On April 23, the U.S. Department of Justice announced it had indicted U.S. Army Master Sgt. Gannon Ken Van Dyke in the first-ever insider trading indictment involving a prediction market. The defendant has been charged with unlawful use of confidential government information for personal gain, theft of nonpublic government information, commodities fraud, wire fraud, and making an unlawful monetary transaction. Van Dyke, a Special Forces operative, helped plan Operation Absolute Resolve, the military operation responsible for capturing Venezuelan President Nicolás Maduro on January 3, 2026.
Days before the operation, Van Dyke allegedly purchased a substantial number of “Yes” shares of a “Maduro out by … January 31?” contract on Polymarket, presumably based on his knowledge of the operation, wagering roughly $33,000 and netting a profit of over $400,000. Federal prosecutors claim Van Dyke sent his winnings to a foreign cryptocurrency vault before depositing them in an online brokerage account.
In a parallel enforcement action, the U.S. Commodity Futures Trading Commission (CFTC) charged Van Dyke with insider trading under Section 6(c)(1) of the Commodity Exchange Act and CFTC Rule 180.1, invoking what is known as the “Eddie Murphy Rule” for the first time under Section 4c(a)(3)-(4), which prohibits government employees from trading on misappropriated nonpublic government information. It’s nicknamed after the 1983 film Trading Places, in which Eddie Murphy’s character and his partner exploit stolen, non-public government crop report data to manipulate frozen orange juice futures.
David Miller, Director of Enforcement for the CFTC, gave a speech at NYU School of Law just weeks before Van Dyke’s indictment where he discussed the CFTC’s enforcement priorities. One of his main points was that the CFTC will focus on a misappropriation theory, rather than a classical theory, when addressing insider trading. Under the misappropriation theory, liability attaches when a trader misappropriates material nonpublic information (MNPI), and their trade is a breach of duty of trust and confidence owed to the source. The classical theory, which protects corporate shareholders from insider trading by corporate insiders, does not apply because trading in prediction markets does not violate any duty owed to shareholders of a company.
In his NYU speech, Miller said “market participants are entitled to use their own knowledge and information to make trading decisions,” and that the CFTC “will only be prosecuting cases against those who tip or trade with misappropriated information.” Under the misappropriation theory, the duty owed to the source of the information is usually through an employer, principal or close personal relationship. In 2025, the Second Circuit reinforced the importance of the nature of the relationship in In re: Archegos 20A Litig., dismissing insider trading claims because the relationship in question, between banks and an investment management company, was commercial, rather than fiduciary, in nature.
In prediction markets, the nonpublic information surrounding a trade may be deeply important to the contract, while still having no financial significance to the source of the information. For example, one of the first times integrity in prediction markets was thrust into the public eye happened at the Super Bowl this past February. Ahead of the game, Ella Whalberg, daughter of actor and known Patriots fan Mark Whalberg, allegedly told friends her father would be attending the game. Social media users claimed a person close to Ella at Clemson University, said that her father planned to attend the game. The person and his fraternity brothers were advised to place bets that Mark Whalberg would be in attendance. Mark ended up attending the game, and when it was all said and done, Ella’s information influenced almost $24 million in predictions.
Would that situation fit under the misappropriation theory of insider trading? Probably not. Mark and Ella Whalberg did not have a fiduciary duty in this situation. Thus, the whereabouts of Ella’s father is not a material fact, nor is sharing it “a breach of duty of trust and confidence to the source.”
Ella Whalberg is not the first person to casually know information that could be traded on, and she certainly won’t be the last. What if ahead of my flight to Chicago for a work trip, I saw Rasmus Dahlin at the Buffalo airport, even though the Sabres had a home game later that night? What if I was event-day staff at Highmark Stadium and I filled the team’s coolers with a blue electrolyte drink? If I went on Polymarket or Kalshi and predicted Dahlin would miss the game or predicted the Bills would drench their coach in blue Gatorade, is that unfair? Probably, in one way or another. However, I would not be violating a duty to anyone, nor is that MNPI.
For this reason, it looks like the CFTC will have to handle this perceived unfairness in prediction markets differently than insider trading. The Van Dyke case is seemingly cut and dry. Van Dyke had access to MNPI, and if the alleged facts are true, he clearly used it for his own financial gain. The cases that will follow will likely be less straightforward, with nonmaterial information spreading through informal games of telephone. The CFTC has stated insider trading in prediction markets will be a priority, so this will be a developing area of law for the foreseeable future. Until more cases are on the books, it looks like the current state of uncertainty will persist.
Sources:
https://www.cnn.com/2026/04/23/politics/us-special-forces-soldier-arrested-maduro-raid-trade
United States v. O’Hagan, 521 U.S. 642, 652 (1997).
Chiarella v. United States, 445 U.S. 222, 230 (1980).
In re: Archegos 20A Litig., 156 F.4th 108, 120 (2d Cir. 2025).