On April 24, 2026, Eventus, a leading trade surveillance and market risk platform, hosted FORWARD, a one-day conference that gathered leaders from law and consulting firms, digital asset exchanges, fintech investment platforms, former regulators and gaming companies to discuss the rapidly growing and evolving prediction markets industry. A&M’s Sarah Fearon-Maradey and Jonathan Zatz participated in FORWARD, with Sarah serving as an insight leader, sharing her expertise in trade surveillance related controls and how it can be applied to prediction markets. 

Over the last year, the U.S. has seen notable Designated Contract Market (DCM) registrations, launches and partnerships, including the debuts of Gemini Titan¹ and Coinbase Events;² the relaunch of Polymarket US following its acquisition of the DCM QCX;³ and Bitnomial’s DCM registration followed by its pending acquisition by Kraken.⁴ Concurrently, prediction markets have become the subject of heightened regulatory and legal scrutiny, including concerns over potential insider trading and manipulation, disputes arising from event contract ambiguity, questions around whether certain contracts are against public interest, and state versus Commodity Futures Trading Commission (CFTC) conflicts regarding jurisdiction.

Recent developments include:

• CFTC issuing a recent advisory and an Advanced Notice of Proposed Rulemaking (ANPRM), both focused on prediction markets;⁵ 
• DCMs fining individual traders and removing them from their platform over suspected insider trading;⁶ 
• Congress introducing legislation that precludes the CFTC from approving prediction contracts on assassinations, war and terrorism;⁷ and 
• Numerous lawsuits filed by states challenging the CFTC’s classification of event contracts as “swaps” under the federal Commodity Exchange Act (CEA), thus shielding them from state gaming laws. While the Third Circuit Court of Appeals issued a ruling in favor of the CFTC, the Ninth Circuit seems to be leaning in the opposite direction, which likely means this topic will be taken up by the Supreme Court sooner rather than later.⁸ 

With these developments serving as the backdrop to FORWARD, the discussion allowed the opportunity for panelists and participants to share their perspective on risks and how to mitigate those risks across three main areas: (1) regulatory enforcement; (2) market structure and contract design; and (3) market conduct surveillance. In this article, we discuss the key takeaways from each of these areas, as well as what prediction markets are doing or should do today to address potential enforcement risk.

Regulatory Enforcement

There was consensus among panelists, who included several former CFTC officials, that despite the current administration’s business-friendly and anti-enforcement tendencies, there still appears to be universal condemnation of sports betting impropriety. Further, it was discussed that while the CFTC has shrunk in the last year, many of those attorneys are landing elsewhere, such as at the New York Attorney General’s office, where they are bringing many cases against prediction markets. One presenter noted that despite the CFTC’s smaller size, they are continuing to investigate and pursue enforcement actions against DCMs. Some even said that trades on business outcomes should be considered “puts,” which fall under SEC criminal jurisdiction. All of this indicates that the legal activity we are seeing now is only the beginning, and can only increase under a subsequent, and likely more active administration.

Panelists agreed that the preemption battles brewing in the U.S. Circuit Courts will likely be fast-tracked to the Supreme Court given the likely conflicting rulings. This could break in DCMs’ favor or not.

Market Structure

The panelists highlighted that DCMs need to carefully consider the CEA’s Core Principle 3 when self-certifying new event contracts. Core Principle 3 mandates that DCMs cannot list contracts that are readily susceptible to manipulation. For instance, most participants agreed that trades tied to an individual’s performance (e.g., a baseball pitcher) are more prone to manipulation than those tied to the performance of a group (e.g., an entire team). Similarly, smaller and lesser-known sports leagues and athletes are more vulnerable to manipulation than more established leagues or famous athletes.

Panelists also emphasized the need to avoid ambiguity in the settlement terms of event contracts. For example, if a contract trades on whether a sanction will be announced against a given country, the contract must stipulate how the back-and-forth of potential outcomes should be handled before the settlement date (in other words, if the sanction is announced, then retracted, who wins?). Another political example that panelists surfaced is the need for DCMs to define certain terms in the contracts, such as what qualifies as an official government announcement (e.g., is a social media post from the president an announcement?). 

The panelists also emphasized that prediction markets need to define a clear dispute resolution process. Defining this process is critical because the majority of prediction market participants are retail investors who may not be as familiar with certain dispute resolution practices.

Surveillance 

The panelists highlighted the difficulties in surveilling prediction markets. For example, with traditional insider trading detection, analysts typically start with unusual trading activity and then look at whether the individual may have access to inside information. With prediction markets and retail traders, the trade sizes may be smaller. Therefore, practitioners may need to start by examining customer connections and then look for unusual transactions rather than vice versa. This paradigm forces surveillance practitioners to think about data and patterns in less traditional ways. For example, in the context of sports, one panelist discussed how their firm looks at data to create behavioral profiles of individual players and umpires both against themselves and their peers to look for unusual behavior patterns.

A major conversation topic highlighted the importance of data sourcing and data sharing to fight prediction market criminal activity. Key data types discussed included trade volume and flow, trade frequency, behavioral profiles of insiders and others who have influence (such as referees), relationship webs, and lists of prohibited patrons. Some panelists represented services that help exchanges use encrypted data sets to detect risk. Others represented platforms themselves and shared their current risk mitigation strategies, such as restricting certain profiles from participating in certain trades (using a given participant’s employer as a data signal, for example). Approaches ranged from very manual processes to exploring how AI can be used to identify connections between traders and assets.

