Its Your Job To Keep Your Secrets

In the last month, many who want to kill Polymarket have agreed on a common strategy: claim that Polymarket allows illegal “insider trading”. I’ve received roughly a dozen media inquiries about this in the last few weeks. E.g., some articles: 1, 2, 3, 4, 5.

This is the strategy: In 2011, the US CFTC issued Rule 180.1 prohibiting any commodity market trades accompanied by “deceptive” talk. Since then the CFTC has interpreted this rule as prohibiting trades based on info obtained via a breach of a duty of trust or confidentiality. Some recent profitable Polymarket trades have been accused (without evidence) of being based on such “inside info”. But Polymarket is a crypto system, where they cannot usually know who are their traders. QED: Polymarket must be shut down.

I see much misleading talk in my world, so a rule against deceptive talk relevant to trades seems to me to not actually be enforced much. And also quite hard to fairly enforce, and in any case not clearly needed. The US Supreme Court has struck down laws against lying on free speech grounds, unless such lies produce “material gain”. I’m not convinced we should distinguish material vs non-material gains re lies.

In any case, trading on info that you promised to keep secret does not remotely “deceive” markets re your or their trades. Furthermore, I don’t think it makes sense to generally assign to all our social institutions the task of preventing anyone from revealing secrets that they instead promised to keep. If you come to my store to buy a dress for your wife, and reveal to me her dress size, I don’t think it should be my job to check that it was okay with your wife for you to tell me her dress size. The two of you should be in charge of figuring out how to enforce your info promises to each other.

As a closer analogy, both journalism and speculative markets are info institutions, which reach out to collect info from the world, aggregate that info into useful summaries, and then spread those summaries into the world so that people can act on them. Both are private for-profit institutions, depending on voluntary participation.

We should treat all such info institutions the same re any duty to ensure that the info they collect doesn’t break secrecy promises. Are you willing to require that journalists either don’t talk to anyone who might know a promised secret (e.g., any govt officials), or keep records of who they talked to on what, available to law enforcement to check on suspicions that a news article revealed a secret? If not, we shouldn’t requite analogous rules of speculative markets either.

Yes, it can sometimes be hard for people and orgs to keep secrets. People who promise to keep secrets might instead tell them to others. But assigning to everyone the task of making sure that no one reveals promised secret seems way too hard, and also doesn’t give good incentives re how many secrets are worth keeping. Instead let people and orgs figure out how to use their voluntary powers to keep their secrets, via contract, reputation, relationships, or something else. When someone tells you something, it shouldn’t be your job to check if they are thereby revealing a secret.