Several major Wall Street banks have introduced or updated internal rules governing employee participation in prediction markets as concerns grow over potential conflicts of interest and the misuse of confidential information.
Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America have all taken steps to address employee activity involving event-based contracts offered by platforms such as Kalshi and Polymarket, according to people familiar with the companies’ policies.
Prediction markets allow users to trade contracts tied to possible outcomes of real-world events, including elections, sports competitions, economic developments and other topics. Their rapid growth has attracted regulatory attention in the United States, particularly ahead of upcoming elections, as authorities examine whether existing financial and market integrity rules are sufficient for these platforms.
Goldman Sachs has introduced restrictions preventing employees from participating in certain event contracts that could create actual or perceived conflicts involving the bank, its customers or the wider financial sector.
Banks review employee conduct policies amid prediction market growth
A Goldman Sachs policy memo states that employees cannot participate in event-based contracts connected to financial markets and political events where conflicts of interest may arise. The restrictions also cover situations involving the bank, its clients or the broader financial industry.
Repeated violations could result in disciplinary action, including termination, and employees may be required to surrender profits generated from prohibited trades.
The restrictions do not cover prediction market contracts related to sports and entertainment, according to information provided by a person familiar with the policy.
Morgan Stanley has also included prediction market rules within its employee code of conduct, although the bank has not disclosed specific details of its requirements.
JPMorgan Chase applies existing restrictions concerning confidential and non-public information to prediction market activity. A bank representative said employees are prohibited from trading based on material information that has not been publicly disclosed, which also applies to contracts offered through prediction platforms.
Bank of America has introduced additional guidance covering certain prediction market contracts, including those connected to company-specific matters, economic conditions and financial services events. According to Reuters, a spokesperson confirmed that the bank recently updated its policies to provide clearer examples of prohibited activity.
Citigroup did not comment on its approach.
The growing attention from financial institutions reflects concerns that employees could use information gained through their professional roles to gain an advantage on prediction markets.
Insider Trading Concerns Emerge around Event Contracts
Legal experts have warned that prediction markets create new challenges because users can trade on a broad range of subjects, increasing the number of situations where confidential information could potentially influence trading decisions.
The issue gained attention after the first insider trading case involving prediction market contracts involving a private-sector employee.
In May, the Commodity Futures Trading Commission and the Department of Justice accused Google employee Michele Spagnuolo of using material, non-public information to trade on Polymarket contracts connected to Google’s “Year in Search” rankings. According to the CFTC complaint, Spagnuolo allegedly earned approximately $1.2 million through trades conducted under the username “AlphaRaccoon.”
Legal specialists said the variety of contracts available on prediction platforms could create additional opportunities for employees to use workplace information improperly.
Karen Woody, a law professor at Washington and Lee University, said, “All these different questions that you’re able to bet on… it makes it really hard to kind of play whack-a-mole in terms of where people are using the information they’ve obtained confidentially,”
David Oliwenstein, a partner at Pillsbury, said companies are increasingly seeking guidance on how regulators may view prediction market activity.
“We are getting constant questions from clients, particularly among regulated entity clients, about what the regulator expectations are, what the risks are, where the areas of potential liability are,” said Oliwenstein.
Companies begin developing clearer guidance for employees
Although financial institutions have moved more quickly than many other industries, many companies have yet to introduce specific prediction market rules.
A review of publicly traded and privately held companies found that only a small number had established explicit policies addressing employee trading on prediction markets, while others were still evaluating possible changes.
United Airlines said it does not have a specific prediction market policy but maintains employee rules preventing workers from using their positions or confidential company information for personal gain.
OpenAI has also relied on broader insider trading restrictions, with company policies preventing employees from using material non-public information in any form of trading activity.
Experts said companies may benefit from directly mentioning prediction markets in their internal policies rather than relying only on general rules covering confidential information.
Tiffany Magri, a regulatory advisor at compliance technology company Smarsh, said, “The question is no longer whether exchanges can detect suspicious trades. It’s whether employers have established clear expectations around when employees should be prohibited from participating in markets tied to information they encounter through their work.”
Prediction market operators have also introduced measures intended to address market integrity concerns. Kalshi has added employment verification tools for some markets and partnered with StarCompliance to allow employers using its software to access employee event contract trades. The platform has also worked with Solidus Labs on monitoring activity.
Polymarket has highlighted partnerships with Chainalysis and Palantir to identify suspicious activity, including monitoring related to sports contracts.
However, legal experts said companies should develop their own internal education programs rather than depend entirely on platforms to detect improper trading.
The regulatory framework surrounding prediction markets remains unsettled. Lawyers said businesses should begin reviewing policies and training employees as these platforms continue expanding.
John Sullivan, a professor at San Francisco State University, said companies should understand how prediction markets operate and prepare internal rules. Legal guidance has suggested updating insider trading policies, monitoring unusual activity involving company-related markets and considering restrictions on workplace access to prediction platforms.