Insider Trading Comes to the Prediction Markets
On February 25, 2026, the CFTC’s Division of Enforcement issued a “Prediction Markets Advisory” with a blunt message: the belief that insider trading law stops at the edge of an event contract is a myth, and the CFTC has the authority to police fraud and manipulation on all commodities markets.1 Enforcement actions followed.
The first case, in April 2026, was a milestone for two reasons. It was the Commission’s first insider trading charge involving event contracts and its first case brought under the so-called “Eddie Murphy rule,” a Dodd-Frank amendment to the CEA which bars federal personnel from trading on nonpublic government information.2 The CFTC alleged that Gannon Ken Van Dyke, an active-duty Army service member, used classified information about the operation to capture Nicolás Maduro to purchase more than 436,000 “Yes” shares of the “Maduro Out by January 31, 2026?” contract listed on Polymarket.2 According to the CFTC, Van Dyke cleared north of $404,000 once the operation became public.2 The Justice Department unsealed a parallel indictment the same day, adding counts for wire fraud and engaging in an unlawful monetary transaction and alleging that Van Dyke used a VPN, routed his winnings through crypto, and asked Polymarket to delete his account. He is contesting the charges, and his defense cuts to the core of the argument about the CFTC’s jurisdiction over prediction markets: he argues the contracts aren’t “swaps” at all and lie beyond the CFTC’s reach. The civil action is paused while the criminal one proceeds.3
The second case, in May, had a white-collar flavor. The CFTC charged Google engineer Michele Spagnuolo with trading on the company’s unreleased “Year in Search” rankings for 2025 — betting on Polymarket on which names would top the list before Google published it.4 Spagnuolo allegedly staked roughly $2.75 million across more than twenty contracts and walked away with about $1.2 million; the Justice Department again charged in parallel.5 Both cases are pending, and the allegations are unproven.
In the third case, the CFTC settled in July with former Congressman George Santos over allegations that Santos placed insider bets on a Kalshi market regarding whether he would attend the 2026 State of the Union.6 Notably, it charged him with manipulation rather than insider trading because Santos moved the market with misleading posts about his plans, rather than trading on a secret.6 Santos gave up his roughly $17,570 in profit, paid a $17,500 penalty, and accepted a three-year ban, without admitting or denying anything.6 Kalshi caught the trades, froze his account, and handed over the evidence.7
These three filed cases are not the whole of it. In September 2026, Wired reported — citing agency records it obtained through a public-records request — that the CFTC had quietly opened at least three more insider trading investigations into Polymarket contracts involving Joe Biden’s pardons, the Iran conflict, and Google.8 Congress has joined in as well; in May the House Oversight Committee opened its own inquiry into both platforms, and independent analyses of on-chain data keep surfacing the same pattern — clusters of well-timed geopolitical bets that pay off with improbable regularity.9 Together, these developments show that insider trading in the prediction markets is drawing serious regulatory scrutiny.
This piece was written by Thomas W. Elrod, a partner at Kirby McInerney LLP
1 Press Release, CFTC, CFTC Enforcement Division Issues Prediction Markets Advisory (Feb. 25, 2026), https://www.cftc.gov/PressRoom/PressReleases/9185-26.
2 Press Release, CFTC, CFTC Charges U.S. Service Member with Insider Trading in Nicolás Maduro-Related Event Contracts (Apr. 23, 2026), https://www.cftc.gov/PressRoom/PressReleases/9217-26.
3 Press Release, U.S. Dep’t of Just., U.S. Soldier Charged With Using Classified Information To Profit From Prediction Market Bets (Apr. 23, 2026) https://www.justice.gov/opa/pr/us-soldier-charged-using-classified-information-profit-prediction-market-bets. The U.S. Attorney’s Office for the Southern District of New York announced the unsealing of an indictment against Van Dyke.
4 Press Release, CFTC, CFTC Charges Google Employee with Insider Trading in Search Result-Related Event Contracts (May 27, 2026), https://www.cftc.gov/PressRoom/PressReleases/9237-26.
5 Press Release, U.S. Dep’t of Justice, Google Employee Charged With Insider Trading (May 27, 2026), https://www.justice.gov/usao-sdny/pr/google-employee-charged-insider-trading.
6 Press Release, CFTC, CFTC Orders George Santos to Pay $35,000 for Manipulative Trading of State-of-the-Union Event Contract (July 31, 2026), https://www.cftc.gov/PressRoom/PressReleases/9276-26.
7 US Commodity Futures Trading Commission Fines George Santos for Alleged Manipulative Trades, Reuters (July 31, 2026), https://www.reuters.com/world/us-commodity-futures-trading-commission-fines-george-santos-alleged-manipulative-2026-07-31/.
8 Kate Knibbs, The US Government Launched 3 Previously Unreported Investigations of Polymarket Trades, WIRED (Sept. 11, 2026), https://www.wired.com/story/polymarket-investigations-iran-biden-google-foia/.
9 Press Release, U.S. House Committee on Oversight and Government Reform, Comer Launches Investigation Into Insider Trading on Prediction Market Platforms (May 22, 2026), https://oversight.house.gov/release/comer-launches-investigation-into-insider-trading-on-prediction-market-platforms/; see also Denitsa Tsekova & Leonardo Nicoletti, Prediction Markets Are Minting a New Type of Insider Trader, Bloomberg (July 20, 2026), https://www.bloomberg.com/graphics/2026-polymarket-traders-who-knew-the-future/ (citing analysis of roughly 34,000 flagged Polymarket transactions that estimated about $200 million in trades bearing the hallmarks of insider activity in the first half of 2026, concentrated in geopolitical contracts).
