The U.S. Commodity Futures Trading Commission is warning prediction market traders that using non-public information can trigger enforcement action. David Miller, the agency’s enforcement director, said at New York University that the idea circulating online that insider trading rules do not reach prediction markets is simply wrong. He added that the Commission is actively watching suspicious activity.
Miller’s comments were a direct response to growing debate over whether traders can legally profit from information not yet available to the public on these platforms. His message was short and sharp: the agency is watching. The remarks are one of the clearest public statements so far that regulators intend to use existing market-abuse rules in this sector.
Event contracts fall under derivatives law
A key part of Miller’s argument was classification. He said event contracts should not be treated as gambling instruments. In the CFTC’s view, the contracts at issue are swaps, placing them inside financial market law rather than gaming rules.
That distinction matters. It shifts the legal debate away from whether prediction markets resemble betting platforms and toward whether participants and venues are complying with the same standards applied in regulated financial markets, including insider trading prohibitions.
Selective enforcement will target misuse of confidential information
Miller said enforcement will not be broad for its own sake. The Commission plans to prioritize cases involving misuse of confidential information, while smaller violations may not draw the same level of attention.
Prediction markets, where users trade on real-world outcomes, have grown rapidly and now exceed $20 billion in monthly trading volume. That expansion has attracted retail traders and institutional interest, while raising concerns that some participants may be acting on privileged information tied to policy decisions or geopolitical events.
Manipulation and AML compliance are also under review
The CFTC’s attention is not limited to insider trading. Miller indicated that the agency is also monitoring possible market manipulation and compliance with anti-money laundering rules. Lawmakers and regulators have recently pointed to several unusually well-timed trades, including bets placed before major announcements connected to Donald Trump.
Another case that has circulated widely involved a trader who reportedly made more than $400,000 by correctly predicting the capture of Nicolás Maduro before that information became public. Trading linked to sensitive geopolitical developments, including tensions involving Iran and speculation around prominent political figures, has added to concerns over national security and market integrity.
Platforms revise rules as lawmakers push new bills
Pressure is now coming from both regulators and Capitol Hill. Kalshi and Polymarket have each introduced updated rules aimed at discouraging trades driven by insider information.
At the legislative level, several proposals are moving forward, including the Public Integrity in Financial Prediction Markets Act of 2026 and the PREDICT Act. The focus of those efforts is to restrict the use of non-public information in prediction markets, especially by government officials.