MarketsJul 10, 2026
Wall Street Cracks Down on Prediction Markets
Compliance Shifts
Rhea Lobo
Discover
Prediction markets have quietly evolved from a niche corner of the internet into a fast-growing financial industry. These platforms let users trade contracts tied to the outcome of future events, from elections to economic data.
Now, as billions of dollars flow through the market, regulators and compliance teams are scrambling to catch up.
Goldman Sachs recently banned employee trading on contracts tied to elections, financial markets, macroeconomic data, geopolitics, and anything specific to the bank itself. Workers can still bet on sports and entertainment, but little else.
The move reflects the bank's existing prohibition on using material nonpublic information (inside knowledge) to trade in any market.
JPMorgan Chase sent a memo urging employees to avoid transactions that "create the appearance of conflict, or use information you learn through work for personal gain."
Morgan Stanley confirmed it has prediction market policies in its employee code of conduct. Bank of America is reportedly finalizing its own update. Hedge funds Point72 and Balyasny have banned personal-account prediction market trading entirely.
The Commodity Futures Trading Commission and Department of Justice charged a Google employee named Michele Spagnuolo with using internal company data to trade on Polymarket contracts tied to Google's "Year in Search" lists. Trading under the handle "AlphaRaccoon," Spagnuolo allegedly collected ~$1.2M in profit.
Legal experts say the case opened the floodgates. Prediction platforms offer contracts on headcount figures, product launch timing, stock price levels, and macroeconomic releases, any of which could be exploited by an insider.
"All these different questions that you're able to bet on makes it really hard to play whack-a-mole in terms of where people are using the information they've obtained confidentially."
Karen Woody, law professor at Washington and Lee University
The CFTC is working with what Woody calls a "blank canvas," suggesting there aren't enough cases yet to establish clear legal precedent, and the regulator hasn't signaled how aggressive it plans to be with companies whose employees commit violations.
Only three of 50 companies contacted by CNBC said they had explicit prediction market trading policies. Another two said they were actively developing one. Thirty-six didn't respond at all.
The compliance scramble is happening against a backdrop of explosive growth. The global prediction market industry is currently estimated at $2B–$4B in annual activity, with analysts projecting growth to $20B–$30B by the early 2030s.
Coinbase Global said its prediction markets product reached $100M in annualized revenue in March, its first two full months live in the US.
Polymarket is pushing further into regulated territory. The platform recently applied for a Futures Commission Merchant license, a registration that would allow it to handle client funds and margin requirements like a traditional futures broker.
It still needs separate CFTC approval to offer contracts that aren't fully collateralized.
Rival Kalshi secured its own FCM license earlier this year and has partnered with compliance firms Solidus Labs and StarCompliance to monitor trading activity. Kalshi is also reportedly exploring an IPO.
Michael Burry (the investor who predicted the 2008 housing crash) is watching the regulatory chaos and drawing a specific conclusion.
He recently bought positions in DraftKings ($DKNG) and Flutter Entertainment ($FLUT), two regulated sports-betting operators whose stocks have been weighed down by prediction market competition.
Burry's thesis is straightforward: prediction markets currently operate in what he calls a "loophole adjacent to a heavily regulated and taxed industry." He believes regulators will eventually close that gap.
Both and have also begun exploring their own prediction market offerings, which Burry noted could position them to benefit regardless of how the rules evolve.
Shares of have fallen ~45% from their 52-week high while has dropped ~65% from its August peak.
The prediction market sector is growing fast, attracting serious capital, and drawing serious regulatory attention all at once. The companies building inside it and the incumbents watching from outside are all making bets on which rules eventually stick.
