Federal Prosecutors Advance New Prediction Market Insider Trading Investigations

Federal authorities are expanding their scrutiny of prediction-market trading with new investigations into military-event contracts and corporate earnings bets. Prosecutors in Manhattan and Washington, along with the CFTC, are involved, with charges in two newly revealed cases potentially filed this fall. No final charging decisions have been made, according to reporting by The Wall Street Journal.

New Probes Target Servicemember and KPMG Employee

One investigation focuses on a U.S. servicemember suspected of profiting over $1 million on Polymarket contracts tied to military strikes in Iran and Venezuela. The servicemember has been under scrutiny since the spring. Authorities have also examined other armed forces members trading contracts linked to military operations, which are unavailable on CFTC-registered platforms but offered on Polymarket’s international site.

A separate case involves an employee at KPMG who may have had access to material nonpublic information. The probe examines trades on whether a specific public company would beat analysts’ consensus estimates for quarterly earnings. It remains unclear how many additional traders the Justice Department and the CFTC are investigating.

Kalshi and Polymarket have collectively referred dozens of traders to authorities this year, though few have led to federal enforcement actions. A related probe into former White House teleprompter operator Gabriel Perez alleges he earned more than $100,000 on Kalshi contracts using advance knowledge of President Donald Trump’s speeches. Federal prosecutors declined criminal charges, but the CFTC has discussed a potential civil settlement. Similar concerns have arisen in Israel, where authorities have arrested or charged military personnel over alleged Polymarket trading involving sensitive information.

Challenges Mount in Existing Polymarket Prosecutions

The potential new cases would broaden a federal crackdown that has so far produced just two criminal Polymarket prosecutions. U.S. Army soldier Gannon Ken Van Dyke was charged in April with using classified information to earn more than $400,000 on contracts tied to the removal of Venezuelan President Nicolás Maduro. Van Dyke has pleaded not guilty and is seeking dismissal, challenging whether the contracts qualify as swaps under the Commodity Exchange Act.

Federal prosecutors also charged Google software engineer Michele Spagnuolo with using confidential information to earn approximately $1.2 million trading contracts tied to Google’s most-searched people of 2025. Spagnuolo has pleaded not guilty and is contesting the government’s legal theory as his case moves toward trial. The defendants are challenging the application of federal antifraud laws to prediction market trading.

The broadening enforcement activity signals continued regulatory pressure on prediction platforms and participants with informational advantages. Outcomes in these matters will clarify the boundaries for compliant operations ahead of any further market growth.

Reporting: Gambling Insider

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