Insider-trading rules on event contracts

How it works

Two sets of rules apply to the same trade, written by different people and enforced by different people, and a reader who knows only one of them will misjudge their position in both directions.

The statute and the CFTC's rule. These apply to anyone, on any venue the Commission reaches, and they are narrower than the everyday meaning of "insider trading". They are enforced by the Commodity Futures Trading Commission in civil court or by administrative order, with criminal cases brought separately by federal prosecutors.

The exchange's rulebook. This applies to the members of one designated contract market, and it is usually wider than the statute: it can bar a person because of their job or their role in the event, whatever they know. It is enforced by the exchange's own compliance department and disciplinary panel, and the penalty is a fine and a suspension from that exchange.

An offshore venue has the second layer only in the form of its terms of use, and none of the exchange-side duties a designated contract market carries. Each layer is taken in turn below.

The federal layer: misappropriation, and government information

The general rule is about deception, not about knowing more. Section 6(c)(1) of the Commodity Exchange Act, at 7 U.S.C. 9(1), makes it unlawful to use "any manipulative or deceptive device or contrivance" in connection with any swap, any contract of sale of a commodity in interstate commerce, or any futures contract, and in the same sentence provides that no rule under it "shall require any person to disclose to another person nonpublic information that may be material to the market price". The rule the Commission wrote under it, 17 CFR 180.1, prohibits, when done intentionally or recklessly, a "manipulative device, scheme, or artifice to defraud" in paragraph (a)(1) and any act that "operates or would operate as a fraud or deceit upon any person" in paragraph (a)(3), and repeats the no-duty-to-disclose sentence as paragraph (b).

What the CFTC has said those two paragraphs reach in event contracts. The Division of Enforcement's advisory of 25 February 2026 names the theory: "misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information (commonly known as 'insider trading')", under section 6(c)(1) and Regulation 180.1(a)(1) and (3). The same advisory lists the other practices the Commission polices on any designated contract market — wash and pre-arranged trading under section 4c(a)(1) and (2)(A), disruptive trading under section 4c(a)(5), and fraud and manipulation generally. The Division of Market Oversight's Letter No. 26-08 of 12 March 2026 repeats the misappropriation sentence word for word and adds that "the Commission retains authority to investigate and bring civil enforcement actions related to any such activity".

The element that does the work is duty. An employee who owes their employer confidentiality, a service member who owes it to the government, a contractor under a non-disclosure agreement: each has a source to breach. A person who worked something out from public material has none, and the statute says in terms that they need not share it.

Government information has its own provisions, and they do not need a duty argument. Section 4c(a)(3) and (4) of the Act, at 7 U.S.C. 6c(a), make it unlawful for a federal employee, a Member or employee of Congress, or a judicial officer or employee to trade a futures contract, an option or a swap on non-public information acquired through their position (paragraph (3)), or to pass it to someone else to trade (paragraph (4)(A)). Paragraph (4)(B) reaches the person who knowingly uses information passed that way, and paragraph (4)(C) makes it unlawful for "any person" to "steal, convert, or misappropriate" information held or created by a federal agency, Congress or the judiciary. The CFTC's release of 23 April 2026 calls its use of the government-information provisions "the so-called 'Eddie Murphy Rule'" without citing the subsection by number.

Which instrument the contract is matters to which text applies. Every provision above is written for futures, options and swaps. The CFTC's release of 28 August 2026 describes the contracts in that matter as "event contracts (i.e., swaps)". That is the Commission's characterisation, and whether a given event contract is a swap is the question two federal courts of appeals answered differently for sports contracts in 2026 — set out in Event contract or swap.

What an exchange rulebook adds

A designated contract market is a front-line regulator of its own market: Letter 26-08 reminds exchanges that they must "conduct real-time monitoring of all trading activity" and may take "disciplinary action" after an inquiry that can include "obtaining trader-level data". The rules they enforce are their own, and the two rulebooks read for this page write them differently.

Kalshi: three bars, two of them without a knowledge test

Kalshi's rulebook, version 1.29, puts the prohibitions in Rule 5.17, Prohibited Transactions and Activities. Version 1.29 took effect on 17 August 2026 and was still the one Kalshi posted on 4 October 2026. Its amendments were about block trades — Rule 5.17(b) among them, and a carve-out in Rule 5.1 for block trades a broker submits for a customer who is a member in its own right — and left 5.17(y) and (z) as they were. The only change to the rulebook's text filed since, on 18 September 2026, adds a Chapter 14 for perpetual security futures and cites Rules 3.6 and 5.17 under the same numbers.

