U.S. special forces soldier arrested over Polymarket bets on Maduro raid
· Axios
A U.S. special forces soldier was arrested and charged with using classified information about the raid to capture Venezuelan leader Nicolás Maduro to profit from prediction market bets, the Department of Justice announced Thursday.
Why it matters: The case lands as regulators and lawmakers intensify scrutiny of prediction markets — offering a real-world test of how aggressively authorities pursue insider trading tied to sensitive government information.
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- This is the first time the Commodity Futures Trading Commission has filed charges of insider trading in connection with event contracts, per a CFTC statement.
The big picture: The indictment accuses Gannon Ken Van Dyke, a master sergeant based at Fort Bragg, North Carolina, of using sensitive classified information to make wagers on Polymarket.
- The 38-year-old active-duty soldier from Fayetteville, North Carolina, took part in the planning and execution of the military operation to capture Maduro on Jan. 3, according to the indictment.
- "Van Dyke profited more than $400,000 by trading various outcomes related to Venezuela after learning of the operation because of his role as a U.S. Army soldier," FBI assistant director in charge James Barnacle said in a statement.
- Van Dyke had "signed nondisclosure agreements in which he promised to 'never divulge, publish, or reveal by writing, words, conduct, or otherwise ... any classified or sensitive information' relating to military operations," per a DOJ statement.
State of play: The indictment, unsealed in the Southern District of New York on Thursday, alleges Van Dyke created a Polymarket account in December and began trading on markets related to Maduro and Venezuela, spending more than $33,000 to place 13 bets that yielded him a profit of nearly $410,000.
- Van Dyke allegedly sent most of the proceeds to a foreign cryptocurrency vault before depositing them into a newly created online brokerage account.
Zoom in: Polymarket noted on X after the announcement that the company last month published its enhanced market integrity rules to combat insider trading.
- "When we identified a user trading on classified government information, we referred the matter to the DOJ & cooperated with their investigation," per the statement.
- "Insider trading has no place on Polymarket. Today's arrest is proof the system works."
Between the lines: The case marks the first time the CFTC has used the "'Eddie Murphy Rule' to bring charges based on the misuse of government information," per the commission.
- Its nickname inspired by the movie "Trading Places," the "Eddie Murphy Rule" (Section 746 of the 2010 Dodd-Frank Act) makes it illegal to trade commodities based on stolen or misappropriated nonpublic government information.
What we're watching: Van Dyke was charged with 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 sentence of 10 years in prison, the DOJ said.
- Van Dyke also faces three counts of violating the Commodity Exchange Act, each of which carries a maximum 10-year prison sentence.
What they're saying: "Prediction markets are not a haven for using misappropriated confidential or classified information for personal gain," said Jay Clayton, U.S. attorney for the Southern District of New York.
- "The defendant allegedly violated the trust placed in him by the United States Government by using classified information about a sensitive military operation to place bets on the timing and outcome of that very operation, all to turn a profit," Clayton said.
- "That is clear insider trading and is illegal under federal law," he added.
Go deeper: Prediction markets regulator vows to investigate insider trading
Editor's note: This article has been updated with additional details throughout.