CFTC says prediction-market trades can trigger insider-trading liability

Prediction-market traders can face insider-trading liability when they misuse material nonpublic information obtained under a duty of trust or confidence, the Commodity Futures Trading Commission’s enforcement director David Miller said at an industry conference in New York.

At NEXTPredict NYC on Oct. 22, Miller rejected the notion that event contracts fall outside established insider-trading rules. He said an informational advantage alone does not automatically create a federal violation. The central question is generally whether the trader breached a confidentiality obligation to the source of the information.

That distinction can leave conduct subject to an exchange’s rules even where it does not breach federal law. Miller said Nicolás Maduro could hypothetically trade on his own capture without necessarily committing federal insider trading, while an exchange could still prohibit a participant from trading on an event affecting them personally. Violations of exchange rules can bring fines or suspensions, he said.

Market manipulation remains separately prohibited. Miller said false statements intended to move contract prices could violate the law even if a trader’s use of underlying information was otherwise lawful. He also said campaign staff who trade using confidential polling data could face enforcement action, and that the agency had investigated candidates over election-related trades and allegedly untruthful statements.

The CFTC reinforced that position in an advisory issued Saturday. It said it can police fraud, manipulation and the misuse of nonpublic information in prediction markets traded on designated contract markets. The agency identified misappropriation of confidential information in breach of a pre-existing duty of trust and confidence as insider trading under Section 6(c)(1) of the Commodity Exchange Act and Regulation 180.1, while stressing exchanges’ independent surveillance, audit-trail and rule-enforcement duties.

The legal theory has already featured in a criminal case. The Justice Department charged Army soldier Gannon Ken Van Dyke in April, alleging he used classified information about Operation Absolute Resolve, the operation to capture Maduro, to make about 13 Polymarket bets on Venezuela- and Maduro-related contracts. Prosecutors said he wagered about $33,000 and made roughly $410,000 after Maduro and his wife were apprehended on Jan. 3. Van Dyke had signed nondisclosure agreements covering classified or sensitive military information, the department said.

Separately at the conference, Miller said the CFTC’s investigation into suspicious oil-futures trades before President Donald Trump’s March announcement concerning Iran was “robust.” He disputed Bloomberg’s account of the handling of an enforcement referral, calling it factually inaccurate without specifying the alleged errors, and said the enforcement division had investigated the matter from the beginning.

Miller also said the CFTC’s cases involving Polymarket’s international platform showed that offshore trading does not automatically insulate activity from U.S. enforcement. Agency surveillance teams were monitoring election-related markets ahead of the Nov. 3 midterm elections.