Between October and December 2025, a Google software engineer allegedly risked about $2.75 million betting on which names would top Google’s annual Year in Search list. According to federal prosecutors, he already knew the answers. He had viewed them in an internal company tool that displayed a “Google Confidential” banner in red text, and his account walked away with roughly $1.2 million in profit, according to the U.S. Attorney’s Office for the Southern District of New York.

The case had nothing to do with stocks, earnings, or mergers. It was about a list of popular search terms. That is exactly why every employer, public or private, large or small, should pay attention. In less than a year, prediction market insider trading has moved from an internet curiosity to a stated federal enforcement priority, and most organizations’ codes of conduct were written before the risk existed.

For HR and compliance leaders, the question is a simple one: if an employee used inside knowledge to profit on a prediction market, would your organization ever find out?

What Is Prediction Market Insider Trading?

Prediction markets such as Kalshi and Polymarket let users buy and sell contracts on whether a future event will happen: an election result, an economic data release, a product launch date, an award winner, or even a word a celebrity will say in a video. Each contract pays out if the outcome occurs, and its price reflects the crowd’s estimate of the odds.

Prediction market insider trading occurs when someone trades those contracts using confidential information obtained through a position of trust, most often their job. Federal regulators have stated that they intend to treat the misuse of material nonpublic information in prediction markets the same way they treat insider trading in other markets they oversee, although courts will ultimately decide how far that theory reaches.

On March 31, 2026, the Commodity Futures Trading Commission’s new Director of Enforcement, David Miller, named insider trading in prediction markets as one of the Division’s five enforcement priorities and stated that misuse of material nonpublic information on these platforms will be handled like insider trading on any other CFTC-regulated market, as summarized by Greenberg Traurig.

The markets themselves are expanding rapidly. According to reporting by PYMNTS, Wall Street broker Bernstein estimated prediction market volume at $51 billion in 2025, projected $240 billion for 2026, and expects volume to reach $1 trillion by 2030. More volume means more markets, and more opportunities for someone inside your organization to know the answer before the public does.

The Cases That Made Prediction Market Insider Trading an Enforcement Priority

In April 2026, federal authorities charged an active-duty U.S. service member with using classified information about the operation to capture Venezuela’s Nicolás Maduro to place prediction market bets. Weeks later came the first case involving a private-sector employer.

On May 27, 2026, the Department of Justice and the CFTC filed parallel criminal and civil actions against the Google engineer. Prosecutors charged him with commodities fraud, wire fraud, and money laundering, counts that carry maximum sentences of 10, 20, and 20 years respectively. U.S. Attorney Jay Clayton framed the message plainly: “corporate insiders cannot use confidential business information to turn a profit in our markets.” The charges are allegations, and the defendant is presumed innocent unless proven guilty.

The CFTC’s complaint alleges that he traded on at least twenty-three Year in Search contracts with near-perfect accuracy. CFTC Enforcement Director Miller warned that employees entrusted with confidential business information “cannot misappropriate that information for personal financial gain.”

Compliance leaders should notice two details. First, prosecutors say the engineer had certified his understanding of Google’s confidentiality and ethics policies. A signed acknowledgment did not prevent the alleged conduct. Second, A Google spokesperson told Axios that the employee accessed the material using a tool available to all employees. This was not an executive with a seat in the boardroom. It was ordinary marketing information that, on a prediction market, suddenly had a price.

The takeaway for compliance leaders is clear. Prediction markets are no longer a theoretical concern. They are an enforcement concern.

Why This Is Not Just a Wall Street or Public Company Problem

Traditional insider trading policies were built around securities: a company’s own stock, options, and related derivatives. Prediction market contracts are not securities. They fall under the CFTC’s authority, and the legal theory regulators are applying is misappropriation, meaning the misuse of information in breach of a duty owed to the person or organization that entrusted it. That duty exists whether or not your organization has publicly traded shares.

The early cases bear this out. Semafor reported that OpenAI, a privately held company, updated its policy to ban employees from using confidential information to bet on prediction markets and then fired a worker who violated it. MrBeast’s holding company, also private, adopted a similar rule after placing an employee on leave.

