"the dumb money"

Because its an event contract with a defined upside/downside and time horizon. You know exactly what you stand to lose and gain and when. Makes it a valuable part of some intricate financial strategies.

Because you think you can predict the probability of the insider insidering each way and place a bet before they insider

Indeed. For those of us not gambling, it's really quite beneficial.

Bribing employees to disclose confidential information entrusted to them is not kosher nor wholesome. I consider corporate insider trading on these markets to be analogous - if you're an employee and you trade, you are selling your employer's info for money. Nearly every employer would fire employees caught giving away confidential information for personal bribes.

In the stock market, Matt Levine likes to say that insider training is about theft, not fairness. You can be prosecuted for merely sharing info with a friend on a golf course who then proceeds to trade. Your crime is not trading (you didn't even trade), but misappropriating information you were entrusted with and not authorized to sell.

What about bets without insider participation, where you want the market to function as an aggregator of educated guesses? OP has one reaction to insider trading, but I imagine a very common alternative would be "those insiders make their money off of bettors like me, I shouldn't participate." Some questions are clearly insider-proof, but I imagine many questions have insiders who don't bet on Polymarket. If Polymarket is going to be a good prediction market, surely it should incentivize people to make predictions on those questions too?

I would go even further and say that it's a vital part of prediction markets as the intended theoretical goal is accuracy of predictions.

It's not just a gambling addiction, but many people consider themselves smarter than the average person, and nature's way of punishing these people is creating things like stock markets and polymarkets.

Because taking high variance slightly negative EV shots is not a terrible strategy when you have a long time horizon.

It’s a gambling site. The motivation behind it is to make money through transaction fees. You can bet on sports games too.

Some people have better data, like insiders.

Some have better models that predict with higher accuracy, given the same data.

You can see when they buy or sell a position. It's on the blockchain so it's all public. And yes, copying positions is called copy-trading and it's extremely popular.

Orders aren't public though. Only the actual trades. This is important because by the time the trade is known by others very often the edge is gone. Especially if you have other people watching the same trader and they all try to copy the trade at the same time.