TLDR
- Goldman Sachs has restricted employee trading on some prediction markets.
- Morgan Stanley said its code of conduct covers prediction market trading.
- A Google employee was charged over alleged Polymarket insider trading.
- Kalshi and Polymarket have added tools to monitor suspicious trading.
- Polymarket is seeking US approval to offer margin trading.
Companies are reviewing employee trading policies as prediction markets expand into business events, financial contracts and politics, raising concerns that workers could use private company information to trade event contracts.
Goldman and Other Firms Review Prediction Market Policies
Goldman Sachs has barred employees from trading contracts tied to events specific to the bank, as well as elections, financial markets, macroeconomic data and geopolitics, people familiar with the policy said. A bank representative declined to comment on the policy but said the firm bans the use of material, nonpublic information across all markets.
Morgan Stanley said its employee code of conduct includes policies covering prediction market trading. JPMorgan Chase has urged employees to proceed with caution when trading on prediction markets, especially contracts tied to the financial sector.
United Airlines said it does not have a specific prediction market trading policy. However, its employee rules prohibit workers from using their position or confidential company information for personal gain.
Bank of America is preparing updates that would outline prohibited conduct and give examples for employees trading on prediction market platforms, a person familiar with the plans said. Legal advisers said financial firms are moving earlier than other sectors because they already have large compliance teams.
Insider Trading Case Raises New Questions
The debate follows the first event contract insider trading case tied to a private-sector company. In May, the Commodity Futures Trading Commission and Department of Justice charged Google employee Michele Spagnuolo with using material, nonpublic information to trade Polymarket contracts tied to Google’s “Year in Search” lists.
The CFTC complaint alleged Spagnuolo used the handle “AlphaRaccoon” and made about $1.2 million in profit. The allegations raised questions about how companies should monitor employee activity on prediction platforms.
Legal experts said prediction markets can create many possible ways for private information to be used. A worker could trade contracts tied to product releases, hiring plans, monthly stock levels, internal performance data or other company-specific events.
Karen Woody, a law professor at Washington and Lee University, said the CFTC has a “blank canvas” for pursuing insider trading cases in this area. She said the number of available contracts makes enforcement difficult because confidential information can apply to many event types.
Platforms Add Controls as Polymarket Seeks Margin Trading
Prediction market platforms have also added tools to monitor suspicious trading. Kalshi introduced employment verification tools for some markets and partnered with StarCompliance so employers using the software can access employee event-contract activity.
Polymarket has pointed to partnerships with Chainalysis and Palantir for monitoring suspicious activity, including sports-related contracts. Bloomberg reported that Polymarket is also seeking approval to offer margin trading in the U.S. through filings tied to Coming Home GBA.
Polymarket would need CFTC approval before offering non-fully collateralized event contracts. The filing comes as prediction markets face rising scrutiny over market integrity, employee access to private data and the use of leverage.
Lawyers have advised companies to update insider trading policies to mention event contracts, train employees and monitor unusual activity in markets tied to their businesses.
