CFTC’s Top Enforcement Official Debunks the ‘Myth’ That Insider Trading Law Does Not Apply to Prediction Markets

(AsiaGameHub) –   During a March 31 address at New York University Law School, David Miller—recently appointed Director of Enforcement at the Commodity Futures Trading Commission (CFTC)—told the audience, “the era of regulation by enforcement is over,” marking a major shift in the commission’s strategy. 

In his speech, he emphasized that under the CFTC’s current leadership, the commission will focus on its core mission of “policing fraud, abuse, and manipulation” rather than setting policy. 

He also issued one of the clearest warnings to date for prediction market traders, stating the commission will “aggressively detect, investigate, and, where appropriate, prosecute insider trading” in these markets. 

Miller underscored that using inside information to trade on prediction markets isn’t a victimless crime and carries “serious consequences for market integrity and trust.”

Miller Affirms Prediction Markets Are Not Exempt From Insider Trading Rules

Miller used his NYU speech to outline five key enforcement priorities for the CFTC, with insider trading and market manipulation at the top of the list. 

He specifically called out what he described as a “myth in the mainstream media and social media” that prediction markets are exempt from insider trading laws, noting those claims are “wrong.”  

Miller explained that the Commodity Exchange Act and Rule 180.1—both modeled after federal securities laws—allow the agency to treat certain types of insider trading in commodity and swap markets as fraud. 

A trade comes under scrutiny when it involves information someone was obligated to protect, he said, stressing that regular informed trading isn’t a problem and the agency targets those who “tip or trade with misappropriated information.”

Prediction market exchanges also have a responsibility to protect their platforms, according to Miller, who called them the “first lines of defense” against insider trading and manipulation. He noted exchanges have a statutory obligation to “protect markets from abusive practices” and only list contracts that aren’t “susceptible to manipulation.”

Former CFTC regulator Carl Kennedy explained these responsibilities to CasinoBeats in a February interview, saying: 

“The CFTC is a mighty strong agency, but it’s a few people,” which is why Congress gave it the authority to let exchanges “help the agency regulate these markets.” He added, “If you are a registered exchange … one of your roles is also to be a regulator deputized by the CFTC to police your own market.”

As part of their duty to police their own markets, Miller said exchanges have “an obligation to have appropriate surveillance, compliance practices and procedures” in place to “promote fair and equitable trading.” 

During his speech, Miller also highlighted a recent case involving Kalshi, where a MrBeast editor used job-related information to place trades on the platform.

He also pointed to the CFTC’s new information-sharing agreement with MLB as an example of the agency’s proactive approach to integrity risks in event contract markets. 

Washington’s Pressure on Insider Trading in Prediction Markets Grows

Miller’s NYU remarks come as the CFTC and prediction markets face increased pressure from Capitol Hill to stamp out insider trading. 

On March 29, Sen. Elizabeth Warren (D-MA), along with 41 other lawmakers, sent a letter to CFTC Chairman Michael Selig and the Office of Government Ethics calling on them to issue formal guidance to federal employees, warning against using inside information to trade on prediction markets.  

In that letter, lawmakers point to suspicious trading ahead of the January capture of Nicolás Maduro by U.S. Armed Forces, well-timed bets that appeared to anticipate March’s joint U.S.-Israeli strikes on Iran, and speculation over former Department of Homeland Security Secretary Kristi Noem’s job status. 

Congress is also using legislation to target insider trading on prediction markets, introducing several bills since the start of the year, including:

• The PREDICT Act: Prohibits members of Congress and senior federal officials from trading on political event contracts. 
• The Public Integrity in Financial Prediction Markets Act: Bans federal officials from trading when they hold material nonpublic information obtained through official duties.
• The End Prediction Market Corruption Act: Bars the president, vice president, and members of Congress from trading event contracts entirely.

Given the focus on insider trading in Miller’s speech, it seems the CFTC is trying to send a message before the next scandal breaks: while prediction markets may be new politically, the agency doesn’t see insider trading as a legal gray area and has the power to pursue traders who misuse nonpublic information.