Prediction and digital markets are growing quickly, but so are the conduct risks. The misuse of material, nonpublic information (MNPI) is now a live threat that compliance teams can no longer treat as a hypothetical.
According to StarCompliance, prediction markets have been in the headlines often, and frequently for the wrong reasons. A wave of investigations and enforcement actions has drawn attention to possible insider activity and employee conflicts. The central questions for firms are who is trading, what they know, and when they learned it.
The cases are varied. Some involve employees allegedly trading on confidential corporate information. Others involve people betting on outcomes they may be able to influence themselves. As these markets expand, firms will need to make sure these emerging risks do not stay hidden in their organisations.
The cases span military operations, corporate earnings and entertainment. A US Army soldier was charged with allegedly using classified information to make around $410,000 in prediction market profits. Separately, researchers flagged more than 150 Polymarket wallets for potentially suspicious military-related trades.
In Washington, a former White House teleprompter operator was ordered to pay more than $172,000 over trades made with advance knowledge of presidential speeches. In entertainment, Kalshi handed a MrBeast editor a two-year ban and a financial penalty for allegedly trading on nonpublic information about upcoming content. Kalshi also suspended a California political candidate for five years after he traded on his own election, raising clear conflict-of-interest concerns.
Big tech and finance have not escaped either. Federal prosecutors in the Southern District of New York charged two Robinhood engineers with commodities and wire fraud. They allegedly used confidential knowledge of upcoming Robinhood Crypto token listings to buy perpetual futures, with each making more than $50,000. A Google engineer was charged with allegedly using confidential search data to make around $1.2m through prediction market trades.
Audit firms face scrutiny too. A KPMG employee is under investigation over bets linked to confidential client earnings, while 19 Polymarket accounts reportedly won 41 of 42 bets tied to KPMG-audited companies.
The industries and information differ, but the challenge is the same: identifying and managing the risk of employees trading on information others do not have.
To keep pace, compliance teams should review their policies, monitoring and controls. Priorities include updating policies to cover prediction markets, employee disclosures and MNPI, and gaining greater visibility into employee trading across both centralised and decentralised platforms.
Firms should also assess risk based on employee roles, responsibilities and access to sensitive data. Stronger surveillance is needed to detect unusual trading patterns and potential conflicts of interest, while centralised case management and audit trails can help streamline investigations.
Read the full StarCompliance post here.
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
