The top enforcement official at the Commodity Futures Trading Commission has issued a direct warning to traders operating in prediction markets, making it clear that insider trading rules will be enforced as scrutiny around the sector intensifies. Summary CFTC’s enforcement chief David Miller has warned that insider trading rules apply to prediction markets and said the agency is actively monitoring suspicious activity. Miller clarified that event contracts are treated as swaps, placing them under financial market laws rather than gambling frameworks. Speaking at New York University, enforcement director David Miller addressed speculation around the legality of trading on non-public information. “We are aware of the speculation about insider trading… We are watching,” he said, pushing back against narratives circulating online. “There’s a myth in mainstream media and social media that insider trading doesn’t apply in the prediction markets… That is wrong,” he added. Miller’s remarks mark one of the clearest signals yet that regulators intend to treat these platforms under existing market abuse frameworks. While outlining the agency’s approach, Miller said enforcement would be selective rather than broad-based. Cases involving misuse of confidential information will take priority, while minor violations may not attract the same level of attention. Prediction markets, which allow users to bet on real-world outcomes, have crossed $20B in monthly trading volume, drawing in both retail participants and institutional interest. Concerns now center on whether some participants are using privileged information tied to policy decisions or geopolitical developments. Regulators have also moved to clarify how these products are classified. According to Miller, event-based contracts should not be viewed as gambling instruments but as financial derivatives. “Our position is that event contracts are not gaming. The event contracts at issue are swaps. Insider trading law applies,” he said. Market manipulation concerns Enforcement efforts are expected to extend beyond insider trading, with the Commission monitoring market manipulation and compliance with anti-money laundering rules. Recently, lawmakers and regulators have pointed to a series of unusually well-timed trades, including bets placed ahead of major announcements linked to Donald Trump. In another widely discussed case, a trader reportedly earned more than $400,000 by predicting the capture of Nicolás Maduro before it became public knowledge. Trading activity tied to sensitive geopolitical developments, including tensions involving Iran and speculation around high-profile political figures, has further raised concerns about national security risks and market integrity. In response, Kalshi and Polymarket have both introduced updated rules designed to discourage insider-driven trades, as pressure from regulators and lawmakers continues to build. On Capitol Hill, multiple legislative efforts are now underway. Proposals such as the Public Integrity in Financial Prediction Markets Act of 2026 and the PREDICT Act have been proposed to restrict the use of non-public information, particularly by government officials.
