Foreign adversaries, particularly from the Middle East and China, are weaponizing political prediction markets. By funding ads that display skewed betting odds, they aim to create a false sense of momentum or inevitability for a candidate, representing a novel and subtle form of election interference designed to sow division.

A fraud operation can be brilliant at exploiting systemic weaknesses while being comically bad at faking basic evidence, like having one person forge dozens of signatures. This paradox is not surprising and reflects a division of labor similar to legitimate businesses, with different skill levels for strategy versus execution.

Electoral systems have an adverse selection problem, favoring narcissistic, Machiavellian, and psychopathic individuals who seek power. A lottery system, by contrast, selects a more representative and less pathologically power-hungry group of leaders, avoiding those who excel at manipulative charm to get elected.

A more significant danger than insider trading is that individuals in power could actively manipulate real-world outcomes to ensure their bets on a prediction market pay out. This moves beyond leveraging information to actively corrupting decision-making for financial gain, akin to throwing a game in sports.

Viewing fraud as its own form of infrastructure, with its own "APIs of evil," provides transferable lessons. By understanding how fraudulent systems are built and operate, we can gain insights to better architect and secure the legitimate, critical infrastructure in our lives.

Instead of a moral failing, corruption is a predictable outcome of game theory. If a system contains an exploit, a subset of people will maximize it. The solution is not appealing to morality but designing radically transparent systems that remove the opportunity to exploit.

An in-person ballot is anonymous by design. Once a fraudulent vote enters the ballot box, it lacks any identifying information linking it to the voter. It becomes indistinguishable from legitimate votes and is mixed in immediately, making it literally impossible to isolate, trace, or remove after the fact.

Terry Duffy distinguishes between large-scale political events like a presidential election and smaller, local races. He argues that a prediction market on a local mayoral race with only a few hundred voters could be easily manipulated, as an actor could potentially buy the election to ensure their market prediction pays off.

Prediction markets are becoming a new vector for election interference. Foreign entities, particularly from China and the Middle East, can place large bets to skew the odds. As media outlets increasingly cite these markets as legitimate indicators, this manipulation can shape public perception and influence voter behavior.