Steve Sosnick: DOJ’s insider trading prosecutions target prediction markets, legal definitions of insider trading differ from public perception, and the Chastain case reshapes digital asset regulation | Unchained

DOJ's insider trading prosecutions in prediction markets signal a major shift in legal landscape.

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Add us on Google by Editorial Team Jun. 7, 2026

Key takeaways

• The DOJ’s recent insider trading prosecutions against prediction market participants mark a significant legal development.
• Insider trading is not a legal term, and its definition varies from common perceptions.
• Trading on insider information is fundamentally unfair and poses serious risks.
• Insider trading cases typically involve charges of securities fraud or wire fraud.
• Wire fraud is a broad statute that can cover various forms of financial misrepresentation.
• The Chastain case set a precedent that some digital assets may not qualify as property for wire fraud.
• The Chastain precedent is expected to be referenced in the defense of Spagnuolo.
• Insider trading involves violating a duty of trust and confidence.
• Certain information asymmetries are legally permissible in trading.
• The George Santos situation highlights questions about responsibility in prediction markets.
• Legal definitions of insider trading differ from public understanding.
• Prediction markets are under increased regulatory scrutiny.
• The legal framework for digital assets is evolving rapidly.
• Understanding legal nuances is crucial for navigating financial markets.
• Ethical considerations are central to discussions on insider trading.

Guest intro

Steve Sosnick is Chief Strategist at Interactive Brokers, where he also serves as Head Trader of IBKR Securities Services and a member of Interactive Brokers Group. He joined Timber Hill in 1995 as an equity risk manager and options market maker, and later led the firm’s expansion into Canada.

DOJ’s new focus on prediction markets

• The DOJ has brought insider trading prosecutions against prediction market participants for the first time

  — Steve Sosnick

• This marks a shift in regulatory scrutiny towards prediction markets.
• Prediction markets are now being treated similarly to traditional financial markets.
• The legal implications of this move could affect how prediction markets operate.

• There are two insider trading prosecutions relating to prediction markets

  — Steve Sosnick

• This development highlights the intersection of prediction markets and insider trading laws.
• The DOJ’s actions may set precedents for future cases in prediction markets.
• Understanding the legal context of prediction markets is becoming increasingly important.

Insider trading: Legal definitions and misconceptions

• Insider trading itself is actually not a legal term

  — Steve Sosnick

• The definition of insider trading can vary significantly from public perception.
• Legal charges in insider trading cases often involve securities fraud or wire fraud.

• The charge in that case is not insider trading… really the charge would be securities fraud or wire fraud

  — Steve Sosnick

• Misunderstandings about insider trading can lead to confusion in legal contexts.
• Clarifying these definitions is crucial for understanding market regulations.
• Public misconceptions about insider trading may influence market behavior.
• Legal nuances play a significant role in insider trading cases.

The ethical and legal implications of insider trading

• Trading on insider information is considered fundamentally unfair.

• That is a very… that theoretically could have put lives at risk

  — Steve Sosnick

• Insider trading poses serious risks, including endangering lives.
• Ethical considerations are central to discussions on insider trading.
• The violation of trust and confidence is a key aspect of insider trading.

• If I have a duty of trust and confidence… and use it for my personal gain… that is a breach of my duty

  — Steve Sosnick

• Legal frameworks aim to protect market integrity and fairness.
• Understanding the ethical implications is crucial for navigating financial markets.

Wire fraud and its application in financial crimes

• Wire fraud is a broad statute encompassing various forms of misrepresentation.

• Judge Rakoff once called the wire fraud statute… it’s a generic statute

  — Steve Sosnick

• The expansive nature of wire fraud charges is critical for legal strategies.
• Wire fraud can involve any misrepresentation in financial transactions.
• Legal definitions of property can impact wire fraud prosecutions.
• The Chastain case set a precedent regarding digital assets and wire fraud.

• This is not the type of property that is the proper subject of a wire fraud prosecution

  — Steve Sosnick

• Understanding wire fraud is essential for navigating financial crime cases.

The Chastain case and its impact on digital asset regulation

• The Chastain case established that some digital assets may not qualify as property.
• This precedent could influence future cases involving digital assets.

• The precedent Chastain is definitely something that the defense in Spagnuolo is going to look at

  — Steve Sosnick

• Legal frameworks for digital assets are rapidly evolving.
• The Chastain case highlights the complexities of digital asset regulation.
• Understanding legal precedents is crucial for navigating digital asset markets.
• The impact of the Chastain case extends to ongoing legal cases.
• Legal definitions of property are central to digital asset regulation.

Information asymmetries and legal trading

• Certain information asymmetries are legally permissible in trading.

• If I’m at a bar and the CEO of IBM… I can trade on that information

  — Steve Sosnick

• Legal trading can occur without breaching insider trading laws.
• Information asymmetries operate within legal trading frameworks.
• Understanding these nuances is crucial for market participants.
• Legal distinctions between permissible and impermissible trading are important.
• Information asymmetries can influence market behavior.
• Legal frameworks aim to balance fairness and market efficiency.

The George Santos situation and prediction markets

• The George Santos situation raises questions about responsibility in prediction markets.

• This may not be insider trading because he’s not betraying a duty

  — Steve Sosnick

• Legal definitions of insider trading differ from public understanding.
• Prediction markets are under increased regulatory scrutiny.
• The situation highlights the complexities of trading based on public statements.
• Understanding legal implications is crucial for navigating prediction markets.
• The role of responsibility in prediction markets is a key consideration.
• Legal frameworks for prediction markets are evolving rapidly.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.