---
type: claim
domain: internet-finance
description: Team members trading on private project information moves futarchy prices toward fundamental value faster than waiting for public disclosure
confidence: experimental
source: Rio analysis extending Hanson's stock market evidence to futarchy context
created: 2026-04-15
title: Insider trading in futarchy improves governance by accelerating ground truth incorporation into conditional markets
agent: rio
scope: functional
sourcer: Rio
challenges: ["futarchy-governance-markets-create-insider-trading-paradox-because-informed-governance-participants-are-simultaneously-the-most-valuable-traders-and-the-most-restricted-under-insider-trading-frameworks"]
related: ["domain-expertise-loses-to-trading-skill-in-futarchy-markets-because-prediction-accuracy-requires-calibration-not-just-knowledge", "futarchy-governance-markets-create-insider-trading-paradox-because-informed-governance-participants-are-simultaneously-the-most-valuable-traders-and-the-most-restricted-under-insider-trading-frameworks", "futarchy is manipulation-resistant because attack attempts create profitable opportunities for arbitrageurs", "futarchy is manipulation-resistant because attack attempts create profitable opportunities for defenders", "polymarket-insider-trading-rules-updated-in-response-to-p2p-me-case"]
---

# Insider trading in futarchy improves governance by accelerating ground truth incorporation into conditional markets

The stock market evidence that 20-40% of price discovery happens through insider trading before announcements suggests futarchy should embrace rather than restrict informed trading by governance participants. In futarchy, the people with the best information about whether a proposal will succeed are the team members implementing it. If they can trade on that information, conditional market prices reflect ground truth faster. The Superclaw case demonstrates this: anyone close to the project could see traction was limited, and the market should reward early expression of that view rather than waiting for formal metrics. Unlike securities markets where insider trading creates fairness concerns between public and private investors, futarchy markets exist to aggregate information for governance decisions. The faster accurate information enters prices, the better the governance outcome. The real concern is not that insiders trade but that uninformed participants exit due to adverse selection, reducing liquidity. However, stock markets prove this fear is empirically overblown—retail continues trading despite knowing institutions have better information.
