Above Board: What Boards Need to Know About Prediction Markets

This episode of the MoFo Perspectives Podcast explores the growing significance of prediction markets for corporate boards and governance professionals. Hosted by Haima Marlier and Scott Lesmus, the discussion features experts Trevor Levine and Ryan Adams, who break down the mechanics, regulation, and legal risks associated with prediction markets in the U.S. These markets, which allow traders to bet on future events ranging from economic indicators to pop culture outcomes, are regulated by the CFTC and require full collateralization of trades. The conversation centers on the critical issue of insider trading, particularly how employees with access to non-public information—such as upcoming earnings announcements or product launches—could exploit prediction markets for personal gain. While the legal framework around insider trading in prediction markets is still evolving, both the CFTC and SEC are signaling heightened enforcement interest, with the CFTC explicitly stating that insider trading in these markets will be a priority. The episode emphasizes that even if companies aren't direct targets of enforcement, the reputational damage from employee misconduct can be severe, making proactive policy updates and employee training essential. The hosts conclude with actionable guidance: public companies should review and clarify their insider trading policies to explicitly include prediction market activity, especially in high-profile or tech-savvy organizations. They recommend clear, specific language in employee handbooks and targeted training to ensure awareness. The episode underscores that prediction markets are not just speculative tools but potential risk vectors for corporate governance, requiring boards to stay informed and proactive. With the CFTC issuing proposed rules and prediction market platforms self-policing through enforcement actions, the regulatory landscape is rapidly developing, making early preparation crucial.