaction

• Stablecoin market cap hits $200 billion, providing almost unlimited liquidity ammunition for prediction markets

People want to bet on the future narrative with cryptocurrencies—elections, wars, cultural events, reality itself. This demand is real and persistent. Institutions hedge uncertainty with it, retail traders use it to practice beliefs or for entertainment, and media see it as a trend indicator.

All of this doesn’t need to be dressed up. In fact, this disguise creates friction.

The Cost of Expectation Dislocation

When platforms tout themselves as "truth machines" and claim moral high ground, every controversy feels like a life-or-death crisis. When markets settle in unsettling ways, the event is elevated into a philosophical dilemma rather than its essence—a high-risk betting product’s dispute over settlement methods.

The dislocation of expectations stems from the dishonesty of the narrative itself.

Several signals in the current crypto market warrant caution:

• Institutional holdings have risen from 15% in 2024 to 35%, but the advantage of inside information has not dispersed; it has become more concentrated

• Spot ETF holdings surpass 1 million BTC, but CME futures premiums remain negative, indicating professional investors are hedging with prediction markets

• Total DeFi lock-up reaches $120 billion, but oracle attack incidents have occurred 23 times in 2025, with losses exceeding $500 million

State Street’s CEO says blockchain will "redesign traditional assets," but platforms like Polymarket are "redesigning insider trading."

Conclusion: Let Casinos Return to Casinos

I am not against prediction markets. They are one of the relatively honest ways humans express beliefs amid uncertainty, often revealing unsettling signals faster than polls. They will continue to grow.

But if we romanticize them as something nobler, we are being irresponsible. They are not epistemological engines; they are financial tools linked to future events. Recognizing this distinction can make them healthier—more regulation, clearer ethics, and better design will follow.

Once you admit you are operating a betting product, you won’t be surprised by betting behaviors. When Riot Platforms uses Bitcoin reserves to pivot into AI infrastructure, it doesn’t claim to "revolutionize computing"; it’s just a business transformation.

Prediction markets should be honest in the same way.

Truth does not become clearer because you bet money on it. Probabilities are not facts; settlement is not justice; and accuracy—especially when gained through privileged information—has never been a standard of value.

【Discussion】 What are your thoughts on the essence of prediction markets? Are they revolutionary information aggregation tools or just disguised gambling platforms? Share your views in the comments.

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Let’s stay alert amid the bubbles and noise.