CFTC Warns Insider Trading Laws Apply to Prediction Markets

The U.S. Commodity Futures Trading Commission issued a firm warning on Tuesday that insider trading laws fully apply to prediction markets, with the agency's new enforcement director pledging active investigations into violations. Speaking at a panel at New York University, David Miller, who assumed the role of enforcement director earlier this month, emphasized that trading on misappropriated confidential information in these platforms will face prosecution, dispelling what he called a widespread misconception.

Miller, a former federal prosecutor appointed on March 2, addressed growing speculation about the legality of using nonpublic information in prediction markets, which allow users to wager on outcomes of events such as elections, geopolitical developments and economic indicators. "There's a myth in mainstream media and social media that insider trading doesn't apply in the prediction markets," Miller said. "That is wrong." He clarified that the agency would focus on cases involving "misappropriated information," such as tips from insiders or trades based on confidential data obtained through employment or partnerships, while exercising discretion to avoid pursuing...