SDNY and CFTC File Prediction Market Insider Trading Charges

Authors: Ilan T. Graff and Benjamin Strachman

On April 23, 2026, the U.S. Attorney's Office for the Southern District of New York ("SDNY") announced a five-count indictment against a U.S. soldier for using classified information about the capture of former Venezuelan President Nicolás Maduro to trade on the prediction marketplace Polymarket.[1] The Commodity Futures Trading Commission ("CFTC") filed parallel civil claims against him for violations of the Commodity Exchange Act.[2] The enforcement actions reflect increased federal scrutiny of prediction markets and prosecutors' willingness to apply traditional insider trading theories to illicit prediction trading.

According to the indictment, Gannon Ken Van Dyke, a U.S. Army Special Forces soldier involved in the Maduro capture operation, used classified information to place bets on Polymarket, including on whether U.S. forces would invade Venezuela and whether Maduro would leave power by January 31, 2026.[3] Van Dyke allegedly made roughly $400,000 and took steps to conceal his proceeds.[4] The indictment charges Van Dyke with (i) unlawful use of confidential government information for personal gain, (ii) theft of nonpublic government information, (iii) commodities fraud, (iv) wire fraud, and (v) money laundering.[5] Polymarket reported the suspicious trading activity to the Department of Justice ("DOJ").[6]

The indictment comes just weeks after SDNY U.S. Attorney Jay Clayton warned that SDNY prosecutors were evaluating the laws available to police prediction markets, including insider trading statutes, since "fraud is fraud."[7] Consistent with U.S. Attorney Clayton's admonition, aside from counts specific to Van Dyke's misuse of classified government information, the prosecution relies on a traditional insider trading theory: Van Dyke breached a duty of confidentiality in pursuit of personal gain.

This approach is consistent with SDNY's broader practice of applying established fraud theories to emerging markets, which can sometimes yield unexpected results. For example, in 2022, SDNY brought what it described as the first "digital asset insider trading" case against an NFT marketplace employee, who traded based on advance knowledge of which NFTs would be featured on the platform's homepage.[8] The Second Circuit later reversed the conviction, holding that the government failed to sufficiently identify a traditional property interest.[9]

The array of legal restrictions on the use of classified information-including specific confidentiality agreements discussed in the indictment-suggest clear avenues to proving that Van Dyke's trading violated a duty he owed to the U.S. Government.[10] Similar theories could also apply in more conventional prediction market cases, e.g., corporate employees with access to material nonpublic information ("MNPI"), who leverage their insider knowledge to trade on prediction markets with respect to the timing of potential acquisitions. The application of traditional fraud statutes to more exotic forms of prediction market activity, such as purported "political insider trading," will depend on the circumstances of the trading activity.[11]

The CFTC recently noticed proposed rulemaking around prediction markets, and state regulators are tightening rules around public employees' trading activities.[12] In the meantime, the DOJ has made abuse of prediction markets an enforcement priority-and as the Van Dyke prosecution reflects, trading platforms are highlighting suspicious trading activity for law enforcement attention. Companies should consider updating insider trading, MNPI, and employee trading policies to expressly address prediction markets, and should incorporate prediction market scenarios into compliance training, surveillance, and escalation protocols.

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