Some Wall Street Banks have added rules preventing their employees from making bets on prediction-market websites.
Reuters reported that the banks in question have added betting rules to their employee codes of conduct. Some have barred employees from making bets on contracts with ties to financial markets or political events.
The sites, including Polymarket and Kalshi, allow people to buy contracts and make predictions on sports, politics, and cultural events. On Kalshi, contracts range from whether the Democrats or Republicans will in the midterm elections, to who will win the Big Brother Season 28.
If a prediction is correct, a person can cash out for a profit. But the contracts also can be sold like a commodity. Also, people are not betting against the house like in a traditional sports book; the value of contracts is solely determined by traders.
Critics have said that the markets create the possibility for insider trading across a wide spectrum of areas. For example, Master Sgt. Gannon Ken Van Dyke faces criminal charges after prosecutors said he used inside information on the capture of Venezuelan President Nicolas Maduro to make $400,000. Van Dyke has pled not guilty.
According to Reuters, Wall Street financial firms have become concerned about potential abuses and the use of insider information, as well.
The outlet added that a Goldman Sachs memo prohibited staff from participating in event-based contracts linked to financial markets and political events. The memo focused on situations that could create real or perceived conflicts of interest with the bank or clients.
Reuters reported that if a person violated the policy, they could be disciplined or even fired. The wire service reported that other large financial institutions, such as Morgan Stanley and JPMorgan Chase also had policies in place.
The prediction markets themselves have attempted to implement policies to deal with insider trading concerns following multiple proposals by lawmakers to address the issues.
"Sports prediction contracts are sports bets—just with a different name. And yet, these contracts are currently offered in all fifty states in clear violation of state and federal law," Adam Schiff, D-California, said earlier this year.
