Goldman Sachs, Morgan Stanley, and other Wall Street banks are clamping down on employee trading on prediction markets Polymarket and Kalshi due to escalating insider trading concerns.
The restrictions emerge as regulators and financial institutions grow wary of information asymmetries in political and event-based betting platforms. Employees with access to privileged market intelligence, material non-public information, or client data face new compliance barriers when engaging with prediction markets.
Prediction markets have exploded in popularity as betting platforms for election outcomes, corporate earnings, and geopolitical events. Polymarket and Kalshi dominate the U.S. space, facilitating billions in notional volume. The platforms attract institutional players, retail speculators, and sophisticated traders seeking alpha through information edge.
The insider trading angle cuts deeper than typical equities compliance. Prediction market prices reflect consensus about future outcomes. An employee with access to proprietary research, client positioning data, or advance knowledge of corporate announcements gains an outsized advantage. A Goldman investment banker knowing a merger is coming can trade merger probability on Kalshi. A Morgan Stanley economist with early economic data can bet election results before the data drops.
Banks implemented these restrictions through updated policies that either ban prediction market trading entirely for sensitive roles or require pre-trade approval and post-trade disclosure. Some institutions flagged prediction market bets as requiring the same scrutiny as derivatives trading or options positions.
The move reflects broader regulatory attention. The Commodity Futures Trading Commission and SEC have signaled concern about prediction market integrity, particularly around elections. Insider trading statutes technically apply to prediction markets, though enforcement remains untested.
Polymarket and Kalshi face pressure to demonstrate market surveillance capabilities and insider trading detection systems. Both platforms rely on blockchain settlement and self-reporting, raising questions about their capacity to identify bad actors with informational advantages.
For Wall Street, the restrictions serve