Around July 10, 2026, the regulatory landscape in the United States saw two interrelated main lines emerging simultaneously: On one side, on Capitol Hill, the latest merged draft of the “Digital Asset Market Transparency Act” (Clarity Act) was finalized by the Senate Banking Committee and Agriculture Committee, adding over seventy pages of text, strengthening consumer protection, and attempting to establish political boundaries through ethical designs that limit business interactions between senior officials like the president and the cryptocurrency industry. It is expected to be officially announced this week and submitted for full house review during the week of July 20; on the other side, Wall Street's compliance departments had already taken the lead—in response to the CFTC and the Justice Department accusing a Google employee of profiting approximately $1.2 million from the “annual search” contract on Polymarket using non-public information, Goldman Sachs was the first to announce a ban on employees trading prediction contracts related to their own events, elections, financial markets, macroeconomic data, and geopolitical matters. Morgan Stanley, JPMorgan Chase, Bank of America, and others have also quietly begun drafting or updating internal rules. This case involving the Google employee pushed what was originally seen as “free bidding of information” predicting markets into the spotlight of “insider trading” versus “freedom of speech,” and whether the Clarity Act can successfully push through before the August recess, along with Wall Street's self-tightening, will answer a core question: In the next phase, where will the U.S. draw compliance boundaries for prediction markets and the broader cryptocurrency business, determining whether they are considered part of mainstream financial infrastructure or confined within high-walled compliance fences.
Wall Street Tightens Gates on Prediction Markets
While Congress was still lobbying for the provisions of the Clarity Act, the first to make a choice was Wall Street itself. Goldman Sachs first issued an internal ban: employees are prohibited from trading prediction contracts related to “their own events, elections, financial markets, macroeconomic data, and geopolitics.” On the surface, it was an update to the code of conduct, but in reality, it swept up almost every potential target that might intersect with work-related information—ranging from rumors of company mergers and macro data expectations to sensitive electoral milestones; anything that could be interpreted as “possessing non-public information” was preemptively marked as a red line by the compliance department. For Goldman Sachs, this was a typical “reputation first” decision: amidst the ongoing association of prediction markets with insider trading due to the CFTC and Justice Department’s actions related to the Polymarket case, continuing to allow employees to participate in related contracts would nearly equate brand exposure to the risks of regulatory scrutiny and media amplification.
Once Goldman Sachs made its move, Morgan Stanley, JPMorgan Chase, Bank of America, and other institutions quickly followed suit, beginning to draft or update internal policies regarding employee participation in prediction market trading. Although specific effective dates and execution details have not yet been made public, the direction is clear: before the regulators provide written boundaries, they will first close off the most sensitive exposures through self-discipline. This chain reaction of “pre-regulatory compliance” directly alters the ecology at three levels: first, the operational space of individual employee accounts is compressed, with past participation in political, macroeconomic, and company event markets, under the guise of “just betting on probabilities,” being unified as a potential compliance risk; second, for platforms like Polymarket, the liquidity and informed capital from professionals in large financial institutions are forced to retreat, potentially lowering the “professionalism” of prediction market prices; third, from a risk management perspective, Wall Street began incorporating prediction contracts into the same risk control narrative as traditional insider trading, employing a one-size-fits-all approach to restrict themes highly related to sensitive information, providing a buffer for how the CFTC might enforce in this domain in the future while pushing the prediction market further towards the “high-walled compliance fence” side in practice.
Polymarket and Google Case Prompting Regulation
What truly pushed regulators and Wall Street into the spotlight was the Google employee betting on the “annual search” contract on Polymarket. According to the accusations from the CFTC and the Justice Department, he utilized non-public data from Google to forecast which category of keywords would top the global search rankings that year, profiting approximately $1.2 million from relevant contracts. This is not the traditional “looking at financial reports illegally before buying stock” scenario, but rather turning internal traffic and user behavior data into tradable chips on the outcome of future events, effectively sewing prediction markets into the classic insider trading paradigm.
The problem is that the regulatory framework was not equipped to deal with this stitching together. Legal experts quickly pointed out that the CFTC has almost no mature insider trading enforcement cases in the field of prediction markets: on one hand, platforms like Polymarket have seen a sharp expansion in contract types in political, financial, and sports domains in recent years, with the same piece of “information” potentially affecting election outcomes, macro data, and company revenue expectations simultaneously; on the other hand, the boundaries of “what constitutes information that is decisive regarding the outcome of events and has not yet been disclosed” are much blurrier in the contract world than in the securities market. In this vacuum, the Google case is forced to become a testing ground: regulators use it to explore how to impose commodity and futures regulatory frameworks onto event contracts, while Wall Street’s compliance departments reverse-engineer the most conservative risk control standards, and legislators are pressured to confront a reality—if even such a highly suspicious use of internal data to wager behavior lacks clear rules, then the upcoming Clarity Act cannot avoid providing clearer answers to the issue of information abuse in prediction markets, thus naturally transforming this case into a starting point for the compliance reconstruction of the entire industry.
