The US Department of Justice and the Commodity Futures Trading Commission (CFTC) have charged Google software engineer Michele Spagnuolo with placing $2.7 million in bets on Polymarket using non-public company data, netting $1.2 million in profit. The case marks the first public criminal prosecution for insider trading on a prediction market in the United States.
Who Was AlphaRaccoon?
The Manhattan federal prosecutor unsealed charges against Spagnuolo on Wednesday, May 28. He works as a software engineer at Google. The account "AlphaRaccoon" placed 25 bets totaling $2.7 million on Polymarket. All bets focused on a single question: who would be the most-searched person on Google in 2025.
The account profited $1.2 million. A telling detail: AlphaRaccoon won on outcomes the market had priced as unlikely. That pattern caught investigators' attention. A trader consistently beating the odds in a narrow subject area raises obvious questions.
Prosecutors allege Spagnuolo had access to unreleased internal Google data and knew the correct answers before the company published its official annual search rankings in December 2025. The charges cover bets placed before that publication date.
How the Scheme Allegedly Worked
To understand the charges, some context helps. Google publishes a "Year in Search" annually, listing the most-searched people and topics. The underlying data is collected throughout the year and kept internal. External access only comes when the rankings are officially published each December.
Polymarket hosts bets on real-world events. Traders set probabilities based on publicly available information. When no one knows the correct answer in advance, the market prices outcomes relatively evenly.
According to the indictment, the alleged scheme worked like this:
- Internal data access: Spagnuolo accessed Google's internal search trend analytics before their public release
- He placed bets on outcomes the market considered unlikely but that matched the internal data
- Polymarket settles in the USDC stablecoin, so all bets and payouts ran through blockchain transactions
- When Google published rankings in December, the bets paid out and AlphaRaccoon collected winnings on those "unlikely" outcomes
How Investigators Found the Account
After Google published its rankings in December, communities on Discord and X began speculating that AlphaRaccoon had insider access to Google data. Shortly after, the account changed its username to a wallet address. The funds were moved through a decentralized crypto-swapping service and then through a privacy-focused blockchain transaction service.
The trail was apparently still traceable. DOJ identified the individual and brought charges. The public court documents do not specify which blockchain analysis tools investigators used.
What Charges Does Spagnuolo Face?
DOJ charged Spagnuolo with three counts: commodities fraud, wire fraud, and money laundering. The combined maximum sentence is 50 years. Manhattan US Attorney Jay Clayton said the case "reinforces a decades-old message: corporate insiders cannot use confidential business information to turn a profit in our markets."
The CFTC filed a parallel civil complaint. The agency is seeking full disgorgement of the $1.2 million profit, civil monetary penalties, and a lifetime ban on trading and registration in regulated markets. CFTC enforcement director David Miller called the commission "a cop on the beat in policing the illegal use of inside information in prediction markets and other markets within the CFTC's jurisdiction."
A Turning Point for Prediction Markets
The Spagnuolo case is not the only one. In April, DOJ charged a US soldier with allegedly using classified military intelligence about operations targeting former Venezuelan president Nicolas Maduro to place bets on Polymarket. Two criminal cases in four months signal a deliberate enforcement push.
Congress has also stepped in. Last Friday, a committee opened a review of Polymarket and Kalshi, asking both platforms how they respond to known instances of insider trading. Polymarket is publicly weighing KYC requirements for traders. The CFTC is making clear that standard insider trading laws apply to prediction markets regardless of their form or structure.
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