Wall Street banks restrict staff trading on prediction markets as Goldman Sachs, Morgan Stanley, JPMorgan and Bank of America tighten rules around event contracts.
Wall Street banks are tightening restrictions on employee trading in prediction markets as the fast-growing industry creates a familiar compliance problem with a modern twist: what happens when workers with confidential information can place bets on the very events they may know more about?
Major financial institutions including Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America have policies restricting certain employee activity on prediction markets, according to Reuters.
The concern is not necessarily whether a banker knows who will win the Super Bowl. The bigger problem begins when event contracts involve interest rates, corporate earnings, mergers, political decisions or other subjects that may overlap with sensitive information available inside major banks.
Apparently, knowing too much is useful at work but becomes slightly awkward when there is a “Buy Yes” button nearby.
Wall Street Banks Restrict Staff Trading on Sensitive Events
Goldman Sachs has told employees that they should not participate in prediction-market contracts involving financial or political events that could create actual or perceived conflicts of interest.
The bank generally permits activity involving sports and entertainment, according to Reuters.
Violations may lead to disciplinary action and could require employees to surrender profits.
Morgan Stanley also restricts staff participation in certain event contracts. JPMorgan Chase and Bank of America maintain policies aimed at preventing employees from using confidential, nonpublic or sensitive information when trading on prediction markets.
Bank of America has recently clarified and expanded its guidance, including examples involving company-specific and macroeconomic events.
The policies differ between institutions, and the restrictions are not a universal ban on every prediction-market trade.
Why Prediction Markets Are Creating Compliance Concerns
Prediction markets allow users to trade contracts based on the outcome of future events.
A contract might ask whether the Federal Reserve will change interest rates, whether a company will beat an earnings target or whether a political candidate will win an election. Prices can move as traders react to new information.
That creates an obvious concern for banks.
Employees at large financial institutions may have access to information that ordinary traders do not. Even when information does not meet the legal definition of material nonpublic information, a trade could still create the appearance of a conflict.
For compliance departments, appearance matters.
Wall Street has spent decades building rules around employee stock trading. Prediction markets have now arrived with a fresh question: what if the employee is not buying the company’s shares but betting on what happens to the company next?
Naturally, the answer involves more compliance manuals.
Kalshi and Polymarket Growth Puts Event Contracts Under Scrutiny
The restrictions come as prediction-market platforms have grown rapidly.
Kalshi and Polymarket have helped bring event contracts into mainstream finance and popular culture. Users can trade on outcomes involving sports, politics, economics, technology and global events.
The industry’s expansion has attracted regulatory and legal attention.
Recent concerns have focused on whether users with privileged information could gain unfair advantages. Kalshi has also considered stronger disclosure measures for certain markets, including requiring some users to identify their employers.
The issue is simple in theory but difficult in practice.
Prediction markets are designed to reward people who make better forecasts. The problem begins when a “better forecast” may actually be a confidential meeting scheduled for Tuesday morning.
What the Restrictions Mean for Wall Street Employees
For most bank employees, the safest approach is to understand their employer’s specific policy before using a prediction market.
A trade involving sports or entertainment may be permitted at one institution. A contract tied to interest rates, corporate events or politics may face restrictions or require additional scrutiny.
Employees may also be subject to broader codes covering conflicts of interest, personal trading and the use of confidential information.
The latest restrictions show that prediction markets are no longer viewed as a niche internet experiment.
They are becoming large enough for Wall Street’s compliance departments to notice.
And on Wall Street, being noticed by compliance is rarely the kind of market signal anyone celebrates.
FAQs
Why are Wall Street banks restricting prediction-market trading?
Banks are concerned that employees could use confidential or sensitive information when trading event contracts or create actual or perceived conflicts of interest.
Which banks have prediction-market restrictions?
Reuters reported policies at Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America.
Are bank employees completely banned from prediction markets?
Not necessarily. Policies vary by institution. Some activity involving sports and entertainment may still be allowed.
What types of prediction-market contracts raise the most concern?
Contracts involving financial markets, company-specific events, interest rates, economic data and politics may create greater compliance risks.
Can employees trade on Kalshi and Polymarket?
That depends on the employee’s location, the platform’s availability and the rules set by the person’s employer. Bank policies may restrict particular contracts rather than every type of activity.
Why could prediction markets create insider-information risks?
Employees at financial institutions may have access to confidential information that could provide an unfair advantage when trading contracts linked to companies, markets or economic events.
Will more companies restrict employee prediction-market trading?
More employers may review their policies as prediction markets expand, especially where employees have access to confidential information that could affect event outcomes.
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