SEC Charges Former President of PetIQ With Insider Trading Ahead of Acquisition

SEC Charges Former Executive and his Friend with Insider Trading

On March 31, 2026, the Securities and Exchange Commission filed charges against Michael A. Smith, the former President and Chief Operating Officer of PetIQ, Inc., and his friend Douglas Joshua Dalton, for insider trading ahead of the August 7, 2024 announcement that private equity firm Bansk Group LP would acquire PetIQ.

According to the SEC’s complaint, Smith purchased PetIQ common stock in his ex-wife’s brokerage accounts on the basis of material nonpublic information about the potential acquisition of PetIQ, which he learned through his employment. As alleged, shortly after making these purchases, Smith shared information about the potential acquisition with his friend Dalton, and, on the basis of that information, Dalton purchased PetIQ call options. The complaint further alleges that when the acquisition was later announced, the price of PetIQ’s common stock rose 48%, and Smith and Dalton collectively made more than $200,000 in illicit profits.

In parallel criminal actions, the U.S. Department of Justice announced charges against Dalton, and Smith previously pleaded guilty to securities fraud and is awaiting sentencing.

CFTC Sues Illinois Over State Crackdown on Prediction Markets

The Commodity Futures Trading Commission is asserting federal authority over fast-growing prediction markets with lawsuits against Illinois, Connecticut and Arizona that challenge state efforts to regulate the multibillion-dollar industry.

The agency is seeking injunctions against officials including Illinois Governor JB Pritzker and Connecticut Governor Ned Lamont, as well as the states’ respective attorneys general and gaming boards. The CFTC said the states have sent cease-and-desist letters to companies including Kalshi and Crypto. com to force them to abide by state gambling laws.

“This unprecedented measure by the CFTC is necessary to protect the exclusive jurisdiction” granted to the regulator by Congress, the agency said in a memo.

Musk-Targeted Judge Uses Scrabble Tiles to Reassign Two Cases

A Delaware judge accused of bias by attorneys for Elon Musk and Tesla Inc. used a board game Thursday to force the firms to randomly select two new judges to preside over cases concerning lingering allegations of corporate wrongdoing before the electric vehicle-maker moved to Texas.

The chief judge of the Delaware Chancery Court made attorneys blindly choose Scrabble tiles from a bag held by one of her law clerks, with each tile corresponding to the name of one of her six colleagues on the prestigious business court’s bench.

Lawyers for Tesla and its CEO, the world’s richest person, had claimed Chancellor Kathaleen St. Jude McCormick showed bias toward him on a social media platform after ruling against him in high-profile lawsuits.

Trump wants the SEC to relax quarterly reporting. Wall Street could be a problem

C-suite executives, leading big business groups and Trump have argued that quarterly reporting forces companies to overly fixate on short-term profits while saddling them with expensive legal bills. And now, Atkins’ SEC, which is under closer watch from Trump’s White House than ever before, is expected to unveil a proposal in the coming weeks that could offer companies more flexibility in how often they report critical financial information to investors.

But the SEC’s push could run into stiff resistance from the investment world.

Officials from GOP megadonor Ken Griffin’s hedge fund Citadel and the investment behemoth Fidelity warned at a recent SEC gathering that a shift away from quarterly reporting could backfire for companies with wilder stock moves and higher costs of raising money in the markets. Wall Street firms BlackRock and T. Rowe Price were staunch critics of moving to a twice-a-year reporting model when the SEC explored the idea in Trump’s first term, citing concerns about losing critical visibility into companies’ operations and performance. And some are questioning why the SEC is even considering the change.

It’s Time for a Prediction Markets MNPI Policy

For these reasons, updating policies and procedures to address the misuse of MNPI in connection with prediction markets trading is increasingly important. Accordingly, policies and procedures that prohibit the misuse of MNPI solely in connection with “securities” trading should be expanded to address the use of MNPI in connection with all event contracts, with an explicit reference to prediction markets and other trading platforms.

Because prediction markets do not involve “securities,” a company’s MNPI policy or insider trading policy may not, on its own, be the most effective policy for addressing these risks. Moreover, insider trading policies are often limited in scope to directors, officers and certain employees likely to receive traditional MNPI, whereas the breadth of prediction markets may create scenarios in which a wider range of employees could potentially misuse information. Companies should therefore consider revising their codes of conduct—which typically apply firmwide rather than only to designated “covered persons”—to prohibit misuse of company confidential information (trading on the basis of MNPI or disclosing such MNPI to another who then uses it to trade, regardless of the market or type of instrument used to monetize that information).

Asset managers or broker-dealers that seek to use prediction markets data in connection with trading strategies—for example, by mining public signals on prediction markets to inform securities and other trades—may also wish to enhance their policies and procedures governing the documentation of trading decisions.