Prediction Markets Are Entering the Enforcement Era

What the CFTC’s latest actions mean for insider trading, market integrity, and financial services firms

On June 10, 2026, the Commodity Futures Trading Commission (CFTC) took another significant step toward establishing a permanent federal framework for prediction markets. Combined with earlier guidance and insider trading prosecutions already brought in 2026, the message is unmistakable: prediction markets are regulated derivatives markets, insider trading and market manipulation are prohibited, and enforcement is active. 

For financial services firms, the question is no longer whether prediction markets belong within compliance programs. The question is whether existing policies, employee training, pre-clearance systems, restricted lists, and surveillance controls are equipped to address the risks. 

Building the Framework

The proposed rule focuses on when event contracts involving activities such as war, terrorism, gaming, and unlawful conduct should be considered contrary to the public interest. 

Among other things, it would: 

• Define “gaming”, a term that has long created regulatory uncertainty.
• Establish when an event contract is sufficiently connected to a prohibited activity.
• Introduce public interest factors for evaluating contracts.
• Formalize a structured 90-day review process.

Importantly, this is only one piece of a broader framework still under construction. Additional rulemaking covering market structure, surveillance, participant obligations, insider trading, and market integrity standards is widely expected.

Insider Trading Rules Already Exist

One notable aspect of the proposal is what it does not do. It does not define insider trading or inside information. 

That omission is intentional. 

The CFTC already considers those prohibitions to be established law. 

Under Rule 180.1 and Section 6(c)(1) of the Commodity Exchange Act, the use of confidential information obtained through an employment, contractual, or fiduciary relationship for personal gain is prohibited. 

In other words, the insider trading framework applicable to prediction markets is not new. It rests on the same misappropriation theory that has long underpinned securities enforcement and has already been applied in the government’s first prediction market prosecutions.

Why Rule 180.1 Matters

• Event contracts are subject to the same broad anti-fraud principles that govern other commodity markets.
• Trading on confidential information obtained through work or fiduciary relationships can constitute insider trading.
• Liability extends to tipping others, even without a personal benefit requirement. 
• Government officials are separately prohibited from trading on government information. 
• Enforcement can involve both the CFTC and the Department of Justice.

Market Integrity is Central to the CFTC’s Framework

At the heart of the proposed rule is a simple principle: prediction markets only serve the public interest if they produce reliable price signals and operate with integrity. 

In evaluating event contracts, the CFTC focuses on three questions: 

1. Price Discovery: Does the contract aggregate dispersed information and provide useful market signals?
2. Market Integrity: Is the contract vulnerable to manipulation, asymmetric information, or insider trading? 
3. Self-Regulatory Capacity: Does the exchange have the surveillance and enforcement capabilities necessary to manage those risks? 

In many respects, insider trading and market manipulation are two sides of the same problem. Both distort prices and undermine the information value that gives prediction markets their legitimacy. 

The CFTC has made clear that exchanges are expected to serve as the first line of defense. Surveillance systems, participant restrictions, and information-sharing arrangements are increasingly viewed as essential components of market integrity. 

Not All Prediction Markets Present the Same Risk

The proposal also makes clear that different categories of contracts present different levels of insider trading exposure,

• Financial and Macroeconomic Contracts: Interest rates, inflation, and employment data are viewed as legitimate price discovery mechanisms. However, employees with access to confidential government or market-moving information remain subject to insider trading prohibitions. 
• Corporate Information Contracts: This represents the highest-risk category for financial services firms. Employees with access to confidential business information, whether involving their own organization or clients, face the same MNPI risks that exist in traditional securities markets. 
• Political Event Contracts: While broad election markets are generally viewed more favorably, contracts involving participants who can influence outcomes raise heightened integrity concerns. 
• Sports Contracts: Sports markets illustrate how participant restrictions and surveillance can mitigate insider information risks. The CFTC’s information-sharing agreement with Major League Baseball provides a model that closely resembles restricted lists and surveillance frameworks used in financial services. 
• War, Terrorism, and Gaming Contracts: These contracts face the greatest regulatory scrutiny because they raise concerns that extend beyond information asymmetry and into broader public interest and ethical considerations. 

Who Bears Primary Responsibility?

The proposed rule applies directly to CFTC-regulated exchanges, which are responsible for evaluating contracts, maintaining surveillance capabilities, and ensuring appropriate controls are in place. 

