On this episode of “An Ounce of Prevention,” host Andrew Good is joined by white collar defense and investigations partner Chad Silverman to discuss why prediction markets have become one of the hottest enforcement topics in the United States. The conversation covers how these platforms work; the debate over whether they fall under commodities, securities or gambling law; and the jurisdictional fight between the CFTC and state regulators now working its way through the circuit courts. The episode also dives into recent high-profile prosecutions, as well as pending congressional bills and the complex international regulatory landscape. Tune in for practical takeaways on how companies can update their insider trading policies to keep pace with this fast-growing and increasingly scrutinized market.
Episode Summary
Prediction markets have exploded from novelty to one of the hottest U.S. enforcement priorities. Host Andrew Good, head of Skadden’s European white collar defense and investigations practice, is joined by Skadden partner Chad Silverman to break down how prediction markets work and the jurisdictional battle between the CFTC and state gambling regulators. Chad walks through recent prosecutions built on misappropriated government and corporate information — including the first-ever use of the “Eddie Murphy Rule” — and shares practical compliance takeaways, from updating insider trading policies to pending congressional bills and the international regulatory patchwork facing multinational companies.
Voiceover (00:01):
Welcome to An Ounce of Prevention, a podcast from Skadden’s White Collar Defense and Investigations Group that explores critical issues shaping the landscape of corporate compliance and enforcement around the globe. Join us for in-depth analysis and practical insights to help you navigate the complexities of corporate accountability.
Andrew Good (00:23):
Hi, and welcome to Ounce of Prevention, podcast series presented by the White Collar Defense and Investigations team at Skadden. This podcast brings you regular analysis of key compliance and white collar crime trends, important industry news and developments, as well as insights from leading practitioners in the field. My name is Andrew Good and I’m the head of Skadden’s European White Collar Defense and Investigations Practice. Today we’re talking about prediction markets and why they’ve gone from a novelty to one of the hottest enforcement topics in the US. To help us understand this prediction market phenomenon and US enforcement priorities, my colleague Chad Silverman has graciously offered his time to join the show today. Chad’s a White Collar partner in our New York office with deep experience in investigations into global financial institutions on a variety of issues, including those involving the Commodity Futures Trading Commission, the SEC, and the US Department of Justice. Chad, welcome to the Ounce of Prevention Podcast.
Chad Silverman (01:26):
Thanks, Andrew. Great to be on.
Andrew Good (01:28):
Great. So let’s get right to it, Chad. The first question is, even if some of us are too afraid to admit it, what exactly is a prediction market?
Chad Silverman (01:36):
Sure. So at its core, a prediction market’s a platform where you buy and sell contracts tied to whether a specific real world event happens or not. Usually it’s structured as follows. The contract will ask something like, “Will candidate X win the election?” And then you’ll choose yes or no. If there’s about a 51% chance that candidate X will win, the contract will probably cost you about 51 cents for the chance to win or be paid $1.
Andrew Good (02:03):
Got it. And the theory behind them is that they’re actually useful forecasting tools?
Chad Silverman (02:09):
Exactly. The underlying academic idea is that when people have real money on the line, markets aggregate information better than pundits or even polls. And there’s good evidence for that. Don’t forget, these platforms performed consistently well during the 2024 US election and that legitimacy is actually part of what’s driven their explosive growth. Poly Market and Kalshi processed about 37 billion, I think, 37 billion contracts in 2025. And you go on CNN, CNBC today, you can see that they’re integrating this data into their feeds.
Andrew Good (02:44):
Nice. And let’s get into the architecture now. When someone trades on on one of these platforms, what’s the governing law? Is it securities law or commodities law or is it gaming law or is it something else entirely?
Chad Silverman (02:58):
Yeah. Well, I mean that really is the question of the day in the US right now. My view is that these prediction market contracts fit squarely within the definition of swap in the Commodity Exchange Act, which generally places them under the CFTC’s jurisdiction unless there’s some event contract tied specifically to a security. The CFTC really does agree with this. We know that because they’ve been participating in these different litigations and they’ve asserted that event contracts fall within their jurisdiction and they’ve even asserted that sporting event contracts fall within their jurisdiction. And they’ve actually sued a number of states to protect this jurisdiction over these contracts.
