Marketplace - The crackdown on prediction market insider trading

Episode Date: April 7, 2026

Laws prohibiting insider trading in commodities markets — which could be applied to prediction market platforms like Kalshi and Polymarket — are more recent and untested than you might think. In this episode, we dig into two conflicting viewpoints: prediction markets as forecasting tools and prediction markets as regulated betting platforms. Plus: Durable goods orders continue a downward trend, the air travel industry weighs the role of small airports, and consumer inflation expectations rise. Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

On the program, today we'll do some data. We'll talk oil and an observation or two about the state of play and this economy. From American public media, this is Marketplay. In Los Angeles, I'm Kai Rizdahl. It is Tuesday, today, the seventh day of April. Good as always, to have you along, everybody. Our throughline today, as it was yesterday and as it will be the rest of the week, unless and until events change our mind is inflation.

Price levels, as you know, were already elevated and war does tend to be inflationary. About which, the war, that is, given the president's public pronouncements the past 18 or so hours, an observation must be made. Markets are not the economy, as you know, nor, as we're seeing, are they a guardrail. Stocks basically flat today in the face of the president's astounding. threats. With that as prologue, Thursday, Friday this week, bring us two of our regularly scheduled updates on inflation. PCE, the Fed's favorite, and then the consumer price index. That is hard data. Today, though, something softer. The New York Fed's survey of consumer expectations

for the month of March. For that first month of the war, consumers said they think inflation a year from now is going to be 3.4%. That is up from 3% even they were thinking, back in February. Daniel Ackerman has more on that. Consumers tend to base their inflation expectations for the future on prices they see today, specifically on prices that they see often. Loretta Mester is with the Wharton School. Consumers are going to be buying gasoline maybe once a week if they're using their car to commute. And that gas price keeps climbing as the war in Iran continues.

And yet, Bill Adams of Fifth Third Bank says, I was actually a little surprised that inflation expectations didn't rise more than they did. Adams says expectations were higher in past energy shocks, like the Russian invasion of Ukraine in 2022. In this case, he says consumers aren't sure the war in Iran will last all that long. It looks like consumers were expecting this conflict to be a relatively short-lived one, and its impact on the U.S. economy to also be relatively short-lived. Inflation expectations for three to five years out barely bud. Still, Kayla Bruhn of Morning Consult says the rise in the short-term number is important.

We see that consumers are already changing their behavior. While they're spending more on gas, we're seeing consumers saying they're cutting back on other categories while this sort of price shock is hitting. That could hurt consumer demand, bringing inflation down. But if consumers continue to expect higher inflation, well, they might just get it, says Bill Adams of Fifth Third Bank. The Fed is incredibly attentive to, expectations because they see inflation as basically set by forward-looking expectations that

become self-reinforcing. Adam says if people expect higher prices in the future, they'll buy more now. And that added demand can raise prices all on its own. I'm Daniel Ackerman for Marketplace. Wall Street on this day of the president's deadline, as I said, unfazed. We will have the details when we do the numbers. I had a conversation the other day about oil prices, the difference between Brent crude and West Texas, and how futures prices and spot prices compare.

Along those lines, here is today's tidbit. You want a barrel of crude right now on the spot, as it were? That'll be $144.46. Thank you very much. A record. What's important about that price, other than its absolute level, is that it's in dollars. as are almost all oil trades globally, part of what's come to be known as the petro-dollar system,

a system that is under some pressure a month and a week or so into the war in Iran. We've called Edward Fishman for a primer. He's on the Council of Foreign Relations, also the author of ChokePoints, American Power, in the age of economic warfare. Edward, welcome back to the program. Thanks for having me, Kai. Let's just do a very quick primer here on the petro-dollar system,

why countries pay for oil and dollars? Sure. This is a linchpin of the dollar's role as the primary currency in the global economy. And the origin of the petro dollar actually goes to the early 70s. So after the Arab oil embargo in 1973, the United States economy was in terrible shape. We were running big deficits because of the Vietnam War and inflation was spiking. And Richard Nixon's Treasury Secretary, this guy named William Simon, came up with an idea. what if we could persuade the Saudi government, the main seller of oil in the world, to sell its oil and dollars and take the dollars that it earned from selling oil and using that to buy U.S. government debt, basically plugging U.S. fiscal deficits. And that was the origin of the petro dollar. In exchange, the U.S. agreed to allow the Saudis to buy U.S. government debt outside of the normal auctions. And we also provided the Saudis with military assistance. But that was the foundation of the petro dollar. And it, as a deal that has

to this day. And it's other Gulf countries as well. And basically what happens is oil dollars get recycled back into U.S. government debt. That's right. And, you know, it's been essential to allow the U.S. to run these fiscal deficits year after year after year. But it's also been more important than that. But, you know, oil is the world's most traded commodity. And the fact that that is priced in dollars and settled in dollars around the world has produced so much demand for dollars and has fundamentally put the dollar at the center of the global economy. Okay. Here we all. April of 2026, the street of Hormuz is closed. That oil from those Gulf countries is locked in, let us say.

