CFTC to Prediction Markets: No Free Pass on Insider Trading—JPMorgan and Paradigm Are Watching From the Sidelines

The CFTC just brought a fire extinguisher to the prediction markets pyre, and Wall Street is taking notes with that classic mix of curiosity and plausible deniability.

In a speech at NYU School of Law on Tuesday, CFTC Director of Enforcement David Miller made one thing crystal clear: insider trading laws absolutely apply to prediction markets. "There's a myth in mainstream media and social media that insider trading doesn't apply," Miller said. "That is wrong." For those who thought "what happens on Polymarket stays on Polymarket," the regulator has news: the blockchain remembers everything, and so do we.

The enforcement chief laid out exactly how the Commodity Exchange Act's anti-fraud provisions cover prediction market event contracts, which the regulator classifies as swaps. The misappropriation theory—liability for using material non-public information in breach of fiduciary duty—is the framework in play. Translation: if you're trading on information you learned because someone trusted you with it, the CFTC would like to have a word.

This posture follows a February advisory tied to two Kalshi cases: a political candidate who traded on his own candidacy, and a MrBeast YouTube staffer who traded on inside channel performance intel. Miller flagged sports injury contracts, government employees with nonpublic info, and anyone bound by workplace confidentiality agreements as particular trouble spots. Apparently the "but I really believed my candidate was going to win" defense doesn't hold up in federal court.

Meanwhile, JPMorgan is keeping the door cracked open. CEO Jamie Dimon told CBS News it's "possible one day we'll do something like that," but drew firm lines around sports and politics. "We have strict rules around insider information," he noted. When pressed on whether prediction markets are gambling or investing, Dimon offered his take: "For the most part, it's more like gambling. But there are areas where you could say, 'No, it's investing.' You are deeply knowledgeable. You're taking the other side of a bet." In other words: degenerate, but degnerate with a sophisticated veneer.

Goldman Sachs is further along in its exploration. CEO David Solomon said in January they're in talks with the two major prediction market firms' leadership. Goldman exploring prediction markets is like watching a whale circle a new liquidity pool—curious, calculating, and definitely not ready to commit until the regulatory waters look less shark-infested.

Paradigm is going a different route. The crypto VC is building a dedicated trading terminal for professional traders and market makers, led by partner Arjun Balaji. The firm, which backed Kalshi through three consecutive 2025 funding rounds, is also setting up an internal market-making desk and exploring prediction market indices—bundling multiple event contracts into single tradeable instruments, like how the S&P 500 aggregates 500 stocks. A public data dashboard is already live. Because nothing says "we're serious about this" like building infrastructure while everyone else is still arguing about regulations on Twitter.

Crucially, Paradigm's effort isn't positioned