US CFTC warns of insider trading in prediction markets… “Insider-trading laws may apply”

The US Commodity Futures Trading Commission (CFTC) has signaled a tough enforcement stance on insider trading in prediction markets, sending a warning to market participants.

According to Cointelegraph on the 31st (local time), David Miller, the CFTC’s Director of Enforcement, said at an event at New York University that “there is a perception that insider trading doesn’t apply in prediction markets, but that is incorrect.”

He stressed, “We are aware of the potential for insider trading and are monitoring it.”

He added that “a mistaken conventional wisdom has spread across major media and social media that insider-trading rules do not apply to prediction markets,” emphasizing, “That is not true.”

Miller also clarified the enforcement standard. He explained, “We will focus prosecutions not on trivial matters, but on cases involving trading on misappropriated information or providing such information.”

The CFTC also reaffirmed its view that prediction-market products are derivatives, not “gambling.” Miller said, “Event contracts are not gambling; they are swaps, and insider-trading laws apply.”

The controversy over insider trading in prediction markets has been spreading rapidly. According to TRM Labs, the market has grown quickly, with monthly trading volume exceeding $20 billion.

Suspicious cases have continued, particularly in trading around geopolitical events. Some traders are reported to have made profits of hundreds of thousands of dollars by trading just ahead of major political and military events.

Amid the controversy, major platforms such as Kalshi and Polymarket have introduced rules to prevent insider trading.

In addition, in the US Congress, bills to ban prediction-market insider trading by public officials have been introduced in succession, and regulatory discussions are gaining momentum.