Organizations Must Expand Compliance Rules for $1 Billion-Plus Weekly Prediction Market Trading
Updated
Updated · Bloomberg Law · Jun 4
Organizations Must Expand Compliance Rules for $1 Billion-Plus Weekly Prediction Market Trading
3 articles · Updated · Bloomberg Law · Jun 4
Summary
$1 billion-plus in weekly prediction-market volume is creating a new compliance problem: companies risk liability if employees use confidential information to trade event contracts or influence the events themselves.
Recent U.S. insider-trading cases tied to a soldier's trades on classified information show regulators can pursue misappropriated-information theories beyond finance, reaching public companies, pharma, tech, crypto and sports organizations.
Financial firms face added exposure as prediction markets move into mainstream channels, with two dozen ETFs awaiting U.S. clearance and brokerages already launching platforms that could let staff misuse MNPI in client, fund or personal accounts.
Recommended fixes include extending MNPI, personal-trading and code-of-conduct policies beyond securities to event contracts, requiring account disclosure or pre-clearance, training staff and tightening blackout or outright trading bans for sensitive roles.
Because event contracts are not securities and enforcement under the Commodity Exchange Act remains partly untested, firms are being urged to update surveillance and supervisory controls now rather than wait for broader entity-level cases.
Can US laws stop insider trading on anonymous, offshore crypto platforms?
With regulators and states at odds, who will control the trillion-dollar prediction market boom?
Is your winning bet on a prediction market clever insight or a federal crime?
Navigating the $1 Trillion Prediction Market Boom: Enforcement, Jurisdictional Clashes, and Compliance Imperatives
Overview
Prediction markets are at a turning point, with explosive growth in trading activity and a surge in high-profile enforcement actions. Federal agencies are stepping up their regulatory authority, making it a clear priority to police these platforms. This creates significant compliance risks for organizations, especially as cases like Michele Spagnuolo’s indictment for using insider information show the severe consequences of misuse. As federal oversight increases, companies must urgently review their internal policies to address these new risks and prevent employees from using confidential information in prediction markets, or they could face serious legal and reputational damage.