Imagine you are a soldier with operational knowledge of a forthcoming raid to capture a foreign head of state. The raid is going to happen. The general public does not know. There is a website where anyone can place bets on whether the raid will happen, and on a dozen related questions. So you open an account, place the bets, watch the raid succeed, and collect about twelve times your stake.

Now imagine you are a United States Senator. You sit on the Intelligence Committee. The same operation is briefed to you in a closed session. The same website is taking bets. You open an account, place the same bets, and collect the same payout.

Have you committed insider trading, senator?

The first hypothetical is, in summary, the conduct alleged in an indictment unsealed in the Southern District of New York on April 23, 2026, charging Master Sergeant Gannon Ken Van Dyke with using classified information about the Jan. 3, 2026, operation that captured Nicolás Maduro to make roughly $400,000 on Polymarket from a roughly $33,000 stake.

The charges are wire fraud, commodities fraud under Commodity Exchange Act §6(c)(1) and CFTC Rule 180.1, theft of nonpublic government information, unlawful use of confidential government information, and making an unlawful monetary transaction. The Commodity Futures Trading Commission filed a parallel civil action.

The second hypothetical is more difficult than it appears. It is also a question Congress has been trying to answer with new legislation for the better part of fifteen years.

There Is No Insider Trading Statute

There is no federal statute that directly prohibits insider trading. There never has been one. What practitioners and the public refer to as “insider trading” is a judicial gloss assembled over the course of four decades, built on top of general anti-fraud provisions in other statutes—primarily Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, the SEC regulation promulgated under § 10(b). But neither provision mentions insider trading. They instead prohibit “manipulative or deceptive devices” and “schemes to defraud,” respectively.

Courts have spent the last 40 years deciding when trading on material nonpublic information falls within those phrases—creating what we know as “insider trading” law.

A few other provisions round out the picture. Section 16 of the Exchange Act addresses short-swing profits by corporate insiders. Rule 14e-3 prohibits trading on material nonpublic information in the tender-offer context.

The Title 18 securities fraud statute, 18 U.S.C. § 1348, parallels Rule 10b-5 with its own “scheme or artifice to defraud” language. CFTC Rule 180.1 mirrors Rule 10b-5 for commodities. But none of these provisions expressly criminalizes trading on misappropriated information.

What this means in practice is that the reach of insider trading law is not fixed by anything Congress wrote. It expands as prosecutors and courts apply fraud statutes to new instruments, new markets, and new sources of duty.

To understand where the doctrine sits today—and whether it reaches a senator trading on information learned in a closed-session briefing—it helps to walk through how courts got here.

The Expanding Ambit of Insider Trading Law

Modern insider trading law starts with Chiarella v. United States, 445 U.S. 222 (1980). Vincent Chiarella was a financial printer. His employer printed offering documents for tender offers, and Chiarella figured out who the targets were before the deals went public. He bought stock in the targets and sold after the announcements. The SEC charged him with violating §10(b) and Rule 10b-5. A jury convicted him.

The Supreme Court reversed. Trading on nonpublic information, the Court held, is not by itself fraud. To violate § 0(b), Chiarella had to have breached a duty—a duty arising from a relationship of trust and confidence. He owed no such duty to the shareholders he traded against. He did not work for the targets. He had not obtained the information from anyone who owed those shareholders a duty. He was, the court said, a “complete stranger who dealt with the sellers only through impersonal market transactions.” As a result, there was no duty, no fraud, and therefore no insider trading.

That was the core of insider trading liability: someone breaching a duty by trading on nonpublic information. But it left a question: what about people who learn nonpublic information from corporate insiders?

In Dirks v. SEC, 463 U.S. 646 (1983), the Court answered. There, a securities analyst named Raymond Dirks had been told by a former insurance company executive that the company was committing massive fraud. Dirks investigated, told his clients, and the clients sold. The SEC censured him.

The court held that a tippee like Dirks inherits the tipper’s duty—but only when the tipper disclosed the information in breach of fiduciary duty for personal benefit. Because Dirks’s source disclosed the fraud to expose it, and not for personal gain, there was no breach of duty to inherit.

So far, “insider trading” prohibitions reached corporate insiders and people who received information from corporate insiders. It did not reach lawyers, accountants, consultants, or anyone else who learned nonpublic information through professional access to a company.