• Rule 5.17(y), first half — holding the information. An "Insider" is "any person who has access to or is in a position to have access to material nonpublic information before such information is made publicly available", and an insider with such information about a contract's underlying "is prohibited from attempting to enter into any trade or entering into any trade, either directly or indirectly". No duty element appears in the sentence. That is wider than the federal misappropriation theory above.
• Rule 5.17(y), second half — the job. "A Trader who is an employee or affiliate of a Source Agency for any Contract is prohibited" from trading that contract. This is a status bar: it applies whatever the employee knows. The source agency is named in each contract's terms (see settlement source), and Kalshi publishes a combined list.
• Rule 5.17(z) — the role. A trader who "is a decision maker, either directly or indirectly, or has any influence, either directly or indirectly, no matter the scale and importance of the influence, on the outcome" may not trade that contract.

Rule 5.1 requires every member, and every customer reaching Kalshi through a futures commission merchant or introducing broker, to have read and accepted the rulebook — and, for broker customers, the "Source Agency Prohibition" by name. A broker's app is not a different rulebook.

One detail is worth knowing before searching the documents. The published source agency list opens "Pursuant to Kalshi Rule 5.13(s)". In version 1.29, Rule 5.13 is the recordkeeping rule for FCM customers' orders and the prohibitions sit at 5.17(y) and (z), which is where every 2026 disciplinary notice cites them. The rulebooks' own cross-references were off in the same way when read on 4 October 2026: Kalshi's Rule 2.11(a) places its adopted Regulation 1.59 provisions "in Chapter 11", which in version 1.29 is limitation of liability (they are Rule 12.1, in Chapter 12), and in the Polymarket US rulebook dated 30 September 2026 Rule 2.10(e) opens "For purposes of this Rule 2.8", the emergency rules, while the definition of Source Prohibition points to Rule 2.9, the maintenance windows. Read the rule text, not the number.

Sports contracts carry their own named list

Contract terms can add prohibitions on top of the rulebook, and the sports terms do. Kalshi's terms for football game outcomes, filed as NFLGAME, open a section headed TRADING PROHIBITIONS "in addition to the general prohibition against trading on material nonpublic information" and bar, for the game in question:

• current and former players, coaches and staff of the participating teams (for college games, of the specific teams, not every player in the association);
• game officials, referees, replay officials and the assigned officiating crew, plus league officiating supervisors and evaluators;
• paid employees of the governing league or association, including league office staff, competition committee members and football operations personnel;
• team medical staff, athletic trainers, team physicians and anyone with access to non-public injury or health information about the players;
• ultimate beneficial owners of the teams and of the league;
• household members and immediate family — parents, siblings, spouses, domestic partners and children — of all of the above.

The same terms name the governing league first among the contract's source agencies, so a league employee is also caught by the source-agency half of Rule 5.17(y). Letter 26-08 separately encourages exchanges to look to "restricted or insider participants lists" kept by leagues and to "cooperate with any league-run investigations". That is staff guidance, not a rule, and it describes a direction of travel rather than an arrangement any exchange has confirmed in a filing this page has read.

Polymarket US: a duty test, a tip test and an influence test

Polymarket US, run by QCX LLC as a designated contract market, puts its equivalents in Rule 7.2 of the rulebook dated 30 September 2026.

• 7.2(g) bars an order "on the basis of confidential information relating to the outcome or likely outcome" of the event "where trading on such information would constitute a breach of a pre-existing duty of trust and confidence owed to another person or entity" — the federal misappropriation theory, written as an exchange rule.
• 7.2(h) reaches the recipient: information obtained from, or an order "directed or solicited" by, someone who owed such a duty, where the participant "knows or has reason to know" the source could not have traded on it.
• 7.2(i) bars a participant who "holds a position of authority or influence sufficient to affect the outcome", and anyone directed or solicited to trade by such a person.
• 7.2(j) bars trading on non-public information about another person's impending transaction — front-running, in the ordinary term.

Two differences from Kalshi follow from the wording. Polymarket US asks whether a duty was breached; Kalshi's insider sentence asks only whether you had the information. And Polymarket US reaches the person acting at someone else's direction in so many words, where Kalshi reaches indirect trading by the restricted person. Rule 8.15 requires final disciplinary actions to be reported to the National Futures Association for its public database and posted on the exchange's website.

