Prediction markets have rapidly become one of financial services’ most discussed developments, opening new avenues for participation while introducing fresh compliance and conduct risks.
As adoption accelerates, compliance leaders are questioning how these markets fit within existing employee compliance frameworks and what controls are needed to keep pace with shifting regulatory expectations.
Unlike traditional securities and digital assets, prediction markets let individuals speculate on real-world events in new ways, creating potential blind spots for employee compliance programmes. This raises fresh questions around insider trading, material nonpublic information (MNPI), conflicts of interest, and regulatory oversight.
The themes were explored during a StarCompliance Product Spotlight webinar featuring Kalshi vice president of business development Max Crowley, who discussed market integrity controls and how firms can prepare their compliance programmes for this fast-evolving asset class.
Kalshi vice president of business development Max Crowley said, “Prediction markets represent an exciting evolution in financial markets, but they also introduce new questions around compliance, conflicts of interest, and insider trading. The industry has an opportunity to build these markets the right way from the start by embedding transparency, participant controls, and compliance into the foundation of how they operate. That’s why we’re excited to partner with StarCompliance to bring enterprise-grade compliance capabilities to this emerging market category and help firms participate responsibly as prediction markets continue to grow and evolve.”
Attendees raised more questions than the session could cover live, prompting Star to publish answers on seven key themes: how prediction markets are reshaping conduct risk; the insider trading and MNPI exposure they create; how compliance teams can monitor and restrict employee participation; why market categorisation matters for identifying conflicts of interest; how Kalshi is approaching market integrity, including CFTC-certified markets and mandatory company-name disclosure at account creation; what firms should demand from a compliance solution; and where regulation is headed next.
Star’s message to compliance leaders is clear: prediction markets are still nascent, but they already represent a new category of employee trading activity that cannot be ignored. Firms that build monitoring, disclosure, and surveillance capabilities now will be better placed as participation grows and regulatory scrutiny intensifies.
StarCompliance’s full post can be found here.
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