What is that doing? What do you suppose that might do to this petro dollar system that has benefited the U.S. fiscally for 50 plus years? Well, look, there have always been outliers, you know, countries that are sort of on the fringes of the system. And Iran has always been one because they've been under sanctions. They haven't been able to transact in dollars. And so in recent years, Iran has effectively sold all of its oil to China.

And so they've been accepting payment in yuan, the Chinese currency. But what's happened now is by establishing itself as gatekeeper of the Strait of Hormuz, Iran doesn't just control its own oil supplies. It's controlling 20% of global oil exports on a daily basis. And allegedly, what they're doing now is they're telling tankers that in order to get through the Strait of Hormuz, they have to pay a toll to Iran in yuan. in R&B. And so Iran is taking direct aim at this petro dollar system and really trying to change the global paradigm as a consequence of this war. You know, the demise of the U.S. dollar is the global

reserve currency has been foretold often and with some degree of vociferousness. It has yet to come to pass and it's not coming tomorrow, but one does imagine that if the petro dollar system goes away, that could speed up a little bit. If the petro dollar were to go, that would be a huge chink in the armor of the dollar's roll. It wouldn't necessarily spell the end of it, but you just got to imagine this is the world's most traded commodity, oil. If oil starts being priced in Chinese yuan, that would be a substantial knock to the dollar's role and, frankly, a boon for China. Is it too late, do you think, to stop this, you know, potential slide? It's not too late. You know, one of the other countries that had been outside of the petro dollar

system up until very recently was Venezuela. Before the Maduro raid in January, Venezuela was selling almost all of its oil to China and accepting payment in R&B. Well, just hours after former Venezuelan President Nicholas Maduro was dropped off at the Metropolitan Detention Center in Brooklyn, the Trump administration announced that Venezuelan oil would henceforth be priced in dollars. And so they have sort of forcibly brought Venezuela back into the petro dollar system. I think the outcome of this war in Iran. Whether Iran actually does establish itself as gatekeeper of the Strait of or whether the U.S. can successfully reopen the strait, that will be profoundly important to the future of the petro dollar system. Edward Fishman is at the Council on Foreign Relations. He's also written

a book very relevant to our conversation today. It's called Choke Points. Eddie, thanks a lot. I appreciate your time. It was my pleasure. Good to talk to you. The good news is that a week or two ago, the prediction markets, Calcian Polymarket rolled out new policies that they said will limit insider trading. Politicians wouldn't be allowed to trade on their own campaigns. People involved in professional and college sports wouldn't be allowed to trade on the sports that they're affiliated with. And the Commodities Futures Trading Commission said that going after that kind of insider

trading is an enforcement priority. All of which might then reasonably lead one to conclude that insider trading on those markets is universally recognized as bad. Kind of? As Marketplace's Megan McCarty Carino reports. To understand what's going on with prediction markets right now, it helps to have a working knowledge of the 1983 movie Trading Places, which turns on a plot to trade on stolen government information. There's a lot going on, but basically, Eddie Murphy plays a down-on-his-look con man,

and Dan Aykroyd is a hoity-to-a-commodities broker. Porkbellies. I have a hunch. Something very exciting is going to happen in the portfilly market this morning. Accroids' evil bosses, the Duke brothers, enact a convoluted scheme to make the two trade places as a social experiment. Are we talking about a wager, Randolph? Then Murphy and Aykroyd team up to get revenge. It occurs to me that the best way you hurt rich people is by turning them into poor people. They intercept a secret USDA report on the orange crop, the Duke.

Dukes were planning to use to make a killing on orange juice futures. They feed the Dukes a fake report and then they use the real secret information to get rich themselves and retire to a tropical paradise. Looking good, Billy Ray. Feeling good, Louet. The setup is pure Hollywood, but the idea that you could get away with a scheme like this was accurate, says Andrew Verstein, a law professor at UCLA. most of American history, if you came to have some information that gave you a really strong sense of what was going to happen in commodity prices, you could trade commodity futures and options and make money with that information. And there wouldn't be any possible legal consequence

to you. He says commodities were seen as different from stocks. They don't have shareholders who would get screwed over by stock price manipulation. And most people trading in the markets like farmers with knowledge of their own crops are insiders to a certain extent. It wasn't until 2010 with the passage of the Dodd-Frank Act that trading on material non-public information was actually made illegal in commodities markets. The CFTC chairman had gone to Congress and said, we actually do want to be able to prosecute insider trading. We saw the movie trading places and we want that stuff to be illegal. One provision was even nicknamed the Eddie Murphy rule. But Verstine says how the law should be applied in the real world is still somewhat unsettled.

