After four months, Polymarket helped Trump catch the military operation leaker, but at a cost...

Original: Odaily Planet Daily (@OdailyChina)

Author: Golem (@web3_golem)

Soon after, facing a jury, Master Sergeant Gannon Ken Van Dyke would surely recall that moment standing on the deck of the USS Iwo Jima, waiting for the sunrise.

On the evening of January 2, 2026, President Trump ordered U.S. forces to raid Venezuela and arrest Nicolás Maduro and his wife. By the early morning of January 3, the operation was complete, and the Maduros were brought aboard the USS Iwo Jima for transport to the United States. Hours later, 38-year-old Master Sergeant Van Dyke, holding a rifle, stood on the deck with three other soldiers for a photo shared on social media. The atmosphere was relaxed, but the joy in his heart could not be shared with anyone.

Because he was a leaker—an insider who exploited confidential information to make huge profits on Polymarket. In the days leading up to the military operation, Van Dyke placed a series of bets on Polymarket, including whether Maduro would step down before January 31, 2026, and whether the U.S. military would attack Venezuela before that date. Van Dyke wagered a total of $33,933, ultimately profiting over $409,000—a return exceeding 1,200%.

Gannon Ken Van Dyke

Van Dyke was not the only one to profit from insider information during this arrest operation. According to monitoring by the Odaily Seer channel, three addresses on Polymarket placed early bets on Maduro's removal before his capture, collectively making $630,400. Specifically, address 0x31a5 (0x31a5...8eD9) invested $34,000 and profited $409,000; address 0xa72D (0xa72D...eBd4) invested $5,800 and profited $75,000; and address SBet365 invested $25,000 and profited $145,600.

At the time, there was much speculation in the market about the identities of these insider addresses, but the specific identity of the address that made the most profit—belonging to Van Dyke—remained unknown.

To be safe, after seeing reports of insider trading related to the mission, Van Dyke deleted his Polymarket account and changed the email address linked to his crypto exchange account, attempting to conceal evidence of the trades.

Despite these efforts, after a joint investigation spanning nearly four months by Polymarket and the U.S. Department of Justice, Van Dyke was apprehended.

On April 23, the U.S. Department of Justice announced the arrest of Van Dyke. He faces charges including illegally using classified government information for personal gain, theft of non-public government information, commodity fraud, wire fraud, and engaging in illegal monetary transactions. The DOJ stated that Van Dyke is expected to appear in court in North Carolina at a later date, and information regarding his defense attorney has not yet been released.

This marks the first time U.S. authorities have arrested an insider for using classified information to place bets on a prediction market. The final verdict could have far-reaching implications for the prevalence of insider trading in prediction markets going forward.

But even before this, Polymarket’s newly strengthened market integrity rules had already made insiders uneasy.

Polymarket's Strengthened Market Integrity Rules

On March 23, Polymarket released an enhanced set of market integrity rules and incorporated them into its terms of service. The new rules explicitly prohibit insider trading and any trading by individuals who could influence the outcome. Specifically, three types of behavior are banned:

• Trading with stolen confidential information: If a user possesses confidential information regarding the outcome or potential outcome of an underlying event, and using that information would violate an existing duty of trust or confidentiality owed to another person or entity, the user is prohibited from engaging in any contract trading;
• No trading on illegally obtained insider information: If a user knows or has reason to know that the person providing the information would themselves be prohibited from trading on that information, they are prohibited from trading on confidential information obtained from a person with an existing duty of trust or confidentiality;
• No trading when able to influence the outcome: If a user has the power or influence to affect the outcome of an underlying event, they are prohibited from engaging in any contract trading; users are also prohibited from trading at the direction of a person with such power or influence.

To help users better understand what constitutes insider trading, Polymarket also provides specific examples in its market integrity rules on the Polymarket main site and its U.S. site. Examples include soldiers betting on upcoming military operations, political election candidates personally betting on or encouraging others to bet on their own election results, and CEOs personally betting on or encouraging others to bet on "mention markets" involving themselves.

