An Prediction Market Participant Profited $436K from Bets Predicting Maduro's Downfall.
An individual made nearly half a million dollars by predicting the removal of Venezuela's president just before it was publicly declared, raising questions about potential gains made from confidential information of the event.
Changing Odds in Wagers
Bets placed on the crypto-platform, a blockchain-based service, that the Venezuelan president would be no longer in control by the month's conclusion increased in the hours before Donald Trump announced on January 3rd that the Venezuelan leader had been taken into custody.
One account, which joined the platform in December and made four bets, all on Venezuela, made more than $nearly half a million from a initial bet of $32.5K.
Who placed the bet is a mystery. The user had only a string of letters and numbers for identification.
Odds Fluctuate Before Public Statement
Platform data shows that traders estimated the likelihood of the president's removal at just 6.5% in the midday period of the Friday before the event.
However the odds had jumped to over 10% by late Friday night and surged in the early hours of the next day, suggesting a sudden change in market sentiment just before the social media post was made.
"This particular bet has all the characteristics of a trade based on confidential knowledge," stated Dennis Kelleher.
A handful of other platform users also made significant sums from similar wagers.
Regulatory Scrutiny Grows
Politicians are beginning to pay attention.
Proposed legislation introduced on the start of the week aims to prohibit government employees from participating on prediction markets if they have "confidential government knowledge" related to a bet.
Industry Context
Prediction markets have become increasingly popular in recent years, with users able to predict everything from elections to political events.
The industry faced scrutiny under the last presidential term. Yet it has received a warmer welcome during the current presidency.
Using confidential knowledge is a crime in the traditional financial markets, but there are less oversight in the forecasting arena.
A company executive for a competing service said their site "explicitly prohibits insider trading of any form."