As prediction markets gain popularity, HR can help dodge risky bets

Prediction markets have taken center stage in recent years, with tens of billions of dollars in trading volumes taking place each month on Kalshi and Polymarket. Most popular with young men, they can be used to bet on everything, from what color Olivia Rodrigo will dye her hair, to when Mitch McConnell will resurface next. Unlike traditional gambling, prediction markets betting works more like a share system, where users bet “yes” or “no” on the likelihood of an outcome, and are paid for successful wagers.

As these platforms have gained popularity (Timothee Chalamet stars in a Kalshi TV ad), some employers have grown concerned that their employees’ use may put their business at risk. Employees at KPMG and Google, for example, allegedly used insider information to profit on these sites, the Wall Street Journal reported.

“I think prediction markets specifically pose really interesting and new risks for employers, and I think that’s really a very recent development that companies are only really coming to terms with in the last six months,” Noah Solowiejczyk, a partner at Fenwick and West and former federal prosecutor, told HR Brew. “This is a whole new type of insider trading risk.”

But people professionals can create prediction markets policies to safeguard their organizations, experts told HR Brew.

Regulations and prediction markets platforms aren’t keeping up. While the Biden administration attempted to impose some limits on prediction betting, the Trump administration has tried to block states from regulating the practice.

For its part, Kalshi has made some moves to prevent insider trading in recent months. Over the summer, the company announced it will require users to disclose their employers when placing bets on potentially sensitive information (like a company’s financial performance) and block trades accordingly, NBC news reported. At the same time, the company introduced a new whistleblower service to combat insider trading.

Kalshi then announced last month a partnership with compliance technology company Comply that will give employers the ability to monitor employee prediction bets. (Comply also works with cryptocurrency tax software company ZenLedger to monitor Polymarket bets.)

“Without knowing what employees are doing, their only choice is to say, from a policy perspective, don’t trade at all,” Sudhir Jain, chief compliance officer at Kalshi, told CNBC. “Now they have the data; they can monitor it.”

Proactive policies. Some companies, including Goldman Sachs and Morgan Stanley, have added prediction markets rules to their employee handbooks. Workers who violate the policies risk disciplinary action, including termination, according to Bloomberg News.

Still, many employers don’t have explicit policies about how workers can engage with prediction markets, leaving them vulnerable, Steven Silver, a lawyer specializing in gaming at Littler, told HR Brew. “They [employers] absolutely should have policies, if they don’t already.”

Private employers can follow states’ leads by limiting workers’ ability to bet on material information.

“On company-issued devices, they [predictions sites] should be blocked, and it should be no question,” Silver said. “Employees should not be able to trade or profit off of company data, trade secrets, proprietary information. But I think there’s been somewhat of a slow roll out, because folks are trying to understand what these are. It’s new to most people.”

A full-on ban might be more difficult, and would require oversight of what workers do on their personal devices outside of work, he added.

HR leaders, general counsel, and business teams can work together to develop and communicate specific policies to employees, according to Silver. “Employees need to have notice of what your expectations are.”

Some experts, including Solowiejczck, recommended that employers provide employees training on what is and isn’t allowed to help ensure compliance. “Some people think of prediction markets as just this fun game essentially, and they may not understand the gravity of the situation,” he said. Such training should be specific to an organization and its industry.

“HR does have a role to play, because part of this is an awareness and training issue,” Solowiejczyk said. “I also think, that’s got to be paired with somebody, either outside counsel or in-house counsel, probably also needs to be involved, because these are relatively nuanced and new issues that companies need to be thinking through.”