Major Wall Street banks are tightening employee rules for prediction markets as concerns grow over the use of confidential information on platforms such as Polymarket and Kalshi. According to Reuters and Economic Times reports, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America have added or updated restrictions covering event contracts, with policies aiming to reduce insider trading and conflict-of-interest risks. Goldman Sachs has prohibited employees from trading prediction contracts linked to financial markets, political events and other subjects that could create real or perceived conflicts with the bank, its clients or the financial sector. The policy covers macroeconomic data, elections, geopolitics and events involving Goldman Sachs, though employees may continue trading contracts related to sports and entertainment. Morgan Stanley has included prediction market rules in its employee code of conduct, while Bank of America recently gave employees clearer examples of banned activity, restricting contracts involving company-specific developments, macroeconomic data and financial services. JPMorgan Chase also maintains a similar policy prohibiting employees from trading on any non-public, confidential information, which extends to betting on prediction markets.
The policy changes follow a federal case involving Google software engineer Michele Spagnuolo, who allegedly used confidential Google search data to earn more than $1.2 million on Polymarket. According to the Department of Justice complaint, Spagnuolo allegedly accessed internal trend information before trading on markets connected to Google search results. Prosecutors said he risked about $2.75 million through an account called 'AlphaRaccoon' between October and December 2025, with his trades allegedly generating $1.2 million after Google released the relevant information publicly. The charges remain allegations, and Spagnuolo is presumed innocent unless proven guilty, but the case showed how employees could use information that does not affect a company's share price to profit from event contracts.
The new policies include strict enforcement measures with serious consequences for violations. As reported by Reuters and Economic Times, repeated violations could result in disciplinary action, including termination, and employees may be required to forfeit gains from prohibited trades. Goldman Sachs requires staff members who make improper trades to forfeit any profit exceeding $200 or donate such amounts to charity. This represents a significant escalation from previous restrictions, which had limited participation to sports and entertainment events only. The enhanced enforcement reflects growing concerns about insider trading risks and the bank's commitment to preventing conflicts of interest that could compromise its reputation and regulatory compliance.
Lawmakers have examined whether prediction platforms can detect users who trade with classified or nonpublic information, with the House Oversight Committee requesting records from Polymarket and Kalshi after reports of suspicious trades linked to military and political events. The inquiry included allegations that a U.S. Army sergeant earned more than $409,000 by using classified information connected to a military operation involving former Venezuelan President Nicolás Maduro. Meanwhile, Congress has considered restrictions on prediction market trading by government officials, seeking to stop officials from wagering on political outcomes or public policy matters they could influence or learn about before the public. In response to regulatory pressure, Kalshi has created an independent surveillance committee and partnered with Solidus Labs to monitor suspicious trades and possible manipulation, while introducing employer disclosures for users trading in sensitive markets.
