According to CNBC on July 9, informed sources revealed that Goldman Sachs and JPMorgan Chase have banned their employees from trading prediction market contracts related to specific events, elections, financial markets, macroeconomic data, and geopolitical issues; this move follows an incident where Google employees allegedly used internal data to trade on Polymarket, profiting approximately $1.2 million.
Michele Spagnuolo Case: Google Employee Profits of $1.2 Million from Insider Trading
According to a CFTC complaint, Google employee Michele Spagnuolo used the account "AlphaRaccoon" to trade event contracts on Polymarket related to Google's "Annual Search Rankings," allegedly leveraging material non-public information (MNPI) to profit about $1.2 million. This is the first case involving insider trading in private company event contracts, jointly filed by the CFTC and the Department of Justice in May 2026.
Legal experts point out that the vast number of contract types on prediction platforms creates broad potential avenues for MNPI abuse: corporate employees might use internal data to trade contracts involving company employee numbers, new product launches, or future company directions, forming a "whack-a-mole" style insider trading problem that is difficult to track individually.
Current Contract Policies of Major Financial Institutions like Goldman Sachs, Morgan Stanley, and JPMorgan Chase
According to CNBC, the responses from major financial institutions are as follows:
Goldman Sachs: Has banned employees from trading prediction market contracts related to specific events, elections, financial markets, macroeconomic data, and geopolitical issues; Goldman representatives declined to comment on policy specifics but stated that the use of material non-public information in trading "across all markets" is prohibited.
Morgan Stanley: A spokesperson said that a prediction market trading policy has been incorporated into the employee code of conduct, but no further details were disclosed.
JPMorgan Chase: According to Barron’s, the company urges employees to exercise caution when trading prediction markets, especially those related to financial sector contracts.
Bank of America: Is updating its policies to clearly specify prohibited behaviors for employees and provide examples.
United Airlines: Has no explicit prediction market trading policy but prohibits employees from using company secrets obtained through their positions for personal gain.
Frequently Asked Questions
Why are Goldman Sachs and other financial institutions starting to develop insider trading policies related to prediction markets?
Reports indicate that the primary trigger was the May 2026 indictment of Google employee Michele Spagnuolo by the CFTC and the Department of Justice, marking the first insider trading case involving private company event contracts. Legal experts note that the variety of prediction market contracts offers new avenues for profiting from MNPI; as more cases are prosecuted, companies that do not implement adequate policies may face potential liability risks.
What is the current regulatory stance of the CFTC regarding insider trading in prediction markets?
According to Professor Karen Woody of Washington and Lee University Law School, the CFTC has "a blank sheet" in combating insider trading in prediction markets, with very few cases to date, making this a relatively new field. The CFTC has not responded to CNBC’s inquiries about whether companies could be held responsible for employee insider trading. The specific regulatory direction will depend on official CFTC announcements.
What measures have Kalshi and Polymarket taken to prevent insider trading?
Reports state that Kalshi launched employment verification tools in June 2026 and partnered with StarCompliance to allow employers to review employee trading records; by February, it had also established cooperation with market integrity firm Solidus Labs. Polymarket collaborates with Chainalysis for on-chain monitoring and partners with Palantir to oversee suspicious activity related to sports contracts. Legal advisors note that these are initial steps, but companies should not rely solely on platforms to prevent insider trading; they need to train employees and establish internal policies.