The court closed that gap in United States v. O’Hagan, 521 U.S. 642 (1997). James O’Hagan was a partner at a Minneapolis law firm representing Grand Met in a hostile bid to take over Pillsbury Corporation. O’Hagan never worked on the deal. He learned about it around the office, bought Pillsbury stock and call options, and made about $4.3 million by selling into the rise after Grand Met’s tender offer was publicly announced. He owed no duty to Pillsbury or its shareholders. The conventional reading of Chiarella would have ended the case there.

The court instead recognized what came to be called the misappropriation theory. O’Hagan owed a duty to his firm, which owed a duty to its client. By trading on the firm’s confidential information, he had defrauded the firm, and that fraud satisfied §10(b)’s “manipulative or deceptive device” requirement. O’Hagan’s duty did not need to run to the trading counterparty. It just needed to run somewhere.

The misappropriation theory of insider trading was a conceptual breakthrough. Nearly thirty years later, the misappropriation theory is being used to support prosecutions at ever-larger scale.

On May 6, 2026, the District of Massachusetts unsealed indictments charging thirty defendants (including corporate attorneys from leading M&A firms) in a decade-long scheme to steal deal information from their firms’ document systems and trade on it ahead of nearly thirty announced acquisitions, generating tens of millions of dollars in illicit profits.

In the decade that followed O’Hagan, the open question was what counted as a duty. The SEC answered with Rule 10b5-2 in 2000. Duties of trust and confidence arise, the rule provides, when a person agrees to maintain information in confidence; when there is a history, pattern, or practice of sharing confidences; or when a family member shares information with another family member who could reasonably expect confidentiality.

The rule was the SEC’s effort to define duty sources by regulation, untethered from the common law of fiduciary obligation.

The U.S. Court of Appeals for the Second Circuit has been the principal venue for testing how far Rule 10b5-2 reaches. In United States v. Kosinski, 976 F.3d 135 (2d Cir. 2020), the court held that a clinical trial doctor was a temporary insider on the strength of his confidentiality agreement with the drug manufacturer. The doctor was an independent contractor. He had no fiduciary relationship to the company. But he had signed a contract promising to keep clinical trial data confidential. That, the court held, was enough to establish a duty.

The next year, in United States v. Chow, 993 F.3d 125 (2d Cir. 2021), the Second Circuit held that a nondisclosure agreement signed by a potential acquirer creates a duty of trust and confidence “as a matter of law,” citing Rule 10b5-2. Thus, an NDA, standing alone, was sufficient to support an insider trading conviction.

The trajectory of the doctrine over forty years has been in one direction. The breached “duty” in 1980 was a corporate insider’s fiduciary obligation to shareholders. By 2021, it was a paragraph in a garden-variety agreement.

Over time, the doctrine has moved closer to our basic intuition: that someone who acquires information under an obligation to keep it confidential, and trades on it instead, has done something the law of fraud should reach.

Insider Trading Reaches New Frontiers

Over those same 40 years, the kinds of markets and instruments to which the doctrine applies have also expanded. Three recent expansions are worth highlighting.

The first is cryptocurrency. The Department of Justice’s first cryptocurrency insider trading prosecution, United States v. Wahi, No. 22-cr-392 (S.D.N.Y.), charged a former Coinbase product manager with tipping his brother and a friend to upcoming token listings on the Coinbase exchange.

The Southern District of New York followed shortly after with United States v. Chastain, No. 22-cr-305 (S.D.N.Y.), the first criminal prosecution of insider trading involving digital assets, charging an OpenSea product manager who front-ran the platform’s NFT featured-listings page. Chastain was charged as wire fraud and money laundering, and so did not depend on whether NFTs are securities.

The Second Circuit, however, vacated the conviction in July 2025, holding that the jury instructions allowed conviction based on the misappropriation of confidential information that had no commercial value to OpenSea and on a theory of unethical conduct untethered to a traditional property interest. The source of Chastain’s duty was his relationship with his employer; the open question after remand is whether the wire fraud statute reaches the information he misused.

