Court Allows First Prediction Market Insider Trading Prosecution to Proceed

The U.S. District Court for the Southern District of New York on October 26, 2026, denied a U.S. Army master sergeant's motion to dismiss the first insider trading indictment involving prediction markets. See United States v. Van Dyke, No. 1:26-cr-00156-MMG (S.D.N.Y. Oct. 26, 2026), ECF No. 47.

The indictment charges the defendant with trading on classified information about the U.S. military operation to apprehend then-Venezuelan President Nicolás Maduro. In its decision, the court rejected or deferred ruling on every challenge to the indictment, clearing the way for trial.

The decision has significant implications for defense and Intelligence Community (IC) contractors whose employees may access similarly sensitive, nonpublic government information that can be readily monetized on prediction markets.

The Allegations

According to the indictment, Gannon Ken Van Dyke, a U.S. Special Forces soldier, signed a nondisclosure agreement (NDA) acknowledging that he was being entrusted with nonpublic sensitive or classified information that constituted property of the U.S. government, including information about the Maduro operation, and agreeing to keep it confidential. He allegedly opened a Polymarket account on December 26, 2025, and over the following week bought "YES" shares on Maduro- and Venezuela-related event markets. U.S. forces captured Maduro on January 3, 2026, and Van Dyke allegedly realized more than $400,000 in profits.

Van Dyke faces five counts. Two arise under CEA provisions aimed specifically at government information: Section 4c(a)(3) bars any "employee or agent" of a federal agency from trading on nonpublic information obtained through that position, and Section 4c(a)(4)(C) bars "any person" from stealing, converting or misappropriating federal government information and using it to trade. A third count charges misappropriation-based insider trading under CEA Section 6(c)(1) and Commodity Futures Trading Commission (CFTC) Rule 180.1. Van Dyke is also charged with wire fraud and money laundering. A parallel CFTC civil action has been stayed pending resolution of the criminal case. See CFTC v. Van Dyke, No. 1:26-cv-03369-ALC (S.D.N.Y. Aug. 7, 2026), ECF No. 34.

The Court's Rulings

Swap Status Turns on Facts Presented at Trial

Van Dyke argued that the contracts he purchased are not "swaps" because their payouts hinged on geopolitical events that are not, as a matter of law, inherently economic. The court declined to resolve that issue before trial, holding that swap status turns on factual questions (e.g., whether the contracts could facilitate hedging or price discovery) that cannot be decided on a motion to dismiss.

Insider Trading Law Applies Under the CEA

Van Dyke contended that applying securities law insider trading doctrine to CEA Section 6(c)(1) and CFTC Rule 180.1 creates an unconstitutional common law crime. The court disagreed.

The operative language of those provisions, the court reasoned, is an "exact transplant" from their securities law analogues – Section 10(b) of the Securities Exchange Act of 1934 and U.S. Securities and Exchange Commission Rule 10b-5 – under which a "long line of insider-trading jurisprudence" has developed. "Applying that well-established body of law to materially identical statutory language," the court wrote, "does not create a federal common-law crime." The misappropriation theory recognized by the U.S. Supreme Court in United States v. O'Hagan, 521 U.S. 642 (1997), therefore applies under the CEA.

Military Secrets Can Be "Property"

As the Supreme Court explained in Ciminelli v. United States, 598 U.S. 306 (2023), the wire fraud statute protects "only traditional property interests." Determining what types of confidential information qualify as "property" for federal fraud crimes has posed challenges to lower courts, creating uncertainty about when insider trading can also be prosecuted as wire fraud – a significant question because wire fraud carries a 20-year maximum sentence, double the maximum for the CEA counts Van Dyke faces.

In United States v. Blaszczak, 56 F.4th 230 (2d Cir. 2022), the U.S. Court of Appeals for the Second Circuit held that confidential government agency information concerning new Medicare reimbursement rates and their timing was "regulatory in character" and therefore not property. More recently, in United States v. Chastain, 145 F.4th 282 (2d Cir. 2025), the court held that confidential business information qualifies as a traditional property interest only if it has commercial value to the company that owns it.

