SEC Monitors Prediction Markets for Fraud and Insider Trading

The Securities and Exchange Commission is monitoring prediction markets for fraud, market manipulation, and insider trading. SEC Enforcement Director David Woodcock stated that the agency expects to bring future cases, specifically targeting trades linked to company earnings or key performance indicators.

While the Commodity Futures Trading Commission holds primary oversight of platforms like Kalshi and Polymarket by treating bets as swaps, the SEC asserts authority over products connected to securities. The CFTC has already pursued cases involving a U.S. soldier and a White House teleprompter operator accused of using classified information.

Prediction markets are also facing state-level legal challenges. New York state has sued several platforms, alleging they operate as unlawful gambling businesses, while the New York City Council is investigating their marketing practices. The platforms maintain they are federally regulated financial exchanges, a dispute that is likely headed to the U.S. Supreme Court.