Goldman Sachs and Morgan Stanley Strictly Restrict Employee Participation in Prediction Markets to Prevent Use of Insider Information

As prediction markets such as Polymarket and Kalshi are integrated into mainstream finance, Wall Street compliance departments are tightening their grip. As of July 10, 2026, major financial institutions, including Goldman Sachs, have issued new guidelines strictly restricting employees from betting on political and financial outcomes they are responsible for analyzing. This measure stems from concerns that insider trading risks could damage not only individual careers but also the reputations of the institutions.

The use of insider information in prediction markets is becoming a regulatory target as dangerous as in traditional stock markets, and this is redefining compliance standards across the entire financial sector.

In early July 2026, Goldman Sachs updated its personal trading policy to explicitly prohibit participation in financial and political-related prediction markets. Notably, this measure includes a strong warning that repeated violations could be grounds for dismissal. This suggests that prediction markets are being viewed not as mere entertainment, but as financial activities with serious regulatory risks.

Goldman Sachs Sets the Standard for Regulatory Tightening

According to Goldman Sachs' new policy, employees can only participate in prediction markets for sports and entertainment. The intent is to fundamentally block financial sector employees from using non-public information obtained through their work to bet on election results or interest rate decisions. These preemptive compliance measures are becoming an industry-wide standard, moving beyond suspicions of individual misconduct.

• Goldman Sachs' introduction of 'Sports and Entertainment Only' trading rules
• Explicitly stating the possibility of employment contract termination in case of rule violations
• Redefining prediction markets as high-risk zones for insider trading

The decisive factor for this tightening of regulations is the recent case of suspected insider trading by a Google employee. The employee is under investigation by federal authorities for allegedly earning approximately $1.2 million on Polymarket using non-public information. As cases of information misuse on decentralized platforms leading to actual profits are confirmed, the anxiety of compliance officers at financial firms has reached its peak.

Morgan Stanley is also joining this trend by strengthening its internal guidelines. While the specific details of Morgan Stanley's internal memo have been less publicly disclosed compared to Goldman Sachs, the direction of strictly limiting participation in prediction markets is known to be the same. This shows that Wall Street as a whole perceives prediction markets as a potential spark for legal disputes.

Pressure from Regulatory Authorities and the July 27 Deadline

The U.S. Commodity Futures Trading Commission (CFTC) is also moving urgently. The CFTC is reviewing a new rule proposal regarding event contracts and public interest determinations, with the deadline for collecting public hearing comments scheduled for July 27, 2026. As regulatory authorities tighten the reins to ensure the integrity of prediction markets, the preemptive response from banks is expected to accelerate further.

However, some point out that completely blocking the participation of the most well-informed financial experts could reduce the accuracy of 'collective intelligence,' which is the essence of prediction markets. This is because if the expert groups that guaranteed market liquidity and predictive power leave, a paradoxical situation could arise where regulation actually hinders market efficiency.

The tension between traditional financial compliance systems and decentralized prediction platforms is expected to be a major issue in the financial market in the second half of 2026. The CFTC's final decision, scheduled for late July 2026, will be a significant watershed that determines not only the scope of bank employees' activities but also the direction of the entire prediction market industry.