A Google software engineer has been arrested and charged with commodities fraud, wire fraud, and money laundering after allegedly using confidential company information to make $1.2 million on the prediction market platform Polymarket. The case marks the second known federal criminal prosecution connected to insider trading on prediction market sites.
Michele Spagnuolo, 36, an Italian citizen residing in Switzerland, was taken into custody on Wednesday. Federal prosecutors allege that Spagnuolo exploited internal Google data tracking user searches to place bets on search trends before that information became publicly available.
According to the federal indictment unsealed on Wednesday, Spagnuolo operated under the username AlphaRaccoon on Polymarket. Prosecutors contend that he placed a wager predicting that the rapper known as D4vd would be the most-searched person on Google in 2025. At the time of his bet, most Polymarket traders assigned near-zero probability to the singer, who has been charged with murder, becoming the top-searched individual of the year.
The charging documents reveal a calculated approach to concealing the scheme. After transferring his winnings from his cryptocurrency wallet, Spagnuolo allegedly removed the name AlphaRaccoon from his Polymarket account in an apparent effort to cover his tracks.
"Unlike the counterparties to his trades, Spagnuolo knew the outcome of these wagers before the trading public did because he had accessed Google's confidential, commercially valuable internal data," the indictment states.
The Commodity Futures Trading Commission has filed a separate civil case against Spagnuolo for allegedly violating commodities law. Spagnuolo did not return a request for comment on the charges.
Google confirmed its cooperation with the federal investigation and announced that Spagnuolo has been placed on leave. Google spokesperson Jaclyn Vazquez addressed the matter in a statement, saying, "The employee accessed our marketing material using a tool available to all employees, but using such confidential information to place bets is a serious breach of our policies."
The case highlights the murky legal landscape surrounding prediction markets, which have exploded in popularity during President Trump's second term. While these platforms face less stringent regulations than traditional stock markets, using non-public confidential information for profit remains illegal under federal law.
In prediction market forums on messaging platforms such as Discord, users actively monitor for large, unusual trades and often encourage others to follow those bets. Before the charges became public, some users had noticed Spagnuolo's suspicious activity. "AlphaRaccoon has alpha," wrote one Discord user, employing slang terminology for information that provides an edge on prediction markets. The user was pointing to Spagnuolo's large bets on the most-Googled person of the year before Google had released the data.
This prosecution follows a similar case from last month, when a master sergeant with the U.S. Army Special Forces was charged with using classified information about the capture of Venezuelan leader Nicolás Maduro to earn more than $400,000 on Polymarket. The pattern suggests federal authorities are intensifying scrutiny of prediction market platforms as their popularity grows.
Prediction market sites such as Kalshi and Polymarket now allow users to bet on an expansive array of topics, including company announcements, geopolitical events, art auction outcomes, elections, and countless other subjects. As more individuals seek profits across every aspect of modern life, online investigators have increasingly identified wagers that appear suspiciously confident, particularly long-shot bets that have generated six- or seven-figure returns.
The timing of the Spagnuolo indictment is notable. It was unsealed one day after President Trump pledged on Truth Social to allow the prediction market industry to thrive by asserting federal regulators' exclusive authority over the controversial betting platforms.
For months, administration officials have been engaged in legal battles with state officials over regulatory jurisdiction. State authorities argue that these platforms function as gambling operations and should be subject to state gambling regulations. The Trump administration, however, contends that Polymarket and Kalshi offer a type of futures contract that falls under the purview of the Commodity Futures Trading Commission, which has traditionally overseen markets for commodities such as grain futures, crude oil, and precious metals.
Polymarket's most popular platform, based in Panama, is technically inaccessible to American users. The company was compelled to shut down its U.S. operation in 2022 as part of a settlement with federal regulators who determined the site was operating without a trading exchange license.
In 2024, the FBI raided the apartment of Polymarket founder Shayne Coplan as part of an investigation into whether the company was violating that agreement. The Trump administration subsequently dropped that investigation and even invited Coplan to the White House for a cryptocurrency summit.
The president's oldest son, Donald Trump Jr., serves as an advisor to both Polymarket and Kalshi and is a partner in 1789 Capital, a major investor in Polymarket. This relationship has raised questions about potential conflicts of interest as the administration shapes policy around prediction market regulation.
As prediction markets continue to attract mainstream attention and significant capital, the Spagnuolo case serves as a warning that traditional prohibitions against insider trading apply to these emerging platforms. Federal prosecutors appear determined to establish clear boundaries, even as the regulatory framework surrounding prediction markets remains in flux.
