Justice Department Tells Judge the Polymarket Maduro Bets Were “Swaps”

Federal prosecutors in Manhattan have told a judge that the Polymarket contracts a US soldier allegedly used to make $409,881 from the Maduro raid “qualify as swaps” under the Commodity Exchange Act. Their September 30 letter to Judge Margaret Garnett of the Southern District of New York answers two appeals court rulings that the defense says knock out the commodities counts.

The defendant is Master Sgt. Gannon Ken Van Dyke, 38, the Army soldier at the center of the Polymarket insider trading case. He faces a five-count indictment alleging that he utilized classified military intelligence about the upcoming raid against Venezuelan President Nicolás Maduro to illegally make $409,881 in insider trading profits. The defense maintains a plea of not guilty to all counts.

Three Counts Hang on One Word

Counts one through three are brought under the Commodity Exchange Act, and each one needs the trades to be swaps. The indictment alleges Van Dyke bought about $33,934 of “Yes” shares on Maduro and Venezuela markets between December 27, 2025 and January 2, 2026, while he was involved in planning the operation.

Under the CEA, a contract qualifies as a swap if it references an agreement dependent upon an occurrence or contingency “associated with a potential financial, economic, or commercial consequence.” Van Dyke’s lawyers moved to dismiss on July 31, and their brief says the word swap “covers financial instruments designed to hedge price risk and facilitate price discovery.” A prediction market trade, they wrote, “is gambling, not hedging.”

Appeals Courts Give the Defense Ammunition

Then two appeals courts weighed in, both in civil cases involving Kalshi. On August 28 the Ninth Circuit found Kalshi’s “sports event contracts are likely not swaps,” and on September 16 it relied on that reading in Blue Lake Rancheria v. Kalshi, a case about gaming under federal Indian gaming law. The Sixth Circuit followed with an opinion dated September 25, holding that Kalshi “has not shown that its sports-event contracts satisfy the statutory definition of a ‘swap.'”

Van Dyke’s lawyers sent all of it to Garnett in two letters on September 28. The first also cited an Iowa federal court ruling from September 8. The second opened with an apology: “We apologize for the series of letters, but Courts of Appeals keep issuing opinions in this new area of law.”

Prosecutors Say War Is No Corner Kick

The government’s two-page reply went in under the name of Deputy US Attorney Sean S. Buckley, with Assistant US Attorneys Nicholas W. Chiuchiolo, Ryan B. Finkel and Juliana N. Murray, and it says the defense letters “misstate the courts’ holdings.” Both appeals courts, prosecutors wrote, “addressed only sports event contracts,” such as “how many corner kicks will be taken in a soccer game.”

Those rulings came out of “civil litigation” over whether federal law overrides state gambling regulation, the letter says, and they are not binding on a New York court. It adds that the Ninth Circuit turned down an invitation from Nevada to find that Kalshi’s election contracts aren’t swaps.

Then comes the sentence the case may turn on. Even on the two courts’ “narrow reading,” prosecutors wrote, the contracts here “involve major military action against Venezuela and the removal of a foreign head of state” and qualify as swaps “because they are inherently economic and investors and institutions could have used them to hedge exposure to potential financial consequences.”

In August They Fought That Test

That is not how the government framed it six weeks earlier. Its opposition brief of August 19 called the defense’s arguments for why swaps must be “inherently economic” unpersuasive, and pointed out that weather and emissions swaps are written into the statute “even though neither is ‘inherently’ economic.”

The same brief made the hedging argument. Investors exposed to Venezuelan sovereign debt, it said, might buy “yes” on these contracts “to hedge against losses if intervention occurred.” It says Venezuela’s sovereign bonds rose 35% after the raid, and bonds issued by the state oil company rose 43%.

The CFTC Wants the Same Answer

The Commodity Futures Trading Commission (CFTC) is on the prosecutors’ side. Garnett let it file a friend-of-the-court brief on August 24 over the defense’s objection, and said she would give it “its appropriate weight.” The agency’s brief calls the case “the first federal prosecution for the insider trading of event contracts.” Its own civil suit against Van Dyke has been stayed by a different judge until the criminal case is over.

The agency is working on the definition itself as well. Reginfo.gov, the federal regulatory review tracker, shows a proposed CFTC rule titled Further Definition of “Swap” to Include Event Contracts as received on September 28. A second CFTC rule received the same day is titled to exclude “Casino-Style Gambling Products” from the definition.

Judge Garnett is scheduled to hear oral arguments on the motion to dismiss on October 7. Ahead of the hearing, prosecutors filed a classified, ex parte submission under Section 4 of the Classified Information Procedures Act (CIPA) to establish protocols for handling sensitive military intelligence during discovery and trial proceedings. Jury selection is currently scheduled for December 7.