The crackdown on insider trading via prediction markets is well underway, and recent cases brought by the federal government against alleged insider traders show an emerging enforcement approach.
Rather than litigating questions about the nature of the instrument being traded—is it a security or a commodity?—prosecutors are pursuing fraud-based theories grounded in the misuse of confidential information.
Traditional insider trading cases (think of Ivan Boesky and Jeff Skilling) have centered on securities markets and the duties insiders owe to shareholders.
In each case, the instrument—public company stock—was the starting point for building a case. The prediction market cases break ...
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