Andrew Good (03:37):
Yeah, and the states don’t necessarily see it the same way as the CFTC though, do they? I recently read about cases brought by a couple of state attorneys generals, particularly Arizona.
Chad Silverman (03:47):
Yeah, that’s right. I mean, Kalshi alone faces over 19 federal lawsuits, I think, including from state gambling commissions and tribal nations. And they’re arguing that sports event contracts are not swaps and that makes those platforms unlicensed gambling platforms.
Andrew Good (04:02):
And do we have decisions from courts on these issues yet?
Chad Silverman (04:05):
Well, yeah, there’s been quite a mix of decisions among the district courts. In terms of the circuit courts, Third Circuit is really the main one that’s ruled on it so far. It’s come out in favor of the CFTC’s position that these contracts are swaps and that the CFTC therefore has exclusive jurisdiction over those contracts. Ninth and fourth circuits also recently heard arguments on those issues. And if there’s a circuit split, we fully expect this to go up to the Supreme Court.
Andrew Good (04:30):
Makes sense. It sounds like an area they could clarify on. Why don’t we shift gears slightly and talk a little bit about some of the enforcement actions that have come out? The first one is the prosecution of US Army Master Sergeant Gannon Van Dyke. Prosecutors alleged that he used sensitive classified information to take positions on Poly Market totaling almost $34,000 in the lead up to a covert operation against Venezuelan, former Venezuelan President Nicolas Maduro. And the CFTC brought a parallel case against Van Dyke along those lines. What are we seeing there?
Chad Silverman (05:03):
Yeah, that’s right. Poly Market had been offering event contracts on certain events involving Venezuela and Maduro, things like the likelihood that US forces would invade Venezuela, that Maduro would be removed from power, and all these wouldn’t happen by a certain date essentially. So Van Dyke, who is allegedly involved in the planning and operation absolute resolve, he bought yes positions on a number of those contracts between late December ‘25 and early January ‘26.
Andrew Good (05:36):
Those were lucrative positions to pick up?
Chad Silverman (05:38):
Yeah, according to the CFTC complaint, there were over 436,000 Yes shares that he purchased on a specific contract that had Maduro out by January 31st, 2026. And DOJ alleged that he profited over $400,000 from them.
Andrew Good (05:54):
And based on the allegations of the complaint, prosecutors are alleging that he transferred a lot of the proceeds to a foreign crypto vault before depositing them into a fairly new brokerage account. Is that right?
Chad Silverman (06:06):
Yeah, they did. They alleged he asked Poly Market to delete his account and they also alleged he claimed he’d lost access to the email address tied to it. I think one of the most interesting things from this story is that there were reports of unusual trading in these contracts that surfaced just hours after the operation was made public and those reports came out on social media and the press. Apparently that’s what triggered DOJ and CFTC to investigate.
Andrew Good (06:30):
Yeah. So if there’s maybe a lesson here, it’s that these markets can be observed for crypto-backed platforms like Poly Market. There’s blockchain on the trades that are made as well. So when unusual trades are happening, people are noticing in real time. You don’t have the opacity say of a traditional equity trade where you’ve got massive volume and brokers transferring shares from party to party. As a result of these allegations, Van Dyke’s charged with unlawful use of confidential government information for personal gain, theft of non-public government information, commodities fraud, wire fraud, and with making an unlawful monetary transaction.
Chad Silverman (07:09):
Yeah, don’t forget, it’s also the first use of the so-called Eddie Murphy rule.
Andrew Good (07:12):
Yeah, let’s look at the commodities law experts out there. I love this one. What’s the Eddie Murphy rule?
Chad Silverman (07:18):
All sight, sure. Well, you remember the movie Trading Places?
Andrew Good (07:21):
Yeah, yeah.
