Wall Street banks tighten rules on prediction-market betting by employees

Goldman Sachs told employees they could ask questions about prediction markets, but they could not trade contracts tied to bank-specific events, elections, financial markets, macroeconomic data or geopolitics.

Morgan Stanley, JPMorgan Chase and Bank of America also tightened their rules, limiting certain event-based contracts linked to company-specific, macroeconomic and financial-services events. Bank of America said it recently clarified prohibited activities and added examples. At some firms, repeated violations could lead to discipline up to termination and the forfeiture of gains from banned trades.

Prediction markets have expanded beyond election wagers into sports and weather. Inside a bank, staff may hear about deal flow, client activity or market-moving plans before the public does.

On February 25, the Commodity Futures Trading Commission’s enforcement division issued a prediction-markets advisory after two cases involving misuse of nonpublic information and fraud on KalshiEX. In one case, Kalshi imposed a $2,246.36 penalty and a five-year suspension on a political candidate who traded on his own candidacy. In another, the platform imposed a $20,397.58 penalty and a two-year suspension on a YouTube editor who traded on a contract tied to a channel he was affiliated with.

On March 16, the CFTC published an advance notice of proposed rulemaking seeking comment on prediction markets and event contracts, with comments due April 30. The same day, the U.S. Senate unanimously banned senators, officers and staff from participating in prediction markets, and the rule took effect immediately. Senate supporters said the ban was needed because inside information could be monetized through those contracts. Polymarket said it supported the Senate move and that its own rulebook already prohibited such conduct. Kalshi co-founder Tarek Mansour said the change would help establish an industry standard.

In May, the CFTC and the Justice Department charged Google employee Michele Spagnuolo over Polymarket trades tied to Google’s Year in Search lists, with prosecutors alleging about $1.2 million in profit.