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Key Takeaways
- College sports face heightened insider information risk given the sheer number of people who possess material, nonpublic information or have influence over game outcomes, placing collegiate programs squarely within the enforcement crosshairs as prediction market scrutiny expands.
- Kalshi's recent bans and fines underscore that Commodity Futures Trading Commission (CFTC)‑regulated prediction markets now apply full federal anti‑fraud and insider trading standards, including in sports‑related markets.
Prediction markets (i.e., platforms where people can bet on the outcome of future events) have moved rapidly from the periphery of finance into the regulatory mainstream. This week, that shift became unmistakable when Kalshi – a CFTC‑regulated prediction market exchange – publicly announced bans and financial penalties against two traders for betting based on insider information. The actions, which Kalshi voluntarily reported to the CFTC, are among the first high‑profile insider trading enforcement matters in the prediction market space.
The CFTC actions carry important implications for sports, particularly college athletics, where nonpublic information is widespread and compliance regimes are still evolving.
The Kalshi Enforcement Actions
Kalshi announced disciplinary actions against two individuals: a political candidate who traded contracts tied to the outcome of his own election campaign (in violation of exchange rules prohibiting trading in events the trader can directly influence) and an employee of a major media brand who traded on contracts linked to content produced by his employer, allegedly using advance, nonpublic information obtained through his job.
In both cases, Kalshi imposed trading bans on the individuals, required them to return their profits, assessed monetary penalties and reported the matters to the CFTC. The CFTC issued an advisory after Kalshi reported the matters, emphasizing that prediction markets are fully subject to federal anti‑fraud and anti‑manipulation authority, including prohibitions on insider trading under the Commodity Exchange Act and CFTC Rule 180.1.
While neither case involved sports, both Kalshi and the CFTC explicitly stated that sports‑related markets pose heightened insider trading risk, because individuals close to teams or players may possess material nonpublic information before it becomes public.
Why This Matters for College Sports
Prediction markets are not simply another way to bet on sports. They are regulated as federal derivatives exchanges, not as state‑licensed sportsbooks, meaning that:
- Trading misconduct is analyzed as market fraud, not merely as a gaming violation.
- Enforcement authority rests with the CFTC – with potential referral to other federal agencies – and not with state agencies.
- Individual bettors can be liable, even when wagers are small, if the bettor possessed or misused insider information.
Of course, college athletics generate abundant insider information. Compared with professional sports, college programs involve a broader and less formalized universe of potential "insiders," including:
- Student‑athletes, their roommates and their friends
- Coaches and graduate assistants
- Athletic trainers and medical staff
- Academic advisers and compliance personnel
- Name, image and likeness (NIL) collective and other third-party entities supporting the funding of student-athletes, officers and consultants whose decisions impact player participation
- NIL agents
These individuals routinely have advance knowledge of information – such as injuries, eligibility decisions, suspensions, depth‑chart changes or coaching decisions – that would likely be considered material in a prediction market. Trading while merely knowing the information, or sharing it with others who trade, fits squarely within Kalshi's and the CFTC's definition of insider trading, potentially leading to significant monetary penalties (up to three times the profit gained or loss avoided) and other civil penalties.
Recognizing this, in January, the NCAA explicitly asked the CFTC to stop prediction markets from offering trades on college sports until more safeguards are in place.1 In a letter, NCAA President Charlie Baker wrote, "I implore you to suspend collegiate sport prediction markets until a more robust system with appropriate safeguards is in place." Baker identified several areas where prediction markets need additional safeguards, such as age restrictions, advertising restrictions, integrity monitoring, restrictions on prop bets, harm reduction resources and anti-harassment measures. Baker continued, "So-called prediction markets are offering what anyone can see is unregulated betting on college games ... we need federal regulators to stabilize this market."
With the CFTC's recent action, Baker may have gotten his wish.
How This Interacts with NCAA Rules and State and Federal Statutes
These federal developments do not replace existing prohibitions; they layer on top of them. In other words, for college athletics, this means that trading on team- or player‑related outcomes may raise exposure from yet another government agency, not just the NCAA.
The NCAA rules already bar athletes and staff from betting on college sports, and many states criminalize certain forms of athlete or insider wagering. Of course, the Department of Justice recently showed that federal criminal statutes can also be applied to insider betting schemes on college athletics.
On Jan. 15, federal prosecutors in the Eastern District of Pennsylvania unsealed a sweeping indictment2 charging 26 individuals – including current and former NCAA Division I men's basketball players across at least 17 programs – with participating in an international point‑shaving and bribery scheme spanning both NCAA and Chinese Basketball Association games. The alleged conspiracy targeted more than 29 games between 2022 and 2025 and cash payments to athletes ranging from $10,000 to $30,000 per game. Athletes allegedly underperformed so bettors could profit from manipulated point spreads. Federal authorities described the operation as a significant corruption of college athletics, involving recruiters, former players and professional gamblers who coordinated wagers, coached athletes on how to avoid covering spreads and, in some instances, continued the scheme even after player transfers between schools. The indictment highlighted the breadth of insider exposure facing college programs and how the combination of digital evidence, expanded legal sports betting and increased government focus is rapidly accelerating enforcement risk across college athletics.
The recent Kalshi action and prediction market enforcement by the CFTC adds an additional, federal anti‑fraud overlay, with potential consequences including disgorgement, market bans and regulatory investigations. Of course, even absent a finding of wrongdoing, universities may face reputational harm or investigative scrutiny if athletes or affiliated individuals are implicated.
Conclusion
The Kalshi actions underscore that regulators view sports‑related information as market‑moving data, not merely as an integrity of competition issue. The CFTC can now be added to the list of entities, both governmental and nongovernmental, that will scrutinize sports betting.
For college athletics – where insider information is plentiful and compliance frameworks are still catching up – the risk is not hypothetical. Institutions should take this issue seriously and not treat prediction markets as a niche or novelty product, or they may find themselves unprepared for the regulatory attention now taking shape.
Footnotes
1. Letter from Charles Baker, NCAA president, to Michael S. Selig, CFTC chairman, available at https://ncaaorg.s3.amazonaws.com/ncaa/wagering/2026NCAA_CFTCLetter.pdf.
2. Department of Justice Press Release, "26 People Charged in Alleged Bribery and Point-Shaving Scheme to Fix NCAA, CBA Men's Basketball Games," Jan. 15, 2026, available at https://www.justice.gov/usao-edpa/pr/26-people-charged-alleged-bribery-and-point-shaving-scheme-fix-ncaa-cba-mens.
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