The crackdown on prediction market insider trading

The Commodity Futures Trading Commission recently declared that going after insider trading on prediction markets is an enforcement priority. Platforms like Kalshi and Polymarket have rolled out new policies to limit the practice—politicians can't trade on their own campaigns, and people involved in professional or college sports can't trade on the sports they're affiliated with. This might suggest a universal consensus that insider trading on these markets is bad. But as Marketplace's Megan McCarty Carino reports, the reality is more complicated, and the debate cuts to the heart of what prediction markets are actually for.

The "Trading Places" problem

The 1983 movie Trading Places provides a useful entry point. In the film, Eddie Murphy and Dan Aykroyd's characters intercept a secret USDA report on the orange crop and use it to get rich trading orange juice futures. For most of American history, that scheme would have been perfectly legal. Andrew Verstein, a law professor at UCLA, explains that commodities were seen as fundamentally different from stocks. They don't have shareholders who would be harmed by price manipulation, and many participants—like farmers trading on their knowledge of their own crops—are insiders by nature. It wasn't until the 2010 Dodd-Frank Act that trading on material non-public information in commodity markets became illegal. One provision was