Goldman Sachs, Morgan Stanley, and Bank of America are tightening employee rules around prediction market trading as platforms like Polymarket and Kalshi gain popularity and attract greater regulatory scrutiny.

Wall Street Is Becoming More Cautious About Prediction Markets

Prediction markets have exploded in popularity over the past year, attracting everyone from retail traders to professional investors. But as trading volumes continue to climb, major Wall Street banks are becoming increasingly concerned about how employees might use confidential information on these platforms.

According to recent reports, financial giants including Goldman Sachs, Morgan Stanley, and Bank of America are strengthening internal policies that restrict employees from participating in certain prediction market contracts. The concern isn’t cryptocurrency itself—it’s the possibility that workers with access to sensitive financial or political information could gain an unfair advantage by betting on future events.

The move reflects a broader effort across the financial industry to prevent conflicts of interest as event-based trading becomes more mainstream.

Why Banks Are Limiting Employee Participation

Unlike traditional stock markets, prediction platforms allow users to trade contracts tied to real-world outcomes rather than company shares.

Participants can speculate on events such as:

• Interest rate decisions
• Election results
• Economic data releases
• Corporate developments
• Geopolitical events
• Sports tournaments

For banks, this creates a unique compliance challenge.

Employees working on mergers, earnings, economic research, or government advisory projects often have access to information that isn’t publicly available. If that knowledge influences trades on prediction markets, regulators could view it similarly to insider trading in securities markets.

Reports indicate that Goldman Sachs has prohibited employees from trading contracts directly related to the firm’s business as well as broader financial and political events where confidential information could create an unfair advantage.

Morgan Stanley reportedly already maintains internal restrictions, while Bank of America is said to be introducing similar compliance measures.

Although Goldman has not publicly explained the policy, the timing suggests growing industry-wide concern over event-based trading.

Prediction Markets Are Drawing More Political Attention

The debate surrounding prediction markets is no longer limited to Wall Street.

Washington has also begun examining whether public officials and government employees should be allowed to trade on platforms that offer contracts tied to political outcomes.

Earlier this year, lawmakers introduced legislation aimed at preventing certain government officials from wagering on elections and public policy decisions. The proposal reflects growing concern that individuals with privileged access to government information could influence or profit from event-based contracts.

As prediction markets become more accurate and influential, policymakers appear increasingly interested in defining where legitimate forecasting ends and unfair information advantages begin.

Previous Cases Have Raised Red Flags

Concerns about insider information are not merely theoretical.

In May, US authorities alleged that Google software engineer Michele Spagnuolo earned approximately $1.2 million on Polymarket after allegedly using confidential workplace information to trade prediction contracts.

While the case remains one of the highest-profile investigations involving prediction markets, it highlighted how nonpublic information could potentially influence event-based trading just as it can affect stock markets.

Another widely discussed incident occurred earlier this year when reports claimed a military servicemember generated more than $400,000 by correctly predicting political developments involving Venezuelan President Nicolás Maduro.

Whether these cases ultimately reshape regulation remains to be seen, but they have undoubtedly increased scrutiny from both regulators and financial institutions.

Polymarket Continues Expanding Despite Regulatory Questions

Even as compliance concerns grow, Polymarket is pushing to expand its presence in the United States.

The company has reportedly applied through its affiliate to become a Futures Commission Merchant (FCM), a designation that would eventually allow it to offer margin trading if approved by regulators.

Margin trading would enable users to open larger prediction positions without fully funding every contract upfront, making the platform more competitive with traditional derivatives markets.

However, additional authorization from the Commodity Futures Trading Commission (CFTC) would still be required before those products could become available.

The application represents another step in Polymarket’s effort to establish a stronger regulatory footing within the US market.

Competition in the Sector Is Heating Up

Polymarket is no longer the only major player in event-based trading.

Its rival Kalshi has already secured regulatory approvals allowing expanded trading capabilities through an affiliated entity.

At the same time, user activity across the industry continues to surge.

According to blockchain analytics, Polymarket recorded a daily taker trading volume of approximately $713 million on June 20, marking the highest single-day activity in the platform’s history.

Kalshi also reported a record-breaking $9.4 billion in monthly trading volume during June, with interest boosted by contracts linked to the 2026 FIFA World Cup and other global events.

These figures illustrate how prediction markets have evolved from niche products into rapidly growing financial platforms.

Looking Back: Prediction Markets Have Come a Long Way

Prediction markets are not a new concept.

Academic platforms such as the Iowa Electronic Markets have been studying collective forecasting since the late 1980s. Over time, these markets proved surprisingly effective at estimating election outcomes and economic events.

Today’s blockchain-powered platforms have dramatically expanded accessibility by allowing millions of users worldwide to participate almost instantly.

That growth, however, has also introduced new legal and ethical questions surrounding market integrity, information asymmetry, and regulatory oversight.

As the industry matures, stronger compliance standards appear increasingly inevitable.

Personal Analysis: Compliance Will Likely Become a Competitive Advantage

In my view, Wall Street’s response is healthy for the long-term credibility of prediction markets.

Whenever new financial products gain popularity, regulators and institutions inevitably focus on preventing misuse. We saw similar developments during the rise of cryptocurrency exchanges, online sports betting, and algorithmic stock trading.

Banks restricting employee participation does not necessarily suggest prediction markets are problematic. Instead, it reflects recognition that these markets have become financially significant enough to require the same ethical standards expected elsewhere in finance.

If platforms like Polymarket and Kalshi want to become permanent parts of global financial markets, robust compliance, transparency, and surveillance systems will be just as important as technological innovation.

Final Thoughts

Prediction markets are entering a new phase of maturity.

Trading volumes continue reaching record highs, institutional interest is growing, and regulators are paying closer attention than ever before. At the same time, major banks are proactively updating internal policies to reduce the risk of insider trading and conflicts of interest.

As event-based trading becomes more integrated into mainstream finance, balancing innovation with market integrity will likely define the industry’s next chapter.

Disclaimer: This article is intended for informational and market analysis purposes only. It should not be considered financial, legal, or investment advice. Always conduct your own research before participating in prediction markets.

Key Takeaways

• Goldman Sachs, Morgan Stanley, and Bank of America are tightening employee restrictions on prediction market trading.
• Banks are concerned that employees with access to confidential information could gain unfair advantages.
• US lawmakers are also considering restrictions on political prediction market participation by certain government officials.
• Polymarket is seeking regulatory approval to introduce margin trading in the United States.
• Polymarket recently reached $713 million in daily trading volume, while Kalshi reported nearly $9.4 billion in monthly volume.
• Compliance and insider trading controls are becoming increasingly important as prediction markets expand.

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