Wall Street’s top cop expects enforcement on prediction markets

Wall Street’s top cop expects regulators to take actions tied to prediction markets following a surge in trading on the platforms over the past year, saying that simply making bets outside of traditional spaces “doesn’t insulate you from fraud.”

Manhattan US Attorney Jay Clayton made the comments Thursday during a speech at the Securities Enforcement Forum in New York, telling the audience that prediction markets are “an area that I am looking at.”

“What is the applicable law? Let’s say I have a big stock position,” Clayton said. “The stock’s trading at $130, there’s a prediction market that pays if the stock goes below $100. Is that an out of the money put option? It sure looks like it. Right? You wouldn’t advise someone to sell that as a non-security.”

Later in the forum, he was asked if he expected enforcement actions tied to the markets. “Yes,” he responded bluntly.

Clayton’s remarks come as prediction markets have exploded into a multi-billion dollar industry, with users placing yes-or-no wagers on everything from Oscar winners to how much snow will fall. Trading on federally-regulated exchanges like Kalshi and the US arm of Polymarket has surged despite legal challenges from multiple state gaming regulators.

Concerns about insider trading are also ramping up. The markets for some wagers are often thin enough that a single trader can move prices, especially if they have non-public information. Those worries escalated in January when a trader on Polymarket made approximately $400 000 betting on the ouster of former Venezuelan leader Nicolás Maduro, with the biggest trades placed just before President Donald Trump publicly announced the US had captured him.

The head of the US Commodity Futures Trading Commission, which regulates derivatives exchanges, last month said the agency would craft new rules on prediction markets.

© 2026 Bloomberg

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