Goldman Sachs Bans Prediction Market Bets — Wall St Crackdown

Goldman Sachs is banning its employees from betting on prediction markets tied to companies, elections, macroeconomic data and geopolitics — and it is threatening dismissal for repeat violators. The policy, revealed July 9, 2026, makes Goldman the most aggressive mover yet in a coordinated Wall Street crackdown on platforms like Polymarket and Kalshi, with JPMorgan Chase updating its own global compliance framework the same day and Morgan Stanley and Bank of America tightening their rules as well.

The details of Goldman’s memo are striking for how far they reach. Staff are barred from event-based contracts that could create a real or perceived conflict with the bank, its clients, or the broader financial industry — a definition that sweeps in bets on Federal Reserve decisions, corporate earnings, merger outcomes, election results and geopolitical events. Sports and entertainment markets are exempt. Employees who breach the rules more than once risk losing their jobs, and the bank has reserved the right to claw back winnings above $200 or direct them to charity.

The trigger for the industry-wide rethink traces back to May 2026, when the CFTC and the Department of Justice brought a historic criminal indictment against a Google software engineer, Michele Spagnuolo, who allegedly operated pseudonymously on Polymarket under the handle "AlphaRaccoon." Prosecutors charged him with wire fraud and commodities manipulation — the first case of its kind — and in doing so put every compliance department in America on notice that event contracts can carry the same insider-trading exposure as securities.

For banks, the risk calculus is obvious once stated: employees at major financial institutions routinely possess material nonpublic information — about deals, about client flows, about economic data previews and central bank thinking — that maps directly onto contracts traded on prediction platforms. An M&A banker betting on whether a merger closes, or a rates trader betting on the next Fed move, is a regulatory scandal waiting to happen. Until this week, most banks had no explicit policy covering it.

The crackdown arrives just as prediction markets hit the mainstream. Polymarket and Kalshi have grown explosively ahead of the November 2026 midterm elections, with contract volumes on political outcomes reaching levels that rival small futures markets. Kalshi operates under CFTC regulation in the United States, while Polymarket — long offshore — has been working its way back into the US regulatory perimeter. Google has even moved to integrate prediction market data into its finance AI tools, citing the platforms’ track record as forecasting instruments.

The platforms are responding to the scrutiny rather than fighting it. Kalshi has introduced enhanced employment verification tools designed to flag traders whose jobs give them privileged information about the contracts they trade. Polymarket has scaled up its market surveillance through data partnerships with analytics firms including Chainalysis and Palantir, aiming to detect suspicious trading patterns before regulators do. Both platforms have also placed new restrictions on insider trading as US senators draft legislation to formalize the rules.

There is a rich irony in Wall Street’s posture. Banks themselves are increasingly interested in prediction markets as data sources — trading desks watch election odds the way they watch bond yields, and research departments cite Polymarket probabilities in client notes. The institutions are not rejecting the markets; they are drawing a line between consuming the information and letting employees trade on it.

Regulators are watching the space with growing intensity. The CFTC under the current administration has taken a broadly permissive stance toward event contracts as a product category, even as it pursues individual bad actors. That combination — legal markets, aggressive enforcement — is exactly the environment in which corporate compliance policies matter most, because the platforms are too big to ignore and too risky to leave ungoverned.

For employees, the practical impact varies by firm. Goldman’s policy is closest to an outright ban on financial, political and geopolitical contracts. JPMorgan’s updated framework similarly restricts staff from trading event contracts on the major platforms. Morgan Stanley and Bank of America are described as tightening rules short of total prohibition, focusing on pre-clearance and conflict screening. Industry recruiters note the rules now form part of the compliance briefing for every new hire.

The bigger picture is that prediction markets have crossed a threshold. Products once dismissed as novelty gambling are now systemically relevant enough that the largest banks in the world are writing personnel policy around them, senators are drafting bills about them, and federal prosecutors are building precedent-setting cases on them. That is, in a strange way, the strongest validation the sector has ever received.

What to watch next: whether the Federal Reserve’s new working groups — established under Chair Kevin Warsh to review policy frameworks, inflation and AI — address the informational role of prediction markets; whether Congress passes insider trading legislation specific to event contracts before the midterms; and whether other regulated industries, from law firms to government contractors, follow Wall Street with bans of their own.

The takeaway: Wall Street just told its people they can bet on the Super Bowl but not on the Fed. As prediction markets surge into the financial mainstream ahead of the 2026 midterms, the line between market intelligence and insider betting has become one of the hottest compliance questions in finance — and the banks are not waiting for regulators to answer it.

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