Maduro Betting Case Could Supercharge Prediction Market Prosecutions

The first criminal case centered on prediction-market bets is proceeding toward trial — and white-collar lawyers say it could result in an uptick of prosecutions involving an industry that’s enjoying explosive growth.

Prosecutors say U.S. Army soldier Gannon Van Dyke used confidential information about the capture of then-Venezuelan leader Nicolás Maduro to bet on the rendition through Polymarket. Van Dyke allegedly placed $33,034 in bets, for a total payout of more than $400,000, according to prosecutors.

Van Dyke’s lawyers are asking a federal judge to toss the indictment by arguing that a prediction-market bet isn’t a “swap,” and therefore can’t be prosecuted under the Commodity Exchange Act, the federal law that regulates commodity futures, options and swaps. A swap is a financial agreement where parties seek to exchange payments by speculating on real-world outcomes.

If U.S. District Judge Margaret Garnett agrees with Van Dyke’s lawyers on that interpretation, it might dissuade prosecutors from bringing similar cases. If, however, Garnett allows the charges to stand, lawyers who are following prediction-market developments say they expect it will unleash prosecutors to pursue additional cases.

“Depending on how this case turns out, I think you're going to see more of them,” said Louis Pellegrino, a former federal prosecutor with the Manhattan U.S. attorney’s office who is now a partner at Dentons LLP.

“It's an interesting test case because it's truly high stakes,” said Pellegrino, who served as a captain in the Army following law school. “There are intelligence issues. There are real-world concerns for troops on the ground and that sort of thing,” he said. “The stakes are a lot higher than something like what dress somebody would wear to the Oscars.”

At oral arguments earlier this month over Van Dyke’s motion to dismiss the indictment, Garnett, a Biden appointee, appeared likely to let the case move forward.

A lawyer for Van Dyke tried to argue that betting on the weather should be considered a swap because of its direct financial and economic consequences, in contrast to Van Dyke’s alleged bets about Maduro. Garnett resisted the comparison, offering the example of betting on whether 2026 will be a Super El Niño year.

“While I think I might agree with you that weather can have lots of financial and economic effects, I’m not sure I’m buying the idea that Super El Niño is a predictable, direct line without externalities or vagaries, as opposed to ‘is the United States going to depose the leader of a petrostate?’” Garnett said.

The arguments attracted a nearly full courtroom, including a defense lawyer working on the only other prediction-market criminal case being prosecuted by the Manhattan U.S. attorney’s office. That one centers on a Google engineer who allegedly traded on confidential information about popular internet searches.

The enforcement director of the Commodity Futures Trading Commission, David Miller, also attended. The CFTC is pursuing a parallel civil case against Van Dyke, and the agency has recently proposed a legal distinction between prediction markets — which it says fall under its jurisdiction — and casino gambling and sportsbooks, which it says fall under state laws.

That comes during a legal fight between states and the CFTC over who should regulate prediction markets.

Garnett’s decision about whether to allow the case to proceed to trial is expected in the coming weeks, with the trial set for early December.

“I do think that people are watching this decision,” said Celia Cohen, former federal prosecutor in Brooklyn who has written about prediction-market prosecutions as a partner at Ballard Spahr.

“The law is always catching up with new technology or new ways of doing things, and we saw this in the crypto market as well, but I think this case really raises a lot of questions,” she said. “If you look at the conduct itself, you think okay, this seems to be somewhat problematic … But is this the right way? Are these statutes appropriate to regulate this?”

If the judge rules in prosecutors’ favor, Cohen said, “it really would open the door here more.”