Two leading Wall Street firms have moved to limit employee activity in the rapidly expanding world of online prediction markets, citing the potential for real or perceived conflicts with clients and the broader financial system. Goldman Sachs issued a memo barring staff from participating in event-based contracts tied to financial or political outcomes, and Morgan Stanley has policies under its code of conduct that cover trading in prediction markets, according to people familiar with the matter who spoke with Reuters.
Policy focus and enforcement
The actions come as trading platforms that allow users to bet on political results and market moves have grown quickly, prompting questions about oversight and the proper firewall between employees’ personal trading and institutional responsibilities.
According to reporting that first surfaced in Bloomberg and was confirmed to Reuters, Goldman’s internal directive forbids participation in contracts that could create conflicts of interest with the bank or its clients. The guidance excludes events tied to sports and entertainment.
| Firm | Scope described |
|---|---|
| Goldman Sachs | Memo prohibits employee participation in event-based contracts tied to financial or political events; sports/entertainment exempt |
| Morgan Stanley | Code of conduct covers trading and investing topics, including prediction markets; specifics not publicly detailed |
Bloomberg reported that repeated breaches of Goldman’s restriction could lead to disciplinary measures, up to termination, and may require employees to forfeit gains from prohibited trades. A person familiar with Morgan Stanley’s rules declined to outline precise prohibitions, saying the policies are not public.
Regulatory and market implications
Prediction-market platforms such as Kalshi and Polymarket have expanded in recent years, attracting attention from regulators and policymakers concerned about information leakage, market manipulation and integrity, particularly as the country approaches midterm elections.
- Compliance risk: Firms are tightening employee trading rules to reduce the appearance of conflicts and protect sensitive information.
- Enforcement uncertainty: Public disclosure of the policies is limited, leaving open questions about monitoring and penalties.
- Regulatory spotlight: Rapid platform growth has prompted scrutiny from both market regulators and election overseers.
The moves by two of Wall Street’s largest institutions illustrate how private-sector compliance practices can shift quickly in response to emerging market structures. By restricting staff access to certain contracts, the banks aim to mitigate operational and reputational risk without broadly banning participation in all prediction-style markets; sports and entertainment markets remain outside the scope of Goldman’s restriction, for example.
Officials at the firms did not provide public comment in the reporting. The developments highlight a broader tension for financial institutions: balancing employees’ private investment liberties with the legal and ethical obligations that flow from access to sophisticated information and client relationships.
As trading in event-linked contracts grows, so too will scrutiny of how firms police employee conduct and how regulators adapt existing securities and market rules to new forms of exchange across political and financial events.
