SDNY judge keeps prediction market manipulation case against soldier alive
A federal judge in the Southern District of New York denied a motion to dismiss charges against a soldier accused of manipulating prediction markets by betting on the removal of a foreign official. The soldier argued that the event contracts could not qualify as swaps under federal law. On October 26, 2026, the court rejected that argument, finding the defendant failed to make the showing required at this early stage. The criminal case will now proceed toward trial.
The soldier's failure to kill the indictment leaves open whether event contracts are swaps under federal law, a question that now heads to jury trial in the Southern District of New York. A verdict that these contracts qualify as swaps would arm prosecutors with commodities fraud statutes carrying felony penalties, not mere ethics sanctions.
That precedent would reshape how the Department of Justice builds cases against defense and intelligence contractors who trade on classified or operational knowledge. For Polymarket and Kalshi, the ruling deepens a second legal front beyond state gambling suits: federal criminal law applied directly to their contract users.
The ruling leaves the swaps classification question for trial in the first SDNY prosecution testing whether prediction market contracts are swaps under federal criminal law.