Federal Prosecutors Prepare Expanded Insider Trading Cases Targeting Prediction Market Activity
TL;DR — US prosecutors and the CFTC are preparing new insider trading cases against a servicemember earning over $1M on military contracts and a KPMG employee using earnings data. This widens action beyond two existing Polymarket prosecutions now challenging the legal framework. Enforcement remains selective despite dozens of referrals.
SCCG Take — The cases test whether antifraud rules reach offshore prediction platforms, pressing operators to tighten access controls and surveillance to limit regulatory exposure.
Federal authorities are preparing to file new insider trading cases tied to prediction market trading. The investigations center on military-event contracts and corporate earnings bets, according to reporting by The Wall Street Journal as carried by Gambling Insider. Prosecutors in Manhattan and Washington, working with the CFTC, have not finalized charging decisions but could move this fall. The effort broadens a crackdown that has so far produced two criminal Polymarket prosecutions.
One probe targets a U.S. servicemember suspected of profiting over $1 million on Polymarket on contracts tied to military strikes in Iran and Venezuela. The servicemember came under scrutiny in the spring. Authorities have also examined trades by other armed forces members on military operations contracts. Those contracts do not appear on CFTC-registered platforms yet are available on Polymarket’s international site, which is barred to U.S. users.
A parallel investigation reviews an employee at KPMG who may have traded on nonpublic information about whether a specific public company would exceed analysts’ consensus estimates for quarterly earnings. The platform used in that instance was not disclosed.
The moves follow charges against U.S. Army soldier Gannon Ken Van Dyke, accused of using classified information to gain more than $400,000 on contracts concerning the ouster of Venezuelan President Nicolás Maduro. Van Dyke has pleaded not guilty and contests whether the contracts qualify as swaps under the Commodity Exchange Act. A second case involves Google software engineer Michele Spagnuolo, charged with earning approximately $1.2 million on contracts about Google’s most-searched people of 2025 using confidential data. Spagnuolo has pleaded not guilty; trial preparations continue.
Related scrutiny includes former White House teleprompter operator Gabriel Perez, who allegedly used advance knowledge of President Donald Trump’s speeches to earn more than $100,000 trading Kalshi contracts. Criminal charges were declined, though the CFTC has discussed a civil settlement. Kalshi and Polymarket have referred dozens of traders to authorities this year, with limited enforcement actions resulting. Israeli authorities have arrested or charged military personnel for analogous trades on sensitive information.
Scale of Current Investigations
It is not yet known how many additional individuals face potential charges. The referred cases have produced few prosecutions to date.
Defenses Raised in Initial Prosecutions
Both prior defendants challenge the government’s application of federal antifraud statutes to prediction market contracts.
Reporting: Gambling Insider
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
Prediction markets now face real enforcement teeth: offshore doesn't mean immune, and platforms need surveillance yesterday.
We've spent years helping platforms navigate regulatory gray zones. This isn't hypothetical anymore—prosecutors are testing antifraud reach across borders, and platforms without serious compliance infrastructure are sitting ducks. SCCG works with operators who need to harden access controls, surveillance, and referral protocols before they become the next example.
- New probes target servicemember ($1M+) and KPMG employee trading on nonpublic military, earnings data
- Expands beyond two pending Polymarket prosecutions; defendants challenging legal framework under Commodity Exchange Act
- Enforcement selective but accelerating—platforms referred dozens of cases, regulators picking battlegrounds
SCCG angle: SCCG connects platforms to compliance architects, surveillance tech partners, and regulatory counsel who understand CFTC enforcement posture. We help operators build referral protocols and access controls that limit exposure before the subpoena arrives—using relationships forged across 545 partnerships in every regulated market.
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