Polymarket Insider Trading Case Is Illegal ‘Government Experiment,’ Lawyers Say

Lawyers for a US special forces soldier accused of using classified intelligence to profit from Polymarket trades on the capture of Venezuelan leader Nicolás Maduro say federal prosecutors are attempting to criminalize conduct not prohibited by existing law.

Master Sgt. Gannon Ken Van Dyke was indicted in April on three Commodity Exchange Act (CEA) violations, wire fraud, and an unlawful monetary transaction.  

Van Dyke allegedly won $409,000 by trading $33,000 across several markets, including “Maduro Out by January 31, 2026?” and “US Forces in Venezuela?” Days later, he was pictured aboard USS Iwo Jima, the vessel that transported the captured Maduro to the United States.

The Justice Department has described the case as the first insider-trading prosecution involving a prediction market, and Van Dyke’s lawyers argue that’s precisely why the indictment should be dismissed. They say federal prosecutors are using an unprecedented legal theory to criminalize prediction market trading.

“The government indicted Gannon Van Dyke using two theories: one, novel, never before prosecuted, and unsupported by the law; the other, already rejected – squarely – by the Second Circuit,” the defense wrote in a 51-page motion, filed Friday (July 31).

“Criminal courts are not laboratories where prosecutors can test new ideas and hypotheses about whether conduct is criminal. Principles of due process forbid that,” it added.

‘This Is Gambling, Not Hedging’

The Van Dyke camp attacked the government’s assertion that Polymarket contracts qualify as “swaps” regulated under the CEA, an argument underpinning the first three counts of the indictment.

The defense argues Congress intended the CEA to regulate financial derivatives used to hedge commercial risk, not wagers on future events.

The filing also cites several recent federal court decisions involving prediction markets, arguing judges have rejected similarly broad interpretations of the CEA that would classify event contracts as swaps.

According to the defense, accepting the government’s interpretation would dramatically expand federal authority over wagering.

“The broad interpretation of the statute advanced by this indictment would sweep every tableside bet on who will win an election, when a political leader will die, or even what color tie a candidate might wear during a debate, into federal regulatory jurisdiction,” the motion says.

Fair Notice

“The government’s desire to use the criminal law to establish a deterrent in a new industry does not relieve it of its constitutional Due Process obligations,” the attorneys wrote. “Conduct is not criminal absent a clear statute that provides fair notice of the forbidden conduct.”

In another pointed passage, they argue: “Conduct does not become a crime simply because certain people don’t like it. If the government does not want people to use confidential government information to engage in prediction markets trading, the solution is legislative.”

The motion separately seeks dismissal of the wire fraud charge, arguing confidential military planning information is not “property” within the meaning of the federal wire fraud statute. Because the money laundering charge depends entirely on the alleged wire fraud, the defense says it must also be dismissed.

If convicted on all five counts, Van Dyke could face up to 60 years in federal prison.