Government Investigations

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On June 10, 2026, the U.S. Commodity Futures Trading Commission (CFTC) published a Notice of Proposed Rulemaking (NPRM) seeking public comment on amendments to CFTC Regulation 40.11 and the addition of a new Appendix F to part 40, addressing event contracts, commonly traded on so-called “prediction markets.” The proposal would specify which event contracts may be subject to a determination that they are contrary to the public interest, set out the factors the Commission would apply, and add a definition of “gaming” together with a rule for when an event contract “involves” an underlying activity.

On May 27, 2026, the Department of Justice (“DOJ”) announced that its Civil Division is implementing reforms to accelerate the review of False Claims Act (FCA) whistleblower complaints alleging fraud on federally funded, state-administered benefits programs. That same day, Assistant Attorney General of the Civil Division, Brett A. Shumate, issued an internal memorandum directing Fraud…

Washington, D.C., USA- January13, 2020: Sign of The U.S. Commodity Futures Trading Commission (CFTC) at its headquarters in Washington, an agency of the US government.

Amid recent high-profile incidents of suspicious activity on prediction markets, as well as pressure from Congress, the CFTC has signaled in unmistakable terms that prediction markets are squarely within its enforcement crosshairs and that it will use every tool at its disposal—including artificial intelligence surveillance.

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In April 2026, U.S. Army Special Forces Master Sergeant Gannon Ken Van Dyke was charged for allegedly profiting over $400,000 on bets placed on an offshore cryptocurrency-based prediction platform using classified information related to a military operation targeting former Venezuelan President Nicolás Maduro. The prosecution of Van Dyke reflected the government’s position that prediction markets are subject to the Commodity Exchange Act’s (CEA) anti-fraud and insider trading prohibitions.

Less than six weeks later, federal prosecutors have filed a second insider trading claim involving prediction markets–this time alleging use of confidential corporate data on Polymarket, the world’s largest online prediction marketplace.

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On May 19, 2026, the Commodity Futures Trading Commission’s (CFTC) Division of Enforcement (Division) issued CFTC Letter No. 26-15, a staff advisory establishing a comprehensive new policy on self-reporting, cooperation, and remediation. The policy creates clear incentives for proactive compliance and early disclosure of potential misconduct.

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On February 24, 2026, the Securities and Exchange Commission’s Division of Enforcement announced sweeping revisions to its Enforcement Manual (the Manual). A central feature of the revisions is a redesigned Wells process, which gives investigation targets a chance to be heard before the Commission authorizes an enforcement action. Most notably, the revised manual instructs staff to provide Wells notice recipients with “salient, probative evidence” before a response is due, addressing the information imbalance that has traditionally characterized SEC investigations. Then, on May 18, 2026, the SEC announced a second major pro-defendant shift: it rescinded Rule 202.5(e)—the decades-old “no-deny” policy that had required settling defendants to agree not to publicly deny the agency’s allegations as a condition of settlement.

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The Department of Justice (DOJ) recently provided important information about how it plans to handle the surge in data-driven False Claims Act (FCA) qui tam lawsuits. On April 30, 2026, DOJ announced its Fraud Oversight through Careful Use of Statistics (FOCUS) Initiative, a new program designed to help the government assess viable data-driven qui tams. This initiative offers important insights into the DOJ’s evolving approach to these cases and potential new avenues for early dismissal.

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The prediction market industry has spent the better part of two years arguing that event contracts are a legitimate, regulated, and economically valuable financial product—and, in important respects, that argument has prevailed. What the industry could not have anticipated is that its first landmark enforcement action involves not a rogue trader on Wall Street but an active-duty U.S. Army Special Forces Master Sergeant accused of leveraging classified intelligence about a covert military operation to pocket more than $400,000 on an offshore cryptocurrency-based prediction platform.