The second is government information. The Second Circuit’s two-trip Blaszczak litigation—United States v. Blaszczak, 947 F.3d 19 (2d Cir. 2019), vacated, 141 S. Ct. 1040 (2021); on remand, 56 F.4th 230 (2d Cir. 2022)—involved a former CMS employee who tipped a political-intelligence consultant about a forthcoming change to Medicare reimbursement rates. The consultant relayed the information to a healthcare-focused hedge fund, which made $2.7 million shorting a radiation device maker.

The case generated extensive analysis of when government information has “property” status for purposes of Title 18 fraud statutes: a question that remains contested after the Supreme Court’s intervening decision in Kelly v. United States, 590 U.S. 391 (2020). But the litigation confirmed that prosecutors will pursue insider trading on executive-branch policy information.

The third is prediction markets. Van Dyke charges the same type of offense against a soldier who traded event contracts on Polymarket. CFTC Rule 180.1 was promulgated in 2011 with the express purpose of mirroring Rule 10b-5 in the commodities context, and it incorporates the same elements. Decades of misappropriation doctrine caselaw arguably apply to prediction market bets as a result.

The expansion of “insider trading” cases to new frontiers shows that the Department of Justice and the CFTC are willing to bring cases in markets the public would not have associated with insider trading even ten years ago.

Congress’s Statutory Duty

Which brings us back to our senator. If insider trading law is fundamentally about duty, what duty does a member of Congress owe?

Congress answered that question, or tried to, in 2012. Section 4(b)(2) of the Stop Trading on Congressional Knowledge Act (the STOCK Act) added a provision to the Exchange Act stating that members of Congress, congressional employees, and federal employees “owe a duty arising from a relationship of trust and confidence” to Congress, the U.S. government, and the citizens of the United States with respect to material nonpublic information acquired through their positions. The provision is now codified at 15 U.S.C. §78u-1(g), within the Exchange Act’s insider trading penalty provisions. The subsection’s title, as Congress wrote it, is “Affirmation of nonexemption from insider trading laws.”

The duty the STOCK Act declares is, on its face, weaker than the duties at issue in O’Hagan, Kosinski, and Chow. The duty enumerated through § 78u-1(g) is owed to “the Congress, the United States Government, and the citizens of the United States.”

Misappropriation cases require prosecutors to identify a specific person or entity the defendant deceived. A duty that runs to Congress, the government, and every citizen is the wrong shape for that requirement. And no court has held that a duty of this character satisfies what O’Hagan requires.

But weak is not nothing. The trajectory we just walked describes a doctrine that has been defining “duty” in increasingly broad ways over time. A confidentiality agreement would not have satisfied Chiarella in 1980. But it satisfies Chow now.

Section 78u-1(g) is, at least textually, a short step along that same trajectory. Whether it is enough to support an insider trading prosecution is a question yet to be answered. No court has held that it is. No court has held that it is not. The cases have not answered the question because no prosecution has tested it.

Is a New Statute Necessary?

Three bills are presently pending that would impose new restrictions on insider trading by elected officials: the Halting Ownership and Non-Ethical Stock Transactions (HONEST) Act, the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, and most recently the Public Integrity in Financial Prediction Markets Act of 2026, introduced by Representative Torres in response to the suspicious Maduro-related Polymarket activity that produced Van Dyke.

These are just the latest in a long line of similar bills introduced over the past decade. The bills differ in scope and design. They share a common feature: each imposes a categorical prohibition or holding ban on covered persons, replacing case-by-case enforcement with a flat rule.

Whether such legislation is necessary is a different question. Return to our hypotheticals: if the senator on the Intelligence Committee places the same bets as Master Sergeant Van Dyke, the elements of the offense—material nonpublic information acquired in confidence, a duty owed to the source of that information, trading in breach of that duty, in a market regulated by federal commodities law—are all present. The information is classified. The duty is declared by §78u-1(g) and is reinforced by the Senate Intelligence Committee’s confidentiality rules and the senator’s own security clearance acknowledgments. The trade is the same one Van Dyke is being prosecuted for.

The prosecutorial tools are all present, even if the pieces are scattered. Whether the existing tools are sufficient to convict has not been tested, because the case has never been brought. So the question is which comes first: a bill banning insider trading by members of Congress, or an indictment under existing law?

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This article first appeared in the May 14, 2026, edition of the “New York Law Journal” © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.