US Soldier Charged with Trading on Inside Information
Prediction markets have exploded in popularity over the past several years, with platforms like Kalshi and Polymarket allowing users to wager real money on the outcomes of elections, geopolitical events, sporting contests, and even whether a foreign leader will be removed from power by a certain date, with millions of dollars at stake. But the legal framework governing them is still being written, with potential for users to find themselves in trouble with the law. Recently, a soldier in the United States army special forces was charged in what is thought to be the first criminal prosecution for insider trading on a prediction market in U.S. history. And the defense arguments being raised have implications that reach far beyond one soldier’s Polymarket account. For anyone who has placed bets on these platforms, or anyone who may face charges for doing so, this case is worth understanding and seeing how the Courts treat individuals charged with breaking the law on these platforms.
In January 2026, U.S. special forces carried out Operation Absolute Resolve, a military operation that captured former Venezuelan President Nicolas Maduro and his wife, Cilia Flores, in Caracas. Days before the raid became public, Master Sergeant Gannon Ken Van Dyke, a special forces soldier who prosecutors say was involved in the planning and execution of the mission, allegedly created a Polymarket account and placed a series of bets knowing the planned outcome from the planned raid. According to the Department of Justice, Van Dyke placed approximately 13 bets between December 27, 2025, and January 2, 2026. Every one of them took the “yes” position on contracts predicting that Maduro would be out of power by January 31, or that U.S. forces would enter Venezuela by the same date. When the raid was executed in the early morning hours of January 3, the contracts resolved in Van Dyke’s favor, netting him over $400,000 from his “bets” on the website, for which he is now charged with commodities fraud, wire fraud, and other charges relating to those positions. However, his attorneys filed a 51-page motion to dismiss the charges recently, arguing that none of his alleged conduct actually broke any laws as they exist. As Van Dyke’s filing put it, the government indicted him “using two theories: one, novel, never before prosecuted, and unsupported by the law; the other, already rejected by the Second Circuit.” They argue that the prosecution is being “overzealous,” saying, “Criminal courts are not laboratories where prosecutors can test new ideas and hypotheses about whether conduct is criminal.”
Kalshi, New York, and the Regulatory Patchwork for These Platforms
The Van Dyke prosecution does not exist in a vacuum, but exists against a larger effort by the government to regulate and exercise control over these platforms and markets. In July 2026, a federal judge in New York denied Kalshi’s request for a preliminary injunction that would have blocked the state of New York from enforcing state gambling laws against the platform. Kalshi, which operates as a CFTC-designated contract market, argued that the Commodity Exchange Act gives the CFTC exclusive authority over contracts traded on its platform and that state gambling regulations are therefore preempted. However, the court disagreed and found against the company at the preliminary stage, seemingly buying the government’s argument that the company is operating in the gambling space. The New York Attorney General filed a separate enforcement lawsuit accusing Kalshi of operating an unlicensed gambling platform and offering event contracts on sports, elections, and other outcomes without approval from the New York State Gaming Commission. Courts in other jurisdictions have reached varying conclusions on whether prediction market contracts qualify as swaps making the future of these markets unclear, many of which handle millions of dollars on a daily basis. How courts and prosecutors treat them in the future will be anyone’s guess, or if Congress decides it needs to intervene and tighten existing regulations to make sure these markets don’t exist in a type of legal “grey” zone. The Van Dyke case has the potential to be a bellwether for future prosecutions. For anyone who has traded on prediction markets, or who is currently facing charges or an investigation related to such trading, the most important thing to understand is that this is an area of genuinely unsettled law with broad implications for any users and whether or not they are opening themselves up to legal liability.
