Banks Keeping a Close Eye on Prediction and Mention Markets

But there is no clear consensus among legal experts on whether that goes far enough. Pillsbury partner David Oliwenstein, formerly an enforcement attorney for the SEC, told Risk.net that “it is possible for a bank to conduct a risk analysis and reasonably conclude that any risk of misuse of material non-public information is appropriately covered by general insider trading policies.”

Following the Democrats’ mid-term election victory, the CFTC is expected to toughen its stance on prediction markets, which should prompt the largest banks and their employees to think more deeply about the new shape of potential insider trading and to add a specific focus to mention markets.

Oliwenstein says: “Because the CFTC has highlighted [mention markets] as an area of particular risk, regulated entities should at a minimum consider whether to reference mention markets in their policies.”

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