The Commodity Futures Trading Commission is stepping up oversight as prediction markets surge in popularity, warning traders that insider trading will not be tolerated.
CFTC Cracks Down On Prediction Market Insider Trading
Speaking Tuesday at New York University’s School of Law, CFTC enforcement chief David Miller said insider trading on platforms like Kalshi and Polymarket is illegal and will be a top enforcement priority, reported Business Insider.
“A myth has spread that insider trading is permissible, or even encouraged, in the prediction markets,” Miller said.
He added, “Prominent individuals in finance, media, and particularly on social media, have contended that insider trading law does not apply to these markets.”
He continued, “These comments all suggest that insider trading is an important and acceptable part of the prediction market ecosystem. Not so.”
Miller said the CFTC will hire more staff to investigate cases and negotiate settlements, emphasizing that the agency has the resources to enforce rules despite recent departures in its Chicago office.
Kalshi and Polymarket have faced scrutiny after incidents, including a California politician wagering on his own election and a content editor trading on confidential information for a media production.
Polymarket recently announced a stricter policy against using nonpublic information on its platform.
Political Pressure Mounts On Prediction Markets Amid Insider Trading Concerns
Rep. Adam Schiff said the prediction markets industry could not be left to self-regulate and called for strong rules to prevent elected officials from using insider information to profit.
He announced that he was joining Sen. Elissa Slotkin on a bipartisan bill aimed at cracking down on such abuses.
Manhattan prosecutors met with Polymarket to investigate whether high-stakes bets, including trades tied to Nicolás Maduro’s capture and Iran war events, violated insider trading and federal laws.
Last week, Polymarket and Kalshi updated rules to ban trades based on confidential information, and Kalshi blocked politicians and athletes from betting in their own markets.
Political risk expert Ian Bremmer banned Eurasia Group employees from trading, calling prediction markets “corrosive for civil society.”
Meanwhile, Arizona filed criminal charges against Kalshi, escalating legal and political pressure on the rapidly growing market platforms.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: PJ McDonnell / Shutterstock.com
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