Something significant happened at NYU Law School on 31 March 2026. David I. Miller, the newly appointed director of enforcement at the Commodity Futures Trading Commission (CFTC), delivered a pointed message to an audience of enforcement professionals, practitioners and students: the notion that insider trading laws do not apply to prediction markets is a myth — and the CFTC intends to enforce that point.
According to StarCompliance, for compliance professionals across financial institutions, hedge funds and investment banks, this is not a future issue. It is a current one.
StarCompliance recently delved into why prediction markets are now becoming a compliance problem.
In his first public address since joining the CFTC, Miller set out both the legal foundation and the agency’s enforcement approach. The framework will be familiar to seasoned practitioners. The CFTC’s anti-fraud authority under the Commodity Exchange Act mirrors the SEC’s Rule 10b-5, and insider trading under the misappropriation theory applies whenever someone trades on material nonpublic information in breach of a duty of trust.
The CFTC’s position is that event contracts fall squarely within its jurisdiction and are subject to those same anti-fraud provisions. Miller was explicit: insider trading in prediction markets will be pursued, particularly where misappropriated information is involved. He also drew a clear line around what is not being targeted — trading based on legitimately held information remains permissible. The enforcement focus is on those who misuse confidential information obtained through their professional role or relationships.
Where risk is emerging
Miller identified several categories where risk is most acute. Contracts tied to individual performance or corporate status create exposure when employees act on advance knowledge of decisions, product launches or internal developments. A recent case involving a media company employee illustrated how quickly this risk can materialise. Sports-related contracts present comparable concerns, given the potential for nonpublic information about injuries, team decisions or outcomes to confer an unfair trading advantage. The CFTC has already begun co-ordinating with professional leagues to monitor these risks. Government-related contracts introduce yet another layer of complexity, with public officials and those privy to policy decisions potentially exposed to insider trading risk if they act on information gained through their position. Legislative scrutiny in this area is intensifying. Across all three categories, the common thread is the same: the misuse of material nonpublic information creates enforcement exposure, regardless of asset class.
Regulatory momentum is building
Miller’s remarks build on broader signals from CFTC leadership. Chair Michael S. Selig has made clear that prediction markets are a priority for both enforcement and rulemaking. The agency is working to establish clearer rules, assert federal jurisdiction and strengthen surveillance capabilities. Co-ordination with the SEC is also increasing as both bodies grapple with the overlap between emerging products, digital assets and traditional financial instruments. For firms, this creates a more complex operating environment. The regulatory boundary is still evolving, but enforcement is already underway.
The compliance gap
Despite this momentum, prediction markets remain largely absent from existing compliance frameworks. Most programmes are designed to monitor trading in equities, fixed income and, more recently, digital assets. Pre-clearance workflows, personal account dealing policies and conflicts of interest frameworks do not typically account for event contracts traded on platforms such as Kalshi or Polymarket. Firms should be asking direct questions: do existing policies capture event contract trading? Are employees with access to material nonpublic information restricted from participating in relevant contracts? Do training programmes address this risk? In many cases, the answer is no.
From policy to action
The path forward is not theoretical — it requires extending established principles to a new type of instrument. Firms should begin by assessing whether event contracts are captured within personal trading policies and pre-clearance processes. Conflicts of interest frameworks should be reviewed to identify roles where access to sensitive information creates exposure. Training and attestation programmes should be updated to reflect this risk, with clear guidance on what constitutes misuse of information. Equally important is the ability to monitor activity. As participation in prediction markets grows, firms need systems that can incorporate these instruments into existing oversight workflows.
A practical approach
StarCompliance is already working with firms to address this challenge by extending employee compliance frameworks to cover prediction market activity. The underlying principles remain unchanged: the same expectations that apply to equity trading, conflicts management and information barriers apply here as well. The difference is the instrument, not the obligation. Firms that act now can build a defensible framework before enforcement reaches their sector. Those that wait risk reacting to an issue after it has already become a regulatory concern. Prediction markets are not a grey area in search of new rules — they are a new application of existing law, and regulators have made clear they are paying close attention.
What firms should do now
Compliance teams should take immediate, practical steps. They should assess whether personal trading policies and pre-clearance processes cover event contracts, review conflicts of interest frameworks for roles with access to material nonpublic information, update training and attestation programmes to address prediction market participation, and evaluate monitoring capabilities to determine whether event contracts can be incorporated into existing oversight workflows.
Read the full StarCompliance post here.
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