And how it should be applied to prediction markets, which, yes, fall under the same regulation as orange juice futures. That's even more unsettled. I am mostly interested in these as an information institution. The main social value is that they tell us about things. Robin Hanson is an economist at George Mason University and part of an intellectual movement that has long. promoted prediction markets as powerful forecasting tools. Want to know if rent control will affect housing prices or if interest rates will rise or fall? Prediction markets, the argument goes, give you fast real-time data, the aggregate beliefs of people willing to put their money where

their mouth is. And that means we want it to be okay for people who have big advantages to use them because that'll give us the information. Inside information makes predictions more accurate. But it can also lead to corruption and mistrust, says Yeshayayadav, a law professor at Vanderbilt University. People may never want to get involved ultimately down the line if they feel like, hang on, you know, this market's going to be super rigged against me at all times. She says there's broad consensus. The law prohibits people from trading on government secrets or stolen information. Kalshi and Polly Market have also banned anyone with influence on real-world outcomes from betting on what they call events. contracts. But Yadav says enforcement is the challenge. Prediction markets are home to goodness knows how many different types of contracts. The number

of contracts are multiplying and proliferating every single day. She says it looks like the platforms recognize insider trading is a threat to their business and are taking actions to prevent it, at least in the U.S. Some of the most questionable bets have happened offshore, where polymarket allows trading anonymously. I'm Megan McCarty Corrino for Marketplace. Coming up. It is a nicer airport and it's quieter and there's no wait times. My kind of airport, I'll tell you what.

But first, sure, why not? Let's do the numbers. Now industrial is off 85 points to date, 2 tenths percent, 46,584. The NASDAG rose 21 points, a 10th percent, 22,017. The S&P 500 ticked up five points. That's just under a 10th percent. percent, rather, 66 and 16. We heard from Megan McCarty Carino about insider trading and prediction markets.

How about some associated companies, shall we say? Robin Hood Markets, Incorporated. It did start, as you know, as a financial market trading app, dip two-tenth of one percent. Draft Kings added two-tenths percent. Flutter Entertainment, that's the parent company of Fandul, subtracted about a tenth of one percent. Sorry, subtracted about one percent on the day. Intel is going to be working with SpaceX, XAI, and Tesla to create specially designed chips. for both companies at Elon Musk's planned

TerraFab facility in Texas. Terrafab's chips are going to be used in Tesla RoboTaxies. Also, it's Optimus Robot Project. What could possibly go wrong? Tesla down one and three quarters percent today. Intel climbed about four and two tenths percent. Intel competitor, Invidia,

inched up a quarter of one percent. Bond prices rose. The yield on the 10-year T-note fell 4.30 percent. You're listening to Marketplace. If you're a business leader, Toet QuickBooks Payroll is an essential tool that completely integrates payroll, time tracking, HR, and your financials in a powerful all-in-one command center. No more juggling platforms or switching between vendors.

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and get ready for the brand new tools coming soon. More at QuickBooks.com slash workforce. That's quickbooks.com slash workforce. This is Marketplace. I'm Kai Risdahl. Among the many, many slices of this economy that the federal government measures is a category known as durable goods. Orders placed with domestic manufacturers for everything from industrial machinery to washing machinery, expensive stuff that is supposed to last. We just got data for February. Durable goods orders down 1.4%, the third straight monthly decline. And you know what? Three, a trend does. make and it's a trend that predates the war. Marketplace's Novasopho makes it make sense. Durable goods orders can be very volatile month to month. One large order at Boeing and it looks like we're doing well and one bad order at Boeing and we're falling out of the sky, if you'll excuse the metaphor.

Ari Schwader at the University of Michigan says look over a longer time horizon and orders have declined in four out of the last five months. This could be taken as a as an indication that things are slowing down. But that slowdown is uneven. Jason Miller is with Michigan State University. A lot of sectors that are more sort of consumer-centric are in maybe a little bit of a weaker condition than what they were heading into last year at this time.

