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Apple (NASDAQ: AAPL), the world’s largest company by market capitalization, is taking a hardline against employees and contractors leveraging sensitive company information for profit on prediction markets. In a word: Don’t.
In a new Form 10-K filing with the Securities and Exchange Commission (SEC), the iPhone maker features an extensive section on insider trading prohibitions, including a section devoted to prediction markets in which the company tells staff to not trade on yes/no exchanges “based on confidential information.”
“Do not participate in ‘prediction markets’ or similar platforms to wager, bet, trade, buy or sell contracts based on the outcome of future events, or otherwise enter into event contracts, when such activity involves the use of Apple,” according to the regulatory document. “Confidential Information (as defined in Apple’s Business Conduct Policy) about Apple or any other company (including Apple suppliers, manufacturers, vendors or customers, such as cellular network carriers or other business partners) obtained in connection with your work at Apple.”
The company doesn’t say if staff can still transact in other event contracts, such as sports derivatives, cryptocurrency and pop culture.
Smart Move by Apple
At a time when more companies are examining and implementing prediction market policies and as politicians and regulators are applying more scrutiny to insider trading on these platforms, Apple’s decision could prove wise.
The iPad maker could be particularly vulnerable to insider trading on prediction markets because those platforms hang markets on Apple events and product updates.
There are examples of insiders at large tech companies allegedly exploiting their positions for prediction markets. Earlier this year, a former software engineer at Google was slapped with federal insider trading charges after allegedly using nonpublic information to make $1.2 million on Polymarket. In such an environment, Apple’s stance is clear.
“You must also not tip Apple Confidential Information to others who may participate in such markets. Apple Confidential Information includes, but is not limited to, material nonpublic information. This prohibition applies whether or not the activity constitutes insider trading or securities trading under applicable laws,” the company added in the 10-K.
Heading Off a Potential Problem
The timing is likely coincidental, but Apple telling staff and contractors to keep nonpublic information to themselves arrives about three weeks after the SEC approved key performance indicator (KPI) event contracts developed by Cboe Global Markets for trading on Robinhood.
Those derivatives, of which there could be 100 or more, are tied to KPIs on a batch of 23 public companies, of which Apple is one. That opens the door to nuanced trading on Apple metrics such as earnings and iPhone sales.
The other side of that coin is bad actors gain more avenues for nefarious trading, but Apple is heading off that problem.