Offshore: terms of use, and the same statute

Polymarket's international site is not a designated contract market, and nothing in the exchange-side duties above — real-time surveillance under the Commodity Exchange Act, published disciplinary notices, a rulebook filed with the CFTC — applies to it as a matter of law. What it has instead is its Terms of Use, which its Market Integrity page summarises as three prohibitions closely matching Polymarket US Rule 7.2(g) to (i): trading on confidential information in breach of a duty, trading on a tip from someone who owed one, and trading while holding "a position of authority or influence sufficient to affect the outcome", or at the direction of someone who does. The enforcement the page describes is the operator's own — it states that the operator can "ban wallets, take legal action, or refer matters to law enforcement" — and the referral counts it publishes are the operator's own figures, which this page has not checked against any other record.

The page also works through examples, and two of the permitted ones show where the duty line falls: an amateur meteorologist trading on a model built from public data, and a trader who commissions a private poll with their own money. Both hold information others lack; neither owes anyone a duty for it.

Not being a regulated venue has not meant being outside the CFTC's reach. The Commission's complaints of 23 April and 27 May 2026 both concern trades on Polymarket's international site:

• 23 April 2026 (release 9217-26). The complaint, filed in the Southern District of New York, alleges that an active-duty US Army service member used classified non-public information about a US operation to buy more than 436,000 Yes shares of the contract "Maduro Out by January 31, 2026?", and alleges more than 404,000 dollars of profit. The release calls it the first time the CFTC "has charged insider trading involving event contracts". The US Attorney's Office for the same district unsealed a parallel indictment the same day.
• 27 May 2026 (release 9237-26). The complaint alleges that a software engineer at Google, resident in Switzerland, traded at least twenty-three contracts on Google's 2025 Year in Search list using non-public information obtained through that employment, and alleges profits of approximately 1.2 million dollars. A parallel criminal complaint was unsealed the same day.

Both are allegations in pending cases, as the releases themselves present them, and neither is a court's finding. What they establish is narrower and still useful: the Commission has filed against conduct on an offshore venue, including by a person resident outside the United States, and in both cases it identified the account behind a public trading record.

What the published cases show

Kalshi's notices index lists eleven Notices of Disciplinary Action and Notices of Settlement posted between 25 February and 31 August 2026, file numbers KDA-2026-0001 to KDA-2026-0011. Read by the rule each cites:

• Seven cite Rule 5.17(z) for a candidate trading their own race — KDA-2026-0002 in February, 0003 to 0005 in April, and 0007 to 0009 in August. Each states that the candidate, once listed as a market option, was a "decision maker" with "direct influence on the outcome of the Underlying event". KDA-2026-0003 applies the same reasoning to a market on who would run for office, traded before the person announced a candidacy.
• Two are Rule 5.17(y) cases. KDA-2026-0001, effective 25 February 2026, concerns a trader the CFTC's advisory of the same day describes as an editor for a YouTube channel who "likely had advanced knowledge of the contents of the channel's videos". KDA-2026-0011, posted 29 August 2026, concerns a federal government employee and was settled alongside a CFTC order: the Commission's order of 28 August 2026 (release 9289-26) finds that a White House teleprompter operator, between December 2025 and February 2026, traded presidential mention-market contracts using advance access to speeches "in breach of his duty of trust and confidence".
• One combines influence with manipulation. KDA-2026-0006, effective 28 August 2026, states that the Compliance Department "has established reasonable cause to believe" a member traded markets on his own attendance at the State of the Union address and then made public statements, "some of these included false or misleading statements", with "the intent to manipulate the price". It cites Rule 3.6(a), the duty to cooperate with an investigation, alongside the trading rules.
• One, KDA-2026-0010, concerns improper access to another user's account, plus prohibited trading on the member's own account that the notice does not describe, and is not presented as an information case.

The February advisory is the place where the two layers are joined explicitly: for the first two notices, the Division of Enforcement wrote that the trader "potentially violated" section 6(c)(1) and Regulation 180.1(a)(1) and (3), and that "while Kalshi's internal enforcement program handled these matters", the Commission "has full authority to police illegal trading practices occurring on any DCM".