To effectively combat such insider trading, Polymarket has also established a multi-layered monitoring system. When Polymarket or the community (Note from Odaily: any user can now report suspected insider trading activity) detects suspicious trading activity, Polymarket initiates a review, and when necessary, takes disciplinary action, bans wallet addresses, initiates legal proceedings, or refers the matter to law enforcement.

Before Van Dyke's arrest, insiders might have thought Polymarket's market integrity rules were just a bluff. On a platform without KYC and settled in cryptocurrency, penetrating on-chain addresses to identify the insiders hiding behind screens seemed extremely difficult, and Polymarket would not be willing to do so.

But this notion was naive. First, current regulatory and on-chain tracking technologies are already highly sophisticated and powerful. Users may not perform KYC on Polymarket, but they inevitably do so on exchanges and other on/off-ramps. Except for top-tier hackers, average users have virtually nowhere to hide from such investigations. Second, to secure support from U.S. regulators, Polymarket actively cooperates with law enforcement in investigating insider trading. For a typical insider case like Van Dyke's, they will spare no effort or expense.

With this analysis, if you are someone with inside information on minor events, you might still think you can get away with it—unlike Van Dyke, who engaged in insider trading on such a high-profile event or is not a U.S. citizen—believing U.S. regulators or Polymarket cannot touch you.

Of course, Polymarket and regulators cannot treat every insider trading case like Van Dyke's. For small-scale, limited-impact insider trades, identifying the true identity of the insider or pursuing legal proceedings might seem overkill. But Polymarket has a potent weapon against such insider trading—address bans. And this is the rule that all insiders and all users truly need to fear; it may even be shaking the core narrative of Polymarket.

The Cost

On April 23, prediction market Kalshi disclosed that it fined three congressional candidates who bet on their own election outcomes and banned them from the platform for five years. How much profit do you think they made? In reality, the total fines for the three candidates amounted to less than $8,000, with one of them having wagered only $100.

Kalshi's ability to handle insider trading so swiftly stems from its KYC and compliance system built from its inception. But for small-scale, low-impact insider trades on Polymarket, they might not even be noticed, let alone addressed.

This is not Polymarket deliberately tolerating insider trading; rather, self-regulation on Polymarket is inherently difficult. Due to features like no KYC, low account creation barriers, and on-chain anonymity, Polymarket struggles to manage and vet users like Kalshi can. This creates a breeding ground for insiders. When the economic incentives for insider trading are high enough and the risks low enough, human nature is put to the test.

Odaily Planet Daily previously analyzed, when insiders used Polymarket to profit illicitly from the Maduro arrest operation, that insider trading is a double-edged sword for Polymarket (Related reading: When Wars Are Settled Before News: How Prediction Markets "Priced In" the Maduro Arrest 6 Days Early).

On one hand, insider trading often means releasing information ahead of mainstream media, bringing Polymarket trading volume and a speed of information disclosure that surpasses traditional media. Pricing events in advance and anticipating outcomes has gradually become a core narrative for Polymarket. On the other hand, insider trading also means information leaks, which naturally draws opposition from stakeholders. Especially when regulators perceive that insider trading threatens traditional information security, Polymarket faces a difficult choice between its own safety and the advantages brought by insider trading.

Looking at the outcome, introducing the enhanced market integrity rules clearly indicates Polymarket's stance, but the cost could be a loss of user trust in the platform.

Banning user addresses is itself a sensitive issue for a decentralized platform. Once abused or resulting in false positives, it can trigger user backlash and concerns about fund security. Allowing people worldwide to participate in prediction markets with freedom to deposit and withdraw funds has always been one of Polymarket's core competitive advantages. But when Polymarket grants itself the power to ban accounts of suspicious users, not only will insiders hesitate to trade on Polymarket, but legitimate profitable users will also worry that the platform might use this as an excuse to block withdrawals. Once the door to account bans is opened, it may never be closed again.

In summary, while a strong crackdown on insider trading can ensure Polymarket's regulatory safety, it will inevitably weaken Polymarket's foresight and accuracy in predicting event outcomes. It will also add another layer of concern for users about the security of their funds. In the end, a mature Polymarket may become just another ordinary adult.