Enforcement Round-Up
April was one of the most consequential months in more recent CFTC enforcement history, headlined by the agency bringing its first-ever insider-trading charges involving a prediction market, the resolution of several previously filed matters involving commodity pool fraud, and a growing wave of federal preemption suits against states concerning regulatory authority over prediction markets.
Landmark Insider Trading Case Against a U.S. Service Member
On April 23, 2026, 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 Special Forces Master Sergeant, alleging that he used classified information about a military operation to trade related event contracts on Polymarket, generating more than $400,000 in profits in violation of the Commodity Exchange Act’s (“CEA”) anti-fraud provisions. The same day, the U.S. Attorney’s Office for the Southern District of New York unsealed a criminal indictment charging Van Dyke with commodities fraud, wire fraud, unlawful use of confidential government information, and related offenses, each carrying maximum potential sentences of 10 to 20 years of imprisonment. The CFTC’s press release confirmed that this case marks the first time the agency has used the “Eddie Murphy Rule”—Sections 4c(a)(3) and 4c(a)(4)(C) of the CEA—which prohibits government employees and others from using nonpublic government information to trade swaps—to bring enforcement charges.
According to the complaint, Van Dyke participated in Operation Absolute Resolve to capture former Venezuelan President Nicolás Maduro beginning on or about December 8, 2025, and as a result of his participation, received a classified security briefing and executed a nondisclosure agreement. Between December 30, 2025 and January 2, 2026, he allegedly purchased over 436,000 “Yes” shares of a Polymarket event contract tied to Maduro’s removal from power at an average price of approximately $0.074, investing about $32,538. Following Maduro’s capture and President Trump’s public announcement on January 3, 2026, “Yes” share prices
spiked and Van Dyke allegedly realized profits exceeding $404,000. The DOJ further alleges that Van Dyke took steps to conceal his identity after the trades, including withdrawing profits to a foreign cryptocurrency vault and requesting Polymarket delete his account under false pretenses.
The CFTC alleges liability under both the CEA’s general anti-fraud provision—Section 6(c)(1) and Regulation 180.1—and the Eddie Murphy Rule, grounding its misappropriation theory of insider trading in Van Dyke’s breach of duties of trust and confidentiality to the U.S. Government arising from his military role and nondisclosure agreement. A central premise of the case, and one that remains the subject of ongoing litigation in other proceedings, is the CFTC’s position that event contracts traded on platforms like Polymarket constitute “swaps” under the CEA’s broad definition, placing prediction markets and their participants
within the CFTC’s anti-fraud jurisdiction. In addition to the traditional market-integrity concerns, both the CFTC and DOJ emphasized the significant national security implications of this case.
This enforcement action did not emerge in isolation. It follows the CFTC Division of Enforcement’s February 2026 Prediction Markets Advisory—issued after two enforcement matters handled by KalshiEX involving alleged misuse of nonpublic information—and Director of Enforcement David I. Miller’s March 31, 2026 remarks at NYU Law School, in which he explicitly warned that the CFTC was “watching” prediction markets for abuses and would “aggressively detect, investigate, and, where appropriate, prosecute insider trading.”
For market participants, the takeaways are clear: (i) prediction markets are squarely within the CFTC’s enforcement crosshairs; (ii) possession-based informational advantages are under heightened scrutiny; (iii) platforms and intermediaries should expect rising expectations around surveillance and the detection of suspicious trading patterns; and (iv) organizations employing individuals with access to nonpublic information—whether government agencies, sports leagues, corporations, or other entities—should evaluate whether their existing policies adequately address the risks posed by prediction market trading and consider refreshing
compliance training and personal trading policies accordingly.
Other Enforcement Action Updates
On April 15, 2026, the CFTC announced that the U.S. District Court for the Southern District of Florida entered a consent order against John Fortini for retail fraud, fraud as an associated person of a commodity pool operator, and related regulatory violations arising from his role as an executive with co-defendant Algo Capital LLC. The order found that Fortini misappropriated customer funds, falsely assured customers they could withdraw funds when withdrawal requests were not being honored, and misled them about the firm’s claimed use of a proprietary trading algorithm, when in reality Algo Capital had arranged for Traders Domain FX Ltd. to trade customer funds. The court ordered Fortini to pay $1,347,867.56 in disgorgement, permanently enjoined him from further violations of the CEA, and
imposed permanent trading and registration bans.
