The burgeoning popularity of prediction markets presents a complex new frontier for corporate compliance and legal departments. As these peer-to-peer platforms, where users trade contracts based on the outcomes of real-world events, gain traction, organizations face a heightened risk of insider trading, reputational damage, and potential legal entanglements. Ignoring the trend is no longer a viable option, as enforcement agencies signal increased scrutiny and high-profile cases emerge, demanding proactive strategies from businesses of all sectors.
Recent months have seen a significant regulatory response to the rise of prediction markets. Several state governments, including Wisconsin, have implemented broad bans on their employees participating in these platforms, citing concerns about the misuse of insider knowledge. Similarly, the U.S. Senate has enacted measures to prohibit its members and staff from engaging in such activities. This contrasts with a more nuanced approach taken by some private organizations, such as OpenAI and United Airlines, which permit employee participation but strictly prohibit trading based on material nonpublic information that confers an unfair advantage. For the majority of companies, however, the critical task of establishing and, more importantly, enforcing clear policies regarding prediction market engagement is just beginning, according to leading compliance and legal experts.
The core of the concern lies in the potential for individuals to leverage confidential information obtained through their employment to profit from prediction markets. This practice is not theoretical; a growing number of individuals are facing criminal charges for allegedly using insider knowledge for financial gain. These cases highlight the diverse nature of events traded on prediction markets, spanning from sporting outcomes and political elections to international conflicts. The stakes can be substantial, with one notable case involving a Google engineer accused of profiting over $1.2 million through alleged insider trading on these platforms.
The explosive growth in the appetite for prediction markets, coupled with explicit signals from enforcement agencies like the Commodity Futures Trading Commission (CFTC) about their intent to pursue insider trading in this space, means that inaction is a precarious strategy. Steve Silver, a shareholder at Littler’s Portland (Maine) office, emphasizes that organizations must actively address this emerging risk. He advises a thorough review of existing corporate policies, including device usage, employee handbooks, codes of conduct, insider trading regulations, employment agreements, non-disclosure agreements, and conflict-of-interest policies.
"Hoping the issue goes away is the worst possible move right now," Silver cautioned. He stressed that until definitive federal or Supreme Court guidance emerges, companies must proactively establish their own internal policies. "At its core, it’s about deciding on a policy," Silver stated, adding that the immediate imperative is not necessarily a fully drafted policy by tomorrow, but rather an acknowledgment that ignoring the issue is likely the most detrimental course of action.
Enforcement Actions and Regulatory Landscape
The regulatory framework surrounding prediction markets is still evolving and subject to significant debate. The CFTC officially classifies the contracts traded on these platforms as swaps, thus asserting its regulatory authority. However, this jurisdiction has been challenged by numerous states. Over a dozen states have contested the CFTC’s oversight, and some, like Minnesota, have opted for outright bans on prediction markets within their borders.
This regulatory ambiguity, however, has not deterred enforcement agencies from investigating and prosecuting individuals. The U.S. Department of Justice (DOJ) and various U.S. Attorney’s offices have demonstrated a clear focus on prosecuting individuals who exploit insider information. Two prominent cases from 2026 illustrate this trend. In April, a U.S. Army soldier was charged in connection with a trade valued at over $400,000, reportedly made just hours before a U.S. raid that captured Venezuelan President Nicolas Maduro. This incident underscored the potential for extremely sensitive geopolitical information to be monetized on prediction markets. In May, the U.S. Attorney for the Southern District of New York announced charges against a Google engineer accused of using his knowledge of search term volume to secure winnings totaling more than $1.2 million. Both individuals face potential multi-year prison sentences if convicted.
CFTC Director David I. Miller has publicly affirmed the agency’s commitment to aggressively investigating and prosecuting insider trading on prediction markets. In remarks delivered in March, Miller stated, "Insider trading in the prediction markets—where there is misappropriated information—is precisely the kind of serious violation that we are going after vigorously. We will aggressively detect, investigate and, where appropriate, prosecute insider trading in the prediction markets." This assertive stance signals an increased likelihood of enforcement actions, prompting a sense of urgency within corporate compliance circles.
Carolyn Pokorny, co-chair of Akerman’s white-collar crime and government investigations practice and a former acting U.S. Attorney for the Eastern District of New York, highlights the broad implications of this enforcement push. "There is an enforcement push right now going on in this space, and that should create a sense of urgency in companies," Pokorny advised. She pointed out the substantial financial activity on these platforms, suggesting that as prediction markets become more legitimized, the number of participants and the potential for misuse will likely increase.
While the current legal risks primarily target individuals rather than their employers, the reputational damage to organizations can be significant. "Why should Google care that it happened? I would say the risk is reputational. And it’s an embarrassment for them. I would think for any company, that would be first and foremost," Pokorny elaborated. The association of an employee’s illicit gains with their employer’s name can tarnish a company’s image and erode public trust.
