Wall Street banks are tightening employee rules for prediction markets as concerns rise over confidential information. Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Bank of America have updated policies. The measures target insider trading risks and conflicts involving event contracts.
Goldman Sachs has prohibited employees from contracts related to financial markets, elections, geopolitics, and macroeconomic data, according to Reuters.
The restriction applies to events related to the bank, its clients, or the financial sector. Employees may still trade sports and entertainment contracts when no real or perceived conflict exists.
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How Wall Street Limits Staff Trading
The bank said that in case of repeated violation, disciplinary measures will be taken in accordance with the new internal rules. Employees may also lose profits earned from prohibited trades. The policy aims to resolve conflicts prior to their impact on the conduct of employees or trust of clients.
Morgan Stanley has also added similar rules to its employee code of conduct. The bank, however, has not provided complete information about the extent of those limitations. Its move is a sign of caution among financial institutions’ prediction markets and compliance teams.
Bank of America recently gave its employees clearer examples of banned activity. It has a policy limiting contracts related to company developments, economic data, and financial services. JPMorgan already bars staff from using confidential information, including through prediction markets.
The policy shift comes in the wake of a federal case against Google software engineer Michele Spagnuolo. Prosecutors allege that he used private Google search data to earn more than $1.2 million on Polymarket. The charges are merely accusations, and he is considered innocent until proven guilty.
What Triggered the Prediction Markets Investigation
The Justice Department complaint alleges that Spagnuolo had access to internal Google trend information prior to making trades. Prosecutors said he used an account called “AlphaRaccoon” between October and December 2025. He apparently lost approximately $2.75 million on future search deals.
The trades earned $1.2 million after Google made the information public. The case has brought more scrutiny to prediction markets and how they can identify informed trading and potential manipulation.
The House Oversight Committee requested records from Polymarket and Kalshi following reports of suspicious trades. The investigation involved military and political contracts, one of which allegedly involved a U.S. Army sergeant. He allegedly made over $409,000 off classified information related to a scheme involving former Venezuelan president Nicolás Maduro.
Why Prediction Market Oversight Is Expanding
Those claims are still pending in court. Congress has looked into regulation of prediction markets trading by government officials who have access to sensitive information.
Operators have responded by expanding their internal compliance and market systems. Kalshi formed an independent surveillance committee and partnered with Solidus Labs to monitor suspicious activity and possible manipulation.
It also added employer disclosures and risk scores to the contracts related to corporate performance, national security, and other sensitive areas.
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