On April 13, 2026, the CFTC announced a consent order against Emir Jesus Matos Camargo entered by the U.S. District Court for the Middle District of Florida for futures fraud, fraud as an associated person of a commodity pool operator, and related violations in connection with the operations of defaulted co-defendant Aureus Revenue Group LLC. The case is notable for particularly egregious misrepresentations, including that Matos sent prospective pool participants a fictitious license purporting to show that the CFTC licensed Aureus as an investment fund, complete with a counterfeit CFTC seal and a forged signature of a former CFTC Commissioner. The court ordered Matos to pay $666,038.67 in restitution and an equal amount in civil monetary penalties, and imposed permanent trading and registration
bans.
On April 2, 2026, the CFTC announced that the U.S. District Court for the Southern District of New York granted summary judgment against James R. Velissaris, the former founder and Chief Investment Officer of Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator that managed a multi-billion-dollar hedge fund. The court found that from 2018 to 2021, Velissaris engaged in a fraudulent valuation scheme, manually adjusting an independent third-party pricing system to artificially inflate the value of over-the-counter derivative positions (variance and corridor variance swaps) held by two commodity pools, creating a false record of success that Infinity Q used to charge inflated fees and induce investments. The scheme resulted in customers paying more than $125 million in
excess fees, of which approximately $22 million Velissaris used for his own benefit. The court imposed a $2.2 million civil monetary penalty and permanently enjoined Velissaris from all CFTC-regulated market activity. Velissaris was previously ordered to pay $125,969,962 in criminal restitution and forfeit $22 million in a separate but related criminal case, in which Velissaris was also sentenced to 15 years in prison.
Prediction Markets Litigation Involving the CFTC
April saw a dramatic escalation in the jurisdictional conflict between the CFTC and the states over whether event contracts traded on prediction markets are federally regulated derivatives or state-regulated gambling products.
Federal Preemption Lawsuits. On April 2, 2026—just three weeks before the Van Dyke complaint—the CFTC filed preemption suits in the federal District Courts for the District of Arizona, the District of Connecticut, and the Northern District of Illinois, challenging those states’ enforcement actions against prediction market platforms, including KalshiEx, Polymarket US, Crypto.com, and Robinhood Derivatives. The CFTC’s complaints advance the legal theory that the CEA’s exclusive-jurisdiction provision—7 U.S.C. § 2(a)(1)(A)—preempts state criminal and gambling laws as applied to federally registered designated contract markets (“DCMs”) offering event contracts, and that Congress long ago decided a national regulatory framework was preferable to a fragmented patchwork of state regulations. Chairman Selig stated that the CFTC “will continue to safeguard its
exclusive regulatory authority over these markets and defend market participants against overzealous state regulators.” The CFTC followed these initial filings with two additional preemption suits: against the State of New York on April 24, 2026, in the Southern District of New York, after New York sought to enforce state gambling laws through cease-and-desist letters and civil enforcement suits against CFTC-registered entities; and against the State of Wisconsin on April 28, 2026, in the Eastern District of Wisconsin, after Wisconsin filed civil suits alleging felony violations of state law against five CFTC-regulated prediction market companies—KalshiEx, Polymarket, Crypto.com, Robinhood, and Coinbase.
Emergency Relief in Arizona. Arizona’s enforcement posture was the most aggressive of any state, as it was the only state to have sought criminal charges against CFTC-registered DCMs. On April 9, 2026, the CFTC filed a motion in the District of Arizona seeking a preliminary injunction and temporary restraining order to halt Arizona’s application of state criminal and gambling laws against CFTC-regulated prediction markets. On April 10, 2026, the U.S. District Court for the District of Arizona granted the TRO, barring Arizona from continuing to pursue criminal charges against CFTC-regulated DCMs pending resolution of the CFTC’s complaint.
Massachusetts Amicus Brief. On April 24, 2026, the CFTC filed an amicus brief in the Massachusetts Supreme Judicial Court in Commonwealth of Massachusetts v. KalshiEx LLC, No. SJC-13906, reaffirming the CFTC’s exclusive jurisdiction over the U.S. commodity derivatives markets, including event contract markets. In the CFTC’s press release, Chairman Selig stated: “To any state that seeks to nullify federal law and seize authority over these markets, I say again: we will see you in court.”
Taken together, these developments represent the most significant test to date of the CFTC’s exclusive-jurisdiction theory over prediction markets. The outcome of these cases will have far-reaching implications for whether prediction market operators can operate nationwide under a single federal license or must navigate a patchwork of state gambling regulations. We will continue to track these proceedings closely.
Tiffany Payne | Email
Chairman Selig’s April 30, 2026 Remarks at ISDA AGM
On April 30, 2026, CFTC Chairman Michael S. Selig delivered keynote remarks at the ISDA 40th Annual General Meeting in Boston, Massachusetts. Chairman Selig used the speech to outline his ongoing regulatory agenda, echoing many points raised in his prior public statements, including emphasizing his philosophy that the government should administer the “minimum effective dose” of regulation. With global notional outstanding exceeding $1 quadrillion for the first time, Chairman Selig stated that the CFTC now centrally oversees approximately 35% of global derivatives activity, making it the world’s largest derivatives regulator. His stated “priority as CFTC Chairman is simple: keep these markets efficient, resilient, and innovative—and keep them in the United States.”
