The First Prediction Market Insider Trading Case: SDNY and CFTC Test the Limits of Fraud and Commodities Law

On April 23, 2026, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) and the Commodity Futures Trading Commission (“CFTC”) announced parallel criminal and civil enforcement actions against an active-duty U.S. Army service member, alleging that he used classified military information concerning a U.S. military operation to capture Venezuelan President Nicolás Maduro to place profitable trades on Polymarket, a prediction market platform.[1] The case—United States v. Gannon Ken Van Dyke—appears to be the first insider trading case involving prediction markets.

The charges follow a series of public statements from senior enforcement officials, including the CFTC Enforcement Director, David Miller, and the U.S. Attorney for the Southern District of New York, Jay Clayton, signaling that insider trading laws apply equally to prediction markets and that civil and criminal enforcement authorities intend to pursue misconduct in that space aggressively. For example, at a February 5 forum hosted by Securities Docket, an audience member asked Clayton if he anticipated prosecutions in the prediction markets. “Yes,” Clayton said. He then gave an example of conspiring to fix a golf game through the prediction markets. He emphasized “[t]hat’s a crime,” and “[b]ecause it’s a prediction market doesn’t insulate you from fraud.”[2]

The indictment[3] and CFTC complaint[4] against Van Dyke make clear that authorities intend to rely on the same misappropriation theory traditionally used in securities insider trading cases to police the use of confidential information in prediction market trading. According to the government, Van Dyke allegedly used classified, nonpublic information obtained through his participation in “Operation Absolute Resolve” to purchase event contracts tied to Maduro’s removal from power, generating more than $400,000 in profits.

In the press release announcing the charges, Clayton emphasized that “[p]rediction markets are not a haven for using misappropriated confidential or classified information for personal gain,” describing the alleged conduct as “clear insider trading and is illegal under federal law.”[5] The CFTC likewise characterized the action as the first insider trading case involving event contracts and the agency’s first use of the so-called “Eddie Murphy Rule,” which prohibits insider trading on the basis of misappropriated government information in commodities markets.

This case may provide an early indication as to whether courts will accept the extension of insider trading principles to prediction markets and could further shape the contours of wire fraud and commodities fraud jurisprudence in this emerging area.  While litigation is likely to unfold over time, companies should consider promptly reviewing their insider trading and compliance policies to address trading in prediction markets and the use of confidential information in connection with event contracts.

Case Overview and Charges

As alleged in the indictment, Van Dyke, a member of the U.S. Army Special Forces, participated in the planning and execution of the U.S. operations to capture Nicolás Maduro. Prosecutors allege Van Dyke used his access to classified military information to purchase event contracts on Polymarket, a prediction market platform where participants buy or sell contracts based on the outcome of future events. Before the operation took place, Van Dyke allegedly spent $33,000 purchasing event contracts predicting that U.S. forces would enter Venezuela and that Maduro would be removed from power by January 31, 2026. After the U.S. successfully carried out the operation, Van Dyke allegedly realized approximately $409,000 in profits, both through contracts that resolved in his favor and by selling certain related positions prior to final resolution.

The indictment further alleges that Van Dyke attempted to conceal the source of those proceeds by transferring funds through cryptocurrency accounts and into a newly created brokerage account, while also taking steps to obscure his connection to the Polymarket account used to place the trades. According to the government, those efforts included routing funds through a foreign cryptocurrency wallet, changing associated email addresses, and requesting deletion of the Polymarket account shortly after public reporting identified suspicious trading activity in Maduro-related markets.

The indictment charges Van Dyke in five counts, four of which are particularly noteworthy. The first two counts allege violations of specific prohibitions on trading swaps using material nonpublic government information. Those prohibitions, commonly referred to as the “Eddie Murphy Rule,” were added to the Commodity Exchange Act by the Dodd-Frank Act and derive their nickname from the movie Trading Places, which centered on commodities trading based on stolen government information. Specifically, the provisions prohibit government employees and other persons who obtain confidential government information from using that information to trade futures, options, or swaps.[6]

Count Three charges Van Dyke with commodities fraud in connection with swap transactions under a theory analogous to the misappropriation theory traditionally used in insider trading cases. The CFTC’s parallel civil complaint asserts claims substantially similar to these first three counts of the Indictment, alleging violations of CEA provisions and regulations that prohibit deceptive conduct and trading on the basis of material nonpublic information (including government information) obtained in breach of a duty of trust or confidence.

Count Four of the Indictment charges Van Dyke with wire fraud based on the alleged misappropriation and use of valuable confidential information for personal gain. The government’s reliance on wire fraud theories alongside commodities fraud claims may expand the use of traditional fraud statutes in the context of prediction markets.

