In prediction markets I recently wrote about the regulatory tangle surrounding prediction markets, questioning whether trading on insider information could be prosecuted and, if so, by whom. A recent high-profile case centered on illicit sports gambling suggests the Justice Department may not only be interested in prosecuting such cases, but willing to take a rather creative approach to do so. Miami Heat guard Terry Rozier has been arrested for allegedly sharing inside information about teams and athletes, such as when specific athletes would remove themselves from games due to purported illness or injury. He gave this private information to proposition bettors, who profit from making bets on the performance of individual athletes rather than the outcome of the game. These bets were made on traditional sports betting platforms — not prediction markets — but even though securities laws even more clearly don’t apply to those platforms, the Justice Department is pursuing an insider trading case. However, some of the case appears to be predicated on the platforms’ terms of service which prohibit making bets based on non-public information, and not all prediction markets impose such terms, which could make a similar case more challenging.45 I’ll be curious to see how this case plays out, as it seems like a somewhat novel legal theory.