Prediction Market Oversight Tightens, Hedge Funds Point72 and Balyasny Ban Employees from Trading

Question: Will other Wall Street firms follow Point72’s ban?

Source: Global Market Report

Sources familiar with the matter say that Point72 Asset Management and Balyasny Asset Management have recently banned employees from using personal accounts to participate in prediction market trading.

Over the past year, prediction trading platforms like Kalshi and Polymarket have rapidly gained popularity, raising regulatory concerns. Hedge fund giants are at the forefront of Wall Street’s response to new regulatory challenges.

These exchanges offer binary financial contracts that allow users to bet on elections, geopolitical events, and more directly related financial market events such as corporate earnings and economic data. This has led to increased scrutiny from regulators due to their susceptibility to manipulation and insider trading.

Hot topics in the market are also increasing, including several cases where prediction traders appear to have profited from insider information about corporate and government actions, drawing attention from compliance departments across the financial industry.

The measures taken by Point72 and Balyasny are more stringent than the standard policies on other financial markets on Wall Street. Employees are generally allowed to trade in these markets using their personal accounts, provided they follow certain restrictions to prevent conflicts of interest and the use of non-public information.

Both Point72 and Balyasny declined to comment.

An insider revealed that the ban is at least partly driven by compliance restrictions. Since prediction markets in the U.S. are regulated by the Commodity Futures Trading Commission (CFTC), their activities are considered derivatives trading, triggering tracking and reporting obligations. However, the individual noted that exchanges often lack the infrastructure to provide reliable electronic records required by financial institutions, making effective monitoring difficult and increasing the risk of violations.

Many firms are still developing policies, and not all companies that have made decisions are following the same approach. One insider said that JPMorgan Chase told employees this week that they should adhere to the same standards as personal trading in prediction markets.

Harris | Oakmark, based in Chicago and managing approximately $100 billion in assets, said its chief legal officer Rana Wright stated that the company is weighing how much to restrict employee participation in prediction markets. The focus is on reducing risks related to insider trading, conflicts of interest, misuse of confidential information, and misconduct.

“We are exploring whether it is appropriate to impose bans on certain activities and whether education is needed,” Wright said. If restrictions on employee trading are indeed implemented, “we will handle this based on a trust-based approach.”

In Los Angeles, James St. Aubin, Chief Investment Officer of Ocean Park Asset Management, which manages over $4 billion, said the firm is also evaluating related policies.

Scott Moss, co-chair of the investment management group at Lowenstein Sandler, stated that in recent months, there has been a noticeable increase in inquiries from investment advisors regarding prediction markets, especially as many prediction markets have updated their annual compliance disclosures required by the U.S. Securities and Exchange Commission.