US special forces soldier arrested for placing bets on the raid to capture Maduro

We now know the identity of one of the people who've placed big bets on Trump administration military and policy moves only hours or minutes before Trump himself announces them. CNN reports that in the hours before the high-risk special forces raid to capture Venezuelan President Nicolas Maduro, large bets on the operation were placed by one of the special forces soldiers involved in that raid.

It's an unusual but still pitch-perfect demonstration of why we need to be criminalizing these online "prediction markets" approximately yesterday.

According to an indictment unsealed Thursday, Master Sgt. Gannon Ken Van Dyke opened an account in late December on Polymarket, one of the best-known prediction markets. He wagered over $32,000 that Maduro would be “out” by January. The bet was a long-shot.

But Van Dyke was involved in the planning and execution of Operation Absolute Resolve, prosecutors allege, and had access to classified information before he placed the bet. His winnings, though anonymous, caught the attention of law enforcement almost immediately.

Van Dyke, an active duty soldier stationed at Fort Bragg, faces five criminal charges for stealing and misusing confidential government information, theft and fraud.

There have been similar large online bets made by suspected insiders in the hours before other Trump decisions become public, including bets immediately preceding the launch of Trump's (still illegal) Iran War.

As for Master Sgt. Van Dyke, he is in deep, deep trouble. It's not only that he stands accused of using classified information to make his online wagers, but by placing conspicuously large bets on a military operation mere hours before it entered enemy airspace, he risked alerting the raid's targets that some new development could be taking place. In that single instance, the clue would have been hard for the Venezuelan military to pick up on, but as these bets continue, the pattern becomes easier to discern.

At this point, there's sure to be at least one intelligence officer somewhere in Iran whose sole job is to monitor online prediction markets for suspiciously large bets on upcoming war developments. Will the U.S. launch an amphibious assault to attack and secure Iranian islands in and around the Strait of Hormuz? Iranian officials might first be alerted to an imminent attack not by U.S. ship movements near the strait, but by large anonymous bets being placed on Polymarket predicting it.

All of the operational security rules and regimens of the U.S. military, all laid low by some dipshit in the White House, Pentagon, or on a U.S. aircraft carrier signaling the start of the attack with a five-or-six figure Polymarket wager. That's not just plausible, at this point it may be inevitable.

There's another danger when it comes to insider betting on military activity. Suppose a given master sergeant, or pilot, or intelligence officer places a $32,000 bet on the success of a military mission they themselves are a decision-maker in. Suppose, for example, a flight engineer on a military transport ferrying a special forces team to their top-secret mission notices that their plane's check engine light has begun flashing red, only halfway to the drop point. It's probably nothing, but the prudent move would be to turn back.

Does he? Does he make that prudent choice, when there's a $400,000 reason for him to put some tape over the light and pretend he never saw it?

It's one thing to bet on a baseball game you're playing in; the worst-case scenario there is that you rig the game to make your own bets work, after which a criminal betting syndicate finds out about it and saws both your legs off. Betting on the success or failure of high-risk secret military missions, though, now that creates new incentives—and consequences—that are rather more broad-ranging.

But that's the thing about online, anonymous "prediction" markets that allow wagers to be made on real-world events:

All prediction markets are insider trading schemes.

And that is broadly why nearly every incarnation is either heavily regulated or outright illegal. You, as a gambler, are never going to "win" in an unregulated bet-on-anything market. There will always be insiders who have information that you don't, and when betting against anonymous players the incentives will always work out for insiders to make these sort of last-minute "whale" bets that sweep in to extract the market's money just hours or minutes before the information they know becomes known to you. Polymarket, Kalshi, and other online betting sites are purpose-built to allow anonymous insiders to siphon off money from lower-dollar rubes.

Roulette wheels, video poker machines, blackjack—you'd be better off dumping your money into any of those. Even if the odds are stacked against you, you at least know the games aren't rigged. Unless they're rigged.

Betting on real world events, however, is invariably a battle of information. Allowing the bettors to remain anonymous is an open invitation to rig whatever's being wagered on at the behest of whoever either knows the most or has the most power to alter the outcome.

And it's rapidly turning a whole lot of things stupid, destructive, and criminal.

Early in April, Ruben Hallali got an unusual alert on his phone: The evening temperature at Paris Charles de Gaulle International Airport had jumped about 6 degrees Fahrenheit in seconds.

Mr. Hallali, the chief executive of the weather risk company Sereno, had set up notifications for extreme weather swings. Then, nine days later, it happened again.

“It was an isolated jump, at one single station, early in the evening,” said Mr. Hallali, who added that he noticed another strange coincidence about the spikes: The timing was just right for somebody to reap a windfall on the betting site Polymarket.