Key Takeaways:
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Basel III Endgame. Chairman Selig praised the revised bank capital proposals for reducing burdens on client clearing, end-users, and swap dealers, signaling strong CFTC support for the prudential regulators’ recalibrated approach.
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Dodd-Frank Reporting Overhaul. The CFTC plans to replace years of no-action letter relief with formal rulemakings addressing swap data reporting errors, ownership and control reports, and the trade execution requirement for package transactions.
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Margin and Cross-Border Relief. The agency is moving toward finalizing margin rule amendments for uncleared swaps and pursuing additional substituted compliance determinations with the EU and UK to reduce duplicative regulatory burdens.
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Tokenization and Digital Markets. The CFTC is actively developing frameworks to support tokenized collateral and real-time settlement, with a focus on enabling 24/7 risk management capabilities.
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SEC-CFTC Harmonization. Joint rulemakings on portfolio margining and swap data reporting are expected imminently, with a broader vision of reducing fragmentation and enabling unified multi-product platforms.
Tiffany Payne | Email
Cross-Margining!
With the Treasury clearing cash mandate now eight months away, the CFTC and SEC’s joint order extending the long-running CME and FICC proprietary cross-margining program to permit customer cross-margining of cash market positions in U.S. Treasury securities. The order permits joint clearing members of CME and FICC that are dually registered as broker-dealers and FCMs (“BD-FCMs”) to hold futures customer funds in a commingled customer account at FICC, notwithstanding that FICC is not a “permitted depository” under CEA section 4d or Commission Regulations 1.20 and 1.49(d), and authorizes BD-FCMs to commingle cross-margined securities positions and associated funds with futures customer positions and funds in a single futures customer account. The relief targets the cost overhang from the SEC's Treasury Clearing Requirement, which mandates
central clearing of cash Treasury transactions by December 31, 2026 and Treasury repos by June 30, 2027; cross-margining allows initial margin requirements at FICC and CME to be reduced to reflect risk offsets between CME-cleared interest rate futures and FICC-cleared Treasury cash and repurchase positions.
The order is heavily conditioned to preserve customer-protections. On the BD-FCM bankruptcy side, the CFTC concludes that cross-margined securities positions and associated funds (“XM Securities Customer Property”) held at FICC qualify as “customer property” in the futures account class under Part 190 and subchapter IV of chapter 7 of the Bankruptcy Code, giving cross-margining customers the same priority distribution rights as other futures customers of the insolvent BD-FCM. One critical issue is that a FICC bankruptcy would not be governed by subchapter IV of the Bankruptcy Code because FICC is not a DCO. As a result, protection
is built on NYUCC Article 8: FICC must amend its rules so that all assets credited to FICC XM Customer Margin Accounts are treated as "financial assets" credited to a "securities account," with the BD-FCM (acting on behalf of customers) as the "entitlement holder" with a "security entitlement," ensuring under NYUCC 8-503 that those assets are not property of FICC's estate and are not subject to the claims of FICC's general creditors. Additional conditions require subordination agreements with cross-margining customers as to SIPA/stockbroker liquidation treatment, prohibit FICC from granting security interests in XM Customer Margin (except to CME under the cross-guaranty), require deposits at the FRBNY or an FDIC-insured commercial bank with appropriately labeled segregated accounts,
mandate rule changes to permit porting of positions on FCM default, and require daily reporting to the CFTC and SEC of cash and CUSIP-level securities held for cross-margining and segregated securities customers.
The Commission received five comment letters (supportive submissions from AIMA, FIA, ISDA, and SIFMA/SIFMA AMG, and a more cautious letter from Better Markets) and the order responds to each set of concerns. The Commission declined to subordinate cross-margining customer claims under the special distribution framework in framework 1 of appendix B to Part 190, concluding that the risks posed to the BD-FCM futures customer account by the program are not materially greater in degree or kind than those posed by other portfolio-margining programs. The order also declines to impose AIMA's request for additional public-disclosure obligations on
the cross-margining margin methodology (existing CFTC Reg. 39.21 and SEC covered clearing agency disclosure rules already apply) or AIMA's proposed limits on suspension/termination of cross-margining access (the Commission preserves CME, FICC, and BD-FCM risk-management discretion). The order is effective immediately, paired with companion SEC orders approving the FICC rule changes and granting Section 36 Exchange Act exemptive relief from Rule 15c3-3, so that BD-FCMs and their customers can implement the framework in advance of the Treasury clearing compliance dates.