The Van Dyke court distinguished the regulatory information at issue in Blaszczak from the classified details of the Maduro operation, which it found "materially analogous" to the confidential information about a Drug Enforcement Administration informant that the Second Circuit held to be a "thing of value" in United States v. Girard, 601 F.2d 69 (2d Cir. 1979), a theft of government property case.¹ Emphasizing the need for secrecy in military operational planning, the court reasoned that advance information about such an operation "derives most of its value to the Government from its confidentiality."²

The court also rejected Van Dyke's argument that dismissal was warranted because, unlike the defendants in Girard, he did not directly disclose the information to a third party. That distinction, the court explained, "concerns the manner in which the confidential information was allegedly exploited, not whether the Government possessed a property interest in that information in the first place." The court further noted that Van Dyke had a financial incentive to keep the information secret because publicizing the operation would have eliminated the informational advantage that allegedly enabled his profitable trades. The court also suggested that disclosure may well have occurred, citing published reports that foreign adversaries routinely mine prediction market trading activity for insight regarding the U.S. government's strategic operations.

Key Takeaways for Defense and IC Contractors

CEA exposure depends significantly on whether event contracts are swaps under the statute, a question the court deferred until trial evidence has been presented. Still, the decision puts contractors on notice of this risk.

The CEA's government information provisions present the clearest source of exposure for contractors. Whether a contractor employee qualifies as an "agent" of a federal agency under Section 4c(a)(3) is an open legal question. But even if an employee does not, Section 4c(a)(4)(C) reaches "any person" who misappropriates federal government information to trade. Critically, neither provision requires that the information be "property," so the "not property" defense available against a wire fraud charge offers no protection.

Even where those provisions do not reach a contractor employee directly, the NDAs that such employees routinely sign may supply the duty of trust and confidence that a misappropriation theory requires. Those NDAs are the most direct factual bridge from government personnel such as Van Dyke to contractor workforces. The indictment relies heavily on Van Dyke's signed NDAs, which acknowledged that the information was government property and allegedly established a duty of trust and confidence to the U.S. government that he breached by trading on it.

Contractor employees who are cleared for sensitive or classified information are required to sign comparable agreements – most notably the standard Classified Information Nondisclosure Agreement (SF-312), which explicitly warns that unauthorized disclosure can lead to criminal charges.

Individual employees are not the only ones at risk. Under its "control person" authority in CEA Section 13(b), the CFTC can seek to hold an executive or the contractor itself civilly liable for an employee's CEA violation if the controlling person failed to act in good faith (e.g., by maintaining inadequate supervision or ignoring red flags) or knowingly induced the violation (e.g., by knowing of the problematic activity and allowing it to persist).

To mitigate these risks, defense and IC contractors, among others who may access sensitive or confidential government information, should consider the following steps:

• Address Prediction Markets Expressly. Insider trading policies written for securities may not cover event contracts. Codes of conduct, policies, training materials and associated employee acknowledgments should be updated to prohibit trading on any market, including prediction markets, based on nonpublic government information, whether or not it is classified. Likewise, insider threat policies and security briefings should be revised to treat prediction markets as a counterintelligence risk.
• Watch for Flow-Down Restrictions. On October 20, 2026, the U.S. Department of War barred its personnel from using nonpublic information to engage in financial transactions on any platform. Contractors should monitor whether similar restrictions apply to them through contract terms or security requirements.
• Be Aware of Disclosure Obligations. Contractors should determine whether they must report employees suspected of trading on prediction markets, including under requirements to disclose certain information about cleared employees to the Defense Counterintelligence and Security Agency.
• Rethink Trading Oversight. Duplicate brokerage statements likely would not capture activity like Van Dyke's: He allegedly traded through a blockchain-based platform using a dollar-pegged cryptocurrency and moved proceeds to a foreign crypto vault. Contractors should instead consider preclearance requirements for event contracts tied to government action and periodic employee attestations.

Holland & Knight Can Help

Holland & Knight's White Collar Defense and Investigations Team and Compliance Services Team will continue to monitor this case and related enforcement developments. If you have questions about the potential impact on your business, contact the authors or another member of these teams.

Notes

¹ Even though the indictment conspicuously alleges that the information Van Dyke traded on had "pecuniary value," the opinion does not address Chastain. Rather than asking whether the operational information had commercial value to the government, the court rested the property interest on Girard and the government's right to exclude others from its operational information. If Van Dyke is convicted, the tension between Chastain and the Girard/Blaszczak line is one of the issues most likely to reach – and potentially divide – the appellate courts.

² Although the court's holding is limited to operational military information, its reasoning suggests broader applicability. If the only prerequisites for information to qualify as property are that it have "value" and that the government have a right to exclude others from accessing it, it is difficult to see how nonoperational military or confidential information, particularly where classified, would not also constitute "property" for purposes of the wire fraud statute.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.