Not only is it not illegal, it’s a feature of the system, since it allows the market to reveal insider information without breaking confidence. The folks who advocate in favor of prediction markets identify this ability to use the market to reveal insider information as a benefit of the system, and argue that allowing “super predictors” (insiders and rich people, by and large) to profit as a result is the cost we pay for getting the insider information as a signal from the price.
You’re also competing against people with insider knowledge (depending on what you are betting on) which currently isn’t illegal AFAICT.
Not only is it not illegal, it’s a feature of the system, since it allows the market to reveal insider information without breaking confidence. The folks who advocate in favor of prediction markets identify this ability to use the market to reveal insider information as a benefit of the system, and argue that allowing “super predictors” (insiders and rich people, by and large) to profit as a result is the cost we pay for getting the insider information as a signal from the price.