Insider trading on prediction markets: what the CFTC prosecutes

Yes. Event contracts are derivatives under the Commodity Exchange Act, and the CFTC treats the misuse of confidential information on them as it does on any futures market: misappropriating information “in breach of a pre-existing duty of trust and confidence to the source of the information (commonly known as ‘insider trading’)” falls under Section 6(c)(1) of the Act and Regulation 180.1 (CFTC advisory, 25 February 2026).

The test is the duty, not just the knowledge. Knowing more than the market from your own research is the point of a prediction market. Trading on information you obtained through a job or a position of trust — an unreleased list, a draft speech, a classified operation — and were obliged to keep confidential is what the law reaches. Exchanges add their own rules: Kalshi’s, the CFTC notes, “prohibit trading in a contract over which the trader has direct or indirect influence over the outcome.”

• A political candidate trading on his own candidacy, and a YouTube channel editor trading on videos before they were posted: both caught by Kalshi’s own surveillance in 2025, fined by Kalshi and suspended for five and two years. The CFTC published them in its February 2026 advisory as conduct that potentially violated the Act (release 9185-26).
• April 2026: the CFTC sued an active-duty US Army service member, alleging he used classified information about the operation to capture Nicolás Maduro to buy “Yes” shares on Polymarket.com, profiting by more than $404,000. The CFTC called it the first time it had charged insider trading involving event contracts; prosecutors in New York unsealed a parallel indictment (release 9217-26).
• May 2026: the CFTC sued a Google software engineer, alleging he traded at least 23 contracts on Google’s 2025 Year in Search list on Polymarket.com with near-perfect accuracy and about $1.2 million in profit, alongside a criminal complaint (release 9237-26).
• August 2026: a White House teleprompter operator who saw presidential speeches before delivery and traded mention-market contracts settled — $107,539.02 in disgorged profits, a $65,000 penalty and a three-year trading ban. The CFTC thanked Kalshi for its assistance (release 9289-26; our report: teleprompter operator fined).

The first two Polymarket cases are allegations in complaints, not findings. They also show something worth knowing: trading on polymarket.com, outside the US regulated framework, did not put the conduct out of the CFTC’s reach.

• Information from your job or a contract with the subject — an employer’s unreleased results, a client’s plans, a draft you were asked to keep private.
• Government information. The CFTC used what it calls the “Eddie Murphy Rule” for the first time in the Maduro case: government employees and service members owe a duty not to trade on what they learn in office.
• Influence over the outcome — trading a contract on your own election, your own performance, your own announcement. Exchange rules prohibit it even where nothing confidential is involved.

Not covered: public information you analysed better than others, rumours anyone could read, and your own forecasts. If you are unsure whether something you know came with a duty of confidentiality, do not trade on it — and this is not legal advice.

Designated exchanges have their own legal duty to watch for this. The CFTC’s advisory reminds them that they must “maintain audit trails, conduct surveillance, and enforce rules against prohibited practices”, and the regulator also lists wash sales, pre-arranged trades and disruptive trading as prohibited on prediction markets. In practice the cases above began with an exchange spotting unusually accurate trading — which is one more reason CFTC designation matters to ordinary traders: someone is checking who is on the other side.

Accounts are identity-verified on regulated venues, so pseudonymous handles do not protect anyone; the Polymarket cases name the handles the traders used. For the regulator itself, see what the CFTC is; for the wider legal picture, are prediction markets legal in the US?.