US regulators are reportedly taking another look at Polymarket, this time focusing on whether the prediction market complied with its 2022 settlement commitment to keep US users off the platform. The renewed scrutiny comes as a criminal case involving an active-duty soldier raises broader questions about how far the Commodity Futures Trading Commission can police event-based contracts.

According to prosecutors, Master Sgt. Gannon Ken Van Dyke used classified information tied to the January operation that captured Nicolás Maduro and placed a series of bets on Polymarket before the mission became public. Reuters reported that the CFTC is now reviewing whether the platform’s safeguards were sufficient after the account was allegedly opened using a virtual private network, or VPN.

Alleged bets tied to Maduro operation

Prosecutors say Van Dyke spent about $33,000 across 13 Polymarket bets before the January raid and later realized roughly $409,881 in profit. They allege the trades were informed by nonpublic, classified knowledge about the operation.

Van Dyke has pleaded not guilty. The allegations place a highly unusual set of facts at the center of the case: an intelligence-linked military operation, a prediction market that says US participation is prohibited, and a regulator whose jurisdiction over these contracts remains contested.

VPN use and Polymarket’s compliance response

The account in question was allegedly accessed through a VPN, a tool that can obscure a user’s location. Polymarket has said its rules prohibit attempts to bypass geographic restrictions in that way.

The company also says it upgraded its compliance systems and referred the trades by the soldier to authorities. The reopened CFTC review reportedly examines whether those controls were adequate and whether Polymarket lived up to promises made in its earlier settlement with the agency.

Court fight over swaps versus event contracts

A central legal dispute is whether the bets should be treated as swaps, a category of derivatives overseen by the CFTC, or as a different kind of event contract beyond the agency’s reach in this context. Van Dyke’s lawyers argued that point in seeking to dismiss the case.

Judge Margaret Garnett rejected that dismissal attempt, allowing the matter to proceed. The case is now moving toward a trial tentatively scheduled for Dec. 7, where the classification question could become a major test of the government’s theory.

Why the case matters beyond one defendant

The outcome could affect more than the charges against Van Dyke. If prosecutors prevail on the swaps argument, it may bolster the CFTC’s position in future disputes involving prediction markets and event-based trading. If that theory fails, the agency’s footing over such contracts could be narrowed, even if a single ruling would not fully resolve the issue across the sector.

Polymarket is also facing pressure on other fronts. A separate lawsuit in New York accuses its US operator of running an illegal gambling business. At the same time, Democratic lawmakers have raised insider trading concerns around prediction markets, and the House Oversight Committee is conducting its own insider trading probe that includes Polymarket.

Source: beincrypto.com