CFTC and Kalshi Announce Enforcement Actions Targeting Prediction Markets

On April 22 and 23, 2026, respectively, KalshiEX LLC (Kalshi or the Kalshi Exchange) and the Commodity Futures Trading Commission (CFTC) announced disciplinary and enforcement actions targeting insider trading in event contracts.¹ These charges were brought very quickly (in an enforcement context) after the occurrence of the actions underpinning the charges. The three Kalshi disciplinary matters involved political candidates who wagered on their own campaigns, while the CFTC’s enforcement action was the agency’s first-ever insider trading complaint concerning event contracts and involved an active-duty U.S. Army service member who allegedly traded Polymarket contracts using classified military intelligence about “Operation Absolute Resolve.”² These actions signal a rapid escalation in market-integrity enforcement across prediction markets against a backdrop of congressional scrutiny and an advance notice of proposed rulemaking on event contracts. 

Kalshi Disciplinary Actions Against Political Candidates

On April 22, Kalshi published three disciplinary notices, including two settlements and one contested action, involving political candidates who violated Kalshi Exchange Rule 5.17(z), which prohibits any trader who is a “decision maker” or who has “any influence, directly or indirectly” on the outcome of an underlying event from trading on contracts related to that event.³

• Mark Moran, a candidate in Virginia’s Democratic primary for U.S. Senate, placed trades in two separate markets: (1) “Who will run for public office this year?” and (2) “Virginia Democratic Senate nominee?” During a call with Kalshi’s Compliance and Legal departments, Moran acknowledged that the trades were improper but subsequently refused to resolve the matter via settlement. Kalshi imposed a five-year suspension and a financial penalty of $6,229.30, plus disgorgement of any resulting profits.⁴
• Matt Klein, a Minnesota Democratic state senator and congressional candidate, purchased less than $100 worth of contracts related to his own candidacy in the Minnesota primary for the state’s 2nd Congressional District. Klein cooperated with the inquiry and agreed to a settlement imposing a five-year suspension and a $539.85 financial penalty.⁵
• Ezekiel Enriquez, a candidate in a Texas Republican primary for a U.S. House seat, similarly purchased less than $100 in contracts related to his own race. Enriquez cooperated with the investigation and settled for a five-year suspension and a $784 penalty.⁶
  
  

The small size of these trades pursued by Kalshi illustrates how, and the context in which, prediction markets are serving as the “first line of defense” as called for in recent statements by CFTC leadership.

The CFTC’s First Insider Trading Complaint in Event Contracts

On April 23, the CFTC filed a civil complaint in the U.S. District Court for the Southern District of New York against Gannon Ken Van Dyke, an active-duty U.S. Army service member involved in planning “Operation Absolute Resolve” (concerning the removal of former Venezuelan President Nicolás Maduro). The complaint alleged that Van Dyke misappropriated classified or sensitive nonpublic information that he obtained in his capacity as a planner of Operation Resolve to trade event contracts on Polymarket, in violation of a duty of confidentiality.⁷ The complaint alleges Van Dyke realized more than $404,000 in profits from this conduct.

CFTC Director of Enforcement David I. Miller stated that the CFTC’s filing of the Van Dyke complaint marks “the first time the CFTC has charged insider trading involving event contracts, and the first time the CFTC has used the so-called ‘Eddie Murphy Rule’ to bring charges based on the misuse of government information.”⁸ The “Eddie Murphy Rule,” which is codified in Section 4c(a)(4) of the Commodity Exchange Act (CEA), prohibits trading any swap on the basis of material nonpublic information obtained through government service. The CFTC also alleged that Van Dyke’s conduct violated other provisions of the CEA and CFTC regulations.⁹

Parallel Criminal Action

On the same day the civil complaint was filed, the U.S. Attorney’s Office for the Southern District of New York announced the unsealing of a criminal indictment against Van Dyke alleging substantially similar conduct.¹⁰ This indicates how seriously the CFTC is taking complaints of insider trading in prediction markets. The combined civil and criminal posture amplifies deterrence and aligns with public statements that the CFTC views prediction market integrity as a top enforcement priority,¹¹ with exchanges expected to serve as the first line of defense and federal authorities ready to act where appropriate.

Broader Context: Congressional Pressure, the Special Rule, and the CFTC’s Own Escalation

These enforcement and disciplinary actions arrive against a backdrop of intense and rapidly accelerating scrutiny of prediction markets at both the federal and state levels. Since January 2026, congressional lawmakers have introduced more than 10 bills targeting prediction markets.¹² Key proposals include the bipartisan PREDICT Act (H.R. 8076), which would bar the President, Vice President, members of Congress, their families, political appointees, senior military officials, and judicial officers from trading event contracts tied to “specific political events;"¹³ the End Prediction Market Corruption Act (S. 4017), which would categorically prohibit the President, Vice President, and members of Congress from trading any event contracts; the Stop Corrupt Bets Act, which would ban event contracts tied to elections, war, and government activity;¹⁴ and the DEATH BETS Act, BETS OFF Act, and bipartisan Prediction Markets Are Gambling Act, each targeting contracts involving terrorism, war, sports, or casino-style games.¹⁵ Several of these proposals would effectively codify hard-line restrictions that go well beyond the CFTC’s current exercise of its discretion under the “special rule” in the CEA authorizing the CFTC to determine that certain event contracts are against the public interest.