Chad Silverman (07:22):
You had the Duke Brothers and they stole a copy of this upcoming USDA crop report and essentially attempted to trade on that information. After that movie came out, the CFTC realized that they actually didn’t have an explicit law that prevented that conduct. So when Dodd-Frank was passed, they inserted a rule called the Eddie Murphy Rule named after Eddie Murphy’s role in the movie Trading Places. And that rule essentially prohibits the trading of futures or swaps based on information stolen from the government.
Andrew Good (07:51):
So this is the first prosecution under that rule. Are there other claims that the CFTC brought?
Chad Silverman (07:56):
Yeah, he was also charged under the CFTC’s general fraud provisions. That would be Section 61 of the Commodity Exchange Act and the rule promulgated under that, which is Rule 180.1. Those were of course modeled after Section 10B and Rule 10B-5 of the Securities Exchange Act. And under all those provisions, liabilities going attach when you have an individual that misappropriates information from a source and then trades on that information, whether that be future swaps or commodities under the Commodity Exchange Act or securities under Section 10B-5 of the Securities Exchange Act. So the prosecution’s theory here was Van Dyke owed a duty of confidentiality to the government based primarily on non-disclosure agreements he had signed regarding the planning that operation, of course. And then he breached that duty by trading on it. So really classic misappropriation, just slightly different product.
Andrew Good (08:49):
Interesting. So very much like someone insider trading on corporate information from their employer, that’s what you see in the securities context. But this time you’ve got a government employee trading on military information.
Chad Silverman (09:02):
Yeah, I mean the product is slightly different, but a theory is the same.
Andrew Good (09:06):
Interesting. Any other prominent cases coming out recently?
Chad Silverman (09:09):
Yeah, there was another case that came out involving an employee of a tech company who also allegedly misappropriated information from his company and then traded on that information. The individual’s name was Michele Spagnuolo, and he was a software engineer that had access to confidential data regarding the year in search, which is proprietary trending search results that are usually kept completely confidential until that information’s released. And Poly Market had some markets with regard to that such as will Kendrick Lamar be the number one search person this year? So allegedly Spagnuolo accessed some internal information regarding whether Kendrick Lamar would be the number one search person that year and invested approximately $2.75 million across 25 different contracts like that. And he voted no on some contracts when he knew that the individual wouldn’t be the one, who’s number one and voted yes on other contracts. And when all was said and done, allegedly profited $1.2 million.
Andrew Good (10:14):
And so like Van Dyke, Spagnuolo’s being charged with commodities fraud, wire fraud, and money laundering. This is interesting for our international listeners because this is someone who’s not actually based in the US, not a US citizen, but it’s another indication that the US is willing to take a pretty broad view of its territorial reach of its laws. Both cases hit the headlines. We’ve got classified military intelligence and highly sensitive covert operation. The other accessing somewhat mundane information, but placing pretty significant bets on it. What do you think the takeaway is from these cases for corporates that are looking at how to ensure compliance going forward?
Chad Silverman (10:55):
Yeah, I mean the takeaway is regulators are making this type of conduct priority in terms of their enforcement goals. I mean, they’ve been pretty consistent with that from the very beginning of the year. February, the CFTC made a formal statement that’s got full authority to police these markets and essentially putting out a warning that any type of misappropriation of inside information used to trade on these markets is going to be considered to be a violation of Section 6C in Rule 180.1, which I mentioned before. And then also in March, you had the new CFTC enforcement director come in, David Miller, and he specifically named insider trading and prediction markets as being one of the top priorities for the agency going forward.
Andrew Good (11:36):
And is the DOJ come out in a similar way on these issues?
Chad Silverman (11:40):
Yeah, yeah. Then US Attorney of SDNY, Jay Clayton, he’s since been nominated for a different position. But he indicated earlier this year that DOJ would be pursuing prosecutions with regard to this very conduct and these markets. And the fact that you saw Van Dyke and Spagnuolo be indicted by the SDNYs, not a coincidence. I mean, they want to position themselves as the home for this type of enforcement just like they’ve done with securities fraud for decades.
Andrew Good (12:06):
Unsurprising that SDNY has taken a role there. So look, there’s a likelihood of enforcement coming forward. Has Congress signaled an interest in regulating this separately from what’s already on the statutes?
