CFTC Says Insider Trading on Prediction Markets Is Now an Enforcement Priority

David Miller, the CFTC's director of enforcement, told an audience at the industry's PREDICT conference in New York this month that insider trading on prediction-market contracts is now one of the agency's enforcement priorities, rejecting the argument that trading on nonpublic information in these markets is victimless. A federal prosecutor from the Southern District of New York, Nick Roos, speaking on the same panel, said his office shares that focus.

The theory the CFTC is using is misappropriation, not simple self-dealing: trading on your own knowledge isn't barred, but trading or tipping based on information taken in breach of a duty owed to its source - an employer or a government agency - is. The agency has already resolved one case on that theory: Gabriel Perez, a former White House teleprompter operator, agreed in an August 28 order to give up $107,539.02 in profits, pay a reduced $65,000 penalty, and accept a three-year trading ban after trading presidential-mention contracts using speech information from his job; the CFTC credited Kalshi's cooperation in that matter. Two more cases are pending: Gannon Ken Van Dyke faces parallel criminal and civil charges over roughly $400,000 in alleged profits trading Venezuela-linked contracts around the operation that removed Nicolás Maduro, and a Google engineer is accused of using advance access to the company's internal list of most-searched terms to make more than $1 million.

Not every prediction-market enforcement case fits the insider-trading label - the CFTC charged former Congressman George Santos with market manipulation, not insider trading, over contracts tied to his own attendance at the State of the Union, a case that has since settled. Miller named insider trading as the first of five current enforcement priorities, alongside market manipulation in energy markets, market abuse, retail fraud, and anti-money-laundering violations. Defendants in the pending cases are contesting whether some of the trades even fall under U.S. jurisdiction, and whether certain event contracts count as "swaps" under the Commodity Exchange Act at all - questions whose outcome could shape how far the CFTC can reach into offshore trading on these platforms.

Prediction markets aren't sweepstakes casinos, but the two products are competing for a lot of the same casual betting attention right now, and this is a reminder that regulators are increasingly unwilling to accept "it's just a prediction market, not real gambling" as a reason to look the other way on any part of how these platforms operate.