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ForesightFlow: An Information Leakage Score Framework for Prediction Markets

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  • Maksym Nechepurenko

Abstract

ForesightFlow is an Information Leakage Score (ILS) framework for detecting informed trading on decentralized prediction markets. For an event-resolved binary market, the score quantifies the fraction of the terminal information move priced in before the public news event. Three operational scope conditions (edge effect, non-trivial total move, anchor sensitivity) are stated as preconditions for interpretation. The score admits a Murphy-decomposition reading that connects label generation to the proper-scoring-rule literature. A pilot empirical evaluation surfaces three findings. First, a resolution-anchored proxy for the public-event timestamp does not separate event-resolved markets from a matched control population (Mann-Whitney p = 1e-6, separation reversed), demonstrating that proxy quality is itself a binding constraint. Second, the article-derived timestamp on a single high-stakes case shifts the score by 0.444 in magnitude relative to the proxy and lies on the opposite side of zero. Third, an audit of the publicly documented Polymarket insider record reveals that documented cases are systematically deadline-resolved, falling outside the original ILS scope (0 of 24 FFIC inventory markets satisfied original scope conditions). This last finding motivates a deadline-ILS extension introduced in Section 7, anchored at the public-event timestamp rather than the news timestamp, and equipped with a per-category exponential hazard baseline for the time-to-event distribution. The extension closes the gap between the methodology and the population in which insider trading has been empirically documented. An end-to-end evaluation of the extension on the 2026 U.S.-Iran conflict cluster is reported in a companion paper. We release the FFIC inventory, the resolution-typology classification of the 911,237-market corpus, and all code at github.com/ForesightFlow.

Suggested Citation

  • Maksym Nechepurenko, 2026. "ForesightFlow: An Information Leakage Score Framework for Prediction Markets," Papers 2605.00493, arXiv.org, revised May 2026.
    • Handle: RePEc:arx:papers:2605.00493
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    References listed on IDEAS

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