But for financial services firms, the implications extend much further. 

As prediction markets continue to evolve, employee training, pre-clearance processes, restricted lists, and surveillance programs will increasingly need to account for risks that look remarkably similar to those firms have managed in traditional markets for decades. 

The proposed rule applies to exchanges, but insider trading rules apply to everyone. Early enforcement actions demonstrate that a wide range of individuals can fall within the scope of these provisions. 

Who Faces Prediction Market Insider Trading Exposure?

Early enforcement actions and regulatory guidance suggest that insider trading exposure can extend to a wide range of participants, including: 

• Financial services employees with access to material non-public information about corporate events, client transactions, regulatory decisions, or macroeconomic developments. 
• Government officials and employees with access to pre-decisional policy or geopolitical information. 
• Corporate employees with access to proprietary business information, including technology and media companies. 
• Sports participants and league personnel with access to non-public information relating to injuries, roster decisions, or game outcomes. 
• Political and campaign insiders with access to confidential polling or strategic information. 
• Recipients of inside information, regardless of whether the source received a personal benefit. 
• Non-U.S. individuals and entities trading on U.S.-regulated platforms. 

The common thread is simple: insider trading risk follows access to material non-public information, not job titles, industries, or geography. 

Enforcement is Multi-Agency

Prediction market enforcement is no longer solely a CFTC issue. 

The Department of Justice has demonstrated its willingness to pursue criminal charges alongside CFTC actions, exposing individuals to potential wire fraud, money laundering, and commodities fraud liability. 

Importantly, these charges can be brought together, not separately. The government’s first major prediction market prosecution included all three. 

What the NPRM Doesn’t Answer

The proposed rule provides greater clarity, but several questions remain. 

• Materiality: The CFTC does not define how materiality applies to non-traditional information such as polling data, sports injuries, or search trends. Early enforcement suggests the concept extends well beyond traditional financial MNPI. 
• Tipping Liability: Unlike securities law, Rule 180.1 does not clearly require proof that the tipper received a personal benefit, potentially creating broader liability. 
• Offshore and Decentralized Platforms: While the proposal focuses on regulated exchanges, existing anti-fraud laws and the CEA’s extraterritorial reach mean trading on offshore or decentralized platforms may still create exposure. 

The message for firms is straightforward: regulatory details are still evolving, but enforcement is already underway.

What Should Firms Do and How Can StarCompliance Help?

Prediction markets do not create entirely new risks. They create new venues for risks that financial services firms have been managing for decades. 

As regulation evolves and enforcement accelerates, firms should focus on extending existing controls to these emerging markets. StarCompliance (Star) helps firms do exactly that through: 

• Personal Account Dealing: Update policies to explicitly address prediction market platforms and reinforce that insider trading restrictions apply regardless of whether a traditional security is involved. 
• Control Room and MNPI Management: Expand restricted list and information barrier logic beyond securities tickers to account for event contracts linked to mergers, earnings, regulatory approvals, and macroeconomic developments. 
• Pre-Clearance: Ensure employees consider not only what they are trading, but whether they possess confidential information that could create insider trading exposure. 
• Employee Training: Educate employees that insider trading rules extend beyond traditional securities markets and apply to prediction market activity. 
• Global Compliance Programs: Recognize that prediction market risk is not limited by geography. Employees accessing U.S.-regulated platforms may create exposure regardless of where they are located. 

Newly Launched

• Prediction Markets Monitoring: Through its partnership with Kalshi, Star has introduced the financial industry’s first enterprise-grade compliance solution designed specifically for prediction markets.  

The capability extends Star’s established digital asset and traditional securities framework, enabling firms to monitor employee participation on Kalshi and manage prediction market activity alongside other employee compliance risks from a single, centralized platform. 

The Bottom Line

Prediction markets represent a new venue for familiar risks. The firms best positioned for this next phase will be those that adapt existing controls rather than wait for entirely new frameworks. 

To learn more about Star’s new Prediction Market Solution, click [HERE] to request a demo. 

In addition, join our upcoming webinar Product Spotlight: Launching Prediction Markets Monitoring with StarCompliance + Kalshi on July 16th at 10 AM ET which will include a live product demonstration. Click [HERE] to reserve your space.