Insider trading on prediction markets: US soldier accused

Insider trading. Prediction markets allow speculation on the outcome of future events, whether elections, sports matches or political decisions. Like all forms of speculation, they also attract their share of cheats. The American justice system has thus just implicated a soldier, accused of having bet on the fall of Venezuelan President Nicolás Maduro based on classified information on Polymarket.

Polymarket, the prediction market that never sleeps

Polymarket operates on the blockchain and allows its users to bet on upcoming events by buying and selling tokens that represent different probabilities. The mechanism is reminiscent of a classic stock exchange. Except that instead of stocks, traders exchange shares indexed on a result: a presidential election, the future price of a cryptocurrency, the fate of a head of state or the temperature in Paris (yes, yes).

The success is real, with volumes soaring with each major political deadline. But this liquidity also attracts those who play with a head start. Starting with this serviceman, suspected of having turned a defense secret into a winning bet.

A US soldier in the dock

According to court documents, Gannon Ken Van Dyke allegedly exploited classified intelligence concerning a US military operation in Venezuela. Presumed objective: to bet on Polymarket with inside knowledge, and more precisely on the overthrow of Maduro as we reported last April.

The case quickly reached the authorities, and for good reason: it is the first prosecution for insider trading (the use of non-public privileged information to make a profit) targeting a prediction market. A precedent that will mark the jurisprudence of these platforms.

The trial is scheduled to take place on December 7, and Mr. Van Dyke faces a heavy prison sentence for having diverted classified information for personal gain.

The case revives the debate on the regulation of prediction markets, because speculating on political or economic events mechanically opens the door to manipulation, especially when some bettors have privileged access to information.

In this case, Polymarket cooperated with investigators to identify the soldier. A transparency that was not enough to protect him from prosecution for fraud and use of classified information.