“People having an edge is a good thing” for prediction markets. That’s what the CEO of one of the leading prediction markets thinks. And, another CEO of a financial tech company said certain prediction markets “thrive” on insider information.
Since 2024, prediction markets have ascended in popularity.[1] Prediction markets are platforms that allow consumers to trade various types of “event contracts.” Consumers try to predict the outcome of real-world, future events based on the probability that they think a given event will occur.
On some of the top prediction market platforms, traders can trade hundreds of various event contracts. Here are several examples of event contracts you might find on a prediction market platform: “Who will win the next presidential election?”, “Who will win the Oscar for ‘Best Actor?’”, “How many Teslas will be sold this year?”
These markets create some unique benefits. Because they reflect what the “market” thinks about the likelihood of an event, which can change over time, they can serve as polls of public opinion. They are often accurate too.[2] They also allow some traders to hedge against risk. And, for some, trading event contracts can simply be entertainment.
In recent months, though, reports suggest that some prediction market traders have placed suspiciously well-timed trades earning large profits. For example, a U.S. soldier reportedly wagered on a leading prediction market platform that Venezuelan President Nicolaus Maduro would soon be removed from office. Within hours of placing several large wagers, the U.S. captured Maduro, removing him from office. That soldier allegedly earned $400,000 from the wagers. On April 23, 2026, the Department of Justice announced that it had indicted that soldier for “unlawful use of confidential government information for personal gain, theft of nonpublic government information, commodities fraud, wire fraud, and making an unlawful monetary transaction.”[3] That case is U.S. v. Van Dyke.[4]
For that last couple of years, the question in many peoples’ minds has been “how will the government handle prediction market insider trading?” That question, at the time of this article, has not been fully answered. But the recent U.S. v. Van Dyke indictment will likely serve as a test case for future prosecutions, and that indictment partially answers the question.
The Commodity Futures Trading Commission primarily regulates modern prediction markets. And unlike securities markets, which are regulated by the Securities Exchange Commission, prediction markets and prediction market consumers have fewer regulations and federal case law to examine to determine the legality of insider trading in prediction markets. In fact, because modern prediction markets are so new, to the Firm’s knowledge, the U.S. v. Van Dyke indictment may be one of the first federal prosecutions for prediction market insider trading. But we should expect to see more. Federal prosecutors have several avenues to prosecute those who trade based on insider information. Those avenues include the Commodities Exchange Act, the federal wire fraud statute, and the federal commodities fraud statute. And Congress predictably could pass legislation that more clearly governs insider trading in prediction markets.
Flannery | Georgalis is keeping a close watch on how the government will regulate or prosecute prediction market insider trading, including U.S. v. Van Dyke. The Firm is comprised of experienced former federal and state prosecutors, many of whom have prosecuted, and now defend insider trading and fraud cases in other contexts. The Firm is prepared to represent clients in this new and developing landscape as well.
[1] The Current State of Prediction Markets (kpmg.com)
[2] Are Betting Markets Better than Polling in Predicting Political Elections? (vanderbilt.edu)
[3] U.S. Soldier Charged With Using Classified Information To Profit From Prediction Market Bets (justice.gov)
[4] United States v. Gannon Van Dyke, Indictment (justice.gov)