Key Takeaways

Many challenges and unknowns were raised by market players throughout the event, including, but not limited to:

• Lack of clarity around who should be considered an insider;
• The need to sift out non-malicious intent (e.g., an athlete telling a friend he is sitting out the next game) by also using post-trade surveillance to determine whether trade activity was actually unusual;
• Compared to traditional financial crimes, lookback periods for certain prediction markets can be very small, resulting in limited data to rely on to determine what is “normal” behavior;
• Low liquidity and low-priced products can produce many false positives for surveillance teams, resulting in wasted time and resources;
• Many of the newer exchanges coming online right now are new to CFTC regulation and have very limited staff to enforce rules; and
• Multiple prediction markets at FORWARD indicated their intent to explore crypto options in the short term, which would facilitate the need for wallet screening and on-chain surveillance.

Preparing for the Future

Given the regulatory and legal focus on prediction markets, DCMs should take action today to provide the most protection possible against future regulatory or legal actions.

These actions platforms can take now may include:

1. Defining risks and risk tolerances, including appetite for certain event contract types;
2. Developing clear policies and procedures, from how to design compliant and unambiguous contracts to know-your-customer (KYC) protocols to defining insiders and potential influences for each event to surveillance review and escalation processes;
3. Building data partnerships and sharing mechanisms;
4. Developing pattern recognition capabilities to identify market abuse, including integrating AI; and
5. Calibrating tools in ways that makes sense for each platform’s products.

While this industry may be nascent, these types of controls are not new. Institutions and professionals have been establishing and enhancing anti-financial crime programs, such as anti-money laundering (AML), for a long time. The need to conduct new and recurring KYC; to assign a risk category to each customer; to uncover relationships between customers (i.e., beneficial owners); to prevent prohibited participants (i.e., sanctions); and to generate suspicious transaction alerts have all been fulfilled before. Becoming compliant will be an exercise in applying and customizing successful paradigms for this new use case.

How Can A&M Help?

Market participants that trade in or offer event contracts need to keep abreast of the shifting regulatory landscape and be prepared to adapt their compliance and supervision programs. Firms may need to revise insider trading policies, enhance monitoring controls, and reassess Core Principles satisfaction. In the event of a potential regulatory investigation or enforcement action, firms will need to develop sound responses.

As the regulatory environment around event contracts continues to evolve, our team has the expertise to help your organization understand key CFTC rule changes and implement necessary enhancements to compliance and risk frameworks, KYC and surveillance systems and tools, data gathering and analysis, and alert and model tuning. We can also support clients in prediction markets-related disputes and litigation matters.

A&M has extensive experience working with all major U.S. regulatory agencies and is well-positioned to provide tailored, risk-based solutions for clients across different sectors of the financial services industry.

Our Services: 

• Investigation support and market analysis
• Expert dispute services
• Regulatory change management guidance and implementation
• Compliance program evaluations
• Risk assessments
• Technology selection and implementation
• Control testing
• KYC and surveillance program review and remediation
• Systems calibration and enhancement
• Regulatory data reporting
• Data governance, mapping and validation

Learn More About Our Services

1. Katherine Hamilton, Winklevoss Twins’ Gemini Space Station Joins Prediction Markets Race, Wall St. J. (Dec. 10, 2025), https://www.wsj.com/tech/winklevoss-twins-gemini-space-station-joins-prediction-markets-race-c2d820a7.
2. Helene Braun, Coinbase Rolls Out Prediction Markets to All U.S. Customers, CoinDesk (Jan. 28, 2026), https://www.coindesk.com/markets/2026/01/27/coinbase-rolls-out-prediction-market-to-u-s-customers.
3. Ryan Ermey, Polymarket Is Back in the U.S. With a Free Grocery Store—What to Know About It and Other Prediction Markets, CNBC (Feb. 14, 2026), https://www.cnbc.com/2026/02/14/how-prediction-markets-work.html.
4. Payward to Acquire Bitnomial, Creating a Fully CFTC-Licensed Derivatives Platform, Kraken Blog (April 17, 2025), https://blog.kraken.com/news/payward-acquires-bitnomial.
5. Jeremy Cusimano et al., Prediction Markets: CFTC Issues Guidance and Potential Rulemaking Notice, A&M (Mar. 24, 2026), https://www.alvarezandmarsal.com/thought-leadership/prediction-markets-cftc-issues-guidance-and-potential-rulemaking-notice.
6. Steve Kopack et al., Kalshi Fines and Suspends Three Politicians for ‘Insider Trading’ on their Own Races, NBC News (April 22, 2026), https://www.nbcnews.com/business/markets/kalshi-fines-suspends-politicians-insider-trading-elections-rcna341505.
7. Ronak D. Desai et al., Congress Predictably Turns Its Attention to Prediction Markets, Paul Hastings, (Apr. 1, 2026), https://www.paulhastings.com/insights/client-alerts/congress-predictably-turns-its-attention-to-prediction-markets.
8. Stefan Modrich, States, Federal Regulators Clash Over Prediction Markets Jurisdiction, S&P Global (April 24, 2026), https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/4/states-federal-regulators-clash-over-prediction-markets-jurisdiction-100961743.