Michele Spagnuolo used confidential Google search data to place winning Polymarket bets, earning sizeable profits before FBI traced crypto payments. Second insider case tests Commodity Exchange Act.
A Google engineer used confidential internal search data to place winning bets on Polymarket, earning sizeable profits before the FBI traced the cryptocurrency payments. The case, unsealed in New York this week, is the second insider trading prosecution tied to the prediction platform and tests how the Commodity Exchange Act applies to information asymmetry in blockchain-based markets.
Michele Spagnuolo, 36, an Italian citizen living in Switzerland who has worked at Google since 2014, allegedly accessed the company's 2025 "Year in Search" data before its public release. Operating under the pseudonym "AlphaRaccoon", he placed wagers on which individuals would rank as the most Googled people of the year. The complaint details trades made from October through December 2025, with Spagnuolo adjusting his positions as internal data shifted. He initially bet on Kendrick Lamar to top the list. After Google's data showed alt-pop singer D4vd (David Burke) surging, he switched his bets. D4vd was later charged with murder.
Jay Clayton, U.S. Attorney for the Southern District of New York, said the charges "reinforce a decades-old message: corporate insiders cannot use confidential business information to turn a profit in our markets." Spagnuolo faces violations of the Commodity Exchange Act, wire fraud, and money laundering. Google confirmed it placed the employee on leave, calling the use of confidential marketing material for bets "a serious breach of our policies."
The simple read is that an employee stole proprietary data and used it to win bets. The better market read is more structural: prediction markets like Polymarket operate on a model where information asymmetry is the core profit mechanism. Traders win by knowing something others do not. The line between legitimate research and illegal insider trading is blurry in these venues. This case draws it sharply.
Spagnuolo did not hack a restricted database. According to the complaint, he used a tool available to all Google employees to access the marketing material. That distinction matters for compliance teams: the data was not locked behind extra clearance. Its use for personal gain still constituted fraud. Google's statement acknowledged the tool was broadly accessible. The company stressed that using the information to place bets violated policy.
The timing shows Spagnuolo exploited a window of confidentiality that lasted weeks. For prediction market operators, the risk is that any employee with access to pre-public data can front-run the market. That undermines the integrity of the contracts.
This is the second insider trading case tied to Polymarket in recent weeks. Last month, a special forces soldier was charged with using classified information to bet on the downfall of former Venezuelan President Nicolás Maduro, making over $400,000. The pattern is damaging for Polymarket's efforts to position itself as a transparent, regulated platform.
Polymarket's spokesperson touted that the company "is the only prediction platform to date whose cooperation has led to insider trading charges in the United States" and argued that blockchain trading is "transparent, traceable, and bad actors leave footprints." That framing cuts both ways: cooperation with authorities may reduce legal risk. The repeated scandals signal that the platform's KYC and surveillance controls are not catching bad actors before they trade.
Key insight: The Commodity Exchange Act applies to prediction market contracts, making insider trading a federal crime even when the underlying asset is not a security. Enforcement requires proving the trader knew the information was material and non-public. Spagnuolo's use of a company-wide tool may make that easier to prove than if he had hacked a secure server.
Prediction markets sell event contracts. They are categorized and regulated differently from traditional forms of gambling. That has raised concerns about consumer protections and legal battles over government oversight. President Donald Trump's administration has supported company operators and sued several states over their regulation efforts. The industry is scrambling to assure the public with new guardrails. Polymarket recently rewrote its rules to clearly state users cannot trade on contracts where they might possess confidential information or could influence the outcome of an event.
Google faces reputational damage. The company cooperated with law enforcement and will "take the appropriate action." For investors in GOOGL, the immediate risk is low. The case does not involve financial misstatements or customer data. It adds to a narrative of internal data misuse that could attract regulatory scrutiny of how tech companies guard their proprietary information.
The charges against Spagnuolo are a concrete catalyst for two groups: compliance teams at tech companies and prediction market operators. For tech firms, the case is a reminder that broad data access policies create insider trading risk even when the data is not financial. For prediction markets, the question is whether self-regulation can keep pace with enforcement.
For traders watching the space, the immediate takeaway is that information advantage in prediction markets is becoming a legal minefield. The same transparency that makes blockchain markets attractive to regulators also makes it easier to trace illicit profits. Spagnuolo's crypto payments were traced by the FBI. The same will apply to anyone else using the platform to trade on confidential data.
For a broader view of how regulatory shifts affect betting-related equities, see our analysis of Wagering Stocks Win Reprieve as Australia Waters Down Ad Ban. For context on how settlement speed changes are reshaping payment margins in digital markets, read Settlement Speed Commoditization Threatens Incumbent Payment Margins.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.