Shortly after a member of the U.S. Special Forces was criminally charged this week with using insider knowledge about the capture of Nicol\u00e1s Maduro of Venezuela to win a series of lucrative bets, the platform on which he gambled, Polymarket, released an approving statement.<\/p>\n
\u201cInsider trading has no place on Polymarket,\u201d it said. \u201cToday\u2019s arrest is proof the system works.\u201d<\/p>\n
The statement reflects a growing trend among gambling companies, including prediction markets like Polymarket and Kalshi and sports betting platforms like DraftKings and FanDuel. Recent insider trading cases brought in New York have given them an opportunity to argue that illegal behavior won\u2019t be tolerated on their platforms and that the system is working.<\/p>\n
DraftKings released a similarly laudatory comment after N.B.A. professionals were charged and accused of similar conduct<\/a> last fall, saying that the current arrangement allowed law enforcement authorities to \u201chold accountable anyone engaged in illegal behavior.\u201d<\/p>\n Critics counter that splashy indictments are not a solution to the more widespread problem of insider trading in gambling markets. While prediction markets and sports books are governed by separate regulations, gambling companies across the spectrum have gestured toward indictments to suggest that anything stricter is unnecessary.<\/p>\n \u201cAs prediction markets and sports gambling companies like to frame it, they can\u2019t lose,\u201d said Danny Funt, the author of the recent book \u201cEverybody Loses: The Tumultuous Rise of American Sports Gambling.\u201d \u201cWhen people get caught participating in insider trading, they say the system is working. When time passes without that kind of fraud coming to light, they say this proves concerns about insider trading were overblown.\u201d<\/p>\n DraftKings did not immediately respond to a request for comment. Polymarket pointed to a comment made on Friday by its chief executive, Shayne Coplan, saying that the company would \u201cwork proactively with all relevant authorities on any suspicious activity on our marketplace.\u201d<\/p>\n The special forces soldier, Master Sgt. Gannon Ken Van Dyke, 38, was accused of betting on events related to Mr. Maduro and Venezuela 13 times in all, including \u201cbets on the timing and outcome\u201d of the operation to remove Mr. Maduro, according to the indictment.<\/p>\n He was charged with wire fraud, commodities fraud and the unlawful use of confidential government information for personal gain, among other counts.<\/p>\n On Friday, he appeared before a U.S. magistrate judge in North Carolina, who released him on a $250,000 unsecured bond. He has been ordered to appear in federal court for arraignment on Tuesday in New York, where the five-count indictment was filed.<\/p>\n During the appearance, Sergeant Van Dyke wore brown cargo pants and a light green polo shirt that revealed a sleeve of tattoos on his right arm. He showed little emotion, answering routine questions from the judge in a tone barely above a whisper.<\/p>\n Joseph Ross II, a lawyer for the sergeant, declined to comment.<\/p>\n Indictments like that of Sergeant Van Dyke could help relieve pressure on prediction markets in particular, which have faced scrutiny in recent months. Politicians from both sides of the aisle are pushing for stricter regulations, prompted in part by a spate of successful bets related to President Trump\u2019s war on Iran<\/a>.<\/p>\n The charges \u201cshow that prosecutors can intercept this sort of activity,\u201d said Joshua Mitts, a law professor at Columbia University who has written about prediction markets. But he added that it benefited the companies to effectively say that \u201cthere are some bad apples but they\u2019re taken care of, so you can use our platforms with confidence.\u201d<\/p>\n Their behavior may not be as isolated as the companies are suggesting, he said, citing a paper<\/a> that he and Moran Ofir, a law professor at the University of Haifa, posted last month, indicating that insider betting was widespread on Polymarket.<\/p>\n It showed that over 200,000 suspicious bets had been made, bringing in more than $143 million in what its authors characterized as \u201canomalous profit.\u201d<\/p>\n Polymarket did not respond to a request for comment on the paper.<\/p>\n Different regulatory bodies govern prediction markets like Polymarket and Kalshi and sports books like DraftKings and FanDuel. On prediction markets, bettors are technically trading futures contracts; for that reason, the markets are regulated by the Commodity Futures Trading Commission.<\/p>\n There may be an advantage for the prediction markets in being regulated by a single federal agency. For now, they do not have to adhere to the kind of piecemeal regulation that is imposed by states on the sports books, though the issue is being actively litigated and is likely to reach the Supreme Court. Their champions argue that they improve the public\u2019s understanding of the world thanks to the power of information aggregation \u2014 in layman\u2019s terms, the wisdom of crowds.<\/p>\n Prediction markets were initially embraced by a subset of gamblers who wanted to bet on the outcome of presidential elections. Now, these platforms rake in billions<\/a> from investors and have entered into partnerships with sports leagues and media companies.<\/p>\n Initially, some prediction market executives applauded the appearance of inside information driving activity on their platforms. Mr. Coplan, the chief executive of Polymarket, said in November that providing incentives for insiders to gamble with their knowledge increased his platform\u2019s value as a prediction tool.<\/p>\n