Lenders are worried that crooked bankers have a new avenue for insider trading.
Driving the news: Several top Canadian banks and financial institutions, including RBC, TD, and Manulife, have updated employee policies to address prediction market use, per the Globe and Mail. The changes follow similar moves from top U.S. banks and hedge funds.
Zoom in: Some institutions, like RBC, are barring prediction market platforms entirely for any employee subject to personal trading policies that govern how they can trade securities. Others, like Scotiabank, only bar speculation on financial markets, indexes, or companies.
Why it matters: Wealthsimple and Interactive Brokers Group are the only brokers currently certified to run prediction markets in Canada, and can only offer three categories of bets. However, two of them — economic forecasts and financial indicators — are ripe for potential insider trading from finance employees in the know, hence the banks’ proactive new policies.
Plus, there’s nothing stopping a savvy banker from accessing a VPN to wager on all sorts of things on a foreign prediction market — nothing except these updated rules, that is.
Bottom line: Company policies are just one piece of a broader apparatus needed to crack down on insider prediction market trading, potentially including new laws and certainly including self-reporting by platforms. In the case of the latter, leading platform Kalshi has referred 32 instances of possible insider trading to the Commodity Futures Trading Commission.—QH
