Event-based trading is booming, but with massive growth comes intense regulatory scrutiny. To get ahead of the curve, prediction market platform Kalshi has officially teamed up with StarCompliance, a leading compliance software provider. Together, they are rolling out a specialized monitoring platform designed to help financial firms keep a close eye on their employees’ trading activities. As prediction markets blur the line between investing and forecasting, regulators are raising the alarm over the potential misuse of material non-public information.
Cracking Down on Insider Trading in Event Contracts
This new surveillance system is built to flag suspicious employee activity by tracking transaction volumes, trading patterns, market categories, and even work-hour engagement. Financial companies will now have a centralized dashboard to manage internal investigations and maintain comprehensive audit records for both onchain and offchain trades. By integrating prediction market data, StarCompliance is expanding its existing employee oversight tools—which already monitor traditional securities and digital assets—to cover this rapidly growing sector.
The launch of this monitoring tool couldn’t be more timely. Just days prior to the announcement, a federal judge scheduled a trial for a US Army Master Sergeant accused of leveraging classified military intelligence to pocket over $400,000 on rival platform Polymarket. This high-profile case, combined with recent congressional inquiries into suspiciously timed trades surrounding geopolitical events, highlights exactly why enhanced surveillance is becoming essential. By bringing event contracts into the same compliance fold as traditional financial markets, Kalshi is actively addressing the very real risk that corporate employees could use sensitive business intelligence to game the system.
The Regulatory Tug-of-War: States vs. The CFTC
Beyond insider trading concerns, the broader prediction market industry is currently caught in a massive jurisdictional tug-of-war. At least eleven US states have already launched legal or regulatory strikes against platforms like Kalshi and Polymarket. The core debate boils down to classification: should these event contracts be strictly regulated under state gambling laws, or do they qualify as federally regulated derivatives overseen by the Commodity Futures Trading Commission (CFTC)?
This philosophical clash has sparked a messy patchwork of cease-and-desist orders and restrictive legislation across the country. States like Nevada and Arizona have actively moved to block operations or label them as illegal gambling rings, while Minnesota recently enacted the nation’s first outright ban on the industry. However, Kalshi and the CFTC are fighting back aggressively. The federal agency has filed multiple lawsuits against state officials in places like Rhode Island and New Mexico, pushing to block local restrictions and firmly establish its own authority. According to industry experts, this heated dispute between state authorities and federal regulators is only just beginning, with many predicting the battle will drag on for years and potentially culminate in a landmark showdown at the US Supreme Court.
