Two of Wall Street's biggest banks have moved to bar their employees from placing certain wagers on prediction market platforms, a quiet but telling sign that the rapid growth of event-based betting is forcing corporate compliance departments to catch up with a market regulators have barely begun to address.
Goldman Sachs issued an internal memo prohibiting staff from participating in event-based contracts that could create "real or perceived conflicts of interest" with the bank, its clients, or the broader financial industry, the New York Post reported. Morgan Stanley, for its part, folded prediction market rules into its employee code of conduct, covering the topic alongside other trading and investing restrictions. The specific terms of Morgan Stanley's policy were not disclosed.
Neither bank has publicly confirmed the policies through official spokespeople. Bloomberg News first reported the Goldman Sachs restrictions and noted that repeated violations could lead to disciplinary action, including termination, and that employees might be required to forfeit gains from prohibited trades.
The Goldman policy draws a clear line. Employees may not trade event contracts that touch on finance, politics, or other areas where the bank's business interests could overlap with the outcome. But the restrictions carve out an exception for prediction market contracts tied to sports and entertainment, a distinction that tells you exactly what Goldman's compliance team is worried about.
A banker who bets on whether a particular merger closes, or whether a regulatory ruling goes a certain way, sits in a very different position than one who wagers on a playoff series. The first scenario creates obvious conflicts. The second does not.
Goldman CEO David Solomon was referenced in connection with the memo, though no specific actions or statements were attributed to him beyond his role atop the firm.
Morgan Stanley's approach appears broader in scope, prediction markets were addressed as part of a wider update to the firm's code of conduct covering trading and investing topics, but the bank did not disclose what, specifically, its employees are now prohibited from doing.
Platforms like Kalshi and Polymarket have grown rapidly in recent years, offering event contracts that function much like wagers on current events. Users can bet on election outcomes, economic data releases, geopolitical developments, and more. The surge in activity has raised concerns about regulatory oversight, particularly ahead of midterm elections.
For ordinary Americans, prediction markets are a novelty, a way to put a few dollars behind a political hunch. For employees at major financial institutions, the calculus is different. A Goldman analyst with access to nonpublic information about a pending deal, or a Morgan Stanley strategist briefed on macroeconomic research before it hits the wire, could exploit prediction markets in ways that traditional stock-trading compliance rules were never designed to catch.
That gap is what makes these new policies noteworthy. The banks are not waiting for regulators to act. They are writing their own rules, a move that reflects both the scale of the prediction market industry and the compliance vacuum surrounding it. As Wall Street firms reshape their operations in various ways, internal governance is evolving alongside broader strategic shifts.
No specific regulatory body was identified as having taken formal action on prediction market oversight in connection with these bank policies. The reporting references "concerns about regulatory oversight" in general terms, but no enforcement actions, proposed rules, or official investigations were cited.
That silence from Washington is itself a story. Prediction markets now handle significant volume on politically sensitive contracts. Yet the regulatory framework remains ambiguous, caught somewhere between securities law, gambling statutes, and commodities regulation. The Commodity Futures Trading Commission has jurisdiction over some event contracts, but the boundaries are contested and enforcement has been sporadic.
Goldman and Morgan Stanley, by moving first, are essentially conceding that their employees operate in an environment where the rules haven't caught up to the technology. The firms decided the reputational and legal risk of inaction outweighed the cost of restricting employee behavior. That's a rational calculation, and one that raises an obvious question about every other major bank and hedge fund that hasn't followed suit.
Corporate decision-making that directly shapes what employees can and cannot do is a recurring theme across industries. From restaurant chains overhauling operations to financial giants rewriting compliance manuals, the pattern is the same: leadership acts when the risk of standing still becomes untenable.
Several important details remain unclear. The exact date Goldman issued its memo was not disclosed, it was described only as having been sent "some time back." Whether the policy applies to all Goldman employees globally, or only to specific roles and regions, is unknown. The same is true for Morgan Stanley's restrictions.
It is also unclear whether specific incidents prompted the new rules. Were employees caught trading prediction market contracts in ways that raised red flags? Did compliance reviews flag the platforms as emerging risks? The reporting does not say.
Nor is it known whether other major financial institutions, JPMorgan Chase, Bank of America, Citigroup, or the large hedge funds, have adopted or are considering similar policies. If Goldman and Morgan Stanley are the only two firms with explicit prediction market restrictions, that itself would be a significant data point about how unevenly the industry is responding to the boom in event-based trading.
Major companies across sectors are grappling with how to adapt internal policies to fast-changing markets. Retailers are rethinking strategy under competitive pressure, and financial firms face their own version of the same challenge, staying ahead of risks that didn't exist five years ago.
Prediction markets themselves are not the problem. They aggregate information, provide price signals, and, when functioning properly, offer a real-time gauge of collective expectation. The 2024 election cycle demonstrated that prediction markets often outperformed traditional polling in accuracy and responsiveness.
The problem is what happens when people with privileged access to material nonpublic information start trading on those platforms. Insider trading laws cover stocks and securities. They do not neatly cover a contract on Kalshi that pays out based on whether the Federal Reserve raises rates, or whether a particular bill passes the Senate.
Goldman's memo, by targeting contracts that could create conflicts of interest with the bank, its clients, or the financial industry, implicitly acknowledges this gap. The firm is drawing a line that federal regulators have not yet drawn themselves. That's prudent corporate governance, but it also highlights the absence of a coherent federal framework.
The broader pattern of companies making bold internal moves while waiting for regulators to catch up is familiar to anyone who has watched the financial industry over the past two decades. Firms act when their own risk calculus demands it, not when Washington gets around to writing rules.
Whether Goldman and Morgan Stanley's policies become the industry standard or remain outliers depends largely on what happens next. If prediction market volumes continue to climb, and if politically sensitive contracts remain a growth area, other firms will face the same pressure to act.
The enforcement mechanism matters, too. Bloomberg's reporting that Goldman employees could face termination for repeated violations, and could be forced to forfeit gains, suggests the firm is serious. A policy without teeth is a memo that gets filed and forgotten. One backed by real consequences changes behavior.
For now, two of Wall Street's most prominent names have decided that the risk of letting employees trade freely on prediction markets is too high. The rest of the industry, and the regulators who are supposed to set the rules for everyone, have yet to catch up.
When the banks move before the government does, it tells you everything about who is actually minding the store.