World Liberty Financial Investor Claims Prediction Market Insider Trading Is Legal—Sparks Industry Backlash

An investor at World Liberty Financial just dropped a bomb—calling insider trading on prediction markets perfectly legal. The finance world is reeling.

The Regulatory Gray Zone

Prediction markets operate in a fog. They let users bet on real-world outcomes—elections, corporate earnings, you name it. But are they gambling? Securities trading? Something else entirely? Most regulators haven't decided, leaving a massive loophole.

Why Insiders Have an Edge

Think about it. If you know a merger is coming, you could quietly place a 'prediction' on a market platform before the news breaks. The investor's argument? Since these platforms aren't officially classified as securities exchanges, traditional insider trading laws don't apply. It's a clever—some say cynical—exploitation of regulatory lag.

The Backlash Erupts

Ethicists and traditional finance veterans are furious. They call it a dangerous precedent that undermines market integrity. "It's legal until it isn't," quipped one critic, highlighting the finance sector's timeless talent for finding loopholes right up until the regulators slam the door.

A Provocative Precedent

This stance forces a brutal question: in the race between financial innovation and regulation, who wins? The investor's comments may be a deliberate provocation, testing boundaries before the rules get written. One thing's clear—the debate over prediction markets just got a lot hotter, and the clock is ticking for lawmakers to respond.

Is insider trading legal?

Karbon, the pseudonymous commentator account @karbonbased simply known as Karbon, wrote about his personal policy of refraining from trading on any market where he possesses non-public information, stating he values being “home with my wife and son, not in prison.”

The post was in response to a World Liberty Financial (WLFI) investor allegedly publicly defending insider trading on prediction platforms. The core investor in the TRUMP family’s World Liberty Financial initiative took to Twitter to call insider trading on prediction markets legal, resulting in immediate backlash.

“It’s totally legal to insider trade on prediction markets as CFTC regulates them as derivatives, not securities. Insider trading rules don’t apply here. And here’s the point people miss: prediction markets are literally designed to attract insiders.

That’s the whole point. The market works best when people with real information participate. The average person scrolling Twitter doesn’t add much value to predicting complex outcomes. Prediction markets are basically a legal way to buy insider info,” he wrote.

Evgeny Gaevoy, the founder and CEO of Wintermute, said he WOULD “think less” of anyone he learned had engaged in insider trading on platforms like Polymarket or Kalshi.

Cryptopolitan reported yesterday that a bill called the Public Integrity in Financial Prediction Markets Act of 2026 is in the works to prevent individuals who might have privileged information about certain issues from being able to make trades on outcomes of bets relating to those issues.

Is insider trading legal on prediction markets?

While Charles claims the CFTC’s classification of prediction markets as derivatives exempts them from securities law, legal experts have noted this interpretation is untested in court.

Traditional insider trading laws primarily target securities markets under the SEC’s jurisdiction. However, the Commodity Exchange Act does contain anti-fraud and manipulation laws that could potentially apply to trading on material non-public information, but no major enforcement action has established a clear precedent specifically for prediction market insider trading.

World Liberty Financial, a crypto project launched by the Trump family, has faced scrutiny over potential conflicts of interest. Critics pointed out the potential for individuals connected to the Trump administration to possess non-public information valuable for prediction markets.

Senator Elizabeth Warren and Representative Maxine Waters have called for investigations into WLFI to determine whether the Trump family’s role in the project is affecting its regulatory compliance.

In November, reports surfaced alleging that World Liberty Financial sold tokens to individuals linked to sanctioned countries such as Iran, North Korea, and Russia.

Wintermute has also faced insider trading allegations in the past, although nothing has stuck legally. It is important to note that some of the allegations also come from users on the wrong end of the firm’s market-making activities.

Tier1Hater, a crypto commentator who initially highlighted Charles’s statements in a post on X, accused WLFI of running “a blatant misinformation campaign” and characterized the insider trading defense as “normalizing corruption while painting it as innovation.”

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