Why Prediction Markets Are a New Frontier for Insider Trading

Prediction markets, where users can place bets on real-world outcomes in anything from sports and award shows to elections, interest rate decisions, and even military operations, have become a multi-billion-dollar industry in just a few years. Along the way, they have also become the focus of growing concern that some participants are using privileged information to profit.

On May 27, Google software engineer Michele Spagnuolo was charged with insider trading on Polymarket, one of the two most popular prediction market platforms. Spagnuolo allegedly used proprietary information to make more than $1 million on a series of bets predicting who would ...