Michele Spagnuolo, 36, an Italian citizen living in Switzerland and employed as a staff information security engineer at Google, was charged in the Southern District of New York (SDNY) with commodities fraud, wire fraud, and money laundering. Prosecutors allege that between October 15 and December 4, 2025, Spagnuolo used access to a Google internal tool that tracks real-time search trends to trade on Polymarket under the alias "AlphaRaccoon." He was released on $2.25 million bail.

What He Allegedly Did

The instrument of the alleged scheme was Google's internal data compiled for its annual "Year in Search" report, which the company releases publicly each December. Spagnuolo allegedly reviewed that data ahead of publication and identified that singer D4vd would top Google's most-searched person list for 2025. At the time, Polymarket's crowd had assigned that outcome a near-zero probability, meaning the odds were long and the potential payout was large.

Across 16 transactions, Spagnuolo moved approximately $3.8 million in USDC (a dollar-pegged stablecoin) into Polymarket. When Google published its Year in Search results on December 4, 2025, his position resolved correctly. After collecting his winnings, prosecutors say he routed funds through crypto swapping services and privacy tools before transferring the money to an Italian payment processor in an effort to obscure the origin of the proceeds.

Federal prosecutors were direct about the core allegation: "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."

Google confirmed that Spagnuolo had accessed "marketing data through an internal tool available to all employees" and called his conduct "a serious violation of company policy." The company placed him on leave.

Notably, members of Polymarket's Discord community had already flagged AlphaRaccoon's unusually confident long-shot bets before investigators acted. Users noted the account appeared to have meaningful "alpha," or market edge, a characterisation that also gave rise to the trader's chosen alias.

The Second Insider Trading Case in Six Weeks

This is not the first time Polymarket has featured in a federal case. On April 23, 2026, U.S. Army Special Forces Master Sergeant Gannon Ken Van Dyke was charged with using classified military intelligence about the U.S. capture of Venezuelan President Nicolás Maduro to place approximately $33,934 in bets on Polymarket, generating around $409,881 in profit. Van Dyke pleaded not guilty and allegedly tried to erase his tracks by asking Polymarket to delete his account and by switching the email address linked to his crypto exchange account.

That case is widely considered the first-ever prediction market insider trading prosecution brought by a U.S. authority.

Both cases are being prosecuted jointly by the SDNY and the Commodity Futures Trading Commission (CFTC), which has taken the position that Polymarket's event contracts qualify as swaps under the Commodity Exchange Act. In response to the Van Dyke charges, CFTC Director of Enforcement David Miller publicly stated that the agency rejects the idea that "insider trading is permissible in prediction markets." SDNY U.S. Attorney Jay Clayton has been equally blunt, warning at a February 2026 public forum that "because it's a prediction market doesn't insulate you from fraud."

A Third Circuit ruling in April 2026, KalshiEX LLC v. Flaherty, further upheld CFTC authority over certain event contracts, reinforcing the legal foundation for both cases.

On-Chain Context: A Market That Has Grown Fast

These prosecutions arrive as Polymarket has expanded sharply. Monthly trading volume grew from roughly $1.2 billion in early 2025 to more than $20 billion by January 2026, and the platform set a single-day volume record of $425 million on February 28, 2026. The platform now counts approximately 840,000 unique monthly wallets, and its current total value locked sits near $483 million with weekly trading volume around $944 million. In April 2026, Polymarket completed a full exchange upgrade and shifted settlement to pUSD, a token backed 1:1 by Circle-issued USDC, replacing its earlier bridged-collateral system.

What This Means Outside the United States

The timing carries weight for users in Asia and Africa. Just six days before the Spagnuolo charges were unsealed, India's Ministry of Electronics and Information Technology blocked Polymarket at the ISP level under the Promotion and Regulation of Online Gaming Act 2025, classifying the platform as an unauthorized gambling network. India had also issued an advisory on April 25 to VPN providers warning against facilitating continued access to blocked platforms, a signal that enforcement intent runs considerably deeper than a routine ISP-level block. Rival platform Kalshi faced its own blocking directive in India by May 23, 2026. Indonesia followed with its own block on May 25, describing Polymarket as "an online gambling site disguised as a prediction market." The Spagnuolo case will likely be cited by both governments as retroactive justification for those decisions.

For Indian users, the platform ban compounds an already restrictive environment. India imposes a 30% flat tax on crypto gains and a 1% tax deducted at source on all transactions, meaning the Polymarket block closes one of the few remaining avenues for speculative exposure that had operated outside that framework.

For users in Nigeria, South Africa, and other markets where Polymarket remains accessible, the more immediate concern is platform durability. Polymarket has moved to geoblock users under regulatory pressure, as the current India and Indonesia actions illustrate, and each enforcement action raises the probability of additional restrictions.

The Spagnuolo case also demonstrates that USDC flows are traceable even when routed through privacy tools, a point relevant to anyone who assumes pseudonymous wallet activity provides meaningful cover.

What Comes Next

Legal analysts at Debevoise & Plimpton LLP have noted that the case signals corporate compliance teams should now explicitly include prediction markets in insider trading policies, particularly for employees with access to commercially sensitive data such as search trends, M&A data, earnings previews, or clinical trial results.

The two prosecutions together establish that the U.S. government views prediction market fraud as a federal matter, and that on-chain forensics combined with community surveillance can be enough to unmask a pseudonymous trader.