He wasn’t the only one who sensed a problem. Météo-France, the country’s national meteorological service, filed a complaint last week with the police and local prosecutors, saying it had evidence that a weather sensor at Charles de Gaulle, the country’s largest airport, may have been tampered with.

That's from a New York Times account of an alleged someone allegedly tampering with the whether station at De Gaulle, boosting the supposed temperature by enough to swing (sigh) Polymarket bets as to what the day's temperature would be.

While you might at first suspect that this is a case of petty criminality for the sake of petty online profits, you'd be wrong. If it's true, it's a case of somebody risking mass murder for the sake of some petty online profits.

Temperature data is used in a host of calculations at airports, helping determine correct takeoff distance, climb rate and whether crews need to apply frost treatment to planes. It’s crucial to airport safety, Mr. Hallali said. [...]

The sums bet on April 6 and 15 were hundreds of thousands of dollars higher than on typical days this month.

Risking commercial airline traffic for the sake of tweaking betting markets is an example of why gambling has become highly regulated. There is a reason gambling has historically been a haven for organized crime; any wager in which the odds can be materially changed if a given certain someone just happens to come down with a severe case of broken kneecaps will, in short order, evolve into an organized kneecap-breaking racket competing against an organized kneecap protection racket.

And this is why insider trading is broadly prohibited in most markets and, up until recently, sports betting. It's not "wagering" if the outcomes are either known to one party or can be trivially altered by one party. That's just old-fashioned fraud.

Most arguments against online prediction markets focus on the additive qualities of such gambling. Bets can be placed on anything, from anywhere, and as even supposedly serious sports networks retool themselves to serve compulsive gamblers over casual fans it's hardly any wonder that gambling addiction is growing.

The problem with online "prediction" sites goes deeper, though. It is another manifestation of a new corporate culture premised on extraction, not goods or services. The ideal capitalist vision is now one in which a "brand" receives money for being a "brand," one in which consumers do not purchase goods but are held captive in rent-seeking arrangements that funnel monthly fees to corporate giants in exchange for, ideally, nothing at all. (See: Software "subscriptions," service fees for your car's "premium" features, etc.)

Even more to the point, though, it yet again demonstrates that the last two decades of Silicon Valley growth has been largely premised on "Doing Crimes, But Legally." Uber and Lyft were formed to sidestep consumer safety protections governing taxis. Airbnb is a quasi-legal hotel chain offering short-term boarding while evading broad swaths of laws governing everything from advertising to health protections. Driverless taxi service Waymo is asking to be allowed to ignore rules protecting bike lanes because they want to, that's why.

And cryptocurrencies, the technology designed specifically to allow anonymous, untraceable money transfers anywhere in the world, are intended as money laundering machines by definition. Terrorist groups, drug cartels, organized theft rings: Unregulated, stateless invented currencies quickly became the tool for criminal groups to avoid state scrutiny. Which is exactly what they were intended to do, and which resulted in enough growth to fuel now-omnipresent lobbying campaigns to convince governments and consumers that there must be some non-criminal uses for the technology, if you squint hard enough and ignore the fact that all those proposed alternative uses can be handled far more easily by normal, regulated methods.

That's what Polymarket is. That's what Kalshi is. It's a quasi-legal means for pump-and-dump schemers, insider traders, government decision-makers, and others bound by pesky laws and regulations to evade those restrictions, allowing them an off-the-books means of funneling the collected savings of the world's compulsive gamblers into their own pockets. Sure, the platforms welcome other bets. Sure, most bets are either on unknowable outcomes or trivial ones.

But that's not their primary purpose. The anonymity is the purpose. The evasion of financial regulations, the ability to hide "bets" from investigators normally tasked with policing them, the ability to launder money at scale—that's what the "prediction markets" offer that other markets can't.

Because it is Silicon Valley promoted, because it is on the blockchain, it is being treated as an innovation rather than a purpose-built crime machine. It's not an innovation. We've had underground bookies willing to take illegal, too-easily gamed bets for a long, long time. You could place bets from your phone since phones were first invented. The bookies kept their books encrypted, too.

A bunch of tech billionaires thought of a new way to circumvent whole swaths of American financial laws and called it "innovation." Again. And now you can bet on the outcome of individual military strikes from the comfort of your very own home.

Or from the helicopter you're riding in on.

This entire supposed industry is going to have to be regulated into the ground. It almost certainly will be, eventually. But probably not before dozens of scandals, the exposure of numerous high-profile bettors, and possibly a commercial airliner crash or two.