Wall Street: Major Banks Restrict Employee Trading on Prediction Markets

The financial world is reacting to the rapid rise of prediction markets. Major Wall Street banks are revising their internal policies and significantly restricting employee betting on certain events. The aim is to prevent potential conflicts of interest and the exploitation of non-public information.

These markets allow users to bet on the outcome of real-world events, from election results to economic indicators and weather patterns. Prominent platforms like Kalshi and Polymarket are fueling this growth. This development is now prompting bank compliance teams to intervene, especially ahead of key political events like the US midterm elections.

Numbers and facts

Goldman Sachs has already taken concrete steps. An internal memo explicitly bars its workforce from trading event-based contracts tied directly to macroeconomic indicators or political races. A source with knowledge of the situation noted that the policy targets activities that could spark “real or perceived conflicts of interest with the bank, its clients or the broader financial industry.” Violations can lead to severe consequences, including immediate termination and forfeiture of any financial returns, as first reported by Bloomberg News.

However, these restrictions are not blanket bans on all prediction-based gambling. Staff are still permitted to wager on non-sensitive, consumer-facing categories such as sports results and entertainment outcomes.

Background

Goldman Sachs is not alone in this crackdown. Bank of America prevents its employees from trading contracts linked to company-specific milestones, macroeconomic figures, and financial services events. A spokesperson for Bank of America confirmed the update, stating the bank recently provided updates “to more explicitly outline prohibited activities for employees and to offer examples.”

JPMorgan Chase has extended its existing insider-trading protocols to encompass these emerging platforms. A bank source confirmed their code of conduct strictly prohibits employees from leveraging any non-public, confidential information to place wagers on prediction markets. Morgan Stanley has also revised its employee code of conduct to include specific rules addressing prediction market wagers, although details were not disclosed.

The threat to financial institutions from cyberattacks is not new and affects the entire industry, as recent incidents at MGM Resorts and Caesars demonstrate. MGM Resorts reported a cyberattack on September 11, which managed to cripple parts of its infrastructure for about 10 days. Likewise, Caesars Entertainment was affected by a similar incident just days earlier, compromising sensitive data and leading to class-action lawsuits against both companies. These attacks highlight the importance of protecting system and information integrity, even in the context of betting markets.

Why it matters for German players

These developments on Wall Street do not directly affect German gambling enthusiasts, as they pertain to internal compliance rules of large financial institutions. Nevertheless, they underscore the global importance of regulations concerning betting and prediction markets.

For German players, it is crucial to focus on online casinos that hold a license from the Gemeinsame Glücksspielbehörde der Länder (GGL). Only these providers operate legally and are strictly supervised. The State Treaty on Gambling 2021 (GlüStV 2021) has established a legal framework that prioritizes player protection. This includes important limitations such as a 1 Euro per spin stake limit on slot machines and a monthly deposit limit of 1,000 Euros via the cross-state player exclusion system LUGAS. These measures are designed to promote responsible gambling and prevent excessive play. Providers with licenses from Malta (MGA) or Curacao are not subject to these German protective measures. There, stakes can be much higher and there are no exclusion systems.

What it means for GGL-licensed casinos

For GGL-licensed casinos in Germany, the news from Wall Street does not change operations. The GGL places great importance on transparency and player protection. The strict requirements of the GlüStV 2021 and supervision by LUGAS ensure that there cannot be comparable conflicts of interest or risks of information exploitation in licensed German online casinos, as those that play a role in prediction markets. Every GGL provider must meet stringent requirements to exclude manipulation or misuse of information. This creates a safe and regulated environment for players.

“The policy targets activities that could spark real or perceived conflicts of interest with the bank, its clients or the broader financial industry.” – A source with knowledge of the situation at Goldman Sachs