Goldman, Morgan Stanley and Peers Move to Shut Down Employee Prediction Market Trading #

Goldman Sachs has banned employees from trading on prediction market contracts tied to specific companies, elections, financial markets, macroeconomic data, and geopolitics, according to Reuters and CNBC, as a group of major Wall Street firms update their internal rules to address the insider trading risk posed by the growing sector.

The Goldman policy, circulated in a recent internal memo, restricts contracts where an employee’s access to confidential information could create a real or perceived conflict of interest with the bank, its clients, or the broader financial industry. Sports and entertainment contracts remain permitted. Bloomberg first reported the policy; Goldman warned that repeated violations could result in dismissal or account closure, and that employees found to have made improper trades may be required to forfeit profits above $200 or donate that sum to charity.

Morgan Stanley has similarly added prediction market guidance to its employee code of conduct, though the bank declined to specify the exact restrictions, according to a person familiar with the matter. JPMorgan Chase took a less prescriptive approach, telling employees to “think carefully” before placing bets on contracts related to the financial sector, while Bank of America has been rolling out internal communications that explicitly outline prohibited categories of event contracts. Hedge funds Point72 Asset Management and Balyasny Asset Management went further, banning all personal-account activity on prediction market platforms outright.

The policy push was driven in large part by the first event-contract insider trading case involving a private-sector employee. In May, the Commodity Futures Trading Commission and the Department of Justice charged Google employee Michele Spagnuolo with using material nonpublic information to place winning bets on Polymarket contracts tied to the company’s annual “Year in Search” rankings. Operating under the handle “AlphaRaccoon,” Spagnuolo allegedly netted around $1.2 million in profits. Legal experts note that the CFTC effectively has a “blank canvas” when it comes to defining how it will pursue insider trading in prediction markets, with no settled body of case law yet established.

The concerns reflect how quickly prediction markets have grown. Monthly trading volumes on major platforms including Kalshi and Polymarket surged to around $24 billion by mid-2026, up from $51 billion for all of last year, according to figures cited by Wall Street broker Bernstein. When CNBC contacted 50 companies about their prediction market trading policies, only three said they had formalized rules in place, with two others indicating the issue was under active review.

Platforms have also taken steps of their own. Polymarket has struck data partnerships with blockchain analytics firm Chainalysis and Palantir to monitor suspicious activity, while Kalshi has introduced enhanced employment verification tools. Legal experts warn, however, that exchanges cannot carry the burden of managing insider risk alone, and that firms need to train employees on the issue rather than waiting for regulators to act first.

Source: CNBC