A fresh batch of criminal charges is coming against several individuals alleged to have used insider information to trade on prediction markets. The cases include a US service member who traded on military actions and a KPMG employee who traded on public company earnings.
The Wall Street Journal reported that the serviceman placed successful bets on Polymarket related to military action in Iran and Venezuela.
The KPMG employee, meanwhile, is accused of using privileged information to wager on whether a specific public company would beat the consensus estimate for quarterly earnings.
KPMG is an accounting firm, and the employee may have had access to company financial details before any public release of the data. The company has not commented on the case.
Criminal Cases Mounting Against Polymarket Users
If the charges are filed, it would add to two ongoing criminal cases in the US against American soldier Gannon Ken Van Dyke and Google engineer Michele Spagnuolo. Both are accused of using insider information to profit on markets on Polymarket.
Additionally, two Israeli military officers have been arrested in their home country for trading on markets related to the conflict in the Middle East on Polymarket.
The first Israeli Air Force (IAF) officer arrested in February claims that wagering on prediction markets is rife among servicemen.
Markets related to war are not permitted in the US, but Polymarket continues to offer users the opportunity to wager on military actions on its international platform. The site is banned in over 40 countries worldwide, but Israel is not among them.
Over 150 Accounts Flagged for Suspected Military Insider Trading
The Anti-Corruption Data Collective published a report earlier this month that raised suspicions of insider trading in military-related markets on Polymarket. The report said 152 accounts have made huge profits wagering on the controversial markets.
Polymarket said it has referred nearly 100 accounts to authorities based on signs of suspicious trading. The company said it conducts surveillance for any trades that would violate its policies, but would not comment specifically on the cases against the serviceman and the KPMG employee.
The Wall Street Journal reported that the CFTC, as well as prosecutors in New York and Washington, are involved in the cases.
Defense Lawyers Claim US Has No Authority Over Markets
In addition to the Department of Justice, the CFTC filed charges against both Spagnuolo and Van Dyke, alleging they violated the Commodity Exchange Act (CEA).
Van Dyke’s lawyers argued that the CFTC is overstepping its authority and that the markets he traded on do not qualify as swaps under the CEA.
Spagnuolo has also been charged with violating the CEA in addition to wire fraud and money laundering. He allegedly used inside information from his position at Google to profit by $1.2 million from trading on search-related markets at Polymarket.
In a motion to dismiss the charges, Spagnuolo’s legal team similarly claimed that the markets he traded in should not be classified as swaps and therefore did not violate the CEA.
The motion cites Van Dyke’s case and the government’s response that said his argument is an “academic objection” with “little relevance to this prosecution.” Spagnoulo’s lawyers say the definition is key to charging the Swiss resident.
They make arguments similar to those that state gambling regulators have made against prediction markets when claiming that sports markets should be prohibited.
Additionally, they claim that the US government has no jurisdiction as he is a non-US citizen wagering on a non-US platform. CFTC Chair Michael Selig said the agency has the ability to pursue cases involving offshore platforms in “extreme circumstances.”
In the case involving the KPMG employee, it is unclear if the trading took place in the US. The military serviceman would have been trading on Polymarket’s international platform, which continues to offer trading on conflicts despite the surge of insider trading cases.
While exercising its authority in criminal cases against individuals, the CFTC does not appear to have taken any action to prevent Polymarket from offering the markets.
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A fresh batch of criminal charges is coming against several individuals alleged to have used insider information to trade on prediction markets. The cases include a US service member who traded on military actions and a KPMG employee who traded on public company earnings. The Wall Street Journal reported that the serviceman placed successful bets
The post US Serviceman & KPMG Employee Face Insider Trading Allegations appeared first on CasinoBeats.