CFTC Fires Insider Trading Warning Shot as JPMorgan and Paradigm Eye Prediction Market Ventures

The U.S. Commodity Futures Trading Commission (CFTC) has issued a stark warning that insider trading laws apply to prediction markets, directly challenging a growing industry assumption. The enforcement notice comes as Wall Street giants like JPMorgan Chase and crypto venture firm Paradigm signal major moves into the booming sector, with Paradigm reportedly building a dedicated trading terminal for professionals.

Why is the CFTC putting prediction markets on notice?

David Miller, the CFTC’s director of enforcement, used a speech at New York University School of Law on Tuesday to deliver a pointed message to the industry.

Miller said, “Unfortunately there’s a myth in mainstream media and social media that insider trading doesn’t apply in the prediction markets.” To which he added, “That is wrong.”

Miller laid out in clear terms that the Commodity Exchange Act’s anti-fraud provisions apply with full force to prediction market event contracts, which the CFTC classifies as swaps. The misappropriation theory of insider trading, under which liability attaches when a trader uses material non-public information in breach of a duty of trust or confidence, is the operative framework.

The CFTC’s posture follows a February enforcement advisory issued after two cases on Kalshi involving the misuse of nonpublic information, one involving a political candidate who traded on his own candidacy and a second where a staff member of MrBeast’s YouTube channel traded on inside knowledge about the channel’s performance. 

Miller flagged injury contracts in sports, trades by government employees using nonpublic information, and conduct by anyone subject to a workplace confidentiality agreement as areas of heightened concern.

Are JPMorgan and Goldman Sachs entering prediction markets?

JPMorgan Chase CEO Jamie Dimon shared insights on what the bank is working on in an interview with CBS News. He spoke on how prediction markets have moved from the fringes of finance to the attention of the industry’s most senior executives. 

The JPMorgan chief said it was “possible one day we’ll do something like that,” while carving out sports and politics as categories the bank would not enter. “There’s a bunch of stuff we won’t do,” he said. “And obviously, we have strict rules around insider information.”

When asked if he felt prediction markets were more about gambling or if they were an investment, Dimon said, “I think 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. And you think you know better than the other person.” 

JPMorgan is also reviewing internal guidelines governing how its staff interacts with existing platforms such as Kalshi and Polymarket.

In January, Goldman Sachs CEO David Solomon said that they are exploring prediction markets for opportunities, adding that they were in talks with the leadership of the two major prediction market firms to learn more.

Paradigm’s trading terminal could change the competitive picture

Crypto venture firm Paradigm is taking a more hands-on approach. The firm is developing a prediction markets trading terminal aimed at professional traders and market makers, led by partner Arjun Balaji, who has been working on the project since late 2025.

Paradigm, a major investor in Kalshi, reportedly joined three successive funding rounds in 2025.

However, what it said it was working on was to create an internal market-making desk in prediction markets. It said that it is working with researchers on the feasibility of constructing prediction market indices, instruments that would bundle multiple event contracts into a single tradeable package, much as the S&P 500 aggregates the stocks of 500 companies. 

Paradigm has already begun assembling prediction market data into a public dashboard. Fortune cited sources close to the matter, saying Paradigm’s startup is not in competition with Kalshi’s platform.

Paradigm’s terminal project sits within the venture capital firm’s pivot beyond crypto. The firm is reportedly raising up to $1.5 billion for a new fund spanning artificial intelligence and robotics.

The CFTC issued an advance notice of proposed rulemaking on March 12, seeking public comment on how to regulate event contract derivatives. Clearer rules may be on the way, but for now, both firms mulling entry and traders already active in the market have been left in little doubt that the era of regulatory ambiguity is drawing to a close.

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