The purpose of any price-based system is to communicate knowledge, not necessarily insider knowledge.
There are actually two theories on insider knowledge. One states that allowing insider trading is beneficial, as it allows prices to better match the underlying reality, the other states that this discourages non-insider trading, which actually makes the prices worse. Stock markets lean heavily towards the second theory, while prediction markets seem to be leaning towards the first.
There are actually two theories on insider knowledge. One states that allowing insider trading is beneficial, as it allows prices to better match the underlying reality, the other states that this discourages non-insider trading, which actually makes the prices worse. Stock markets lean heavily towards the second theory, while prediction markets seem to be leaning towards the first.