Employers Need to Be Vigilant on Prediction Markets Insider Trading, Says Law Firm
Posted on: December 15, 2025, 12:07h.
Last updated on: December 15, 2025, 12:47h.
- The rise of prediction markets has been accompanied by allegations of insider trading
- It’s largely tied to corporate events, such as new product releases
- Prediction markets don’t yet have a clear insider trading framework
The rise of prediction markets has ushered in a new version of an old issue employers contend with: the specter of insider trading.
While platforms such as Kalshi and Polymarket rose to prominence by offering event contracts on US elections and built on that fame by embracing sports derivatives, these exchanges also make markets in corporate events, including possible dates for initial public offerings (IPOs) or launches of new products and technologies. At some enterprises, many employees have access to private data, meaning employers need to be vigilant when it comes to regulating insider trading on prediction markets.
As such, traditional confidentiality agreements may not necessarily prevent sensitive information being used for profit by employees or their friends and family,” writes Steve Silver of labor law firm Littler. “Additionally, employees may not have adequate notice under existing employer policies about the use of prediction markets. Nor may employees understand the potential legal risks involved from capitalizing on insider information, which in and of itself, is in limbo as the CFTC and the Securities and Exchange Commission (SEC) have not yet set forth a clear regulatory framework for prediction markets.”
For nearly as long as there have been public companies, there have been examples of insiders profiting from nonpublic information, but there are guardrails for that behavior, and when the perpetrators are caught, they face firing and possible jail time. Now, employers that are publicly traded corporations have a new issue to contend with in the form of prediction markets.
Allegations of Insider Trading Already Surfacing
In a recent — and perhaps the most stunning example to date of alleged insider trading on a prediction market — a Polymarket user earlier this month profited by more than $1 million on trades linked to features and release dates of upcoming Google artificial intelligence (AI) models, including Gemini 3.
“Alleged” is the operative word, but the trader known as AlphaRaccoon had a portfolio heavy with trades related to Google searches. That situation sparked speculation — emphasis on “speculation” — that elevated activity in event contracts tied to the launch date of DraftKings’ prediction market platform was also the work of an insider.
At a time when current insider trading laws don’t govern prediction markets, employers may want to consider implementing their own standards, says Silver.
“Employers may want to consider revising Internet and mobile device use policies to specifically block, restrict, or prohibit the use of prediction markets on company devices, using company resources, or while on company time to protect company information and minimize distractions and loss of productivity,” notes the attorney. “Maintaining policies with clear expectations helps put employees on notice of what is and is not permissible.”
Prediction Markets Ripe for Insider Trading
With prediction market operators looking for growth outside sports event contracts, it’s logical that they’ll offer more derivatives linked to corporate goings on. For example, Kalshi currently has a contract with nearly $4.3 million in open interest on IPO candidates before the end of 2025. Another contract on Tesla potentially releasing robotaxis to the public this year has north of $1 million in open interest.
From there, the list is expansive, and the event contracts often revolve around the data that employees have access to. For now, there aren’t uniform standards for employers guarding against prediction market insider trading, but a simple first step is talking with lawyers.
“There is no one-size-fits-all approach, and given the relative newness of prediction markets entering the mainstream, employers should consult with counsel when adopting new policies and updating employment agreements to better protect the company and ensure compliance with local, state, and federal laws,” concludes Silver.
No comments yet