Officials: one rule in force, several bills

The Senate has a rule. S.Res. 708, agreed to on 30 April 2026, adds paragraph 15 to rule XXXVII of the Standing Rules of the Senate: no Member, officer or employee of the Senate may enter into a contract on an excluded commodity "that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of a specific event or contingency", with an exception only for insurance where the insured "holds a lawful insurable interest". It is a ban on the instrument, not on information, and it is a Senate rule — the Congressional Research Service's report R49266 of 17 August 2026 notes that it does not extend to House Members, other legislative employees, or executive or judicial officials. The same report summarises guidance from the Senate Select Committee on Ethics dated 5 May 2026, including that existing positions had to be divested; this page has not read that letter directly.

The bills are bills. R49266 summarises, among others, H.R. 7004 (Public Integrity in Financial Prediction Markets Act of 2026, introduced 9 January 2026), S. 4017 (End Prediction Market Corruption Act, 5 March 2026), H.R. 8076 (PREDICT Act, 25 March 2026) and S. 4188 (Public Integrity in Financial Prediction Markets Act of 2026, 25 March 2026). They differ in who they cover and whether they turn on information or on the instrument: H.R. 7004 would bar covered officials from trading contracts on government policy, government action or a political outcome while holding relevant non-public information or able to obtain it in their duties, while S. 4017 would bar the President, the Vice President and Members of Congress from trading event contracts at all. On Congress.gov's records read on 4 October 2026, the latest action on each of those four was referral to committee on the day it was introduced. None of them is law, and none should be read as describing a reader's position today.

What it costs

These are the figures in the documents, each with its scope.

Three things the table does not show. A Kalshi suspension is "from direct or indirect access" to that exchange, which on its face includes access through a broker that routes orders to Kalshi. The CFTC described its 65,000-dollar penalty as "a substantial discount" for cooperation, so it is not a schedule. And the two pending complaints ask for restitution, disgorgement, civil penalties, trading and registration bans and an injunction, alongside criminal cases whose outcome is for the court.

What you can do about it

Before trading a contract that touches your job, your sport or your campaign, read three things in order. First the contract's own terms, for a TRADING PROHIBITIONS section — on Kalshi the Kalshi API links each series to its filed terms, set out in how to read a market's rules from the API. Second the source agency named in those terms: if you work for it, Kalshi's Rule 5.17(y) bars you whatever you know. Third, ask whether anything you do can move the outcome. Under Kalshi's Rule 5.17(z) "no matter the scale", and under Polymarket US Rule 7.2(i) "sufficient to affect the outcome" — the second is narrower on its face, and the safe reading of both is the wider one.

Check who else the terms reach. The football terms bar household members and immediate family of players, officials, league staff and team medical staff, and former players of the teams involved. If someone in your household is on that list, so are you, on that game.

Read your employer's confidentiality policy, not just the venue's. The federal theory and Polymarket's rules both turn on a duty, and the duty usually comes from an employment contract, a non-disclosure agreement or a security clearance. If your work gives you advance sight of a release, a ranking, a speech, a transaction or a decision, the venue cannot tell you whether you owe a duty about it; the document you signed can.

Federal staff are a separate case. The government-information provisions of section 4c(a) cover employees of any federal department or agency, Congress and the judiciary, with no duty argument needed. Senate staff are additionally barred from event contracts entirely by Senate rule XXXVII, paragraph 15, whatever the contract is about.

Treat a compliance enquiry as part of the rulebook. Kalshi's Rule 3.6(a) requires members to "cooperate promptly and fully" with any investigation, and two 2026 notices cite it as a violation in its own right. On a designated contract market your identity sits behind every trade from the moment of signup, as described in what you have to prove to trade.

Do not read a small stake as a safe harbour. Two April 2026 settlements record purchases of less than 100 dollars each and five-year suspensions; two August 2026 settlements record less than 1,000 dollars each and three-year suspensions.

Offshore is not an exemption from the statute. If the CFTC's position in its April and May 2026 complaints holds, the provisions above follow the information, not the venue. A wallet's history on a public chain is permanent; both complaints identified the account behind one.

If you are reading activity rather than trading it, keep the data and the inference apart. Polymarket's public Data API returns trades, positions and holders for any market; dashboards such as Unusual Predictions rank wallets and flag "potential insiders" by threshold. Both report what an address did and when. None of them knows who the address belongs to, what that person knew, or whether any rule above applied to them — set out in what wallet tracking shows. A flag is a reason to look at the record, not a finding about a person, and the regulator's and exchange's documents listed here are the only places such findings are made.