In the CFTC enforcement framework, information becomes a prediction-market insider-trading concern when it is material and nonpublic, the trader or tipper obtained it through a relationship carrying a duty of trust and confidence, used or disclosed it in breach of that duty, and acted with scienter. Merely knowing something the public has not yet seen is not, by itself, the complete legal test.
The short answer: MNPI is more than a private fact
For U.S. prediction markets covered by the Commodity Exchange Act (CEA) and overseen by the Commodity Futures Trading Commission (CFTC), the most useful explanation comes from CFTC Enforcement Director David Miller’s 2026 remarks at NYU Law School. He described the misappropriation theory in three parts:
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- The person possesses material nonpublic information.
- The person misappropriates it by trading on it or tipping someone else, in breach of a duty of trust and confidence owed to the information’s source.
- The person acts with scienter, meaning the required wrongful state of mind.
This framework focuses on the relationship between the trader and the source, not just on whether other market participants lacked the information. It is an account of CFTC anti-fraud enforcement for covered products and regulated-market contexts, not a universal rule for every offshore platform, product classification, or country.
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How “material” works in an event contract
Materiality asks whether information could matter to the market or to a reasonable market participant’s decision. In a prediction market, that usually means information that bears directly on the event described by the contract, the probability of an outcome, or the timing of a settlement-triggering fact.
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The CFTC remarks do not provide a complete bright-line materiality checklist for every event contract. A careful practical explanation is therefore narrower: information is potentially material when it could significantly affect how the market evaluates the event. Whether it actually meets the legal standard depends on the contract, the facts, and the applicable enforcement theory.
Examples of potentially material information
- A confidential production schedule that reveals whether a widely watched video or announcement will be released before a contract’s deadline.
- Nonpublic information about a participant’s health or injury when the contract turns on that person’s appearance or performance.
- Advance knowledge of an organizational decision, vote, filing, or announcement that is the direct subject of a contract.
- Private information showing that an event has already occurred even though the public confirmation has not been posted.
These examples illustrate relevance, not an automatic finding of illegality. The information still has to be nonpublic, connected to a duty, and used with the required mental state.
What makes information “nonpublic”
Nonpublic information has not been broadly released through an authorized public channel. A rumor, a small private chat, an employee’s early access, or a leak may be widely discussed in a limited group while remaining nonpublic for legal purposes. Public availability is a factual question: who received the information, how it was distributed, and whether the market had a fair opportunity to evaluate it.
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Access is not the same as ownership
Being an employee, contractor, editor, athlete, campaign worker, consultant, or family member does not automatically make every trade illegal. The key questions are how the person obtained the information, whether the source expected confidentiality, whether a duty existed, and whether the person exploited that relationship.
The duty of trust and confidence is the pivot
Under the misappropriation theory described by the CFTC, a trader violates the theory when the information is taken or used in breach of a pre-existing duty owed to its source. The duty can arise from employment, a contract, a formal affiliation, a confidentiality undertaking, or another relationship in which the source is entitled to expect that information will not be misused.
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This is why “anyone with an informational advantage is an insider” is too broad. A person who independently observes a public event, analyzes a public record, or makes a lawful forecast may have an advantage without having misappropriated confidential information. By contrast, a person who receives confidential information through work and secretly trades on it presents the central misappropriation concern.
Trading and tipping are both covered
The theory applies to direct trading and to tipping. A tipper may create liability by passing confidential information to another person for trading, while the recipient may face risk if the recipient knows, or acts with the required scienter regarding, the improper source and breach. Platform rules may separately prohibit sharing information even where a federal enforcement case would require additional proof.
Scienter: why intent and knowledge matter
Scienter is the required wrongful mental state. The CFTC’s formulation says the person must act with scienter; it does not treat an innocent mistake as automatically equivalent to a deliberate misuse of confidential information. Evidence can include the person’s role, communications, timing, trading pattern, instructions received, and efforts to conceal conduct. The exact showing depends on the claim and facts.
A trader cannot eliminate risk simply by avoiding a written acknowledgment that information was confidential. Nor does a profitable trade alone prove scienter. Investigators assess the circumstances surrounding access, the duty, the trade, and any disclosure to others.
A documented case: advance knowledge of YouTube videos
A CFTC Enforcement Division advisory dated February 25, 2026 describes a case involving an individual connected to a YouTube channel who traded markets related to that channel. According to the advisory, the person was an editor whose employment or formal affiliation likely provided advance knowledge of video contents before publication.
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The exchange concluded that there was a reasonable basis to believe the trader used material nonpublic information misappropriated in violation of a pre-existing duty. The reported outcome was:
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| Measure | Reported amount or term |
|---|---|
| Disgorged profits | $5,397.58 |
| Separate penalty | $15,000 |
| Total financial penalty | $20,397.58 |
| Access restriction | Two-year suspension from direct or indirect exchange access |
Those figures describe one exchange case reported by the CFTC. They are not a general penalty schedule, a market-wide average, or a prediction of the result in another matter.
Potential CEA and Regulation 180.1 theories
The same advisory identifies potential issues under CEA Section 6(c)(1) and CFTC Regulation 180.1(a)(1) and (3). It describes those provisions as potentially relevant to a manipulative scheme or artifice to defraud, or conduct operating as a fraud on another person. “Potentially” matters: the advisory does not establish that every information-based trade violates those provisions.