Government employers are moving even faster. When North Carolina Governor Josh Stein signed an executive order in May 2026, WUNC reported that the state joined California, Illinois, Maryland, and New York in barring state employees from profiting on nonpublic knowledge through prediction markets. “Public employees with insider information must not participate in these prediction markets,” Stein said. Minnesota followed in July. In April, the U.S. Senate adopted a rule change by unanimous consent barring senators and their staff from trading on prediction markets, as reported by Roll Call.

Consider what people throughout your organization know before the public does. A plant supervisor may know a facility is likely to close. A customer service representative may know a product launch has slipped. An HR employee may know a senior executive is preparing to leave. A procurement specialist may know which vendor will win a contract. A researcher may know the likely outcome of a study or ranking. None of these employees fits the traditional profile of someone subject to insider trading monitoring, yet each could hold information that creates an unfair advantage in a prediction market.

That makes this a risk for manufacturers, healthcare systems, universities, nonprofits, government agencies, government contractors, and family-owned businesses, not just Wall Street. If a market can be created around information your people hold, someone can trade on it.

Yet few organizations have addressed the risk. Semafor contacted more than 100 companies, law firms, banks, PR firms, and hedge funds and found that few had explicit rules on prediction markets.

7 Prediction Market Insider Trading Gaps Hiding in Most Codes of Conduct

1. Your Insider Trading Policy Only Covers Securities

Many policies prohibit trading in “the Company’s securities” and stop there. An employee who reads that language literally could conclude that betting on an event contract is outside its scope. Your policy should state explicitly that the prohibition on using confidential information extends to prediction markets, event contracts, and any similar platform, regardless of how the instrument is classified.

2. Your Rules Apply Only to Executives and Designated Insiders

Traditional insider trading programs focus on directors, officers, and employees on a restricted list. Prediction market insider trading does not respect that boundary. The Google case allegedly involved an engineer and a widely available internal tool. Your rules should reach every employee, as well as contractors and temporary staff who have access to nonpublic information.

3. Your Definition of Confidential Information Is Too Narrow

Policies often define confidential information in terms of financial results, trade secrets, or customer data. Prediction markets put a price on far more: launch dates, hiring decisions, contract awards, product features, internal rankings, and personnel moves. Broaden the definition so that employees understand that any nonpublic information about the organization’s plans, decisions, or results is protected, whether or not it seems financially significant.

4. Your Conflict-of-Interest Policy Is Silent on Betting

A prediction market wager tied to your organization’s decisions creates a personal financial interest in an outcome the employee may be able to influence. That is a classic conflict of interest, as we explain in our guide to navigating conflicts of interest. Some employers already have a foundation to build on. United Airlines told Semafor that its ethics rules “prohibit using your position for your personal gain,” which would apply to prediction market profits. Saying so explicitly removes any doubt.

5. Your Training Predates Prediction Markets

Annual ethics training that reviews insider trading through the lens of stock tips will not prepare employees for an app on their phone that offers odds on next month’s product announcement. Many employees understand that buying stock on inside information is prohibited, but far fewer recognize that the same conduct on a prediction market raises the same ethical and legal concerns.

Add a short module that explains what prediction markets are, why confidential information creates an unfair advantage, what your organization expects, and how to report concerns. Realistic scenarios drawn from your own industry make the point stick, and the Google case is a powerful example because it shows regulators are already paying attention. Then update your code of conduct acknowledgment so employees confirm they understand the new language.

6. Your Policy Does Not Say What Happens to Violators

Ambiguity invites rationalization. When Goldman Sachs updated its personal trading policy in July 2026, it reportedly barred employees from event contracts tied to specific companies, elections, financial markets, macroeconomic data, and geopolitics, while permitting sports and entertainment contracts. According to Bloomberg’s reporting, as summarized by PYMNTS, improper trades may require employees to forfeit profits over $200, and repeated violations may lead to dismissal.

Whether your organization chooses a full ban or a narrower confidential-information rule, state the consequences in writing. Make clear that a trade can lead to discipline even when it is placed on a lawful platform, from a personal phone, on personal time, if the information behind it came from work.

