ForesightFlow: Real-Time Detection of Informed Trading in Decentralized Prediction Markets
Maksym Nechepurenko · 2026 · Working Paper
Abstract
We introduce the Information Leakage Score (ILS), a market-microstructure framework for detecting informed trading in prediction markets in real time. We adapt classical PIN, VPIN, and Kyle's λ to discrete-outcome on-chain CLOB venues, and combine them with on-chain wallet features (novelty, funding concentration, cross-market behavior). The framework is validated on the ForesightFlow Insider Cases inventory of eight documented episodes spanning 24 markets.
This paper introduces the Information Leakage Score (ILS) framework for real-time detection of informed trading in decentralized prediction markets, with a focus on Polymarket.
Motivation
Prediction markets have emerged as a third venue for price discovery, yet they lack the regulatory infrastructure and academic research depth of equity and derivatives markets. This creates both risk — informed traders can profit systematically from non-public information — and opportunity for detection using tools developed for classical microstructure.
Framework
We adapt three classical microstructure estimators to discrete-outcome on-chain CLOB venues:
- PIN (Probability of Informed Trading) adapted for binary markets
- VPIN (Volume-Synchronized PIN) for real-time monitoring
- Kyle's λ (price impact coefficient) as a liquidity-based signal
These are combined with on-chain wallet features: novelty score, funding concentration, and cross-market behavior clustering.
Validation
The ILS framework is validated on the ForesightFlow Insider Cases (FFIC) inventory — eight documented or strongly-suspected insider-trading episodes spanning 24 markets between April 2024 and April 2026.
Related tracks
Cite this work
@misc{nechepurenko2026foresightflow,
title = {ForesightFlow: Real-Time Detection of Informed Trading in Decentralized Prediction Markets},
author = {Nechepurenko, Maksym},
year = {2026},
note = {Working paper, v0.95}
}