Prediction market traders face insider trading crackdown, warns CFTC enforcement chief
Top enforcement official at the CFTC has declared that insider trading regulations cover prediction markets and promised enforcement actions against those trading on illegally obtained information.
A stern warning was delivered to insider traders operating in prediction markets on Tuesday by the head of enforcement at the United States commodities regulatory agency, who promised that rule breakers will be subject to enforcement measures.
"We are aware of the speculation about insider trading," stated David Miller, the CFTC's enforcement director, during a panel discussion at New York University on Tuesday. "We are watching."
"There's a myth in mainstream media and social media that insider trading doesn't apply in the prediction markets … That is wrong."
According to Miller, who previously served as a federal prosecutor and assumed his current role on March 2, the regulatory body will exercise its prosecutorial authority strategically and will not allocate resources toward "trivial" matters.
"We will only be prosecuting cases against those who tip or trade with misappropriated information," he stated, as reported by Bloomberg.
The issue of insider trading within prediction markets has emerged as a pressing concern for United States legislators in recent months, posing a threat to the legitimacy of an industry that has recently surpassed $20 billion in monthly trading volume, based on data from TRM Labs.
Event contracts are "swaps," not gaming
"Our position is that event contracts are not gaming. The event contracts at issue are swaps. Insider trading law applies," Miller stated, as reported by Reuters.
According to his remarks, the regulatory agency will also concentrate on several key enforcement priorities, including the abuse of markets and breaches of regulations intended to combat money laundering activities.
Worries about insider trading in prediction markets intensified following a series of strategically timed transactions that occurred before major policy announcements from United States President Donald Trump.
In a separate incident, an unidentified trader who placed a wager on the apprehension of Venezuelan leader Nicolás Maduro earned more than $400,000.
Most recently, platform users participated in questionable trading activity surrounding the potential invasion of Iran and speculation about the death of Ayatollah Khamenei, raising concerns about national security implications.
New legislation proposed as prediction platforms self-regulate
Responding to increasing public scrutiny, the two dominant prediction market platforms, Kalshi and Polymarket, have both recently implemented new policies prohibiting insider trading.
Toward the end of March, legislators in the United States presented the bipartisan Public Integrity in Financial Prediction Markets Act of 2026, designed to restrict insider trading activities by government officials.
During that same week, members of Congress introduced the Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act (PREDICT Act).
The CFTC has additionally faced pressure from Democratic members of Congress in recent times, who have called on the regulatory body to issue warnings to federal employees against utilizing insider information for trading activities in prediction markets.