Prediction Markets and FTX: A Week of Regulatory Crackdowns in Crypto

FTX’s Long Shadow: Campaign Finance Case Progresses

The legal fallout from FTX’s 2022 collapse continues through the courts. Michelle Bond, who ran unsuccessfully for New York’s congressional seat in 2022, faces campaign finance charges stemming from allegations that her campaign received contributions funded by the defunct exchange. According to court filings submitted to the US District Court for the Southern District of New York (SDNY) on Friday, Bond’s legal team is seeking to prevent the court from considering certain evidence regarding her husband, Ryan Salame, a former FTX Digital Markets co-CEO.

Salame, who is currently serving a 90-month prison sentence after pleading guilty in 2023, admitted to facilitating political contributions that were funded through accounts connected to FTX. Bond’s attorneys argue that introducing her husband’s guilty plea would unfairly prejudice the jury against her. The legal team also referenced concurrent divorce and custody proceedings, emphasizing that Bond and Salame were not married when the alleged misconduct occurred, positioning him as an atypical donor rather than an intimate family member.

Prediction Market Trading Abuses Draw Regulatory Action

The emerging risks of prediction markets have become increasingly apparent through recent enforcement actions. George Santos, the former New York House representative who was expelled from Congress in 2023, has been ordered by the US Commodity Futures Trading Commission (CFTC) to pay $17,500 in civil penalties and forfeit $17,570 in profits derived from trading on Kalshi, a prediction market platform.

According to the CFTC’s findings, Santos engaged in what the agency characterized as manipulative trading. He placed bets on event contracts related to his attendance at the 2026 State of the Union address while simultaneously posting on social media about his plans to attend or skip the event. These posts, which contained material misstatements and omissions about his actual intentions, moved market prices in favorable directions before he closed his positions at a profit. Santos has been barred from prediction market platforms for three years as a result. This action comes after Santos received a commutation of his prison sentence in 2025—he had been sentenced to 87 months for wire fraud and identity theft but served only three months before the sentence was reduced.

Military Insider Trading: A Broader Systemic Challenge

Beyond celebrity political figures, prediction markets face emerging challenges from those with access to sensitive nonpublic information. Gannon Ken Van Dyke, a US soldier, faces charges for allegedly profiting more than $400,000 through Polymarket event contracts by leveraging insider knowledge. According to the US Justice Department, Van Dyke participated in a military operation in January related to Venezuelan President Nicolás Maduro’s removal from power and allegedly used this nonpublic information to place profitable bets on the political outcome.

In a court filing submitted Friday to the SDNY, Van Dyke’s legal team filed a 51-page motion seeking dismissal, arguing that the Commodity Exchange Act (CEA) is ambiguous in its treatment of event contracts as financial “swaps.” The filing questions whether ordinary citizens can reasonably be expected to understand that prediction market wagers fall under federal commodities regulations. Van Dyke has pleaded not guilty to all charges, with trial proceedings potentially commencing in late 2026 or early 2027. These cases signal intensifying regulatory scrutiny of crypto derivatives and prediction markets, which could significantly influence how policymakers approach the broader digital asset ecosystem.

Source: CFTC, SDNY, DOJ, via Cointelegraph. Not financial advice.