Introduction
Prediction markets have crossed into territory that regulators can no longer overlook. They are now large enough, mainstream enough, and connected enough to real-world events that they have started to attract the kind of attention previously reserved for more familiar trading venues.
What are prediction markets?
A prediction market is a platform where people buy and sell *contracts tied to the outcome of a future event. Each contract pays a fixed amount if the event happens and nothing if it does not. The price at which the contract trades represents the market’s view of the probability of that outcome.
These markets cover anything with a verifiable outcome: elections, interest rate decisions, inflation prints, unemployment figures, geopolitical developments, corporate mergers, IPOs, product launches, regulatory approvals, and event-specific prompts such as whether a particular word or phrase will appear in a speech, a press release, or an earnings call. The range is wide, and it is growing.
Not all contracts raise the same concern
Different contracts pose different compliance and legal issues.
A contract on the outcome of a tennis match may raise questions about sporting integrity or fairness, but it does not connect to the insider dealing or market abuse frameworks built for financial markets. If someone close to a player traded on confidential knowledge about match preparation or intended play, that concern sits apart from trading on inside information linked to a listed issuer or a regulated financial instrument.
A contract on whether a head of government will announce a military action sits in different territory. The information could be sensitive and non-public, known only to a small circle inside government, defence, or advisory structures. It may not fit the narrowest definition of securities-law insider trading, because the contract itself is unlikely to be a security. But using confidential government information to place a directional trade on an event outcome raises concerns about fraud, manipulation, and market integrity, concerns that regulators and prosecutors have signalled they will pursue.
A contract tied to what will be said during a public company’s earnings call, or whether that call will contain a particular announcement, offers the clearest example of a bridge into the established market abuse framework. If someone has advance access to an earnings script, a profit warning, a change in guidance, or any other market-sensitive disclosure, that information may qualify as material non-public information under US securities law and as inside information under UK MAR or EU MAR, assuming it relates to an issuer or financial instrument and would affect price if disclosed. That does not mean the prediction market contract itself automatically falls within MAR’s scope. Rather, the point is that the information may be inside information in relation to the company’s shares or other financial instruments, and those are the markets at which the market abuse regime is principally directed. The prediction contract may therefore raise analogous concerns, but it is not simply treated as though MAR applies to it directly.
Across all three examples, the same question arises: is someone using information the wider market does not have to gain an advantage in a market whose prices should reflect publicly available knowledge?
Gambling or financial markets?
Depending on the jurisdiction and the structure of the contract, prediction markets can sit under either framework, and that ambiguity is part of the problem. The CFTC has asserted that prediction markets fall within its jurisdiction as event contract markets, treating them as derivatives rather than gambling products. The UK Gambling Commission has taken the opposite starting point, stating that prediction markets generally fall within existing gambling law and require a licence. Several European countries have gone further, blocking major platforms on the basis that they constitute illegal gambling. Classification determines which rules apply, which regulator has authority, and what conduct is prohibited. Where a contract affects a financial instrument, insider trading and market abuse laws apply directly. Where it is treated as gambling, those specific regimes generally do not apply, though the conduct is not left unregulated: CFTC anti-fraud provisions, exchange rules, the STOCK Act, wire fraud statutes, and fiduciary or contractual confidentiality duties can each still reach information misuse, depending on who the trader is and how the information was obtained. What the gambling classification strips away is the tailored architecture of insider dealing law: the disclosure regimes, the defined concept of material non-public information, the enforcement machinery built for securities and derivatives markets. That narrower gap, rather than a wholesale absence of law, is where the information misuse risk takes hold.
The US regulatory position
In the United States, the legal framework exists but has rough edges. Traditional insider trading doctrine under securities law was built around the purchase or sale of securities, and many prediction market contracts do not relate to securities. Not every misuse of non-public information in a prediction market fits the standard securities-law insider trading case.
Enforcement risk remains. The CFTC has asserted regulatory authority over prediction markets as event contract markets under the Commodity Exchange Act, and its anti-fraud tools reach manipulation, fraud, and misuse of confidential information in those markets. The CFTC’s Director of Enforcement has said publicly that the idea insider trading law does not apply in prediction markets is a myth, and that the agency will detect, investigate, and where appropriate prosecute such conduct.
Existing compliance frameworks were not built with prediction markets in mind. Employees with access to confidential deal information, trading flows, or imminent market-moving announcements can now use that knowledge in a venue that may fall outside conventional surveillance, pre-clearance, and personal dealing controls.
The UK and EU framework
UK MAR and EU MAR prohibit insider dealing, unlawful disclosure of inside information, and market manipulation, aimed at protecting market integrity and investor confidence. MAR defines inside information as information of a precise nature that is not public, relates directly or indirectly to one or more issuers or financial instruments, and would have a significant effect on price if made public.
For prediction markets, the framework is relevant but not automatic. Its scope is tied to in-scope financial instruments. A standalone prediction market contract may sit outside MAR if it has no close connection to one. Where the event traded connects to information about a listed issuer or regulated financial instrument, the analysis changes. The same information that would constitute inside information in the underlying market remains exploitable through the prediction market route.
