CFTC and Lawmakers Address Insider Trading in Prediction Markets

Regulatory oversight of insider trading in prediction markets has increased, with new enforcement actions and policy guidance involving platforms such as Kalshi and Polymarket. These developments reflect ongoing efforts by authorities and industry participants to address the use of nonpublic information in trading on event-based contracts.

On February 25, 2026, the Commodity Futures Trading Commission’s Division of Enforcement published an advisory covering enforcement actions in prediction markets, including two cases involving misuse of confidential information on KalshiEX, a regulated Designated Contract Market. The advisory described internal cases handled by Kalshi, such as a political candidate trading on their own candidacy and a YouTube channel editor trading on undisclosed information, both resulting in financial penalties and suspensions.

The CFTC advisory reiterated the agency’s authority to enforce rules against insider trading, fraud, manipulation, and wash sales on all Designated Contract Markets, including those focused on prediction contracts. CFTC Rule 180.1 and Section 6(c)(1) of the Commodity Exchange Act were cited as the legal basis for prohibiting trading on misappropriated material nonpublic information in these markets.

Legal analysis confirms that anti-fraud and anti-manipulation provisions under the Commodity Exchange Act and CFTC Regulation 180.1 are applicable to insider trading cases in prediction markets. Platforms have responded by introducing new bans and surveillance mechanisms to detect and prevent improper trading activity.

What the numbers show

• Kalshi opened more than 200 insider trading investigations in the past year
• Two internal enforcement cases at Kalshi in 2025 resulted in suspensions of two and five years
• Over 40 lawmakers urged regulatory guidance on insider trading in March 2026

In March 2026, a group of lawmakers led by Senator Mark Warner formally requested that the CFTC and the Office of Government Ethics issue guidance reminding federal employees that insider trading in prediction markets is prohibited under the Commodity Exchange Act, as amended by the STOCK Act. This request was intended to clarify the application of existing legal standards to government personnel participating in these markets.

Platform operators have also updated their internal rules and monitoring systems. Kalshi banned political candidates and sports participants from trading on contracts related to their own activities, while Polymarket clarified that users are not permitted to trade on contracts where they might possess confidential information or have the ability to affect outcomes.

Kalshi’s CEO announced support for proposed legislation from Representative Ritchie Torres that would formally affirm the ban on insider trading in prediction markets. The CEO stated that Kalshi already enforces rules adapted from established stock exchange standards, such as those used by NYSE and NASDAQ.

Industry reaction

Kalshi has reported that it freezes accounts, imposes penalties, and refers cases to the CFTC when potential insider trading is detected. These actions are part of a broader compliance effort in response to regulatory expectations and recent enforcement advisories.

In January 2026, CFTC chair Michael Selig stated that the agency intends to develop new rules for prediction markets and vacate a previous rule from 2024 that would have banned event contracts related to politics and sports. This regulatory direction is expected to shape future market practices and oversight.

* This article is based on publicly available information at the time of writing.