Published on: December 15, 2025, at 12:07h.
Updated on: December 15, 2025, at 12:07h.
- Increase in prediction markets coincides with insider trading allegations.
- These markets are primarily associated with corporate events, like new product launches.
- Current regulations around insider trading in prediction markets are unclear.
The emergence of prediction markets has given rise to an enduring issue for employers: the looming threat of insider trading.
Platforms such as Kalshi and Polymarket have gained visibility by providing event contracts for US elections and have expanded their offerings to include sports derivatives. They also trade on corporate events, such as potential IPO dates or new technological releases. With many employees having access to confidential data, employers must remain proactive in addressing the risks of insider trading within prediction markets.
“Traditional confidentiality agreements may not effectively prevent sensitive information from being exploited for personal gain by employees, their relatives, or acquaintances,” observes Steve Silver from labor law firm Littler. “Additionally, employees may lack sufficient awareness of the existing employer policies regarding prediction markets, and they may not fully comprehend the legal ramifications of utilizing insider information, which remains an ambiguous area as the CFTC and SEC have yet to establish a definitive regulatory framework for prediction markets.”
Insider trading has long been a concern in publicly traded companies; however, recent developments in prediction markets introduce new challenges. When infractions do occur, the involved parties typically face termination and legal consequences. Today, public corporations confront a fresh hurdle brought on by the rise of prediction markets.
Emerging Claims of Insider Trading
A recent incident illustrates alleged insider trading in a prediction market: this month, a user on Polymarket reportedly profited over $1 million from trades associated with the launch of Google’s AI models, including Gemini 3.
While the term “alleged” is key, the trader, known as AlphaRaccoon, had significant involvement in trades related to Google. This raised questions — underscored by the word “questions” — surrounding possible insider involvement in the surge of event contracts tied to the launch of DraftKings’ prediction market platform.
Considering the absence of governance by current insider trading laws over prediction markets, it is prudent for employers to establish their own standards, advises Silver.
“Companies should contemplate updating Internet and mobile usage policies to deter the use of prediction markets on work devices, during work hours, or through company resources in order to safeguard sensitive information and avoid distractions that impede productivity,” suggests the attorney. “Clear policies with defined expectations can help inform employees about what is acceptable and what is not.”
Opportunities for Insider Trading in Prediction Markets
As operators of prediction markets seek to expand beyond sports-related contracts, they are likely to present an array of derivatives tied to corporate activities. For instance, Kalshi currently holds a contract with nearly $4.3 million in open interest relating to IPO candidates anticipated by the end of 2025. Another contract regarding Tesla’s potential release of robotaxis this year exhibits over $1 million in open interest.
The opportunities are extensive, often based on information that employees have access to. Currently, there are no standardized measures in place for employers to mitigate insider trading in prediction markets, but consulting with legal experts for initial steps is advisable.
“Due to the uniqueness of each situation and given the emerging status of prediction markets in the public eye, it is essential for employers to seek legal counsel when crafting new policies or updating employment agreements, ensuring protection for the company and compliance with applicable laws,” concludes Silver.