What HR Teams Can Do Now to Mitigate Risks Associated With Employees Participating in Prediction Markets
Prediction markets allow participants to profit financially by entering into contracts based on the outcomes of a virtually unlimited universe of future events. For most users, trading on the outcome of a World Cup game or whether the U.S. will confirm that aliens exist before 2027 can seem like relatively low-stakes wagers. But when employees use their insider positions for personal profit, the game changes.
Consider the following: Joseph Bolt is a product design manager at a global technology firm, and he’s feeling good. His team has spent the past year working on the next new hot gadget for dog and cat lovers: AI-enabled collars that provide owners with both real-time and predictive health updates on their furry friends.
A day before the product’s launch, Joseph sits at his desk and pulls up Kalshi, the booming prediction market platform where he’s had an account for a couple of weeks. Using information he learned through his position as a product design manager, Joseph wins $10,000 by placing bets on the next biggest technology item for pet owners.
Although Joseph is a fictional character, the emerging risks that prediction markets pose to companies are real. While the company information Joseph used for his personal profit may seem benign, his actions have increasingly landed employees like him (and their employers) under the watchful eye of state and federal regulators.
For HR leaders, prediction markets create new risks around the sharing of confidential information that existing company policies are often unequipped to handle. However, as this article addresses, there are practical steps companies can take to address compliance gaps created by the booming new industry of prediction markets.
What Is the Current Regulatory Landscape?
As prediction markets have continued to rise at a meteoric pace, a legal debate has cropped up that asks the question: Should these markets be regulated at the state or federal level?
Popular prediction market platforms such as Kalshi and Polymarket characterize event contracts as federally regulated derivatives falling within the Commodity Exchange Act and subject to the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC) oversight. The CFTC characterizes prediction market event contracts as federally regulated commodity derivatives, and has become increasingly aggressive in defending its authority over these designated contract markets.
State regulators disagree, and consider the contracts, particularly sport event contracts, as gambling activity subject to state gaming laws. State attorneys general throughout the U.S. have filed numerous lawsuits against prediction market platforms for violating state gambling laws and want to ban the markets from operating in their states. These lawsuits are currently making their way through the court system, resulting in an increasingly fragmented and murky legal landscape.
In June 2026, the CFTC proposed a rule to create a more structured framework for evaluating whether prediction market contracts are contrary to the public interest. Recent compliance policy reforms by prediction market platforms indicate that these operators are preparing for a more heavily regulated environment, such as Kalshi’s announcement that it has developed a framework to address insider trading and manipulation concerns for certain types of business industries.
Importantly for HR teams, some prediction market platforms are also beginning to police themselves by requiring users to report their employer information before they can utilize the platforms, further raising the potential risk exposure to companies.
What Risks Do HR Leaders Face With Prediction Markets?
The average company’s compliance policy was most likely not designed to address the type of activity we’re now seeing with employee participation in prediction markets.
The reason for this is because most employers’ existing compliance policies focus on the use of material nonpublic information (MNPI) in connection with trading stocks, bonds, and other securities regulated by the U.S. Securities and Exchange Commission (SEC). However, company information that doesn’t fit the specific definition of MNPI can still create a broader risk for employers whose employees have access to confidential information not subject to regulation by a federal agency like the SEC. The SEC polices the markets for fraudulent use of non-public information for personal benefit or to manipulate the public markets.
This means that prediction market risk is not limited solely to publicly traded companies, as information need not affect a company’s stock price to obtain an unfair advantage in a prediction market.
Private companies that may have less stringent compliance policies can still possess confidential information capable of influencing prediction market contracts, even if the information does not meet the traditional definition of MNPI. This includes entities such as universities, healthcare organizations, government contractors, and professional-services firms.
Nonpublic information that employees can use to profit in prediction markets encompasses a much wider range of seemingly benign information, such as information related to:
- Product launches and delays
- Regulatory approvals or enforcement actions
- Customer trends or operational metrics
- Changes to executive leadership or the workforce, and
- Government contracts or funding decisions.
HR leaders should also be aware of reputational risks resulting from regulatory investigations or civil or criminal charges due to employee misuse of prediction market platforms. The CFTC has made it clear that the misuse of confidential information obtained through a relationship of trust and confidence may constitute insider-trading-type misconduct. Recent enforcement actions demonstrate regulators’ willingness to pursue employees accused of using confidential employer information to trade event contracts.
Additionally, public reports often identify the employer whose information was allegedly misappropriated, leading to unwanted or negative press exposure and a loss of trust in the company from its customers, investors, business partners, and employees. Even unsubstantiated allegations may still generate significant adverse publicity.
In the course of an investigation, regulators may seek employers’ internal business records, communications and policies. They may also interview witnesses. Plus, employers will likely need to devote substantial resources to respond to a CFTC investigation of an employee.
What Are Some Practical Steps HR Teams Can Take Now?
HR teams should begin by reassessing whether the company’s existing confidentiality, insider trading, ethics, conflicts of interest and acceptable use policies adequately address prediction markets and event contracts. Employers should consider adding clear language prohibiting employees from using any confidential information for personal wagers or trades, regardless of whether that information would qualify as traditional MNPI.
Next, HR should partner with legal, compliance and business leaders to identify higher-risk roles and functions within the company, including employees with access to sensitive customer data, product timelines, regulatory developments, government contracts, workforce changes, M&A activity, cybersecurity issues or clinical and research information. To identify these roles, employers should consider targeted restrictions, pre-clearance requirements, disclosure obligations or attestations tailored to the organization’s industry and risk profile.
HR should also incorporate prediction-market risks into employee training and onboarding. Training should explain what prediction markets are, give concrete examples of prohibited conduct, and reinforce that company and client information may not be used for personal financial gain.
Finally, employers should also document compliance expectations in handbooks, training materials, and employee certifications, while reviewing whether company devices and systems should be restricted from accessing prediction-market platforms. These steps can help employers close policy gaps, reduce regulatory and reputational risk, and show that they are responding proactively to an emerging compliance issue.
Tory Summey, Partner at Parker Poe, and Tiffany Rowe, Counsel at Parker Poe, contributed to this article.
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