The US Commodity Futures Trading Commission (CFTC) is reportedly reopening a Polymarket probe. A soldiers alleged $400,000 insider-betting case now tests its authority over prediction markets.
Two sources told Reuters the agency is reviewing whether Polymarket honored a 2022 settlement promise to block US traders. The reported scope also covers its CFTC-licensed US exchange.
How did a soldier‘s VPN end up in the CFTC’s orbit？
Prosecutors allege Master Sgt. Gannon Ken Van Dyke used classified knowledge of the Maduro raid to bet on Polymarket.
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He allegedly spent about $33,000 on 13 bets before the January operation that captured Venezuelan leader Nicolás Maduro. The wagers produced $409,881 in profit, prosecutors say.
Additionally, he allegedly opened the account through a virtual private network (VPN), which masks a users location. However, Polymarket says its rules bar such workarounds.
Van Dyke pleaded not guilty. His lawyers instead argue the wagers were event contracts, not swaps, the derivatives the CFTC regulates.
What does the Polymarket probe mean for CFTC authority？
Judge Margaret Garnett rejected the dismissal bid this week, according to Courthouse News. She found the swaps question unsuitable for resolution at that stage.
Therefore, the dispute moves toward a trial tentatively set for Dec. 7. Meanwhile, Polymarket says it revamped its controls and referred the soldiers trades to authorities.
Last year, however, the CFTC and Justice Department shut similar probes without charges. Polymarket announced it had bought a CFTC-licensed exchange a week after CEO Shayne Coplan said the inquiries had ended.
CFTC enforcement director David Miller said in March that he would aggressively police prediction markets. Separately, a New York lawsuit accuses Polymarkets US operator of running an illegal gambling business.
Reuters notes the sector has surged under supportive US policy, though Democratic lawmakers have raised insider trading concerns. The House Oversight Committee is also running an insider trading probe that names Polymarket.
A trial win on the swaps theory could strengthen the CFTCs footing over event contracts. A loss could narrow it, though one case may not settle the wider question.