Reimagining Insider Trading for a World Beyond Securities
October 31, 2025
Prediction markets. Digital assets. Decentralized platforms.
All have the potential to push the limits of “insider trading” when we think about markets.
For compliance leaders, this is more than an academic discussion. It’s a call to rethink how we define material, nonpublic information (MNPI) - and how we manage it in a world where information itself is the new currency.
A recent Fenwick analysis suggested both the CFTC and DOJ may step into the prediction market arena to address insider trading concerns. These are markets where participants can “bet” on outcomes — anything from company earnings to elections — based on data and insights that may not be public.
Sounds like the plot of a sci-fi finance movie. But it’s already happening.
The Definition of “Material” Is Expanding
Traditionally, insider trading risk centered on securities - buying or selling based on material, nonpublic information. But prediction markets and crypto ecosystems stretch that definition.
Think about it:
- A policy analyst with early knowledge of a regulatory shift.
- A developer with access to unreleased AI models.
- A data vendor holding private indicators of supply chain disruption.
Legally, these individuals are likely prohibited from trading securities, but their information could drive market bets - and profits - in new digital venues. Effective compliance policies do more than catalog restricted securities - they clarify the intent behind restrictions, ensuring firms understand why certain trades pose risk, not just what trades are off-limits.
Five Steps to Future-Proof Insider Trading Policies
- Broaden the Scope Update policies to cover all digital asset classes and event-driven trading - even when regulatory definitions are still evolving.
- Revisit Pre-Clearance Include digital platforms and decentralized exchanges in pre-clearance frameworks. If your systems only flag traditional securities, firms may be missing part of the bigger picture.
- Train Beyond the Obvious Employees may not think prediction markets or crypto trading are subject to insider trading or market abuse rules. Regular certification programs and scenario-based training help bridge that gap.
- Enhance Surveillance Modern compliance means connecting dots across disparate data sources - markets, crypto wallets, digital exchanges, and communication tools. You can’t manage what you can’t see.
- Collaborate Across Teams Legal, IT, InfoSec, and Compliance should all share the same playbook. Insider trading and market manipulation risks today sits at the intersection of systems, data, and behavior.
Ethics: The Constant in a Changing Market
Regulation will always lag innovation. That’s the reality.
But ethics doesn’t have to.
The best compliance leaders treat emerging markets not as loopholes, but as signals - reminders to raise standards before the rulebook catches up. Whether it’s crypto, AI-driven analytics, or prediction markets, the principle stays the same: if information gives someone an unfair edge, it’s worth managing.
In a world where anything can be traded, integrity remains the one asset that never depreciates - it compounds over time. Compliance leaders who recognize this are not only managing risk; they are shaping strategy. But doing so requires investment: in systems, in people, and in modernized policies that evolve with the market.
If you’re preparing to make that case internally, especially to your CFO, my earlier piece - Budget Planning for 2026: How to Convince Your CFO That Compliance Matters - offers practical ways to translate compliance value into business language that drives support and funding.
Note: This article originally appeared on TabbFORUM - Where Capital Markets Speak.