Google Engineer Charged Over $2.75 Million in Alleged Polymarket Insider Trading Bets

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In brief - A Google employee was charged over alleged Polymarket trades using private data. - The CFTC also filed a civil case seeking penalties and trading bans. - The case is positive for prediction markets because it shows insider activity can be prosecuted, an industry expert told Decrypt. Federal prosecutors charged a Google employee with commodities fraud, wire fraud, and money laundering, alleging confidential data was used to trade on Polymarket prediction markets. Michele Spagnuolo, a staff software engineer at Google who used the alias “AlphaRaccoon,” allegedly bet about $2.75 million across Google-related Polymarket contracts from October 15 to December 4 last year, the U.S. Department of Justice disclosed Wednesday. Spanuolo allegedly won about $1.2 million from the predictions. Spagnuolo allegedly had access to a Google internal software tool that provided access to “confidential, nonpublic Year in Search data” and bore a “Google Confidential” banner, the DOJ’s criminal complaint reads. The U.S. Commodity Futures Trading Commission has also filed a parallel civil complaint, alleging Spagnuolo violated the Commodity Exchange Act and seeking restitution, disgorgement, civil penalties, trading and registration bans, and a permanent injunction. The case is the second federal prosecution tied to alleged prediction market insider trading. Late last month, a U.S. soldier pleaded not guilty to charges that he used classified military information to profit from Polymarket bets related to the capture of then Venezuelan President Nicolás Maduro, when the U.S. launched strikes on Venezuela in January. “Blockchain trading is transparent, traceable, and bad actors leave footprints,” a Polymarket spokesperson told Decrypt in response to questions on fairness and rules. Spagnuolo accessed marketing material through a tool available to all Google employees, a company spokesperson told Decrypt, adding that using confidential information to place bets was “a serious breach” of company policies. He has been placed on leave as the company weighs “appropriate action,” the spokesperson confirmed. A ‘positive moment’ Prediction markets are platforms that allow users to bet on the outcome of future events, with contract prices moving as traders buy and sell based on what they think will happen. The case is “ultimately a positive moment for prediction markets” because it shows insider activity can be identified and prosecuted, Tre Upshaw, founder of Polysights, an intelligence and strategy layer for prediction markets, told Decrypt. Using material, nonpublic information “to trade against everyone else” is a market integrity issue whether it happens on a stock exchange, a regulated event market, or an on-chain prediction market, Upshaw noted. “Pseudonymity makes enforcement harder, but it does not make traders invisible,” Upshaw said, adding that platforms need stronger surveillance and insider risk controls, “instead of only reacting after the damage is done.” Such concerns were already pushing platforms and state governments to draw clearer rules around who can trade on event outcomes, ahead of the recent federal charges. Prediction market firms had already moved to tighten rules against insider trading. Polymarket updated its prohibited conduct rules, while Kalshi began screening athletes and politicians after lawmakers questioned markets tied to government actions and outcomes known in advance. State governments such as New York, California, and Illinois have also moved to restrict public employees from using nonpublic information to trade on prediction markets. Officials in the states said federal regulators had not set clear enough standards for the sector. Earlier this week, President Donald Trump backed CFTC control over prediction markets, saying state officials should not set rules for the sector.

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