TLDR
- The CFTC says policing insider trading on prediction markets is an enforcement priority.
- An Army master sergeant allegedly made over $400,000 on Polymarket using Maduro raid details.
- A Google engineer allegedly risked $2.75 million and made about $1.2 million on Polymarket.
- Both men deny wrongdoing, and the sergeant’s criminal trial begins December 7.
- The agency has investigated candidates who traded on contracts tied to their own elections.
The Commodity Futures Trading Commission (CFTC) says insider trading on prediction markets is now an enforcement priority. The message came from David Miller, the agency’s director of enforcement.
Miller spoke last week at the Next Predict Summit in New York. He was appointed earlier this year by CFTC Chairman Michael Selig.
“I’ve said publicly that our priority at the Division of Enforcement is policing fraud, abuse, and manipulation,” Miller said.
Clearing Up Confusion Over the Rules
Miller said there was once a lot of confusion about whether insider trading rules applied to prediction markets. Platforms like Polymarket had operated in a gray area on the issue.
On February 25, the CFTC’s Division of Enforcement issued an advisory on the topic. It said the belief that insider trading laws do not apply to event contracts and prediction markets is incorrect.
Miller explained that insider trading is about a breach of duty. “You have material nonpublic information, you have a duty to shareholders, not to trade against them,” he said.
He added that a trade might break an exchange’s rules without breaking federal law. He made the point when CNN senior reporter Marshall Cohen asked whether Nicolas Maduro could have legally traded on his own capture.
Two Polymarket Cases Still Pending
In April, the CFTC brought its first insider trading case tied to prediction markets. It targeted Army Master Sgt. Gannon Ken Van Dyke.
The agency alleges Van Dyke used confidential details about the operation to capture former Venezuelan President Nicolas Maduro. He allegedly earned more than $400,000 trading on Polymarket.
Van Dyke helped plan and carry out the raid. He has pleaded not guilty to charges that include unlawful use of confidential government information for personal gain.
He is free on bond. His federal criminal trial is set to begin on December 7.
“We’ve been bringing insider trading cases for over a decade, but this was the first one with prediction markets,” Miller said.
In May, the CFTC and the U.S. Department of Justice filed parallel civil and criminal charges against Google software engineer Michael Spagnuolo. He is accused of insider trading on Polymarket using confidential corporate data.
The complaints allege he risked $2.75 million across several contracts and made about $1.2 million in profits. Miller said both cases remain pending, and both men deny wrongdoing.
With the November 3 midterm elections approaching, Cohen noted there have already been scandals involving candidates betting on their own races. Some of those candidates were punished by the prediction markets.
Miller said he would not discuss specific midterm cases. But he confirmed the agency has looked into this type of trading.
“We do investigate and have investigated and may have open investigations about some candidates who have placed trades on contracts that are based on their own elections,” he said.