Event Contracts Under the Commodity Exchange Act

The charges brought by SDNY under the Commodity Exchange Act (Counts One through Three) and all of the parallel claims in the CFTC’s complaint rest on the premise that the event contracts Van Dyke traded constitute “swaps” within the meaning of the CEA.

The CEA has a broad definition of a “swap,” which includes “an agreement, contract, or transaction” that provides for a payment or delivery dependent on the “occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A). Consistent with that definition, the CFTC alleges that “[e]vent contracts are swaps because they are settled based on the occurrence or nonoccurrence of a specified future event with potential financial, economic, or commercial consequences, such as the occurrence of a weather event, the outcome of an election, the price of a market index, or prevailing interest rates.”

In particular, the CFTC alleges (and SDNY will presumably make the same argument) that the outcome of the event contracts at issue here, including a wager on Maduro’s removal from power, depended on an event or contingency “associated with a potential financial, economic, or commercial consequence,” because “potential financial, economic, or commercial consequences of Maduro’s removal from power were substantial, including but not limited to potential impacts on the global prices of crude oil, Venezuelan government bonds, and the Venezuelan bolívar.” In other words, the government’s theory is that the relevant inquiry is not whether the contract itself directly references a financial instrument, but whether the underlying event has potential economic consequences of the kind contemplated by the statute.

The defendant may argue that, to the contrary, event contracts concerning whether Maduro would be ousted by a particular date are simply wagers on political or military events rather than swaps associated with “potential financial, economic, or commercial consequences” as understood under the CEA. A ruling for the defendant on that issue would have consequences not just for the defendant in this case, but for the ongoing debate—being litigated now across the country—about the CFTC’s jurisdiction over event contracts.

For example, on April 6, 2026, a divided panel of the U.S. Court of Appeals for the Third Circuit held that sport-related event contracts traded on a CFTC-regulated exchange likely qualify as swaps because sporting events can have economic consequences for sponsors, advertisers, broadcasters, franchises, and local economies.[7] Accordingly, a ruling in Van Dyke rejecting the government’s characterization of these contracts as swaps could have implications extending well beyond insider trading liability, potentially affecting the broader debate over the extent of the CFTC’s jurisdiction over prediction markets and event contracts generally.

Confidential Government Information and Property Under the Federal Fraud Statutes

In addition to the CEA charges, SDNY’s indictment charges Van Dyke with wire fraud on the theory that he misappropriated confidential government information for use in his trades on prediction markets. What is particularly notable—and what may ultimately yield further development in the law governing the meaning of “property” under federal fraud statutes—is the government’s allegation that the classified nonpublic information concerning military operations possessed “pecuniary value.”[8]

Under the federal wire fraud statute, a defendant may only be convicted if he or she participates in a scheme to defraud “for obtaining money or property.” 18 U.S.C. § 1343. The government’s theory here resembles the misappropriation theory used in insider trading prosecutions: namely that Van Dyke wrongfully misappropriated intangible property, i.e., confidential information, for personal gain in breach of a duty of trust and confidence. The key question, however, is whether confidential information about military options concerning the ouster of Maduro constitutes “property” within the meaning of the wire fraud statute.

The question arises against the backdrop of a series of recent Second Circuit decisions narrowing the scope of what qualifies as “property” under federal fraud statutes. In United States v. Blaszczak (Blaszczak II), the Second Circuit held that confidential information in the possession of the Centers for Medicare and Medicaid Services concerning forthcoming changes in reimbursement rates did not constitute “property” for purposes of the wire fraud statute because the information was regulatory in nature rather than proprietary—even where the information was market-moving and maintained confidentially.[9] Judge Amalya Kearse, writing for the court, nonetheless maintained that the Second Circuit’s holding in United States v. Girard that information about DEA informants does constitute “property” remains good law, because the information is “inherently valuable law enforcement information,” the theft of which would hinder DEA’s operations.[10] Writing in dissent, Judge Richard Sullivan questioned how Girard could still be good law under the court’s main holding.[11]

More recently, in United States v. Chastain, the Second Circuit vacated a wire fraud conviction last year arising from the government’s first NFT “insider trading” prosecution.[12] The court held that confidential business information constitutes “property” under the wire fraud statute only if it possesses commercial value to the information’s owner.[13] The court emphasized that not all confidential information qualifies as property merely because it is nonpublic or because its misuse is unethical; rather, the information must resemble a traditional proprietary interest, such as a trade secret or commercially valuable business information.[14]

It is not entirely clear from the indictment what theory the government will advance in Van Dyke. It appears likely, however, given caselaw supporting the view that classified information is property in the hands of the government, that prosecutors will analogize the classified military information to the DEA informant information in Girard, arguing that the operational information was inherently valuable to the military and that misuse threatened governmental functions and national security interests. The government may also argue that the information had commercial value under Chastain, or even, as suggested by the indictment’s allegation that the information had “pecuniary value” was used for “pecuniary gain,” that the fact that the information had market value itself demonstrates that the information was “property.”

