We Predict That a Prediction Market Policy is In Your Future: 3 Steps to Crafting an Effective Policy
Odds are good that someone in your workplace has money riding on the next interest rate decision, election outcome, or season finale of a reality show – and your existing workplace policies might not cover this new trend. Online prediction markets like Kalshi and Polymarket are booming, with participants spending nearly $5 billion per week and the total annual market estimated to rise to over $1 trillion annually by 2030. But this explosive growth is a new compliance risk for employers, as the line between an informed guess and insider trading can blur fast when employees have access to information the rest of the market doesn’t. What do you need to know about this latest trend, and what three steps should you take to craft an effective workplace policy?
What are Prediction Markets?
Prediction markets are generally online markets in which participants buy and sell “contracts” tied to some future event. The two most popular sites are Kalshi and Polymarket, but many others exist and major brands are continuing to enter the space.
Contracts can cover just about any topic – elections, sporting events, economic outcomes, geopolitical events, Love Island finalists, and more. The price of the contract is generally considered the likelihood that the event will occur. For example, if one party thinks the US will win the World Cup, they may buy a $100 contract for $10 (i.e., a 10% chance that the US will win). If the US wins, the purchaser makes a $90 profit.
The Problem for Employers
These markets can pose legal and reputational threats for your business if employees are using confidential inside information when purchasing these contracts. The DOJ and the Commodities Future Trading Commission have opened numerous high-profile investigations of employees who are accused of engaging in such behavior.
- One recent example involves criminal charges against a US soldier who allegedly used classified information to bet on the arrest of Nicholas Maduro.
- In addition, authorities have investigated and criminally charged employees with exploiting inside information for allegedly purchasing contracts based on future internet search results, future reported high and low official temperature readings, and future executive firings and hirings.
Besides individuals facing criminal liability, employers could also face government investigations related to their supervisory controls, code of ethics policies, enforcement, and overall compliance environment.
These risks are not limited to large governmental units and publicly traded companies. The risk of reputational harms and investigations into employer internal controls impacts private employers, educational institutions, non-profit organizations, and professional service providers. Any entity that might have some critical confidential information about a future event is at risk of employee misuse of the information, corporate enforcement actions, and reputational harm.
In response to the growing confidential information trading risk, Kalshi has instituted a new policy requiring traders to disclose their employer before placing bets on specific “higher-risk” markets, which are identified using an algorithmic risk-scoring framework.
What Should Employers Do Now: 3 Steps to a Policy
Most publicly traded companies have insider trading policies. You need to update those existing policies to address prediction market threats. Any company that does not have an insider trading policy needs to implement such policies as soon as feasible. Here are three factors to consider when developing the policies:
1. Update Existing Insider Trading Policies or Create New Ones
- Prohibit employees from using material, confidential, proprietary, or nonpublic company information to trade, wager, or participate in prediction markets or event contracts.
- Define coverage broadly: prediction markets, event contracts, political/event-based contracts, sports/event contracts, crypto-based prediction markets, and similar platforms, whether regulated or unregulated.
- Prohibit disclosing inside information to family, friends, online communities, group chats, forums, or other market participants.
2. Define “Covered Information” Broadly
- Include nonpublic information about company finances, layoffs, M&A, litigation, labor issues, client matters, product launches, market data, business data, cybersecurity incidents, investigations, government actions, workplace incidents, or executive decisions, etc.
- Apply to employees, officers, contractors, consultants, interns, temporary workers, and anyone with access to confidential information.
- Especially for professional services, legal, consulting, finance, health care, or tech employers, expressly prohibit using client/customer/vendor confidential information in prediction markets.
3. Combine With Training, Monitoring, and Enforcement
- Add annual training, onboarding acknowledgments, and targeted reminders for employees with access to sensitive confidential business, legal, financial, HR, or government-relations information.
- Require employees to report suspected misuse of confidential information and preserve the company’s ability to investigate policy violations.
- State that violations may result in discipline up to and including termination, and possible referral to regulators or law enforcement where warranted.
Conclusion
If you need assistance developing such a policy, please contact your Fisher Phillips attorney, the author of this Insight, or any attorney in our Corporate Compliance and Governance Group. Make sure to subscribe to Fisher Phillips’ Insight System to get the most up-to-date information on this and other workplace topics sent directly to your inbox.
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Prediction markets, event contracts, politiical/event based contracts, sports/event contracts, crypto-based prediction markets, covered employees, annual training
Source(s):
We Predict That a Prediction Market Policy is In Your Future: 3 Steps to Crafting an Effective Policy. (2026). Fisher Phillips; Fisher Phillips LLP. https://www.fisherphillips.com/en/insights/insights/a-prediction-market-policy-is-in-your-future