Harvard Scandal Fallout: A Crypto Bet Gone Wrong

• Journalist and Polymarket Bet: The Claudine Gay's Plagiarism Saga
• The Big Story
• Trading on Impactful Work
• The Ethical Dilemma
• Legal Implications
• The Future of Prediction Markets

Journalist and Polymarket Bet: The Claudine Gay's Plagiarism Saga

The fact-finding journalist who unveiled Claudine Gay's plagiarism gamble was primed to win $1400 in crypto through a Polymarket contract if she stepped down before the end of the year. Although Chris Brunet didn't gain financially due to her late resignation, he remains hopeful of profiting from his work through prediction market trading. The ethical dimensions of this occurrence remain somewhat ambiguous, but a journalism professor advises that it is preferable if it's publicly disclosed. A securities lawyer opines that a journalist betting on their own story probably doesn't amount to insider trading.

The Big Story

Chris Brunet was aware that he had a significant story, and he wagered on its potential for a massive impact. As an independent investigative journalist, he had revealed the past plagiarism of Claudine Gay, the former president of Harvard, in December 2023, along with her data fabrication a year prior. For many journalists, publishing such groundbreaking exposés would be a reward in itself, but Brunet intended to financially benefit from the aftermath of his discoveries.

Later that month, he placed a bet on Polymarket, the most prominent prediction market platform. He was poised to win $1,400 in cryptocurrency if Gay vacated the presidency of Harvard by the year's end. Unfortunately, Brunet's hope was cut short as Gay chose to step down a few days into the new year, causing him to lose the bet. Despite his accurate prediction of Gay's resignation, the timing was off, and he lost out on his potential winnings.

Trading on Impactful Work

Brunet admits that he's a better journalist than a trader. Nevertheless, he remains eager to profit from his impactful work by trading on it. The only constraint he faces is his limited financial resources, which prevent him from placing significant bets on Polymarket. Given more resources, he would gladly bet on the outcomes of his ongoing investigations.

If a journalist has the audacity to write something that might lead to an arrest and federal charges or the resignation of a high-profile academic, why not reap some financial benefits? After all, if prediction markets are set to become the ultimate arbiters of truth by harnessing the crowd's power and giving them an opportunity to put their money where their mouths are, they will need a starting point.

The Ethical Dilemma

Brunet, however, contemplates the ethical implications of his actions. Does having a personal stake in the outcome of his story akin to insider trading or possessing information before the markets do present an ethical issue? According to Jane E. Kirtley, a professor of media ethics and law at the University of Minnesota's Hubbard School of Journalism, betting on one's stories' outcome can potentially present a conflict of interest.

Kirtley pointed to the 1980s case of Foster Winans, a former Wall Street Journal reporter who leaked potentially market-moving information to a stockbroker. She argued that from an ethical standpoint, Winans' conduct wasn't in line with journalistic ethical norms. Journalists betting on their stories' outcome should be transparent about it to their employers and the public, she recommended.

Legal Implications

As for the legality, it's a somewhat complex issue. The cases of Foster Winans and others have shown that breaking the duty of confidentiality for personal gain can lead to legal consequences. However, the situation with prediction markets is murkier. According to Florida-based digital assets attorney John Montague, there is no definitive answer as to whether betting on prediction markets with insider information amounts to insider trading under U.S. law.

This would possibly rely on whether prediction markets are classified as 'securities' under this law and thus under the U.S. Securities and Exchange Commission's jurisdiction. If so, using insider information in prediction markets could be viewed as insider trading.

The Future of Prediction Markets

Despite not being profitable so far with prediction markets, Brunet still believes in the idea of monetizing the wisdom of the crowd. Perhaps it's still early for the industry. Brunet's investigation into Gay has considerably boosted his subscriber count. After his success in reporting on academia, he plans to launch a Substack newsletter covering central bank digital currencies.

Edited by Jonathan Stoker