The rising risks of prediction markets and what it means for your business
Back in April, I wrote on this blog that prediction markets would probably become a huge concern for corporate compliance officers in 2026. Four months later, that prediction seems to have been proven true.
Since that time, we’ve seen several high-profile examples of employees betraying their employer – and, according to prosecutors, breaking the law – by engaging in misconduct through bets on prediction markets. For example:
- In June, federal prosecutors indicted a security engineer at Google, on charges that he used his data access privileges to learn the identity of the most-Googled person in 2025 and then placed bets on Polymarket before the news became public. The engineer allegedly made $1.2 million.
- In July, President Trump’s long-time teleprompter operator was suspended and eventually fired from his job amid accusations that he made more than $100,000 placing bets about certain words or phrases Trump might use in his speeches.
- In April, a U.S. special forces soldier was charged with using classified information he knew about plans to capture Venezuela president Nicholas Maduro to make $400,000 in bets on Polymarket.
These cases are telling because, if true, they clearly constitute misconduct. At the very least, they require organizations to implement stronger policies, better training, and more vigilant monitoring.
But none of the above are insider trading in the traditional sense. They demonstrate that the risks of prediction markets will affect more businesses, in more ways – and force compliance teams to devise new controls that address misconduct risks you never had to consider before.
Prediction market risks can affect anyone
Let’s start with the cases of Trump’s teleprompter operator and the U.S. soldier. Those incidents are so striking because the victim businesses are not publicly traded companies.
That’s a critical point for compliance teams to understand. Since “prediction market risk” is simply the risk that any employee tries to make a quick financial gain by placing bets on any scrap of confidential information they know, every type of organization is vulnerable: private companies, nonprofit institutions, government agencies, universities, and more.
For example, imagine:
- An employee at a private company, knowing that the CEO is in poor health, bets on the CEO’s sudden retirement.
- A university employee knows the results of a cutting-edge cancer treatment and bets on the date a cure for cancer is announced.
- An employee at NASA, knowing the roster of the next Artemis crew, and betting on whether a woman will be going to the moon.
None of the above scenarios involve publicly traded companies, but all of them are quite plausible. (Indeed, you can place bets on prediction markets about all three situations right now.) Prediction market risks can affect any organization, which means all organizations need to address the risk.
The fundamental issue is that the employee knows confidential company information that has some sort of value; and rather than use that knowledge to fulfill their job duties, the employee uses the knowledge to make a bet for private financial gain.
That’s the misconduct your policies need to prohibit. You also need employee training to emphasize the message, as well as internal reporting systems that can take reports of prediction markets abuse and investigate as necessary.
Defining ‘confidential information’ will be tricky
Compliance teams have another challenge, too. The range of confidential information that could be abused in prediction markets is so huge and diverse, that you’ll need to think carefully – and creatively – about how to detect those potential abuses.
For example, employees in the executive offices might be able to make money betting on the color of the CEO’s shirt before they go on television. Does that mean your company should consider the CEO’s shirt confidential information? How would you even protect that information? By making the CEO walk around the office in a poncho?
Clearly some company information could be financially lucrative on the prediction markets, but so irrelevant to business operations that policing against those bets might be a waste of time.
Companies could (and should) have a policy against prediction markets betting in all forms, since that would be a breach of the employee’s ethical duty to the business. In practice, however, enforcing compliance with that policy (which may involve time-consuming investigations and disciplinary action) might require a clear-eyed cost-benefit analysis. Some infractions might not be worth the bother.
Who decides where to draw that line? That’s a conversation compliance leaders will need to have with senior management and potentially the board. But your ability to triage those offenses – “yes, this is an egregious breach of trust that can’t be tolerated” versus “no, our anticorruption probe takes priority over bets about the color of the new corporate logo” – will still be critical.
Focus on the Ethics & Compliance basics
As dizzying as the risks of prediction markets might be, focusing on the fundamentals can go a long way to reducing your risks. For example:
- Start with a policy. Focus on the employee’s ethical duty to keep confidential information private and to use it only for corporate purposes. Even if any bit of information could be used, every bit of information shouldn’t.
- Use training and executive messaging to reinforce that point. Without training, employees might misunderstand the policy and what they’re supposed to do.
- Use your internal reporting hotline to learn about potential abuses. No matter how many prediction market scenarios you anticipate, you won’t anticipate them all. The more you encourage employees to speak up about what they see coworkers do, the faster you’ll hear about schemes that never even crossed your mind.
- Reinforce a culture of shared accountability. Policies and reporting channels work best when employees understand that protecting confidential information is a collective responsibility. Make clear that using inside knowledge for personal gain is inconsistent with the organization’s values – and that employees should be willing to question or report this behavior when they see it. A strong ethical culture creates another layer of protection by making misconduct less likely to be normalized or ignored.
- Monitor what you can or what you must. Publicly traded companies, for example, are required to have policies and procedures in place to control the use of material, nonpublic information and reduce the risk of insider trading. The potential abuses of prediction markets extend far beyond traditional insider trading risks, but it’s a start.
- Be ready for outside help. The prediction markets themselves don’t like these abuses either, and do work to police against them. (The incident with Trump’s teleprompter operator, for example, was first detected by the prediction market Kalshi.) If prediction markets or federal prosecutors alert you to your employees’ potential misconduct, have procedures in place to do something with the matter.
Prediction markets may be a new source of misconduct risk, but the fundamentals of preventing unethical behavior haven’t changed. You still need clear policies, effective employee training, trusted reporting channels, consistent investigations and the visibility to identify emerging risks before they become bigger problems.
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