7. Employees Have No Safe Way to Report What They Notice

Prediction market activity is usually invisible to management, but it is rarely invisible to coworkers. A colleague brags about a winning bet on a company announcement, or describes an upcoming wager as a “sure thing.” A team member checks the odds during a meeting about a confidential decision. Someone asks a little too pointedly about the timing of a launch. Those observations only help if employees have a trusted, confidential way to raise them.

There is also a hard business reason to make internal reporting easy. The CFTC operates a whistleblower program that can award eligible whistleblowers between 10 and 30 percent of monetary sanctions collected in actions exceeding $1 million. An employee who does not trust internal channels has a well-funded alternative. An independent, anonymous hotline gives your organization the chance to learn about a problem first and address it on its own terms. Independence matters here, because employees are far less likely to report a colleague when they fear the report will be traced back to them, a point we explore in Why Independence Matters: The Hidden Risks of Internal Hotlines.

How to Address Prediction Market Insider Trading Now

Closing these gaps does not require a new compliance program. It requires updating the one you have. A practical starting point:

1. Inventory your exposure. Identify the nonpublic information your people hold that could be the subject of a market, from contract awards and product timelines to personnel decisions and regulatory outcomes.
2. Choose your approach. Decide whether to prohibit prediction market participation entirely, restrict it to certain categories, or prohibit only trades connected to confidential information.
3. Update your documents. Add explicit prediction market language to your code of conduct, and cross-reference it in your insider trading, confidentiality, and conflict-of-interest policies.
4. Train everyone with access. Include employees at every level, along with contractors and temporary staff who handle nonpublic information.
5. Define consequences. Spell out disciplinary outcomes, including forfeiture of profits where appropriate.
6. Promote your reporting channel. Remind employees that concerns about prediction market activity belong in your ethics hotline, and that reports can be made anonymously.

Give Employees a Safe Way to Speak Up

Prediction market insider trading is the newest example of an old truth: policies set expectations, but people bring problems to light. Red Flag Reporting provides independent, third-party ethics and compliance hotlines and case management to organizations in 60 countries, giving employees a confidential, anonymous way to report concerns directly to the people you designate. Our pricing is straightforward, with no administrator license fees.

If your code of conduct has not caught up with prediction markets, now is the time to make sure your reporting channel has. Contact Red Flag Reporting to learn how an independent hotline can help your organization hear about prediction market insider trading, and every other form of misconduct, before it becomes a headline.

Frequently Asked Questions About Prediction Market Insider Trading

What is prediction market insider trading, and is it illegal?

Prediction market insider trading occurs when someone uses confidential, nonpublic information, usually obtained through their job, to gain an advantage trading contracts tied to future events on platforms such as Kalshi or Polymarket. It can be illegal. Federal regulators take the position that trading event contracts on misappropriated confidential information violates the Commodity Exchange Act and CFTC rules, and the Department of Justice has brought criminal charges, including commodities fraud and wire fraud, in prediction market cases. Even where conduct falls short of a crime, it can violate an employer’s confidentiality, ethics, and conflict-of-interest policies.

Does prediction market insider trading only affect publicly traded companies?

No. Prediction market contracts are not securities, and the legal theory regulators apply rests on the misuse of information in breach of a duty to the employer. Private companies, nonprofits, universities, hospitals, and government agencies all hold nonpublic information that could be traded on, and several privately held companies have already disciplined employees for this conduct.

Can government employees bet on prediction markets?

Rules vary by jurisdiction. California, Illinois, Maryland, New York, North Carolina, and Minnesota have barred state employees from using nonpublic information gained through their jobs to participate in prediction markets, and the U.S. Senate has changed its rules to bar senators and their staff from trading on them. Public employers should review applicable ethics laws and consider adopting explicit policies.

Should we ban employees from using prediction markets entirely?

It depends on your risk profile. Some hedge funds have banned all personal prediction market activity, Goldman Sachs restricted categories tied to companies, elections, markets, and economic data, and other employers prohibit only trades based on confidential information. Whatever you choose, state it clearly, apply it to all employees with access to nonpublic information, and explain the consequences.

How can employees report suspected prediction market insider trading?

Employees should be able to use the organization’s existing ethics hotline or other reporting channels. An independent, third-party hotline that allows anonymous reporting encourages employees to raise concerns about colleagues without fear of retaliation, and gives the organization an opportunity to investigate before the matter reaches regulators or the press.