The European approach has been restrictive. France, Germany, and the Netherlands have moved to block access to major operators including Polymarket. France’s gambling regulator described such platforms as unauthorised illegal gambling services displaying addictive characteristics without the consumer protections found in licensed gambling markets. Gibraltar has become the first European jurisdiction to license a prediction markets operator, granting Predict Street Ltd a betting intermediary licence under the 2005 Gambling Act on 26 March 2026 [iGaming Business, "Gibraltar licenses first prediction market operator," 2 April 2026]. Malta has signalled that it is exploring a dedicated statutory framework, with Economy Minister Silvio Schembri emphasising transparency, compliance, and user protection as guiding principles [iGaming Business, "Malta 'actively exploring' statutory framework regulating prediction markets].
The UK sits between these positions, though less ambiguously than the framing might suggest. In a February 2026 statement, the Gambling Commission said that current prediction-market products, subject to the specific business model, would fall within the definition of a "betting intermediary" under UK legislation, the same licensing category that covers betting exchanges like Betfair, and that operators could not classify themselves as non-gambling products if they launched in Great Britain [Gambling Commission, "Prediction markets: here's what you need to know," 4 February 2026]. That resolves the default treatment of exchange-style event contracts: they are gambling and they require a Gambling Commission licence. The classification question that remains open is narrower. Spread betting is already carved out to the FCA as a financial service, and other financial-style offerings may require FCA authorisation rather than a gambling licence, so the live issue is where any given contract sits on the boundary between a betting intermediary and a regulated financial instrument. That boundary determines which conduct rules apply and which authority has enforcement power, and for hybrid or financial-adjacent designs it is not yet resolved.
The FCA’s appetite for market abuse enforcement remains strong. The December 2025 penalty against consultant Russel Gerrity for insider dealing shows that the FCA does not limit its attention to obvious corporate insiders. But unlike the US, where the CFTC has asserted jurisdiction over event contracts and is moving toward rulemaking, the UK has not produced a comparable statement of regulatory intent directed at prediction markets. Across the UK and Europe, the regulatory picture is fragmented: the information misuse risk is understood, but the legal route for addressing it varies depending on where the platform operates, where the user is located, and how the contract is classified under local law. For anyone concerned with market integrity, that inconsistency is part of the problem.
Regulation is catching up, but the gap remains wide
While the regulatory response is accelerating, it has not caught up with the scale or pace of the market.
In January 2026 the CFTC announced it would move forward with a prediction markets rulemaking. In March 2026 it issued a staff advisory and published an advance notice of proposed rulemaking requesting public comment on how event contracts should be governed. That is progress, but it remains early stage. Enforcement signals are meaningful but limited. Platform-level actions have included Kalshi’s decision to fine and suspend a MrBeast employee who used non-public information about upcoming videos to profit from related prediction market contracts, and the suspension of a former California gubernatorial candidate who traded contracts tied to his own candidacy. These are not major regulatory prosecutions, and to date there has been no significant insider trading arrest in the United States involving prediction markets.
Congress is paying attention, though without clear consensus. Lawmakers have introduced at least ten bills to regulate or restrict prediction markets, several focused on insider trading. Senators Adam Schiff (D-Calif.) and John Curtis (R-Utah), introducing the Prediction Markets are Gambling Act in March 2026, argued that platform self-regulation is insufficient, noting that stating a policy differs from putting in place the steps to make sure it is followed.
One academic commentator has argued that insider trading is likely more common in prediction markets than in financial markets, partly because it is not always clear the people making the trades are located in the United States. That raises questions about how enforcement would work across borders.
How platforms are responding
The concern reaches beyond regulators and legal analysts. It is shaping commercial decisions inside the markets. Robinhood has reported restricting some contracts amid insider trading concerns, which moves the issue into product governance. Robinhood has excluded certain mention markets, where traders seek to profit on whether specific words or phrases will appear in speeches or earnings calls, citing the elevated risk of insider advantage. That exclusion reflects a judgement that some contracts are too vulnerable to misuse by people with non-public access to be offered comfortably at scale.
The White House example points in the same direction, though the reported concerns remain unproven. In a March 2026 memo, White House staff were reminded that using nonpublic information to place bets on prediction markets such as Kalshi and Polymarket would be a criminal offence and a breach of federal ethics regulations [CNN, "White House warns staff against insider trading on prediction markets," 10 April 2026]. The memo was issued after press reports flagged a series of well-timed trades around the US-Israel war in Iran, including bets on prediction-market contracts and oil futures placed in the minutes before presidential announcements [Time, "White House, Oil, Prediction Markets, Polymarket Bets and Insider Trading in Iran War," 10 April 2026]. The White House has said there is no public evidence that administration officials misused information, and spokesperson Davis Ingle described the implication as baseless and irresponsible [Washington Times, "White House staff issued insider trading warning due to suspiciously well-timed bets," 11 April 2026]. Whatever the eventual findings, the episode was serious enough to trigger an internal warning, congressional letters to Polymarket and the regulators, and more than a dozen proposed bills on prediction-market oversight.
The thread that runs through all of it
The legal frameworks on both sides of the Atlantic were not designed with event contracts in mind, and the doctrinal fit can be untidy. The underlying concern is straightforward. When someone uses information the wider market does not yet have to trade on an outcome, the fairness of that market is in question. Using non-public information to trade is the same conduct whether the instrument is a share or a prediction contract.
The law is moving, but internal policies, training programmes, and controls have not kept pace. Few codes of conduct, insider trading policies, or training materials address prediction market trading. The absence of an express policy may give a would-be trader a false sense of protection, even though confidentiality obligations apply regardless of how the instrument is labelled. As regulators catch up, firms should move faster on internal governance: codes of conduct, training programmes, and personal trading policies that address prediction markets directly.
