Prediction markets spark insider trading concerns. Here's how Goldman and other companies are responding

• Goldman Sachs has banned employees from trading on prediction market contracts related to bank-specific events, elections, financial markets, macroeconomic data, and geopolitics
• Only 3 of 50 companies contacted by CNBC confirmed having prediction market trading policies, with 2 others actively reviewing the issue, while 36 did not respond
• The CFTC's first private-sector case involved Google employee 'AlphaRaccoon' who allegedly earned $1.2 million profit using internal data to trade on Polymarket contracts about Google's 'Year in Search' lists

Summary: Prediction Markets Spark Insider Trading Concerns

Key Development:

Companies are updating policies to address insider trading risks on prediction markets, following the first major enforcement case. In May, the CFTC and DOJ charged Google employee Connor Spagnuolo with using confidential information to profit approximately $1.2 million on Kalshi contracts related to Google's "Year in Search" lists under the handle "AlphaRaccoon."

Corporate Response:

Goldman Sachs has banned employees from trading on prediction market contracts related to bank-specific events, elections, financial markets, macroeconomic data, and geopolitics. Of 50 companies contacted by CNBC:

• Only 3 confirmed existing prediction market policies
• 2 are actively reviewing policies
• 36 did not respond
• 7 declined to comment

Bank of America is updating its employee code of conduct to outline prohibited activities on prediction platforms. Morgan Stanley has urged employees to exercise caution, particularly on financial sector contracts. OpenAI relies on its broad insider trading policy.

Market Implications:

Legal experts warn the proliferation of contracts on prediction platforms (covering employee headcount, product releases, corporate events) creates numerous opportunities for insider trading. Financial institutions are leading policy development due to robust compliance infrastructure, but most companies remain in early stages.

Regulatory Landscape:

The CFTC faces a "blank canvas" for enforcement, with limited precedent in this space. Platforms Kalshi and Polymarket have implemented monitoring partnerships with companies like Solidus Labs and Palantir, but legal experts emphasize companies must independently train employees rather than rely solely on exchange oversight.

Expert Recommendation:

Lawyers advise companies to explicitly mention prediction markets in policies, establish monitoring protocols, and potentially restrict platform access on company devices to avoid future liability.