Chad Silverman (12:19):
Yeah, I mean certain bills have been proposed. I wouldn’t put them at a high likelihood of being passed, but just to go over the main ones, you have the Public Integrity and Financial Prediction Markets Act of ‘26 that would prohibit federally elected officials and government employees from using inside information to trade on prediction markets. That would codify a clear prohibition specific to prediction markets, very similar to what you see in the Stock Act. And it would also implement some disclosure requirements and reporting requirements for transactions over a certain dollar amount. And then there’s also the stop trading on Predictions and Corrupt Bets Act that would amend the Commodity Exchange Act to prohibit certain types of event contracts like political election contracts and military action contracts and sporting event contracts. But like I said, I don’t think the odds of passage are very high for either.
Andrew Good (13:09):
Plenty of moving pieces though. We’ve got federal and state authorities disputing who has the authority to regulate in the space. Congress potentially weighing in. When you’re talking to in-house counsel and compliance officers about these issues, what are you recommending that they take away from this?
Chad Silverman (13:26):
Yeah, I think the main thing is for them to take a close look at their insider trading policies because a lot of these policies are written really with securities in mind and prediction markets really haven’t been top of mind when it comes to writing these policies. But as the Spagnuolo case shows, employee with access to sensitive information, whether that’s year-end search or something else, could be an M&A transaction, earnings figures, drug trials. I mean, that individual can misappropriate that information to trade on those markets and that could happen with these markets just as easily as it could happen with equities. So government’s been clear that they’re going to make this type of issue a priority. So I really think compliance officers should be thinking about these policies and whether they are expansive enough to cover this type of product in these markets.
Andrew Good (14:11):
Yeah, like so much. If the legal exposure is not enough to scare you, there’s obviously a reputational piece to this too.
Chad Silverman (14:17):
Yeah. I mean, in the Spagnuolo case, that’s essentially what happened. The company put a lot of money and effort into having their year in search and they wanted that to be a big public reveal. And then you have an employee who’s allegedly trading on it in advance that information comes out before the results come out and all the attention is now on the potential insider trading rather than the actual release of the results itself. And that’s just a reputational problem no company wants to deal with. So even setting aside CFTC and DOJ, companies I think have a strong self-interest in making sure that employees understand that they can’t misappropriate and then trade on information, whether that’s securities or prediction market contracts.
Andrew Good (15:01):
I completely agree. Sitting over here in London, why don’t we close with an international cross-border dimension. For listeners at multinational companies or firms with cross-border practices, what does the regulatory picture look like outside the US on these issues?
Chad Silverman (15:18):
Pretty complicated. So outside of the US, no jurisdiction has yet created a dedicated prediction market regime, but the UK has classified them under gambling law. Singapore has banned Poly Market outright. Germany, Belgium, France, some other European countries have also blocked access to Poly Market on the basis that they’re offering gambling services without a license. So pretty complicated.
Andrew Good (15:43):
Where do you see this area going forward? Do you think prediction markets are going to be a sustained enforcement priority or is this something where the government wants to put down a marker and we’ll see a tailing off of activity after that?
Chad Silverman (15:55):
|Oh, definitely sustained and I wouldn’t be surprised if it expands even further and should be aware also the CFTC’s actively engaged in rulemaking in this space and seen DOJ being fully willing to bring criminal cases here. On top of all that, these platforms are growing incredibly fast. I mean, trading volume I think has quadrupled over the past two years. So when you have that type of scale, that’s inevitably going to attract regulators and heightened attention. So definitely more to come.
Andrew Good (16:25):
Great. Well, look, good discussion here today, Chad. Thanks for joining. Appreciate that. It’s timely as well. Thanks, Chad.
Chad Silverman (16:33):
Yeah, been my pleasure.
Andrew Good (16:34):
Great. Well, look, to listeners, I hope you can join us next time. In the meantime, please stay vigilant, stay compliant, and please come back for our next episode where we’ll discuss another key topic shaping our industry. Until then, goodbye.
Voiceover (16:51):
Thank you for joining us for today’s episode of An Ounce of Prevention. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden could be found at skadden.com.
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