Unchained: DEX in the City – "Why Prediction Market 'Insider Trading' Isn't Illegal — Yet"

Host: Laura Shin
Guest Panel: Katherine KK (Starkware), Jesse (Ribbit Capital, ex-Web3 prosecutor), V (ex-SEC, Web3 legal expert)
Date: January 10, 2026

Episode Overview

This episode of "DEX in the City," an Unchained Podcast spin-off, dives into three main segments shaping the intersection of traditional finance (TradFi) and decentralized technologies:

1. The emergence and debate around permissioned blockchains for regulated finance (featuring the Canton Network and Nasdaq’s new role),
2. The growing entanglement of AI-driven agents and blockchain infrastructure,
3. The fast-approaching legal dilemmas posed by prediction markets, focusing on whether "insider trading" is or should be illegal in these contexts.

Panelists blend legal, technical, and industry perspectives—often with wry humor and practical insight—while also highlighting both the optimism and challenges facing crypto as it matures into mainstream relevance.

Key Discussion Points and Insights

1. TradFi Meets Blockchain: The Canton-Nasdaq Debate

(Starts ~05:50)

• What is the Canton Network?

  • A permissioned blockchain tailored for regulated finance, developed by Digital Asset (owned by Don Wilson of DRW fame), with backing from major TradFi entities, often Chicago-based.
  • Recently, Nasdaq became a super validator after a vote, with Canton's token price spiking 18% on the news.
  • Controversy: Is it a true win if you have to "pay" Nasdaq to join without use guarantees? Does this simply mirror old TradFi approaches disguised as innovation?

• Tokenized Equities: Who Wins?

  • Debate between permissioned TradFi chains dominating tokenized equities versus open, retail-driven platforms benefiting global markets (Asia, Africa, South America).
  • The elephant in the room: KYC requirements and whether global retail can ever meaningfully participate.

• Panel Insights:

  • V: Confidentiality remains a stumbling block; TradFi’s preference for opaqueness clashes with DeFi’s ethos of radical transparency. “There’s a lot of agreements where we don’t know all the terms… things run ‘off chain’ or behind the scenes.” (06:30)
  • Jesse: The real story is transaction ordering, which determines price, priority, and liability—heart of fair and orderly markets. “In these markets, ordering is power… probably having Nasdaq ordering transactions is a big deal.” (08:04)
  • Katherine KK: Is this "maturation" or just recreating broken TradFi models with blockchains as new plumbing? Are regulatory compromises worth the blue-chip PR? “Sometimes there’s a perception... you’re selling out.” (10:02)
  • V (devil’s advocate): Does shepherding TradFi efficiency matter if we’re not changing the underlying system? “If I joined crypto thinking it was just going to make Nasdaq more efficient… that’s not what gets me out of bed.” (11:56)

Memorable Moment

• Katherine KK jokes about being “hopped up” on two “fridge cigarettes,” aka Diet Coke, to keep energy going—a running podcast in-joke. (13:07)

2. AI Agents Meet Crypto: The Dawn of the Machine Economy

(Starts ~15:00)

• DeepMind’s New Paper and Why Crypto Should Care

  • Google DeepMind asserts the "agent economy"—AI agents transacting, negotiating, and spending autonomously—is not only coming but already happening.
  • “You need machine-readable money, programmable payments, verifiable identities for non-humans… DeepMind explicitly mentions blockchain-style systems as uniquely situated for this.” (V, 15:00)
  • Real-use scenarios: AI agents ordering Instacart groceries, coordinating calendars, making micro-payments across multiple sites.
  • Historically, credit cards/PayPal weren’t fit for sub-dollar payments. Now, stablecoins and public blockchains unlock these use cases: “The only thing that allows for micropayments right now is stablecoins.” (V, 21:09)

• Guardrails and Responsibilities

  • As AI agents become economic actors, questions arise: What rules, disclosures, and guardrails should govern their behavior on-chain?
  • Reference to WALL-E: Will humans lose agency to automation and frictionless living? Are we losing something ineffable as we chase radical efficiency?