But business investment, especially in technology, is strong. Think AI automation. The business investment measure called core capital goods orders increased about half a percent in February. It's important to remember that February is a pre-war reading. Bernard Yaros of Oxford Economics says the data still has to catch up with higher energy prices. The trajectory for capital spending by businesses is just not going to be as robust as it would have been in the absence of all the geopolitical tensions in the Middle East. And there's not much room to maneuver, says Hittendra Chattervady at Arizona State University,

because tariffs are still taking a bite out of economic growth. At this moment, we are barely holding our head above the border. If the energy shock caused by the Iran war persists, things could go south very, very fast. The silver lining, analysts say, is that AI spending and new tax breaks for capital expenditures should prop up business investment for now. I'm Novosafo for Marketplace.

You don't have to have been squeezed in a moment. middle seat on a totally booked flight or have been stuck in an airport delayed for some reason or have heard the news about far worse things happening to know that our airspace is overcrowded and under-resourced. Meanwhile, passenger numbers just keep going up. And that traffic, the FAA says, is expected to increase especially quickly at the big hubs, airports that each handle at least one percent of commercial passengers every year think Atlanta and Chicago and LAX. But we do have hundreds of smaller airports that could help alleviate some of that congestion as Marketplace's Henry App reports. Donna Dracunis lives in rural northeastern Vermont. So anytime she wants to fly, she has to choose from a few different airports all a few hours away.

There's the three-hour drive to Boston Logan, a major international hub that handles more than a thousand flights a day, or just under two hours to Vermont's largest airport in Burlington. And with about 30 departures a day, there aren't nearly as many destinations to choose from. But it is a nicer airport and it's quieter and there's no wait times. Up until recently, though, there was a downside. Four of the airport's gates were clustered in one narrow hallway. They used to wait in that long hallway and it was so hot and it was, you know, it never felt clean because it was just so old and worn out. But that changed in late March when the Burlington Airport opened a new, spacious area of the terminal funded by a $34 million congressional earmark.

Four new gates, high ceilings, lots of space to spread out. Dracunus was on the first flight to depart from one of the new gates. It's like amazing. There's a fireplace and a kids' playroom and everything. I had no idea that it was going to be like that. Making this small hub airport a lot nicer could help relieve some of the congestion at other big hubs, like Boston, at least a bit, because Burlington is competing for market share. The airport's director of aviation, Nick Longo, says Burlington attracts half of the

three million or so passengers that fly in and out of its market, which stretches from northern New York through New Hampshire. That means there's another 1.5 million flyers that choose other airports. His goal, get more of them to choose Burlington. So people don't have to drive two, three, four hours to find a flight. If we have it here, we'll be able to serve that same customer. And in turn, that customer won't be adding traffic to Boston's skies. But enticing airlines to spread routes to more small hubs like Burlington is not an easy sell, says Robert Mann, an independent airline industry analyst. The issue is, you know, people want to fly where they want to fly, they want to fly from and to those big places. And airlines build their networks

to serve the most profitable routes. To borrow a phrase, why do people rob banks, well, that's where the money is. Why do airlines schedule to these major airports? Well, that's where the money is. So big hubs end up with more service and congestion than, and small airports. The FAA projects that activity at large hubs will grow about twice as fast as at small hubs in the coming years. At the same time, the country faces a persistent shortage of air traffic controllers, says Dan Bub, a professor in residence at the University of Nevada, Las Vegas. It makes one wonder, is our air traffic system reaching its saturation point in terms of the maximum level of stress it can handle? One short-term solution, Bubb says, the FAA can tell airlines,

we're capping the number of flights at certain hubs during peak hours. It's going to be a difficult conversation, though, because airlines don't want to cut their flights. But the conversation is already underway at one major airport, Chicago O'Hare. In March, the FAA told airlines that they'd overpacked their Chicago schedules for this coming summer. So regulators may limit the number of flights in and out of O'Hare. A similar limit is already in place at Newark Airport in New Jersey. Capping flights isn't an ideal solution, Bob says. says, so in the long run, he thinks the industry should take a second look at smaller hubs.

They get overlooked. I think they're undervalued. And I think it would be, you know, prudent to strongly consider, you know, increasing their visibility and making greater use to them. In Burlington, Aviation Director Nick Longo hopes that happens. His next goal is upgrading the other six gates at the airport. We need to adjust how our jet bridges work, how people get access to these aircraft, and some, some sports. space to do it. The airport was designed in the 1950s, he says. To gain more market share, it needs to stay up to date. In Burlington, Vermont, I'm Henry App for Marketplace. This final note on the way out today in which I'm going to repeat myself, but it does seem like

today is a good day for that. The institutions of this economy depend on the institutions of this democracy, fair regulation, transparency, the right of recourse when wronged, and the rule of law, international law, too. Jordan Manji, Zaniel Maharaj, Janet Wynne, Olga Oxman, and Virginia Kaye Smith are the digital team around here. I'm Kai Rizdahl. We will see you tomorrow, everybody. This is APM.

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