Wall Street's biggest banks are drawing a harder line on employees using prediction markets, as platforms like Kalshi and Polymarket surge in popularity. Goldman Sachs and Bank of America have both clarified internal policies restricting trading in event contracts—bets on outcomes ranging from election results to interest rate decisions.
The moves come as the Commodity Futures Trading Commission (CFTC) and other regulators increasingly scrutinize these markets. While prediction contracts have existed for years, their recent explosion in volume and visibility has caught the attention of compliance officers at major financial institutions.
What Are Prediction Markets?
Prediction markets allow users to buy and sell contracts that pay out based on the outcome of future events—such as who will win a presidential election, whether the Federal Reserve will raise rates, or where the S&P 500 will close. Platforms like Kalshi and Polymarket have attracted millions of users, including some Wall Street professionals who see them as a way to hedge or speculate on macro events.
But for banks, these trades pose unique compliance risks. Employees could potentially trade on non-public information about their own firm's activities, or create conflicts of interest by betting on outcomes they can influence. The new policies aim to close those loopholes.
What the Banks Are Doing
Goldman Sachs and Bank of America have updated their personal trading policies to explicitly prohibit or restrict event-contract trading tied to politics and financial markets. The rules apply to all employees, not just traders or research analysts. Similar restrictions already exist at Morgan Stanley and other major firms, as reported earlier.
The banks are not banning all prediction market activity—some contracts tied to sports or entertainment may still be allowed—but the focus is on contracts that overlap with the firm's business or could be seen as insider trading. Compliance departments are also monitoring employee accounts more closely for unauthorized activity.
Why Now?
The crackdown reflects a broader trend: as prediction markets grow, they attract more regulatory attention. The CFTC has proposed rules that would ban certain event contracts, particularly those tied to political outcomes, arguing they amount to gambling. Meanwhile, the SEC has warned that some prediction contracts may be illegal securities.
For banks, the reputational risk is also significant. If an employee were caught trading on inside information via a prediction market, it could trigger fines and damage the firm's brand. The new policies are a preemptive measure to avoid such scenarios.
What It Means for Investors
For everyday investors, the tightening of rules at major banks is a signal that prediction markets are entering the mainstream—and with that comes greater oversight. While these platforms offer a novel way to bet on events, they also carry risks that regulators are only beginning to address.
Investors should be aware that prediction markets are not regulated like traditional exchanges. There is no SIPC insurance, and the platforms themselves can face legal challenges or shutdowns. The banks' actions suggest that even sophisticated financial professionals are being told to steer clear.
That said, the growing popularity of prediction markets could eventually lead to more standardized products, such as exchange-traded event contracts. For now, the message from Wall Street is clear: keep your bets away from the office.
As markets continue to digest a range of macro risks—from inflation data and geopolitical tensions to sector rotations—the line between personal speculation and professional conflict is getting sharper. Banks are making sure their employees know which side they're on.
