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Prediction markets spent years being dismissed as a niche corner of crypto culture, useful mainly for settling arguments about election outcomes. That perception is now colliding with a harder reality: the same informational edges that make these platforms compelling to traders are precisely what make them dangerous when the traders happen to work at Goldman Sachs.
According to a CNBC report citing people familiar with the matter, Goldman Sachs has banned employees from trading event contracts tied to the bank itself, as well as broader categories including financial markets, macroeconomic events, elections and geopolitics. Morgan Stanley has existing policies covering prediction market activity by staff, and a Bank of America spokesperson confirmed the bank is in the process of introducing new prohibitive measures. Goldman Sachs declined to comment when approached by Cointelegraph.
The Insider Trading Problem Is No Longer Theoretical
The concern driving these policies is straightforward. Prediction markets price the probability of real-world outcomes, and anyone with advance knowledge of those outcomes can convert that knowledge into profit with relative ease. Unlike equity markets, where insider trading law is well-developed and enforcement is routine, the regulatory framework around event contracts is still being assembled.
The clearest example of what regulators fear came in May, when the US Justice Department and the Commodity Futures Trading Commission named Michele Spagnuolo, a Google software engineer, as someone who allegedly accessed nonpublic information at work and used it to generate approximately $1.2 million in profits on Polymarket. That case gave the abstract concern a concrete face and a specific dollar figure, and it appears to have accelerated the compliance response inside major financial institutions.
The political dimension adds further pressure. On June 18, Wisconsin Representative Bryan Steil introduced legislation to prevent certain public officials from wagering on public policy issues and political outcomes. The bill did not name any White House officials specifically, but its introduction followed a January incident in which a soldier allegedly made more than $400,000 betting on the removal of Venezuelan President Nicolás Maduro, who was subsequently ousted and captured by US forces. The White House and members of Congress have both flagged the insider risk in prediction markets, meaning the legislative appetite for action is real even if the statutory framework remains incomplete.
Polymarket Pushes Into the US Market Anyway
Against this backdrop of tightening scrutiny, Polymarket is moving in the opposite direction. The platform filed an application on July 3 with the National Futures Association to become a futures commission merchant through its affiliate, Coming Home GBA LLC. The goal is to offer margin trading for US users, allowing them to take positions on events with less capital committed upfront rather than requiring full collateral.
Polymarket still needs separate authorization from the CFTC before non-fully collateralized trading can go live for US users. Its main rival, Kalshi, is already ahead on this front: Kalshi’s affiliate Kinetic Markets LLC received NFA authorization in March, giving it a meaningful head start in the race to offer leveraged event contracts to American retail participants.
The timing of Polymarket’s regulatory push is notable. The platform recorded a single-day taker volume of $713 million on June 20, according to Dune Analytics data, a record that arrived more than a week after the 2026 FIFA World Cup kicked off on June 11. Kalshi separately posted nearly $9.4 billion in monthly trading volume for June, with the World Cup cited as a major driver. These are not trivial numbers. They represent a market that has moved well beyond its crypto-native origins and is now attracting the kind of volume that regulators and compliance officers at traditional financial institutions cannot reasonably ignore.
Why the Convergence of TradFi and Prediction Markets Creates a New Compliance Frontier
What makes the current moment significant is the collision of two trends that were previously running on separate tracks. On one side, prediction markets have grown rapidly in legitimacy and liquidity, aided by high-profile election forecasting and now sports betting volumes in the billions. On the other side, the employees of the institutions that move financial markets, set interest rates, and advise on mergers are now personally active on those same platforms.
The banks moving to restrict trading are essentially acknowledging that the boundary between material nonpublic information and prediction market opportunity is dangerously thin. A Goldman Sachs analyst who knows a major client is about to announce a restructuring, or a Morgan Stanley banker who has visibility into an upcoming deal, could in theory trade on that knowledge through an event contract rather than through the equity market, where surveillance systems are far more mature.
For investors and observers in Malaysia and Singapore, the broader lesson is about regulatory lag. The CFTC and the NFA are the primary US bodies overseeing these instruments, and both are still defining the rules of the road. Platforms like Polymarket and Kalshi are actively seeking to expand within that evolving framework rather than waiting for it to settle. That dynamic, where market growth consistently outpaces the regulatory response, is familiar territory in crypto and it is now repeating itself in a product category that sits at the intersection of crypto infrastructure and traditional financial market information.
The fact that Wall Street compliance departments are acting before regulators have mandated them to do so suggests the industry recognises that the status quo is not sustainable. Whether that self-regulation proves sufficient, or whether the Spagnuolo case turns out to be the first of many enforcement actions, will determine how aggressively legislators move to close the gaps that currently exist.
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