At the state level, California, Illinois, and New York have each issued executive orders banning state employees from using nonpublic information to trade on prediction markets.¹⁶ During testimony before Congress in April, CFTC Chairman Michael Selig stated that the agency has a “zero tolerance” policy regarding insider trading and suggested that the CFTC is actively investigating cases related to prediction markets.¹⁷

Looking Ahead

These actions have several immediate implications for market participants and the industry at large. The CFTC has made clear that it expects designated contract markets to serve as the “first line of defense” against insider trading and market manipulation, as Director David Miller stated in his March 31 remarks, and that the agency will act where exchange-level enforcement proves insufficient.¹⁸ Prediction markets should ensure they have robust surveillance programs and internal investigation programs and that they investigate and discipline suspicious activity promptly when warranted.

For market participants, the Van Dyke prosecution is a watershed. It establishes that the CFTC will aggressively pursue insider trading in event contracts under existing authority. It also demonstrates that the Department of Justice will pursue parallel criminal cases where the facts warrant. Government employees and service members, as well as anyone with access to material nonpublic information concerning the outcomes of events underlying event contracts, should understand that trading on such information carries the risk of both civil penalties and criminal prosecution.

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This alert is for informational purposes only and does not constitute legal advice. If you have any questions about this alert or would like to discuss how these developments may affect your business, please contact the Lowenstein Sandler attorneys listed above.

¹ CFTC Press Release No. 9217-26, CFTC Charges U.S. Service Member with Insider Trading in Nicolás Maduro-Related Event Contracts (Apr. 23, 2026); see also Kalshi Exchange, Regulatory Notices (Apr. 22, 2026), available at https://kalshi.com/regulatory/notices.
² Commodity Futures Trading Comm’n v. Van Dyke, No. 26-cv-3369 (S.D.N.Y. Apr. 23, 2026).
³ Kalshi Rule 5.17(z).
⁴ Kalshi Notice of Disciplinary Action, File No. KE-2026-0003 (Moran).
⁵ Kalshi Notice of Settlement, File No. KDA-2026-0005 (Klein).
⁶ Kalshi Notice of Settlement, File No. KDA-2026-0004 (Enriquez).
⁷ See Van Dyke, supra note 2.
⁸ CFTC Press Release No. 9217-26 (statement of Director of Enforcement David I. Miller).
⁹ CEA §§ 4c(a)(3) and 6(c)(1) and CFTC Regulations §§ 180.1(a)(1), (3).
¹⁰ United States v. Van Dyke, No. 26 Cr. 156 (S.D.N.Y. 2026).
¹¹ See Miller Remarks, supra note 8.
¹² See, e.g., Prediction Markets Are Gambling Act (introduced Mar. 23, 2026) (Sens. Schiff (D-CA) and Curtis (R-UT)); DEATH BETS Act (introduced Mar. 10, 2026) (Sen. Schiff (D-CA) and Rep. Levin (D-CA)); BETS OFF Act (introduced Mar. 17, 2026) (Sen. Murphy (D-CT) and Rep. Casar (D-TX)).
¹³ PREDICT Act, H.R. 8076, 119th Cong. (introduced Mar. 25, 2026) (Reps. Smith (R-NE) and Budzinski (D-IL)).
¹⁴ End Prediction Market Corruption Act, S. 4017, 119th Cong. (introduced 2026) (Sen. Merkley (D-OR)); Stop Corrupt Bets Act (introduced Mar. 26, 2026) (Sen. Merkley (D-OR) and Rep. Raskin (D-MD)).
¹⁵ See Prediction Markets Are Gambling Act (introduced Mar. 23, 2026) (Sens. Schiff (D-CA) and Curtis (R-UT)); DEATH BETS Act (introduced Mar. 10, 2026) (Sen. Schiff (D-CA) and Rep. Levin (D-CA)); BETS OFF Act (introduced Mar. 17, 2026) (Sen. Murphy (D-CT) and Rep. Casar (D-TX)).
¹⁶ See Cal. Exec. Order N-14-26 (Mar. 27, 2026) (Gov. Newsom); Ill. Exec. Order 2026-05 (Apr. 21, 2026) (Gov. Pritzker); N.Y. Exec. Order No. 37 (Apr. 22, 2026) (Gov. Hochul).
¹⁷ See Testimony of CFTC Chairman Michael S. Selig Before the S. Comm. on Agriculture, Nutrition, and Forestry (Apr. 16, 2026) (stating “zero tolerance” policy regarding insider trading and referencing active investigations into prediction market cases).
¹⁸ See Miller Remarks, supra note 8.