As prediction markets expand beyond elections and sports to cover corporate, regulatory, and geopolitical events, employees, directors, and other insiders who know something nonpublic may be able to profit from that knowledge without ever touching a share of stock. The government’s position, reflected in the first insider trading case brought over these markets, is that existing insider trading and antifraud principles already apply to event contracts. That leaves a gap for most companies given that standard insider trading policies, confidentiality agreements, and codes of conduct are typically drafted around trading in the company’s own securities and may not reach these platforms at all.
To avoid legal, reputational, and compliance exposure, organizations – whether public or private – should address prediction markets before an incident rather than after, including by: prohibiting misuse of confidential business information, naming prediction markets explicitly in the company’s relevant policies, extending confidentiality obligations to information that could move an event contract, training people on the risk, and adding monitoring and reporting controls.
