Insider Dealing Without Securities

Insider dealing has always been easier to define than to detect. For decades, regulators, prosecutors, and surveillance teams have operated with a shared mental model: privileged information leaks, a trade occurs in a regulated instrument, a profit is realised, and enforcement follows. The mechanics may be complex, but the logic is linear and familiar.

That model is no longer merely strained. It is structurally obsolete.

Not because insider dealing has declined, but because it is no longer anchored to securities at all. In 2026, the most valuable informational advantages are routinely monetised before they ever touch an exchange, a clearing house, or a reporting regime. Surveillance systems remain transaction-focused. The law remains instrument-bound. Abuse has moved upstream — to information itself.

This is not an enforcement failure. It is a design failure.

Every major insider dealing regime still relies on a simple legal anchor: a trade in a regulated financial instrument.

In the EU, the Market Abuse Regulation only applies where a defined “financial instrument” is traded on a regulated venue or its equivalent. In the United States, Rule 10b-5 requires a purchase or sale of a security. Commodity laws require a futures or swaps transaction. Asia-Pacific regimes follow the same structure.

No trade, no offence.

This is not a loophole. It is the architecture.

Insider dealing law was built for an era in which information moved through markets. It assumes that misuse of information reveals itself at the point of execution — on an order book, in a position, or through a transaction that can be reconstructed and challenged.

That assumption no longer holds.

Modern insiders do not ask which instrument best reflects the information they hold. They ask where that information can be monetised with the least friction, the lowest probability of scrutiny, and the greatest asymmetry against other participants.

Increasingly, the answer lies outside securities markets altogether.

Information is expressed first. Markets react later.

This inversion is fundamental. Surveillance systems still look for anomalous trading behaviour after information has entered regulated markets. But informational advantage is now routinely extracted before those markets are ever touched — if they are touched at all.

By the time a suspicious trade appears in a stock or derivative, the informational rent has often already been captured elsewhere.

Practitioners already see this reality. Insider behaviour rarely confines itself to a single product, venue, or legal classification. Information about geopolitical events, regulatory decisions, supply disruptions, or corporate actions is routinely expressed through correlated commodities, volatility structures, digital assets, or alternative contracts before it surfaces in equities.

What looks like “clean” price discovery in a listed security is often the final echo of information that has already circulated — and been monetised — across other channels.

Surveillance frameworks, however, remain largely instrument-centric. They are designed to reconstruct behaviour within predefined perimeters, not across them. They excel at monitoring activity where the law clearly applies — and struggle precisely where the economic substance has already escaped.

The gap between where information is exploited and where enforcement is possible is widening.

This gap is most visible in the rise of prediction markets.

Platforms such as Polymarket are often framed as tools for collective forecasting rather than financial trading. That distinction is not incidental. It places these venues beyond the reach of traditional insider dealing regimes, which require a regulated instrument to exist in the first place.

But the distinction collapses under economic scrutiny.

A contract tied to a real-world outcome is functionally equivalent to a derivative when one participant possesses superior information. The absence of a listed security does not eliminate informational abuse. It simply prevents the law from activating.

Earlier this year, that reality became difficult to ignore. A newly created account placed a stake of roughly $30,000 on a geopolitical outcome days before the event occurred. When the outcome materialised, the contract surged in value, producing an estimated $400,000 profit.

No equities were traded.
No derivatives were booked.
No reporting thresholds were crossed.

The conduct looked indistinguishable from classic insider dealing. Legally, it did not exist.

This is not a grey area. It is a legal void.

When regulators do attempt to intervene outside securities markets, the results are telling.

In the United States, the first major “crypto insider trading” case did not rely on securities law at all. Prosecutors charged wire fraud. The behaviour resembled insider dealing in every economic sense, but the instruments involved did not clearly qualify as securities.

That improvisation should not be mistaken for progress. It is a signal that existing legal tools no longer match the behaviour they are meant to police.

Insider dealing law still asks the wrong question. It asks what was traded. The real question is what was known, when, and how it was monetised.

It is tempting to treat these cases as technical edge conditions — clever positioning rather than misconduct. That temptation misunderstands how market integrity actually works.

Market integrity is not sustained by statutory definitions alone. It rests on trust in price formation — the belief that prices reflect broadly available information, not privileged access exploited elsewhere and earlier.

When participants begin to suspect that meaningful information is being monetised outside regulated venues, confidence erodes quietly. Prices feel reactive rather than informative. Markets appear fair while functioning unfairly.

Retail-adjacent venues are particularly exposed. Participants assume they are trading collective expectations, not asymmetric knowledge. When that assumption fails, the damage is reputational as much as financial.

This erosion is subtle, cumulative, and difficult to reverse.

For surveillance teams, this exposes an uncomfortable truth. Systems may be operating exactly as designed — and still missing the problem entirely.

Perfect monitoring of equities, options, or futures will not detect informational abuse that never enters those markets. The trade may be invisible, but the informational advantage and the economic benefit are real.

This is not a tooling problem. It is a conceptual one.

Insider dealing oversight remains transaction-first. Abuse has become information-first.

As long as surveillance is triggered only when a regulated instrument is touched, it will continue to detect the final echo of informational abuse rather than its origin.

Prediction markets are not unique. They are simply the most visible example of a broader trend: products engineered to sit just outside legal classifications while delivering financial exposure to real-world outcomes.

This is regulatory arbitrage executed through product design rather than jurisdiction hopping. The rules have not been broken. They have been sidestepped.

As long as enforcement remains tethered to formal definitions instead of economic substance, this pattern will continue.

Some jurisdictions are beginning to respond — extending market-abuse regimes to crypto assets or proposing targeted rules for event markets. But these efforts remain reactive, fragmented, and incomplete.

The underlying issue remains unresolved.

The greatest danger is not that insider-like behaviour occurs outside traditional markets. It is that it becomes normalised.

That markets quietly accept that some information is fair game, some venues are beyond scrutiny, and some profits are simply clever positioning. That enforcement becomes a matter of form rather than substance.

This is how market integrity erodes — not through scandal, but through accommodation.

Once that line blurs, restoring trust becomes almost impossible.

Insider dealing has not disappeared. It has outgrown the legal and surveillance perimeter built to contain it.

If oversight continues to focus narrowly on securities and transactions, it will remain structurally misaligned with how informational advantage is actually extracted. Surveillance will become increasingly sophisticated — and increasingly irrelevant to the most consequential forms of abuse.

The next phase of market integrity requires a shift from instrument-based enforcement to information-centric oversight — one that recognises that price discovery now happens across venues, products, and classifications traditional frameworks were never designed to see.

Until then, insider dealing will remain legally invisible, economically real, and corrosive to trust.

That is the problem surveillance must confront in 2026 — whether the law is ready or not.