Goldman Sachs has prohibited its employees from trading prediction market contracts tied to companies, elections, financial markets and geopolitical events, becoming one of the highest-profile financial institutions to tighten internal rules as regulators increase scrutiny of the rapidly growing industry.
According to Bloomberg, the investment bank recently updated its personal trading policy to bar employees from wagering on event contracts involving specific companies, electoral outcomes, macroeconomic data, financial market performance, and geopolitical developments.
The move comes amid mounting concerns that prediction markets, which allow users to bet on the likelihood of future events, could create new avenues for insider trading, particularly for employees with access to confidential corporate or market-sensitive information.
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Goldman said staff who repeatedly violate the policy could face disciplinary action, including dismissal or the closure of their trading accounts. The bank also reserved the right to recover profits earned from prohibited trades.
Under the revised policy, if a trade is determined to be improper, Goldman can claw back any gains exceeding $200 or require that the amount be donated to a charitable organization.
When contacted by CNBC, a Goldman Sachs spokesperson declined to comment on the specifics of the revised policy but reiterated the firm’s longstanding position on insider trading.
The spokesperson noted that trading using material, nonpublic information is prohibited across every market in which Goldman operates.
Broad Range of Contracts Now Prohibited
The restrictions extend well beyond traditional securities trading. Employees are now barred from participating in contracts that speculate on whether Goldman itself will announce a corporate restructuring during a particular quarter or pursue a merger or acquisition.
The policy also prohibits trading on contracts linked to ceasefire timelines in ongoing armed conflicts, the future price of Bitcoin, regulatory approval of pending mergers and acquisitions, and other events where employees could possess privileged information unavailable to the public.
However, Goldman has stopped short of banning prediction market activity altogether. Employees remain free to participate in contracts related to sports and entertainment, where insider information is considered less likely to intersect with the firm’s business activities or client relationships.
Banks Adopt Different Approaches
Wall Street firms have been taking varied approaches to regulating employee participation in prediction markets as the platforms gain popularity.
According to Barron’s, JPMorgan Chase has adopted a more measured stance, advising employees to exercise caution before trading contracts related to the financial sector rather than imposing a blanket prohibition.
Meanwhile, hedge funds Point72 Asset Management and Balyasny Asset Management have introduced even stricter rules than Goldman by banning all prediction market trading in employees’ personal accounts, regardless of the subject matter.
The differing policies are seen as a pointer to the regulatory uncertainty surrounding an industry that has expanded rapidly over the past two years as prediction markets have evolved from niche platforms into venues attracting billions of dollars in trading volume.
Industry Faces Growing Regulatory Scrutiny
Goldman’s policy update follows what authorities have described as the first insider trading case involving a prediction market linked to a private-sector company.
In May, the Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice charged Michele Spagnuolo, a Google employee, with allegedly using confidential company information to profit from contracts traded on Polymarket.
According to the CFTC’s complaint, Spagnuolo, who allegedly traded under the username “AlphaRaccoon,” used inside knowledge relating to Google’s annual “Year in Search” rankings to place successful wagers.
Federal regulators alleged the activity generated approximately $1.2 million in profits.
The case marked a significant milestone because it demonstrated that insider trading laws can extend beyond conventional stock and options markets to prediction contracts tied to corporate events.
More Firms Expected To Tighten Rules
Bloomberg reported that among 50 companies surveyed, only three had formal policies governing employee participation in prediction markets, while two others said they were actively considering introducing restrictions.
Morgan Stanley said it already addresses the issue through its employee code of conduct.
At Bank of America, internal communications outlining new restrictions were reportedly being distributed to employees, according to a person familiar with the matter.
The issue has also reached the U.S. government.
In March, the White House warned officials against using nonpublic government information to trade prediction market contracts after unusual activity in futures markets preceded President Donald Trump’s public announcement that U.S. strikes against Iran would be paused.
The warning underscored growing concerns that government officials, like corporate insiders, could potentially exploit confidential information through prediction market platforms.
Together, Goldman’s tougher stance represents a notable shift given Chief Executive David Solomon’s previously positive comments about the emerging industry.
As recently as January, Solomon described prediction market platforms as “super interesting”. He also disclosed that he had met with the leaders of the two dominant companies operating in the sector.
The new policy suggests that while Goldman continues to recognize the commercial potential of prediction markets, it views the compliance risks associated with employee participation as high.
As prediction markets expand into areas covering corporate earnings, mergers and acquisitions, economic data releases, elections, and geopolitical events, financial institutions are facing a new challenge of ensuring that employees with access to confidential information do not use those platforms to gain an unfair trading advantage.
The latest policy update indicates that, for major Wall Street firms, prediction markets are no longer viewed solely as innovative forecasting tools. They are increasingly being treated as regulated financial markets that require many of the same compliance safeguards, surveillance measures and insider trading controls that already govern stocks, bonds and derivatives.