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SDNY Court Denies Motion To Dismiss First Prediction Market Insider Trading Prosecution
11/03/2026On October 26, 2026, U.S. District Judge Margaret M. Garnett of the Southern District of New York denied a motion to dismiss the indictment in United States v. Gannon Ken Van Dyke—the first criminal insider trading prosecution arising from prediction market trading.1 Defendant, an active-duty Army Special Forces Master Sergeant, allegedly used classified information about the U.S. operation to capture Nicolás Maduro to trade on a prediction market, realizing approximately $409,881 in profits.2 The ruling clears the way for a trial currently scheduled for December 2026, but does not definitively resolve certain of the key arguments raised as to how insider trading laws apply to prediction markets.3
Background
According to the indictment, defendant signed nondisclosure agreements with the U.S. Government in 2018 and 2025, acknowledging that “all information” he obtained in his role with the Special Forces was “the property of the United States Government.” Nevertheless, the government contends that from December 8, 2025 through January 5, 2026, while defendant was involved in planning and executing “Operation Absolute Resolve” regarding the eventual capture of Maduro, defendant bought $33,934 in “YES” shares on Maduro- and Venezuela-related markets, “substantially increas[ing] his [prediction market] positions during the two days immediately preceding the military operation to capture Maduro.”4
The five-count indictment charges defendant with the following crimes:
- Unlawful use of confidential government information under 7 U.S.C. §§ 6c(a)(3) and 13(a)(5);
- Theft of nonpublic government information, in violation of 7 U.S.C. §§ 6c(a)(4)(C);
- Commodities fraud, in violation of 7 U.S.C. § 9(1) and 13(a)(5) and 17 C.F.R. § 180.1;
- Wire fraud, in violation of 18 U.S.C. § 1343; and
- Engaging in a monetary transaction in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.5
A parallel Commodity Futures Trading Commission (CFTC) civil action focused on alleged violations of the Commodities Exchange Act has been stayed.6
Why the case is novel
As noted when these charges were announced, the case “applies traditional insider trading principles to prediction markets under the Commodity Exchange Act (CEA).”7 The CEA charges depend on event contracts qualifying as “swaps” under the Act—essentially, whether they fall within the definition of a specific type of transaction that guarantees a purchase, sale, or payment if a specifically agreed-to event does or does not happen. The government’s position imports a securities-law misappropriation theory into the CEA’s anti-fraud provision, along with a claim that the inside information in this case was property belonging to the U.S. Government.
The Court's decision
Swap Classification Is a Question for Trial
Defendant argued that the contracts at issue are not “swaps” under the CEA because the subjects of the contracts are not “inherently economic” and do not “traditionally and directly affect commodity prices.”8 The court held that it “need not wade into the thicket of the parties’ interpretive dispute at this stage because [defendant]’s motion can succeed only if the event contracts alleged in the Indictment cannot be swaps as a matter of law, and [defendant] has failed to make that showing.”9 Moreover, the Court determined that whether the contracts are associated with economic consequences “turns on the nature of those contracts and their relationship to the underlying events—factual questions that cannot be resolved on a motion to dismiss.”10 For example, the Court noted that whether the contracts at issue could have been used to hedge exposures to Venezuelan sovereign debt or other exposures could be relevant to the question of whether they are swaps. The court also rejected defendant’s request for lenity, explaining that “novelty of application does not establish ambiguity” of the law.11
Rule 180.1 Insider Trading Is Not a “Common-Law Crime”
Similarly, the Court rejected defendant’s argument that laws he is charged with violating in Count Three inappropriately use terms without defining them, and that this amounts to charging him with a federal common law crime.12 The court was not convinced, finding that the laws he is charged under rely on the fact that these terms are defined in the federal securities laws, and “[w]hen a statutory term is obviously transplanted from another legal source,”13 and has “a well-settled interpretation,” then applying it “does not create a federal common-law crime, but rather interprets the scope of a prohibition enacted by Congress.”14
Confidential Military Information Is “Property”
The subject matter also uniquely affected the outcome, as, the Court held that advance information about a military operation “derives most of its value to the Government from its confidentiality.”15 Judge Garnett emphasized that even though defendant traded without disclosing the information in his possession, the Government still maintains a “property interest in its exclusive use.”16
Looking ahead
The court’s decision, while not a surprise, only heightens the significance of the anticipated trial—as well as any potential post-trial briefing—as it may provide a critical roadmap for future matters in determining when and how insider trading laws apply in the context of prediction markets.
Footnotes
[1]United States v. Van Dyke, No. 26-CR-156, 2026 WL 3206159, *1, 22 (S.D.N.Y. Oct. 26, 2026).
[2]Van Dyke, 2026 WL 3206159, at *1–5.
[3] On June 8, 2026 the Court entered a Minute Entry on the docket scheduling trial as set to begin with jury selection on December 7, 2026. Subsequent filings to the docket, including changes to the pre-trial schedule, have left the trial date unchanged.
[4]Id. at 3–4 (the Department of Justice press release reported approximately $33,034).
[5] Id. at 1; see also United States v. Van Dyke, No. 26-CR-156, Redacted Indictment, Dkt No. 2 (S.D.N.Y. Apr. 23, 2026).
[6] Id.
[7] Prediction markets and insider trading: what in-house counsel need to know after first U.S. enforcement announced, A&O Shearman (Apr. 27, 2026), https://www.aoshearman.com/en/insights/ao-shearman-on-investigations/what-in-house-counsel-need-to-know-after-first-us-enforcement-announced.
[8] Van Dyke, 2026 WL 3206159, at *7.
[9] Id.
[10] Id. at *7–8.
[11] Id. at *10–11.
[12] Van Dyke’s argument was that the insider trading allegation amounted to an unconstitutional common-law crime because it “merely copies, without defining, terms from the securities law.” Id. at 13–14.
[13] Id. at 14 (quoting Taggart v. Lorenzen, 587 U.S. 554, 560 (2019)).
[14] Id. at *14.[15] Id. at *15–17.
[16] Id. at *21.
Government/Regulatory Enforcement