What Two DOJ Cases Reveal About the Legal Risks of Prediction Markets: Bits + Bips

**Sam Ender** (0:00)
I think, and it doesn't have to be limited to commodities. And I think if you are privy to non-public information that could affect the price of an asset, whether that is a bet on polymarket, real estate, stocks, a gambling bet. If you have material non-public information, information that could really be market moving as to the value of an asset, it's not available to the public.
And then critically, you received it in confidence from someone that you have a duty of trust and confidence to.

**Steve Ehrlich** (0:35)
Like Google or the US government for the two cases that we mentioned.

**Sam Ender** (0:39)
Right, in the case of Google, in the case of the government, the soldier, Van Dyke, had signed paperwork that he had to comply with the classification and confidentiality requirements. The complaint in the Spagnuolo case, the Google employee is less clear on whether there was some type of non-disclosure agreement. But generally, employees have a fiduciary duty to their employer.
And they reference in the complaint that he was marked confidential. So if you have material non-public information, inside information, if you got it from a source that expects you to keep it secret, trading on that information could be a crime. That's the basis.

**Steve Ehrlich** (1:22)
Hi, everyone. Welcome to another episode of Bits and Bips, the Interview. My name is Steve Ehrlich. I am the head of research at SharpLink, and once again, your host for today. We've got a really exciting episode, and hopefully one that will distract you a little bit from some of the market doldrums. But before we get into all of it, as always, nothing that you hear or see on the show should be considered investment or financial advice. For full disclosures, please see unchained.com/bits and Bips. And before we begin, let's take a very brief break to hear from some of the sponsors who make the show possible.

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**Steve Ehrlich** (2:45)
I'm here today with Sam Ender, a prominent attorney, former DOJ prosecutor, and currently a partner, Cahill, and founder of CahillNext, a prominent law firm focused on all things crypto. Welcome, Sam.

**Sam Ender** (3:00)
Thank you so much for having me, Stephen. It's a pleasure to be here.

**Steve Ehrlich** (3:02)
Yeah, absolutely. We're here to talk about prediction markets. They've been in the news a lot, honestly, since last year's, or since I would say the presidential elections in 2024, but there's been a number of, I guess, events, newsmaking events that have happened over the last couple of months that really brought forth a lot of key questions pertaining to the safety of these markets, especially as usage is only growing. So that's what we're really going to talk about.
A few, I guess, probably the most prominent example that happened recently is an insider trading case that was brought against a former, I guess, a current Google employee who traded on inside information related to top searchers for 2025 to make about $1.2 million. And interestingly, this was, I think, presented as an insider trading case. As you know, and I would have mentioned a lot of people in the audience know, insider trading is kind of a curious term for something like this, because we usually think of insider trading as trading on equities with privileged information, and that's not exactly what happened here, even though it certainly rhymes. So why don't you kind of walk us through what happened and why you think this is the first time, I believe, that the DOJ has actually brought an insider trading type prosecution against their prediction market participant.

**Sam Ender** (4:23)
Sure, and it's a fascinating issue. I used to be a federal prosecutor in the Southern District of New York, that's the office, that brought, actually there are two insider trading prosecutions relating to prediction markets. Both happen to be polymarket, but we may see cases in the future that relate to trading on Kalshi.