Should Prediction Markets Allow Insider Trading? Coinbase's CEO Says There’s No 'Clear-Cut' Answer

If prediction markets are supposed to provide insight into what’s going on in the world, does it make sense to let “insiders” make bets on those platforms?

Comments made by Coinbase CEO Brian Armstrong on Wednesday suggest he thinks there could be benefits in allowing a little insider trading via the event contracts offered by federally regulated prediction markets. 

Now, does that mean letting professional athletes bet on their games using Kalshi, Polymarket, or Coinbase (eventually)? Probably not. And, due in no small part to recent sports betting-related scandals, the answer from sports leagues would almost certainly be definitely not. 

But could there be some value in allowing some insider trading on, say, geopolitics? According to Armstrong, there just might.

The Coinbase CEO was speaking Wednesday at the New York Times’ DealBook Summit when he was asked about prediction markets, platforms that allow users to bet "yes" or "no" on certain outcomes, including those tied to sports.

Prediction markets also allow traders to bet on things like what words corporate executives may say during a quarterly earnings call, which Armstrong infamously acknowledged during a Coinbase call at the end of October by rattling off several tradeable words.

Armstrong told moderator Andrew Ross Sorkin on Wednesday that he was "just having a little bit of fun" on the call, before providing a deeper answer about the usage of prediction markets, which Armstrong called “a big deal.” 

(It's worth noting here that Coinbase is planning to launch its own prediction markets.)

lol this was fun - happened spontaneously when someone on our team dropped a link in the chat https://t.co/tQiV3B9jUj

— Brian Armstrong (@brian_armstrong) October 31, 2025

The Coinbase CEO estimated 1% of people are trading event contracts like any other asset class, but that 99% could be looking at it as an "alternative" to traditional media to “figure out what's going to happen in the world."

Then Armstrong added that some people could also just be using prediction markets for entertainment. 

"So it's a very interesting new area," he said. "I think that actually we're going to see even more potential here."

An example Armstrong floated was policymakers using prediction markets to provide a “signal” about economic indicators. They could then use those insights to make policy decisions.

Plot a course ... to profits?

Sorkin then asked about market manipulation, saying Armstrong had "effectively manipulated the outcome" of the Coinbase mention markets.

Armstrong replied that he "of course" hadn't traded on those words. He then added that he'd had an interesting conversation with someone who had been nominated to serve as a commissioner for the Commodity Futures Trading Commission, the federal regulator of prediction markets.

“He asked me … ‘Do you think we should allow insider trading in prediction markets?’” Armstrong said. 

The Coinbase CEO said his response was that it’s not as “clear cut” a question as you might think.

“Because if your goal is to actually, for the 99% of people trying to get signal about what's going to happen in the world, like, is the Suez Canal going to be reopened, or whatever, you actually want insider trading,” Armstrong said. “You want, you know, some admiral sitting on a ship in the Suez Canal who has really good information to be trading, so you get better, higher-quality signal out of them, right? Now, if you want to preserve the integrity of those markets, maybe you don't want insider trading, right? So there might be like a decentralization test that has to go in here. But … it's not a clear-cut answer.”

Armstrong's comments come as prediction market projections are being woven into traditional sources of news and sports information, such as Kalshi's recently announced partnership with CNN. Prediction markets were also more bullish about the reelection of President Donald Trump than some pollsters, and they are fond of publicly celebrating when their forecasts prove accurate.

There is an argument that could be made that allowing insiders to bet would make prediction market projections more accurate. Because who would know better than insiders?

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OK, but ...

However, the CFTC would duly note that federal commodities law and regulations prohibit, among other things, trading on the basis of material nonpublic information (MNPI) “in breach of a pre‐existing duty or trading on the basis of MNPI that was obtained by fraud or deception.”

Interestingly, another CFTC-regulated prediction market, PredictIt, does not forbid insider trading.

PredictIt's terms and conditions state that it “is not a stock exchange, and there are no controls on market manipulation or trading on the basis of ‘inside information.’”

But PredictIt, in its current form (as an “experimental project operated for academic purposes under permission from the CFTC”), is subject to different rules than other prediction markets. It also has tighter limits on how much someone can trade, namely, a $3,500 cap on how much someone can buy of any given contract. So the opportunities for windfall profits from market manipulation are just not there like they could be for other prediction markets. 

Thanks to the @CFTC and Acting Chairman @CarolineDPham, PredictIt is excited to announce major updates, including no trader limits and a larger position limit: https://t.co/P4eUX8hQcd #PredictIt #Forecasting #Markets #NAL pic.twitter.com/nbz6VUsH1i

— PI (@PredictIt) July 15, 2025

There’s also a certain group of stakeholders that would probably have a collective freak-out if CFTC-regulated prediction markets suddenly allowed certain employees to bet on their own industry.

That would be professional sports leagues, which have recently been rocked by sports betting-related scandals and have since taken pains to show that they have and are trying to uphold the integrity of their games. Leagues are also applying their sports betting rules to prediction markets.

“NFL players could participate in prediction markets in sports other than the NFL and as long as they aren’t doing it at work or on a work trip,” an NFL spokesperson told Covers earlier this year. “In that way, it mirrors the policy for regular sports betting.”

The NHL, which has partnered with Kalshi and Polymarket, also says its rules “prohibit all NHL personnel, including Players, from trading NHL contracts in the same way we prohibit all NHL personnel, including Players, from betting on the NHL.”

“These platforms are required to comply with the stringent requirements set forth by Commodities Futures Trading Commission (CFTC) regulations,” the league told Covers. “Integrity is paramount to the NHL and our agreements with Kalshi and Polymarket require that each undertake security measures to prevent and address unauthorized contract trading, in addition to their CFTC regulatory obligations.”

So, maybe an admiral betting on the Suez Canal’s reopening would be worthwhile and perhaps even permissible someday. But an athlete betting on their games using a prediction market would just create a lot of headaches for leagues, and add to the preexisting concerns that fans and sports bettors may have about the integrity of what they’re watching and wagering on.

Not everybody’s cup of tea

Armstrong’s companion on Wednesday’s DealBook panel was Larry Fink, the chairman and CEO of the massive investment company BlackRock.

And, when Fink spoke after Armstrong’s prediction market-related comments, he was much less interested.

“We try to help people navigate a 30-year outcome,” Fink said. “I don't really care about what happens the next moment. I mean, I’m aware in the betting market, football, you could bet every play. To me, this is not how I’m going to live my life.”

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