The first criminal case centered on prediction-market bets is moving steadily toward trial, and white-collar defense attorneys warn that the outcome could trigger a significant uptick in federal prosecutions involving an industry currently experiencing explosive growth. At the center of the legal battle is a technical disagreement over the legal definition of a “swap,” a dispute that has the potential to either open the floodgates for new enforcement actions or severely limit federal jurisdiction.
Prosecutors allege that U.S. Army soldier Gannon Van Dyke utilized confidential, nonpublic information regarding the capture of former Venezuelan leader Nicolás Maduro to place lucrative wagers on the rendition through the prediction platform Polymarket. According to court filings, Van Dyke allegedly wagered $33,034 in bets, ultimately yielding a total payout exceeding $400,000.
In response to the charges, Van Dyke’s defense attorneys have asked a federal judge to dismiss the indictment. Their argument hinges on the assertion that a prediction-market wager does not qualify as a “swap,” and therefore cannot be prosecuted under the Commodity Exchange Act. The federal statute regulates commodity futures, options, and swaps, which are financial agreements where parties seek to exchange payments by speculating on real-world outcomes.
If U.S. District Judge Margaret Garnett agrees with the defense interpretation, legal experts suggest it could effectively dissuade prosecutors from bringing similar criminal cases in the future. Conversely, if Garnett allows the charges to stand, attorneys following the evolution of prediction markets expect federal prosecutors to pursue a broader slate of cases.
Legal observers note the high-profile nature of the litigation. Louis Pellegrino, a partner at Dentons LLP and a former federal prosecutor with the Manhattan U.S. attorney’s office, emphasized the gravity of the matter. Depending on how the case is resolved, Pellegrino expects to see more actions of this kind. He described the litigation as a high-stakes test case involving complex intelligence issues and real-world consequences for troops on the ground, distinguishing it from lower-stakes consumer wagers.
During oral arguments concerning the motion to dismiss the indictment, Judge Garnett appeared inclined to let the case proceed to trial. During the hearing, Van Dyke’s defense attempted to argue that betting on the weather should qualify as a swap because of direct economic and financial consequences, contrasting it with wagers on geopolitical events like the Maduro rendition. Garnett pushed back against the comparison, questioning whether complex weather phenomena represent a direct, predictable line without externalities compared to geopolitical regime changes.
The courtroom proceedings drew substantial attention, filling the courtroom with interested legal professionals. Among the attendees was a defense attorney representing the defendant in the only other prediction-market criminal case prosecuted by the Manhattan U.S. attorney’s office, a matter centering on a Google engineer who allegedly traded on confidential information regarding popular internet searches.
David Miller, enforcement director of the Commodity Futures Trading Commission, also attended the hearing. The CFTC is pursuing a parallel civil case against Van Dyke. The agency recently proposed a legal distinction establishing that prediction markets fall under its regulatory jurisdiction, separating them from casino gambling and sportsbooks, which are governed by state laws. That regulatory push coincides with an ongoing legal battle between individual states and the CFTC over who holds the authority to regulate prediction markets.
A ruling from Judge Garnett on whether the case will proceed to trial is expected in the coming weeks, with the trial itself currently scheduled for early December. Celia Cohen, a partner at Ballard Spahr and former federal prosecutor in Brooklyn, noted the widespread interest surrounding the impending decision. Remarking on how the law continuously attempts to catch up with emerging technologies and financial instruments similar to the early days of the cryptocurrency market, Cohen observed that the case forces difficult questions about whether traditional statutes are appropriate tools to regulate novel platforms.