Barrett Morris | Email
Joint CFTC and SEC Amendments to Form PF
On April 24, 2026, the SEC and CFTC jointly published proposed amendments to Form PF designed to eliminate filing obligations for many advisers, streamline existing reporting, and make targeted corrections, while still providing FSOC and the Commissions with the data necessary to monitor systemic risk and protect investors. The Form PF is the confidential reporting form used by SEC-registered investment advisers to private funds, including those dually registered with the CFTC as commodity pool operators or commodity trading advisors. The headline change raises the Form PF filing threshold from $150 million to $1 billion in private fund
assets under management, which the Commissions estimate would eliminate filing obligations for roughly 43% of currently-filing advisers while still capturing approximately 94% of reported private fund gross asset value. The proposal also raises the large hedge fund adviser reporting threshold from $1.5 billion to $10 billion in hedge fund AUM, reducing the population of advisers required to report as large hedge fund advisers by approximately two-thirds while continuing to capture more than 80% of reported hedge fund gross asset value. The Commissions cite a comprehensive review conducted under the January 2025 regulatory-freeze Presidential Memorandum and note that the private fund industry's reported gross asset value has more than tripled (from $8 trillion to over $25 trillion) between
2013 and Q1 2025, justifying recalibration of thresholds set in 2011.
Beyond the threshold changes, the proposal eliminates or simplifies a range of more granular requirements added in the 2024 Form PF amendments. These include allowing aggregation of “disregarded” feeder funds with up to 5% of gross asset value held outside a single master fund, U.S. treasury bills, or cash equivalents; replacing the prescriptive "look through" requirement with reasonable estimates consistent with the adviser's internal methodologies; narrowing the universe of "trading vehicles" that must be identified to those facing counterparties or reported on Form ADV; and deleting Question 23(c) (intra-month volatility), portions
of Questions 29 and 30 (period-end trading and clearing values), Question 32(b)(2) (duplicative adjusted-exposure reporting), Question 34 (monthly portfolio turnover), Question 45 (rehypothecation), and the Section 6 quarterly event-reporting regime for private equity advisers. The proposal also modifies large hedge fund adviser current reporting under Section 5 by removing the "as soon as practicable" trigger in favor of a flat 72-hour window, eliminates current reporting for margin defaults and inability to meet redemption requests, and streamlines reporting of operations events; the Commissions also request comment on whether to modify Form PF's reporting requirements specifically for private credit funds. Comments are due June 23, 2026 (60 days after Federal Register publication),
running concurrently with the existing October 1, 2026 compliance deadline for the still-pending 2024 Form PF amendments.
Barrett Morris | Email
Prediction Markets Advanced Notice of Proposed Rule
On March 16, the CFTC released an Advanced Notice of Proposed Rule (“ANPR”) regarding “event contract derivatives traded on markets commonly referred to as ‘prediction markets’”. The comment period closed on April 30 and the CFTC received over 1,500 comments on the ANPR. Prediction market contracts are traded either on a CFTC registered designated contract market (“DCM”) or swap execution facility (“SEF”). As such, the ANPR aims to set out how the DCM core principles should be amended or whether additional guidance should be provided for prediction markets regarding their oversight and surveillance, management of risk, and prevention of market manipulation.
While we did not read all of the comment letters, we read the letters from the larger organizations. There are essentially two camps that submitted comment letters, what I will refer to as the “Restrictionists” and the “Industry”.
The Restrictionists, which included a group of Senator Democrats, the Democracy Defenders Fund, Project on Government Oversight, a bipartisan coalition of 41 state attorneys general, and the California Nations Indian Gaming Association (“CNIGA”) advocated for the prohibition of certain contract types (both political and sports). Specifically, the 41 state attorneys general and CNIGA argue in their letters that sports contracts lack any real financial risk management functions or serve any real commercial purpose other than entertainment-based gambling. The Restrictionists bottom line is that the CFTC either lacks jurisdiction to
regulate certain political or sports contracts, or such contracts are against public policy.
In the Industry camp we have the different market participants, and groups like the Coalition for Prediction Markets (the principal industry trade group), the Crypto Council, and the Hyperliquid Policy Center. The Coalition for Prediction Markets made a concession that the CFTC should adopt a formal rule defining “gaming” to cover casino-style games traditionally regulated by states on the theory that there is no price-discovery function and no economic significance to wagers on casino style games. This limitation was not extended to sports contracts.
The takeaway here though is that a compromise appears to be available. The Industry is recognizing that there are limits to the value prediction markets provide. Where that line is drawn remains to be seen. The CFTC will have its hands full sifting through the comment letters.
Barrett Morris | Email
Interesting Links
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