2026/05/04 by Maksym Nechepurenko · 1 voice
Computer Science · Decision Sciences · Economics, Econometrics and Finance · #Classifier (UML) #Database transaction #Enforcement #Financial Markets and Investment Strategies #Flagging #Heuristics #Information leakage #Insider #Insider trading #Population #Sports Analytics and Performance #Stock Market Forecasting Methods #cs.CY #q-fin.GN #q-fin.TR
paper · pdf · doi:10.48550/arxiv.2605.02287
openalex publication_date 2026/05/04 · arxiv published 2026/05/04 · openalex created_date 2026/05/06 · arxiv updated 2026/05/14 · openalex updated_date 2026/07/28
April 2026 saw notable methodological convergence in the academic study of informed trading on decentralized prediction markets. Three approaches surfaced almost simultaneously: Mitts and Ofir (2026) apply a composite screen to over 210,000 wallet-market pairs; Gomez-Cram et al. (2026) apply an event-level sign-randomization test to Polymarket's complete transaction history, classifying 3.14% of accounts as "skilled winners" and separately flagging 1,950 accounts as "insiders" via a lifecycle heuristic; Nechepurenko (2026) develops the Information Leakage Score (ILS) framework, which quantifies per-market information front-loading at an article-derived public-event timestamp. This paper provides a methodological comparison. The central claim is that these are three distinct layers of detection, not competing methods on a single layer. Sign-randomization is best understood as an account-level test of persistent directional skill conditional on opportunity selection -- not a direct test of insider trading, and not a per-market measure. The heuristic insider flag is separate from the skill classifier, applies to a population the classifier excludes by design, and has unknown precision. The Polymarket sample pools politics, sports, crypto, and other categories with different information technologies, so a platform-wide "skilled winner" classification is mechanism-ambiguous. The January 2026 U.S.-Venezuela operation cluster, where the DOJ indictment of Master Sergeant Gannon Van Dyke provides a rare external enforcement benchmark, illustrates how the layers stack: lifecycle heuristics identify suspicious accounts; legal investigation addresses non-public-information possession; per-market scoring would quantify how much information was leaked into each contract. A combined pipeline gains in precision because each layer filters a different dimension.