Prediction markets and insider trading: what in-house counsel need to know after first U.S. enforcement announced

Enforcement announced of soldier using classified information to trade

On 23 April 2026, the U.S. Department of Justice (DOJ) and Commodities Futures Trading Commission (CFTC) announced separate enforcement actions against an active-duty member of the U.S. Army, alleging that the soldier utilized non-public information regarding classified U.S. operations related to the capture of Venezuelan President Nicolás Maduro to trade on Polymarket.com, a prediction market website. The case, the first of its kind, applies traditional insider trading principles to prediction markets under the Commodity Exchange Act (CEA) and signals that regulators will treat these rapidly growing platforms as firmly within the scope of existing market-abuse frameworks.

In 2025, Polymarket, a prediction marketplace, began offering binary event contracts related to whether certain events involving Venezuela and/or Maduro would, or would not, occur. Those event contracts included the future likelihood of “U.S. forces in Venezuela by” certain dates, the future likelihood of Maduro being “out” of or removed from power by certain dates, the future likelihood of the U.S. invading Venezuela on or before January 31, and the future likelihood of President Trump “invoking War Powers against Venezuela” by a certain date. According to both the DOJ and CFTC, from at least December 2025 through January 2026, the soldier was involved in the planning and execution of the U.S. operations to capture Maduro and used his access to highly classified and nonpublic information to purchase more than 436,000 “Yes” shares of the “Maduro Out by January 31, 2026?” contract listed on Polymarket.com. When the U.S. later conducted a successful operation to apprehend Maduro, the soldier allegedly obtained more than USD404,000 in profits through his trades.

The parallel enforcement actions follow public comments from both the DOJ and CFTC regarding their intention to police nascent prediction markets and signal the government’s increasing focus on such markets.

CFTC Complaint

The CFTC’s complaint, filed in the Southern District of New York, alleges three counts of violating the CEA and analogous CFTC regulations.¹ Specifically, the CFTC alleges the soldier’s trading violated (i) Section 6(c)(1) of the CEA, which makes it unlawful for a person to “use or employ, in connection with any swap . . . any manipulative or deceptive device or contrivance”; (ii) Section 4c(a)(3) of the CEA, which states that it is “unlawful for any employee . . . of the Federal Government . . . who, by virtue of the[ir] employment . . . acquires [non-public] information” to “use th[at] information in his personal capacity and for personal gain to enter into, or offer to enter into . . . a swap”; and (iii) Section 4c(a)(4)(C) of the CEA, which makes it unlawful for any person to “steal, convert, or misappropriate . . . information held or created by any department or agency of the Federal Government . . . that may affect or tend to affect the price of . . . any swap.”  The CFTC seeks restitution, disgorgement, civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations, as charged.

The CFTC Complaint follows from the agency’s recent advisory regarding its authority to pursue misuse of material nonpublic information to trade, and other forms of market abuse, in the prediction markets.²

In the press release announcing the complaint, CFTC Chairman Michale Selig stated, “I have been crystal clear that anyone who engages in fraud, manipulation, or insider trading in any of our markets will face the full force of the law.”³

DOJ Indictment

The DOJ’s indictment, also filed in the Southern District of New York, alleges three counts of violating the CEA, each of which carries a maximum sentence of 10 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of an unlawful monetary transaction, which carries a maximum penalty of 10 years in prison.⁴ As in the CFTC Complaint, the DOJ’s indictment emphasizes the soldier’s use of governmental non-public information for personal profit. The indictment also references various military non-disclosure agreements that the soldier signed and stated thus that his trading violated the “special confidence and trust” placed in him by the U.S. government.

The indictment comes several months after Jay Clayton, the U.S. attorney for the Southern District of New York, said at a securities law conference that he believed there would be criminal cases involving prediction market activity and indicated that federal prosectors were exploring whether prediction market bets implicated insider trading laws.⁵

As these actions demonstrate, the proliferation and rising popularity of prediction markets present new opportunities for employees to misuse and misappropriate the non-public information obtained through their work and may require legal and compliance officers to evaluate workplace policies that had previously been focused on insider trading in the securities markets to account for these newer markets. 

Footnotes

1. Complaint, CFTC v. Van Dyke, No. 26-cv-3369, at 8 (Apr. 23, 2026) (hereinafter “CFTC Complaint”). 

2. CFTC Enforcement Division Issues Advisory on Prediction Practices, A&O Shearman (Mar. 3, 2026) https://www.lit-wc.aoshearman.com/cftc-enforcement-division-issues-advisory-on-prediction-market-trading-practices.

3. 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.

4. Indictment, U.S. v. Van Dyke, No. 26-cr-156 (Apr. 21, 2026) (hereinafter “DOJ Indictment”)

5. Wall Street’s Top Cop Expects Enforcement on Prediction Markets, Bloomberg (Feb. 5, 2026) https://www.bloomberg.com/news/articles/2026-02-05/wall-street-s-top-cop-expects-enforcement-on-prediction-markets.