Banks and companies tighten prediction market trading rules over insider risk

Major Wall Street banks are tightening employee rules on prediction markets as concern grows that event contracts can create conflicts of interest and provide a way to profit from confidential information. Goldman Sachs has reportedly barred employees from trading contracts tied to financial markets, macroeconomic data, elections, geopolitics and events involving the bank, while Morgan Stanley has added prediction-market rules to its employee code of conduct, Bank of America has clarified examples of prohibited activity and JPMorgan Chase’s existing rules bar trading with confidential information, including through prediction markets. The compliance push has intensified as federal cases and congressional scrutiny raise questions about how platforms such as Polymarket and Kalshi detect suspicious trading. Prosecutors allege Google software engineer Michele Spagnuolo used internal Google search trend data to make more than $1.2 million on Polymarket, risking about $2.75 million through an account called “AlphaRaccoon” between October and December 2025. The charges remain allegations, and Spagnuolo is presumed innocent unless proven guilty. Lawmakers are also examining whether traders can use classified or nonpublic information on event-contract platforms. The House Oversight Committee has requested records from Polymarket and Kalshi after reports of suspicious trades tied to military and political events, including allegations that a U.S. Army sergeant earned more than $409,000 using classified information related to an operation involving former Venezuelan President Nicolás Maduro. Kalshi has responded by expanding surveillance, creating an independent monitoring committee, partnering with Solidus Labs and requiring employer disclosures in sensitive markets, while the broader debate now centers on how far insider-trading restrictions should extend in prediction markets.