Federal enforcement and exchange rules are separate layers
A regulated exchange must establish and enforce trading rules and monitor activity for anomalies and abuses such as insider trading. That responsibility comes from CFTC customer guidance. An exchange can therefore investigate or restrict conduct under its own rulebook even when the facts do not lead to a federal enforcement action.
Platform policies may define prohibited persons, information use, tipping, attempts to influence an outcome, reporting duties, suspension procedures, and appeals. Those contractual or exchange rules can be broader than the minimum elements needed for a CEA anti-fraud case.
Example of platform-level restrictions
Kalshi’s published screening and surveillance policy illustrates this additional layer. Its policy discusses categories such as political persons and sports professionals and describes screening and enforcement processes. Those statements are that platform’s rules; they are not a universal statutory definition of MNPI for every prediction market.
Information that may affect an event versus information that influences it
Readers often mix two different issues:
- Information advantage: confidential knowledge that changes the trader’s estimate of an outcome.
- Ability to influence the outcome: power to cause, prevent, or alter the event being traded.
Both can matter to an exchange’s rules and surveillance, but they are not identical legal concepts. A person who can influence an event may face a separate prohibition even if the person does not possess classic confidential information. A person with confidential information may lack any ability to influence the event but still face misappropriation concerns.
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What the 2024 proposed rule does—and does not—establish
CFTC Federal Register materials from 2024 discuss concerns about event contracts, including a participant’s ability to influence an event and access to information about a player’s health or injury. Those materials are proposal text, not a final, generally applicable definition of MNPI. They should not be cited as if they enacted a new universal checklist.
Until a final rule or binding interpretation applies, readers should distinguish proposal language from current enforcement accounts, existing CEA provisions, and the rules of the particular exchange.
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Before trading a contract connected to your work or affiliation, document answers to these questions:
- What exactly is the contract? Read the event definition, source of settlement, deadline, and any special terms.
- What information do you have? Separate public facts, personal analysis, rumors, and confidential material received through a role or relationship.
- Could the information change the market’s estimate? If it bears directly on the event or settlement timing, treat materiality as a serious risk rather than making a casual assumption.
- Who supplied it and under what relationship? Identify employment, contract, confidentiality, fiduciary, or other trust relationship.
- Is the information public yet? Check the authorized public source and the time of release, not just social-media chatter.
- Would trading or tipping breach a duty? Review employment agreements, confidentiality policies, exchange rules, and compliance instructions.
- What does the platform prohibit independently? Look for rules on restricted persons, tipping, influence, information use, surveillance, and suspensions.
- Can you preserve an audit trail? Keep the contract version, public-release timestamp, compliance advice, and relevant communications.
If the answers show confidential access through a duty-bearing relationship, do not trade or tip until qualified legal or compliance personnel clear the conduct. Do not rely on a generic statement that prediction markets are different from securities markets; the CFTC’s anti-fraud framework and exchange rules can still apply to covered products.
How to compare two prediction-market venues
Comparing venues requires more than asking which one has an “insider-trading policy.” Check the same four dimensions for each contract and platform:
| Comparison point | Questions to ask |
|---|---|
| Product and jurisdiction | What is the exact contract, and which law and product classification govern it? |
| Information restrictions | Do the rules address trading, tipping, restricted persons, confidential information, or attempts to influence outcomes? |
| Surveillance and investigation | Who monitors activity, what triggers review, and what information can the venue request? |
| Consequences and process | What penalties, disgorgement, suspensions, account restrictions, appeal rights, and dispute procedures are disclosed? |
Also read the contract’s settlement and source-of-information provisions. A rule that looks similar in two places may operate differently because one contract settles on an official government release while another uses a platform, league, or publisher’s determination.
What is not established by the available CFTC materials
- There is no single, all-platform bright-line test in these materials that resolves every question of materiality.
- There is no general prevalence rate or market-wide statistic showing how often MNPI cases occur.
- An employee, candidate, athlete, or other person with early access is not automatically guilty of federal insider trading.
- A platform’s prohibited-person list is not the same thing as a universal statutory definition.
- The 2024 proposed rule is not final law.
The safest conclusion is fact-specific: identify the event, determine whether the information is important and still confidential, trace how it was obtained, analyze the duty owed to the source, and then apply both the CEA framework and the platform’s own rules.
Frequently Asked Questions
Does every rumor count as material nonpublic information?
No. A rumor may be unreliable, already public, or unrelated to the contract. The relevant analysis asks whether the information is important to the event, remains nonpublic, and was obtained and used in circumstances involving a duty of trust and confidence.
Can I trade after information appears on social media?
Not automatically. Assess whether the post was an authorized public release, when it became available, and whether your own earlier access came through a confidentiality-bound relationship. Exchange rules may impose additional restrictions.
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Are prediction-market rules the same as securities insider-trading rules?
No. The CFTC materials discussed here concern the CEA and regulated-market enforcement. Contract classification, jurisdiction, and each exchange’s rulebook can change the analysis.
What should I do if I already traded using possibly confidential information?
Stop further trading or tipping, preserve the contract and communications, and obtain advice from qualified legal or compliance counsel. Do not delete records or assume that reversing the trade resolves the issue.
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