# Insider trading can destroy trust even when it improves prices

Markdown copy of https://realalpha.app/s/insider-trading-can-destroy-trust-even-when-it-improves/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Tarek Mansour](https://realalpha.app/people/tarek-mansour/) · Tarek Mansour is cofounder and CEO of Kalshi. · Built Kalshi, the federally regulated exchange for event contracts, with co-founder Luana Lopes Lara.
- Host: [Scott Galloway](https://realalpha.app/people/scott-galloway/)
- Host: [Ed Elson](https://realalpha.app/people/ed-elson/)
- Show: Prof G Markets
- Episode: [Prediction Markets vs. Gambling: Where’s the Line? | Prof G Markets](https://realalpha.app/v/J31lDCBRZgg/), Feb 27, 2026
- Moment: 29:55 to 35:48 of the episode (6 min), playing on https://realalpha.app/s/insider-trading-can-destroy-trust-even-when-it-improves/; the episode from there: https://realalpha.app/v/J31lDCBRZgg/?t=1795

## Quote

> “if you let insider trading kind of go loose **people stop trusting the market**”
> — [Tarek Mansour](https://realalpha.app/people/tarek-mansour/) at [30:30](https://realalpha.app/v/J31lDCBRZgg/?t=1830) · Prof G Markets

## Takeaways

1. Market accuracy is not enough if participants lose trust.
2. Kalshi applies a material non-public information standard.
3. Information that is legally fair game may still be researched and traded.

## About this segment

Tarek Mansour argues that insider trading undermines participation by making markets feel rigged. He describes Kalshi's rule against trading on material information that a person is legally obligated not to disclose.

From “Prediction Markets vs. Gambling: Where’s the Line? | Prof G Markets”, Feb 27, 2026. [Watch the full episode](https://realalpha.app/v/J31lDCBRZgg/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[30:05](https://realalpha.app/v/J31lDCBRZgg/?t=1805) I mean, look, there's a lot of consumption, and I like that frame, too. It's like the consumption bucket to think about a lot of these different things. And I think there's consumption on prediction markets, a lot of traditional like financial markets. And that's not necessarily a bad thing. But so I agree with Scott. And I think the way I always think about this is let's think about why is insider trading banned in the first place? You know, some would argue, well, if you let insider trading happen in stock markets, shouldn't that make it even more accurate? But the reason it's banned, and actually in some ways we've tried this, is that what happens is exactly what Scott mentioned is that like if you let insider trading kind of go loose people stop trusting the market and if people stop trusting

[30:46](https://realalpha.app/v/J31lDCBRZgg/?t=1846) the market did they stop trading like no one wants to participate or very few people want to participate in a game or a structure or a mechanism that is rigged like that is there is just like you know unfair so but but and so but but that's why we actually you know that first we are regulated there are rules against seller trading. So, you know, and these rules are very similar to the stock market rules and the mechanism of how we police it are very similar.

[31:12](https://realalpha.app/v/J31lDCBRZgg/?t=1872) And, you know, this has been a big topic of discussion and it goes... Back a little bit to the regulated versus unregulated situation. There are unregulated players, you know, and they are, you know, offshore. And there is, or at least allegedly, there is a lot of insider trading going on, like the Maduro trade that a lot of people have talked about. And, you know, that has brought kind of these issues into light. But at least on the cash side, like, we have a very strong position, which is we ban insider trading. Insider trading is not a good thing. It makes the marketplace unhealthy long term, and it creates an unfair field.

[31:41](https://realalpha.app/v/J31lDCBRZgg/?t=1901) Can I ask how you do that? Because I think in the stock market, insider trading laws are very, very strict. And anyone who's worked on Wall Street will know and will tell you just how intense everyone is about making sure. The problem is the executive who told the cousin who told the cousin, right? And that stuff does happen in the stock market. But we have such airtight definitions in the stock market and such airtight regulations, or you're shaking your head, as airtight as we could make them.

[32:15](https://realalpha.app/v/J31lDCBRZgg/?t=1935) Yes, sure. But the definitions are airtight here, too, and the regulations are airtight here, too. So please explain that. And I think it's an education thing. So it's a thing that over time we need to get there as an industry. And look, are they perfect? I don't think they're perfect. And I think there's work to do with regulators and policymakers, and that's something we're very committed to. But the, so how is it defined in the stock market, right?

[32:37](https://realalpha.app/v/J31lDCBRZgg/?t=1957) And, you know, let's just sort of attack that problem first. I think at a high level, it's defined as like, you cannot trade on material, non-public information, which is basically, let's make that even simpler. It's like, Ed, if you have a legal obligation not to disclose information that you have, that you have received, you cannot trade because trading is a form of disclosure, right? Disclosing information, you can, you know, one way to disclose information is you can call Scott and tell him.

[33:02](https://realalpha.app/v/J31lDCBRZgg/?t=1982) One way is go on CNBC and tell them, or you can trade it. And that's one way of disclosing it, right? That same standard applies to prediction markets. And our rules ban it the same way, right? So if you have information that you receive that you legally cannot disclose, you're not supposed to tell anyone, like you work at the BLS and the Fed, you're not allowed to release the report beforehand, you cannot go into the marketplace and trade it.

[33:27](https://realalpha.app/v/J31lDCBRZgg/?t=2007) And this applies to any of the other markets that we have. Isn't the reason that it's that it's there is a legal requirement not to disclose it because of the insider trading laws in the first place, which says you can't disclose this. And just to explain this for people, this came up in your interview with. NBC, where Andrew Ross Sorkin was providing to you the hypothetical, like, what if there's a dancer at the halftime show who knows what's going to happen in the halftime show? And there's no law requiring him or her to not tell someone about it. But then he or she does. And that seems to me to be insider trading.

[34:09](https://realalpha.app/v/J31lDCBRZgg/?t=2049) The stock market is not the only market that exists out there, right? We have markets on commodities you have market on rates we have markets on i mean we have all sorts of markets it's not like we add the stock market and then also in prediction markets happen but those markets also have rules around market manipulation insider trading and so on and so forth right so so yes there's some reflexivity i agree with you like that maybe the com like the companies in some ways the underlying got more strict about some of these things because of the existence of the market and this could happen in our market too it's possible right but like the the the way i describe it is like and by the way i do also want to address how we actually police it like how do we actually find so let's just finish a talk so let's finish the definition and let's

[34:48](https://realalpha.app/v/J31lDCBRZgg/?t=2088) move on to that but on the definition piece like if there isn't a problem with disclosing the information to people then there isn't a problem with disclosing the information to people you can trade it like you know and and and you know you could tell a friend who could tell a cousin and then that's completely fair game and that is not considered insider trading there's no issue with that and if people feel like hey maybe too many people may be around the stadium and can look at it they don't and they you know that's like an unfair market they would stop trade like they would just like you know if you over time feel like the the subset of information is too important or too prevalent like too deterministic for the marketplace and they would start trading like scott scott basically was saying um but but i think that the the line like you know you don't

[35:32](https://realalpha.app/v/J31lDCBRZgg/?t=2132) want to be in a position where you like block information because it is actually totally fair game to go and sit around next to a stadium and figure out what the next song is going to be and listen to rehearsal.