Peter Chan, Matthew Smith, Jerome Tomas and Ethan Primeaux Examine Insider Trading in Prediction Markets in Law360

In a recent Law360 article, Baker McKenzie partners Peter Chan, Matthew Smith and Jerome Tomas, along with legal fellow Ethan Primeaux, analyze the legal landscape for insider trading enforcement in prediction markets following the first-ever prediction market insider trading indictment in the US.

Their key takeaways include:

• Insider trading doctrines like materiality, duty, scienter, tipper-tippee liability and the use-versus-possession standard were developed in the securities context and raise unresolved questions when applied to prediction markets tied to real-world events.
• Companies should carefully review their insider trading policies. Overly broad policies may create legal exposure, while overly narrow ones may fail to protect against employee misconduct.
• The US CFTC has indicated that enforcement in this area will be a priority, but until further guidance is issued, market participants are likely to face continued uncertainty about how existing insider trading principles will apply in this context.

Read the full article