Can Employers Ban Employees From Trading on Prediction Markets?

Yes, employers can ban employees from trading on prediction markets — and after OpenAI fired an employee in February 2026 for using confidential information to trade on event contracts, a growing number of companies are adopting explicit policies. The incident exposed a gap that most corporate compliance frameworks hadn't addressed: prediction markets create new insider trading vectors that fall outside traditional securities regulation.

The OpenAI Incident

In February 2026, OpenAI terminated an employee for allegedly using material non-public information — specifically, advance knowledge of product announcements and partnership decisions — to trade on prediction market contracts. The employee reportedly profited from contracts tied to AI industry events on platforms that list technology-related markets.

Following the firing, OpenAI updated its internal policies to explicitly prohibit employees from using insider information for prediction market trading. The company's response was notable for how quickly it moved, suggesting the issue had already been escalating internally before the termination.

S&P Global's analysis of the incident noted that prediction markets "create insider trading loopholes as enforcement lags" — pointing out that existing securities law wasn't designed for event contracts and that corporate policies are currently the primary line of defense.

Why This Is Different From Stock Trading

Most large companies already have policies restricting employee trading in their own stock during blackout periods or when in possession of material non-public information. Prediction markets create a fundamentally different challenge:

• Broader information surface — an employee doesn't need to know about earnings to profit. Knowledge about product launches, partnerships, regulatory filings, or even internal restructuring can all be monetized through event contracts
• Cross-company impact — information about Company A's decisions can be used to trade contracts about Company B, an industry trend, or a regulatory outcome
• Regulatory ambiguity — prediction market contracts aren't securities in most jurisdictions, meaning traditional insider trading prohibitions may not apply
• Platform anonymity — crypto-native platforms like Polymarket have historically offered pseudonymous trading, making detection harder than traditional stock surveillance

What Companies Are Doing

The corporate response in 2026 has followed a few patterns:

Explicit Prediction Market Policies

Companies with employees who have access to market-moving information — particularly in tech, finance, and pharmaceuticals — are adding prediction market trading to their restricted activities lists. These policies typically mirror existing personal trading policies but extend them to cover event contracts.

Expanded Definition of "Material Non-Public Information"

Some compliance teams are broadening their MNPI definitions to cover information that could move prediction markets, not just stock prices. This includes product roadmaps, partnership negotiations, hiring decisions for high-profile roles, and regulatory engagement timelines.

Trading Disclosure Requirements

A middle-ground approach requires employees to disclose prediction market trading activity rather than banning it outright. This allows compliance teams to monitor for potential conflicts without imposing blanket restrictions.

The Legal Landscape

The legal framework around prediction market insider trading is still forming. Key developments:

• The Prediction Market Integrity Act of 2026, introduced March 26, would specifically prohibit government employees from using insider information on prediction markets — but doesn't directly address private-sector employees
• California moved in March 2026 to ban state officials from insider prediction market trading
• The CFTC has enforcement authority over Kalshi as a designated contract market, but its jurisdiction over other platforms remains contested
• Both Kalshi and Polymarket updated their terms of service in March 2026 to explicitly prohibit insider trading on their platforms

For private employers, the current legal answer is clear: companies can restrict employee trading on prediction markets as a condition of employment, just as they restrict personal stock trading. The murkier question is whether existing federal law — particularly the CFTC's anti-manipulation authority — covers prediction market insider trading by private individuals.

What This Means for the Industry

For B2B operators and intelligence layer providers in the prediction market space, the employer policy trend creates both challenges and opportunities:

• Identity verification and KYC become more important as platforms face pressure to detect and prevent insider trading
• Market surveillance tools — the same kind used in traditional exchanges — will likely become standard for prediction market operators
• Compliance-as-a-service is an emerging need, particularly for platforms that want to offer institutional or corporate prediction market products
• The reputational risk of being associated with insider trading is pushing platforms toward more aggressive self-regulation

The OpenAI case was the canary. Every company with employees who possess market-relevant information is now asking the same question: do we have a prediction market policy? If the answer is no, the clock is ticking.

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Adkuu tracks regulatory and compliance developments across prediction markets and the broader iGaming ecosystem.