Michele Spagnuolo, a Google engineer arrested in May by US authorities for alleged insider trading on Polymarket, has filed a motion to dismiss the charges against him. His legal team argues that the wagers he made were not financial instruments regulated by the United States’ Commodities Exchange Act but rather international betting, which they claim the US has no authority over.
Spagnuolo is facing accusations of commodities fraud, wire fraud, and money laundering. He allegedly made profits exceeding $1.2 million using the alias 'AlphaRaccoon' by wagering on Polymarket’s platform. According to the criminal complaint, 'AlphaRaccoon' accurately predicted that singer D4vd would be Google’s most-searched person of the year in 2025. D4vd has since been charged with murder, to which he pleaded not guilty.
The legal dispute surrounding prediction markets has led to unusual alliances between defense lawyers and state prosecutors. Across the US, state attorneys general and regulators are contesting whether event contracts should be classified as 'swaps' under the Commodities Exchange Act or as gambling, which is regulated at the state level.
Spagnuolo’s lawyers contend that including wagers like predicting the most-searched person on Google as swaps would contradict the statute’s intent and lead to unreasonable outcomes. They argue that such a classification could extend to any wager globally, from charity raffles to local sports matches. Financial services regulation expert Todd Phillips noted that Spagnuolo's argument aligns with states suing prediction markets, suggesting that this issue may escalate to the Supreme Court.
Additionally, Spagnuolo’s legal team argues that the US government lacks jurisdiction over him as he is a non-US citizen wagering on a non-US platform. Although Polymarket is based in New York, its main prediction market is banned in the US and is administered by a Panama-based entity, Adventure One QSS. Spagnuolo was residing in Zurich, Switzerland, at the time of the trades. Phillips remarked that the extraterritorial argument raises questions about the US's role in regulating global prediction markets.
Spagnuolo’s defense also claims that the internal information he allegedly used did not hold any commercial value to Google. Google did not respond to requests for comment. The Commodity Futures Trading Commission (CFTC), responsible for regulating prediction markets, and Spagnuolo’s legal team also did not provide comments. CFTC chairman Michael Selig previously indicated that the agency could pursue extraterritorial jurisdiction in extreme cases involving offshore platforms.
Spagnuolo is the second individual publicly charged with insider trading on Polymarket in the US. A month before his arrest, Special Forces soldier Gannon Ken van Dyke was charged with allegedly profiting over $400,000 from wagers related to the raid on former Venezuelan leader Nicolás Maduro. Van Dyke’s defense team is similarly arguing for the dismissal of charges, claiming his activities should be classified as gambling and thus not subject to federal commodities law.
Earlier this week, the CFTC, which has filed a separate civil lawsuit against Van Dyke, emphasized in an amicus brief for the criminal case that his Polymarket event contracts were indeed swaps. It is likely that the CFTC will take a similar stance in Spagnuolo’s case. By adopting this defense, the alleged insider traders have positioned themselves in a broader debate regarding the future of prediction markets.