Charting a Course: Developing Effective Policies
The public’s attention to prediction market risks intensified following the Maduro-related trade in January 2026. Data from Pew Research indicates a substantial surge in trading volume on platforms like Polymarket, with a more than 35% increase between January and April 2026 alone. This escalating activity suggests a growing likelihood of employees engaging with these markets, necessitating immediate policy development.
Experts like Silver and Pokorny recommend starting with a comprehensive review of existing corporate policies. Silver, an employment law specialist, suggests scrutinizing confidentiality agreements, employee handbooks, and device usage policies. Pokorny emphasizes the importance of reviewing insider trading policies, personal trading rules, and guidelines concerning conflicts of interest and gambling.
A critical point raised by Pokorny is that many existing insider trading policies were drafted long before prediction markets became prevalent and may not adequately address the nuances of this new trading environment. "I think a lot of the policies are written around securities and don’t mention these kinds of trades. They were written at a time when prediction markets [weren’t] even contemplated," she explained. This suggests that policy modernization, or the creation of entirely new policies specifically tailored to prediction markets, may be the most effective approach for many organizations.
Silver proposes that companies could consider developing standalone policies exclusively for prediction markets or expanding the scope of existing policies to encompass this activity. "What are your existing policies or your agreements and who do they cover? Because a lot of times those agreements, you’re giving that to high-level executives, maybe some engineers. Maybe that needs to be broader. Maybe you do need, in addition to the handbook, maybe it’s a standalone policy," he recommended.
The individuals charged in the 2026 prediction market cases were also accused of violating various agreements designed to protect confidential information. For publicly traded companies like Google’s parent, Alphabet, existing insider trading policies, while potentially not updated since 2024, are a starting point. However, the definition of Material Nonpublic Information (MNPI) used in securities law—information significant enough to affect stock prices and not publicly available—may not fully capture the scope of information that can be exploited on prediction markets. For instance, information about the content of a reality television show, while known to many individuals, would likely not meet the MNPI threshold for a publicly traded parent company like Comcast. This distinction highlights the need for policies that go beyond traditional securities-focused insider trading rules.
The fundamental objective, according to Silver, is to make it unequivocally clear to employees that they cannot trade based on information obtained through their employment, regardless of whether that information is classified as a trade secret or simply nonpublic information. "Probably the number one common factor is we want to make clear that you should not be trading based on our information," Silver asserted. "And that is whether it’s considered a trade secret or it’s just nonpublic information—information that you only know because of your job. We don’t want you trading on that, and that’s really as close to ‘best’ as you can do at this point."
Mary Shirley, a compliance executive, suggests that if new policies are necessary, companies should consider an outright ban on employees trading on any events related to their own company. Even without a new policy, clear communication with employees about what is permissible is paramount. This communication can take various forms, from updates to the code of conduct and targeted email blasts in response to relevant news events, to incorporating prediction market scenarios into annual compliance training programs.
Enforcement and Monitoring: The Next Frontier
Crafting a policy is merely the initial step. The subsequent phases of training, enforcement, and monitoring present the most significant challenges, according to experts. The ability to monitor employee activity on prediction markets varies significantly by platform and company. Kalshi, a rival to Polymarket, requires traders to disclose their employers and does not permit anonymous trading, offering a potential avenue for some companies to track employee engagement.
Certain financial services firms have begun integrating Kalshi with regtech platforms like StarCompliance to monitor employee trades. Kelvin Dickenson, chief product officer at StarCompliance, notes that this integration is currently tailored for the financial services sector and relies on employees self-disclosing their Kalshi accounts. He acknowledges that the rapid pace of prediction markets might make traditional pre-clearance processes, common for securities trading, impractical. "Companies don’t want to create a very frictionful experience for their employees, because people who are active in prediction markets today work at a very quick speed," Dickenson explained. The speed at which market conditions change could render pre-clearance processes obsolete before approval is granted.
Despite these monitoring challenges, organizations can still take steps to assess the effectiveness of their communications and training. Shirley suggests utilizing existing compliance initiatives, such as compliance weeks, to gauge employee understanding through quiz-style questions about prediction markets. This approach can serve as a pulse check to determine if communications and training are being absorbed and applied.
Ultimately, fostering an open dialogue about prediction markets is crucial, regardless of the formal monitoring or policy-making efforts. Both Shirley and Silver emphasize the value of providing employees with a designated resource for questions. "I still believe the vast majority of employees are trying to do the right thing," Silver remarked. "And they may have legitimate questions, like, is this OK? And so providing them a resource is a good idea." By creating channels for employees to seek clarification and guidance, organizations can proactively mitigate risks and build a more robust compliance culture in the evolving landscape of prediction markets.
