Your insider trading policy probably covers securities.
Does it cover a $500 bet on whether your company will close a major acquisition by year-end?
Prediction markets — platforms like Kalshi and Polymarket — now offer contracts on events like product launches, earnings results, regulatory approvals, and M&A activity. Anyone with access to material nonpublic information (MNPI) can place a wager and profit.
No securities change hands. But the legal exposure is very real. I wrote briefly about it last month (see here) but today’s article on NPR (link) about campaign staffers betting on their own political candidate prompted me to explore this a bit more.
The CFTC has already issued an enforcement advisory. The SDNY has met with platform operators. DOJ is watching. Enforcement test cases are coming and the companies whose employees are named in them will wish they had updated their policies sooner.
Here’s what E&C teams should do right now:
Update the policy. Explicitly cover prediction market trading. Most existing insider trading policies are written around securities and simply don’t get there. Great article here.
Expand the definition of MNPI. Product launch dates, earnings scripts, cybersecurity incidents, and merger timelines can all move prediction market contracts. If it’s confidential and material, it’s covered regardless of the instrument. Another great article here.
Widen the net. The risk isn’t just in the executive suite. Engineers, investor relations staff, communications teams, and legal assistants all carry information that could move a market.
Address tipping. An employee who shares a tip with a friend who then places the bet may be just as exposed as the one who bet directly. Make sure your policy says so clearly.
Train. Then certify. The most common defense will be “I didn’t know this counted.” Training eliminates that defense. Annual certifications create accountability.
One more thing that often gets overlooked: a policy alone accomplishes nothing. If you update the language but don’t train, monitor, or enforce, you’ve just created a paper control.
Prediction markets are a compliance blind spot. The good news is they’re not a hard one to close — if you act now.
The Ethical Leader 