A critical announcement was made at NYU Law School on March 31, 2026, as David I. Miller, the newly appointed director of enforcement at the Commodity Futures Trading Commission (CFTC), addressed an audience of enforcement professionals and law students. He emphasized that the belief that insider trading regulations do not apply to prediction markets is incorrect, indicating the CFTC’s resolve to demonstrate that these laws are applicable.
StarCompliance, a prominent compliance solutions provider for financial institutions, hedge funds, and investment banks, highlighted that firms must address these issues now, as they are already present in the market.
In Miller’s inaugural public address as director, he outlined the legal frameworks and enforcement strategies the CFTC plans to deploy. The CFTC’s authority to combat fraud, derived from the Commodity Exchange Act, closely resembles the SEC’s Rule 10b-5, particularly concerning insider trading through misappropriated information.
According to Miller, the CFTC will pursue cases of insider trading in prediction markets, especially those involving misappropriated data. However, he clarified that trading based on legitimately acquired information will remain acceptable. The agency’s focus will be on individuals who leverage confidential information acquired through professional associations.
Miller specified three primary areas of concern regarding regulatory risks. First, contracts linked to individual performance can pose risks when employees act based on insider knowledge of corporate decisions, launches, or internal matters. A recent incident in the media sector highlighted the potential immediacy of this danger.
The second area of concern involves sports-related contracts, where nonpublic information regarding injuries, team strategies, or match outcomes could be exploited. The CFTC has initiated coordination with professional sports leagues to mitigate these risks. Lastly, contracts tied to government dealings present significant risks, as public officials accessing policy information may face insider trading exposure, an area currently under increased legislative scrutiny.
The underlying issue across all three categories is the misuse of material nonpublic information, which creates inherent enforcement risks irrespective of the asset class involved.
Miller’s statements reflect a broader trend in CFTC leadership’s focus on prediction markets, as Chair Michael S. Selig has prioritized enforcement and regulatory clarity in this area. The agency is engaged in formulating clearer rules, reinforcing federal jurisdiction, and augmenting its surveillance capabilities, while also enhancing coordination efforts with the SEC regarding the interaction between emerging products and traditional financial instruments.
This evolving regulatory landscape complicates the operating environment for firms, with the definition of regulatory boundaries still under development. Nonetheless, enforcement actions are already in progress.
Despite this momentum, compliance frameworks for prediction markets are largely insufficient. Existing compliance programs typically center on equities, fixed income, and, more recently, digital assets, often omitting event contracts traded on platforms like Kalshi or Polymarket.
Firms are urged to critically evaluate their practices. Questions to consider include whether current policies adequately address event contract trading and if employees with access to critical nonpublic information are restricted from engaging in relevant contracts. Many organizations may find the honest answer to be negative.
Moving forward requires actionable steps rather than hypothetical approaches. Firms are advised to assess whether their personal trading policies encompass event contracts and review conflicts of interest frameworks to identify positions with access to sensitive data. Additionally, training programs should be updated to include guidance on the misuse of information.
Monitoring capabilities also play a crucial role as participation in prediction markets expands. Firms need to incorporate these instruments into their existing oversight processes.
StarCompliance is actively collaborating with organizations to extend their employee compliance frameworks to include prediction market activities. While the principles governing compliance remain consistent, it is essential to recognize that the same standards applicable to equity trading also pertain to these new instruments.
Firms that take proactive measures now can position themselves defensively ahead of anticipated enforcement actions, while those that delay may find themselves responding reactively to regulatory concerns.
Prediction markets are not unregulated gray areas; they are subject to existing laws, and regulators are monitoring developments closely.
Compliance teams should undertake immediate, practical measures. This includes assessing personal trading policies and pre-clearance processes concerning event contracts, reviewing conflict of interest frameworks for roles with access to sensitive information, updating training programs to cover prediction market participation, and evaluating whether current monitoring workflows can appropriately accommodate event contracts.
Read the full StarCompliance post here.
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