Attorneys representing a U.S. special forces soldier, who faces allegations of exploiting classified intelligence for profit with Polymarket trades regarding the capture of Venezuelan leader Nicolás Maduro, assert that federal prosecutors are attempting to criminalize actions not currently restricted by existing legislation.
Indicted in April, Master Sgt. Gannon Ken Van Dyke faces charges of three violations of the Commodity Exchange Act (CEA), wire fraud, and an illegal monetary transaction.
Allegedly, Van Dyke profited $409,000 from a $33,000 investment across various markets, including “Maduro Out by January 31, 2026?” and “US Forces in Venezuela?” Shortly after, he was photographed aboard the USS Iwo Jima, the ship that transported Maduro to the U.S.
The Justice Department has identified this case as the inaugural insider-trading prosecution related to a prediction market. However, Van Dyke’s attorneys argue that this unique circumstance warrants the dismissal of the indictment. They contend that prosecutors are employing an unprecedented legal approach to criminalize trading in prediction markets.
“The government has indicted Gannon Van Dyke based on two theories: one is novel, never before enacted, and not supported by the law; the other is expressly rejected by the Second Circuit,” the defense stated in a recent 51-page motion filed on July 31.
“Criminal courts are not experimental venues where prosecutors can explore new legal theories about whether certain behaviors constitute a crime. Due process principles prohibit such actions,” they added.
‘This Is Gambling, Not Hedging’
The defense team challenged the government’s claim that Polymarket contracts should be categorized as “swaps” under the CEA, a point central to the first three charges in the indictment.
They argue that Congress intended for the CEA to regulate financial derivatives aimed at mitigating commercial risk, not betting on future occurrences.
“Unlike a swap counterparty, he does not mitigate existing commercial risk – he creates risk by making the bet itself,” the attorneys asserted. “This is gambling, not hedging.”
The motion also references recent federal court cases concerning prediction markets, asserting that judges have previously rejected overly broad interpretations of the CEA that would classify event contracts as swaps.
The defense warns that endorsing the government’s interpretation could greatly extend federal jurisdiction over gambling activities.
“The expansive reading of the statute proposed by this indictment would encompass every bet made regarding election winners, the timing of a political leader’s death, or even the color of a candidate’s tie during a debate, into federal regulatory oversight,” the motion argues.
Fair Notice
“The government’s intent to apply criminal law as a deterrent in an emerging sector does not absolve it of its constitutional Due Process requirements,” the attorneys stated. “Behavior cannot be deemed illegal without a transparent statute that provides clear notice of forbidden actions.”
In another significant statement, they contend: “Actions do not become criminal simply because certain individuals disapprove of them. Should the government wish to prevent individuals from using confidential governmental information in prediction market trading, legislative measures are the appropriate course.”
The motion also seeks the dismissal of the wire fraud charge, contending that confidential military planning information does not constitute “property” under the federal wire fraud statute. Since the money laundering allegation relies entirely on the purported wire fraud, the defense argues it must also be dismissed.
If found guilty of all charges, Van Dyke could face a potential 60-year sentence in federal prison.