• Balancing Speed and Safety

  • Jesse: The unique advantages of crypto are not just efficiency, but fairness—yet there's always a risk/reward balancing act: “It’s always about balancing the benefits against the unique risks.” (26:31)

Notable Quotes

• “DeepMind… says if agent economies are real... something like blockchain becomes structurally necessary.” (V, 15:00)
• “Everything about the Internet is about reducing friction in our lives... but without friction, we don’t get used to what it’s like in the real world.” (V, 23:50)

3. Prediction Markets and the 'Insider Trading' Paradox

(Starts ~28:22, Deep Dive at ~29:55)

• Recent Scandal:

  • Before the U.S. announced the capture of Venezuela’s Maduro, Polymarket betting spiked; one account gained ~$500,000.
  • Raises the question: Was this insider trading with material non-public information?

• Why 'Insider Trading' Isn’t Illegal (Yet) in Prediction Markets

  • Under current U.S. law, prediction markets are treated as event derivatives (“event contracts”) not securities. The SEC’s classic insider trading rules mostly do not apply.
  • Legally, “trading on non-public information isn’t automatically illegal unless you can prove fraud, manipulation, or breach of duty—which is a way higher bar.” (Jesse, 30:07)
  • Most prediction markets (outside of US-regulated Kalshi or Polymarket US) don’t require KYC. Anonymous wallets make enforcement all but impossible.

• Emerging Policy:

  • Rep. Richie Torres's proposed bill would specifically ban federal officials from trading on prediction markets with inside knowledge—“just applying insider trading logic to this new market category.” (Jesse, 34:40)
  • Panel mostly enthused, citing threats to public trust and the potential for officials to both profit and influence outcomes for personal gain—“a dangerous place to be.”
  • “If a federal official is trading on an outcome... because they have classified info... that is monetizing state power.” (Jesse, 36:16)
  • Jesse: “People aren’t going to participate in markets they don’t trust... just like you wouldn’t bet if you thought the game was rigged.” (39:58)

Memorable Moment / Analogy

• Katherine: “We’re at this weird time where we’re like a preteen begging for a phone... and instead of being responsible, we go smoke weed at our friend's house. This is what's happening in crypto right now.” (40:58)

4. Crypto Good News: Charity in Focus

(Begins ~42:40)

• Potherium.com: Crypto-based animal welfare charity—$500k donated to animal shelters and organizations so far.
• Heartfelt panel banter about their rescue dogs; celebration of positive, concrete crypto impacts away from speculative headlines.

Timestamps for Key Segments

• [05:50-13:07] TradFi x Blockchain: Canton-Nasdaq Deep Dive
• [15:00-27:26] AI Agents, Agentic Economy, and Blockchain
• [28:22-41:00] Insider Trading in Prediction Markets
• [42:40-end] Crypto Good News: Animal Welfare

Closing Reflections

This episode critically examines the possible futures converging at crypto’s intersection with regulated finance, rapidly advancing AI, and law:

• Will crypto simply become TradFi with better tools?
• Can agentic economies be safe, fair, and efficient—without losing what makes us human?
• How long before prediction market “insider trading” is tackled by law, and who will make it happen?

Through candid, often witty exchange, the panel highlights both the promise and perils at the digital frontier.

Notable Quotes for Sharing

• “In these markets, ordering is power.” — Jesse [08:04]
• “If a federal official is trading... because they have classified information... that is monetizing state power.” — Jesse [36:16]
• “People aren’t going to participate in markets they don’t trust... just like you wouldn’t bet if you thought the game was rigged.” — Jesse [39:58]
• “We’re like a preteen begging for a phone…instead of being responsible, we go smoke weed at our friend's house. This is what's happening in crypto right now.” — Katherine KK [40:58]
• “DeepMind says if agent economies are real…something like blockchain becomes structurally necessary.” — V [15:00]

Connect:

• @Unchained_pod
• @laurashin
• @Katherine_KK, @Jesse, @V

Learn More:

• Unchainedcrypto.com
• Potherium.com