Clarity Act Draft Upgrade: Transparency and Ethics
As the Google employee case brought the issue of “information abuse” to the forefront, the U.S. “Digital Asset Market Transparency Act” (Clarity Act) was also forced to evolve rapidly. After multiple rounds of closed-door negotiations, the Senate Banking Committee and Agriculture Committee merged the already controversial text into the latest draft, adding more than 70 pages of content at once, with the key focus being to refine and intensify consumer protection provisions: from a legislative technical pathway, the entire framework has been repackaged into a regulatory tool centered on “market transparency,” hoping to establish a clearer compliance boundary between digital assets and event contracts.
What truly locked this bill at the legislative gates, however, was not the technical details, but the ethical provisions. In the latest merged draft, the design limiting senior officials like the president from maintaining commercial relationships with the cryptocurrency industry has transformed from an ancillary clause into a political minefield: on one side is the moral narrative of “preventing regulatory capture,” while on the other is the concern of directly pushing the digital asset industry into a politically high-pressure zone due to industry lobbying. According to the current schedule, the merged text is expected to be unveiled during the week after July 10 and submitted to the full Senate for review during the week of July 20, with all procedures needing to be crammed in before the August recess, but crucial Democratic votes have yet to be secured, indicating that whether the Clarity Act becomes the fulcrum of compliance upgrades for Wall Street and prediction markets, or a typical counterexample caught in the ethical dispute, will completely hinge on the final political and industrial power struggle in the coming weeks.
Ethical Red Line Strains Relationship Between Cryptocurrency and Washington
What truly holds up the Clarity Act is not only the technical definitions but the “ethical red line” written in the merged draft—limiting senior officials like the president from maintaining commercial relationships with the cryptocurrency industry. For an ecosystem that has heavily relied on the “revolving door” over the past decade, these few sentences directly choke off the most sensitive channels of interest between Washington and cryptocurrency: former officials cannot easily join the boards or advisory groups of exchanges, project parties, or related financial institutions, and the current team finds it challenging to maintain complex business collaborations with the industry. This not only changes the traditional path for cryptocurrency firms to gain a voice but also impacts the long-standing model used by Wall Street institutions of “bringing in acquaintances to dictate the rules.”
Political donations and policy lobbying from Wall Street and cryptocurrency firms have emerged as a packaged deal: the former provides resources and compliance experience, while the latter offers technical narratives and voter mobilization visions, together weaving a network of relationships in Washington. Once ethical provisions are implemented in the current direction, exchanges, project parties, and even major financial institutions must rewrite their lobbying scripts—previous hidden incentives around “where to go after leaving” and “who can legally collect consulting fees” will have to give way to more transparent and traceable policy dialogues; political donations and policy collaborations will be cut even cleaner, and any regulatory tilt following contributions will first be scrutinized under ethical provisions by the opposition party. The problem is that the prioritization of “clearing interest conflicts” versus “ensuring industry development” is not consistent between the two parties, and the specific objections within the Democratic Party remain undisclosed; all that is visible is the amplification of the controversy surrounding this clause. In the limited time before the August recess, whether the Clarity Act will weaken ethical requirements for industrial consensus or adhere to high standards at the risk of stagnation will depend on where this red line is drawn in the power struggle between the two parties, and this will in turn define how much “revolving door” space the cryptocurrency industry will have left in Washington.
Observation Points and Uncertainties in the Coming Weeks
In the coming weeks, Congress will compress space along two paths simultaneously: one path is that the Clarity Act attempts to reshape the formal rules of the cryptocurrency market with transparency and high officer ethics, while the other path is represented by Goldman Sachs’ internal compliance tightening, keeping prediction market trading “closed and strictly managed.” The regulatory boundaries have clearly shifted from simply acting post-facto on individual cases to preemptively defining who can participate, what types of contracts they can engage in, and what information they can rely on through legislative text and internal control systems. Specific observation points include: first, the Clarity Act merged draft will be published within a week after July 10 and will enter the full Senate review during the week of July 20; whether it can complete the legislation before the August recess will determine how close or distant the cryptocurrency industry will maintain its relationship with Washington and the power centers; second, following Goldman Sachs, the tightening of prediction market trading regulations being developed or updated by Morgan Stanley, JPMorgan Chase, Bank of America, and other institutions will directly impact the operational boundaries for professional traders; third, how the insider trading case of the Google employee on the Polymarket “annual search” contract is ultimately ruled, as well as whether the CFTC and Justice Department codify similar cases as enforcement models for prediction markets, will inversely shape platforms and practitioners' understanding of risk. For cryptocurrency platforms and professional traders, the current need for foresight is not just about the business continuity of a single platform but how prediction contracts can be designed not to be seen as tools for information abuse, how to isolate internal and external information to meet regulatory expectations, and to what extent all businesses linked to political and macro events will be considered “sensitive areas.” These variables will determine whether this round of regulatory reshaping sets new boundaries for market order or the survival space of participants themselves.
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