The indictment appears to be framed to give the government flexibility in what theory to advance. On the one hand, the use of the word “pecuniary” suggests an effort to ground the government’s case in a theory of economic or commercial value similar to Chastain. On the other hand, the information at issue—classified military intelligence—appears much different from the commercial business information in Chastain, and more closely resembles the operational government information at issue in Girard.

As a result, the case may be an important vehicle for clarifying the meaning of “property” under the federal fraud statutes in the context of confidential government information. Pre-trial motions, jury instruction disputes, and any eventual appeal could further define the extent to which operational government information, national security intelligence, or politically sensitive information may constitute “property” capable of supporting wire fraud liability under Title 18.

Conclusion and Key Takeaways

This case presents the first application of insider trading principles to prediction markets and may provide further guidance regarding the types of misappropriated information and trading activity that can support criminal and civil enforcement actions in that context. In particular, the litigation is likely to test the boundaries of the CEA’s treatment of event contracts, the application of misappropriation-based fraud theories to prediction market trading, and the scope of “property” under the federal wire fraud statute. The case may therefore shape not only the future regulation of prediction markets, but also broader insider trading and fraud jurisprudence involving non-traditional financial instruments and confidential government information.

In the meantime, companies should consider reviewing and expanding their insider trading, material nonpublic information (MNPI), and employee trading policies to address prediction markets and event contracts expressly. Many existing compliance policies focus exclusively on securities trading and may not contemplate trading on platforms offering contracts tied to elections, geopolitical developments, sporting events, regulatory outcomes, and other real-world contingencies. Companies should also consider updating training programs to ensure personnel understand that confidential information, whether commercial, operational, regulatory, or governmental in nature, may not be used to trade or place bets in prediction markets, even where the underlying instruments may not resemble traditional securities.

[1] Press Release, U.S. Soldier Charged With Using Classified Information To Profit From Prediction Market Bets, DOJ, Apr. 23, 2026, https://www.justice.gov/opa/pr/us-soldier-charged-using-classified-information-profit-prediction-market-bets; Press Release, CFTC Charges U.S. Service Member with Insider Trading in Nicolás Maduro-Related Event Contracts (Apr. 23, 2026), https://www.cftc.gov/PressRoom/PressReleases/9217-26.

[2] Jessica Corso, SDNY Chief Says Office Has Eye On Prediction Markets, Law360 (Feb. 5, 2026, at 6:13 ET), https://www.law360.com/securities/articles/2438607

[3] Indictment, U.S. v. Van Dyke, No. 26-cr-156 (Apr. 21, 2026), available at https://www.justice.gov/usao-sdny/media/1437781/dl.

[4] Complaint, CFTC v. Van Dyke, No. 26-cv-3369 (Apr. 23, 2026), available at

[5] Press Release, U.S. Soldier Charged With Using Classified Information To Profit From Prediction Market Bets, DOJ, Apr. 23, 2026, https://www.justice.gov/opa/pr/us-soldier-charged-using-classified-information-profit-prediction-market-bets.

[6] Press Release, CFTC Charges U.S. Service Member with Insider Trading in Nicolás Maduro-Related Event Contracts (Apr. 23, 2026), https://www.cftc.gov/PressRoom/PressReleases/9217-26.

[7]KalshiEX LLC v. Flaherty, No. 25-1922, slip op. at 14–15 (3d Cir. Apr. 6, 2026).The Third Circuit affirmed the District Court’s grant of a preliminary injunction in favor of Kalshi.

[8] 18 U.S.C. § 1343; Indictment ¶ 24.

[9] United States v. Blaszczak, 56 F.4th 230, 244, 255–56 (2d Cir. 2022) (Blaszczak II).

[10] Id.

[11] Id. at 255-56 (citing United States v. Girard, 601 F.2d 69, 70–71 (2d Cir. 1979).

[12] United States v. Chastain, 145 F.4th 282, 293–94, 300 (2d Cir. 2025).

[13] Id. at 293-94.

[14] Id.

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