SEC signals prediction-market enforcement over fraud and insider trading

The Securities and Exchange Commission is monitoring prediction markets for insider trading and market manipulation, with its enforcement director, David Woodcock, saying the agency expects cases involving trading on the platforms.

Woodcock said the SEC was following the sector “very closely” and needed to be ready when people commit fraud or other securities-law violations. “I suspect you will see activity in that space,” he said.

The comments point particularly to contracts tied to company earnings, key performance indicators or other securities-linked measures. Such products may fall within the SEC’s jurisdiction, even though the Commodity Futures Trading Commission has primary oversight of platforms including Kalshi and Polymarket’s US arm.

As reported in September, issuer-specific contracts tied to earnings, production and share-price outcomes have raised the question of when an event market becomes a security-based swap. Under the 2010 Dodd-Frank law, the CFTC generally regulates swaps while the SEC oversees securities-based swaps, which are tied to a single security.

The agencies have been reviewing where that line falls. They agreed in March to coordinate on definitions, jurisdictional boundaries, oversight and data sharing, then jointly sought public comment in June on definitions affecting swaps, security-based swaps and emerging products.

The SEC has since approved Cboe Global Markets’ plan to offer options linked to company-performance measures, including Citigroup’s per-share earnings and Apple’s iPhone sales revenue. Meanwhile, Representative Sean Casten and seven House Democrats have asked the SEC to clarify its authority over event contracts referencing individual securities, indexes and related financial metrics, arguing that contracts without suitable safeguards can be susceptible to manipulation and insider trading.

The CFTC has been the lead regulator of event-contract exchanges for more than three decades and regards election and sports bets as swaps. Trading on CFTC-registered prediction markets exceeded $25 billion in 2025, according to the agency’s June rule proposal.

Kalshi and Polymarket said they do not condone insider trading, monitor risks across their platforms and alert regulators to suspicious activity.