DOJ and CFTC Bring Parallel Insider Trading Actions Based on Internet Search Trend Event Contracts

On May 27, 2026, the U.S. Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) filed parallel criminal and civil insider trading actions in the U.S. District Court for the Southern District of New York against Michele Spagnuolo, a Google software engineer based in Switzerland.[1] The complaints allege that Spagnuolo used confidential “Year in Search” data to place highly profitable bets on a prediction market platform—profiting approximately $1.2 million—and then laundered the proceeds through cryptocurrency privacy services. The cases mark the second coordinated DOJ/CFTC enforcement action targeting insider trading on prediction markets in roughly a month, following the agencies’ April 2026 charges against a U.S. Army Special Forces master sergeant. [See our prior alert.]

Key Takeaways

These back-to-back enforcement actions carry several overarching messages:

• U.S. enforcement authorities will pursue prediction market traders even when they reside outside the United States. The complaints allege that Spagnuolo is based in Switzerland and traded on an international blockchain-based platform with decentralized trade execution. The CFTC complaint grounds venue in the Southern District of New York based on the prediction market’s New York headquarters, the fact that a majority of the “Markets” team responsible for creating and deploying the contracts at issue worked from New York during the relevant period, and the presence of Polygon blockchain transaction-validating nodes in the United States. The DOJ’s criminal complaint similarly alleges venue in the Southern District of New York, relying on the same New York nexus points.
• In press releases, leadership at both the CFTC and the U.S. Attorney’s Office for the Southern District of New York continue to signal that prediction market insider trading is a top enforcement priority.
• The actions follow a traditional misappropriation theory of insider trading, in which a corporate insider is alleged to have misappropriated confidential business information of his employer in breach of a duty of trust and confidence in order to place profitable bets in the prediction markets.
• Companies should treat prediction markets as a compliance risk. As we discussed in prior client alerts, companies whose employees have access to material nonpublic information—including information that may not traditionally be considered “financial” in nature—should consider updating their insider trading policies, codes of conduct, and employee training to address the growing prediction market landscape. Information-barrier and access-control measures for employees and other insiders are also critical.

Alleged Scheme

According to the complaints, Spagnuolo, in his role as a software engineer, accessed the tech company’s confidential Year in Search data through an internal tool bearing a red “Confidential” banner. The tech company’s annual Year in Search campaign publicly reveals the year’s top trending searches as part of a coordinated, commercially significant marketing event; the underlying data is tightly held within the company until the moment of public release.

On approximately October 15, 2025, Spagnuolo allegedly accessed the confidential 2025 Year in Search data. The next day, and before the tech company’s Year in Search results were publicly revealed, using he began placing bets on Year in Search outcomes on the prediction market platform through an account known as “AlphaRaccoon,” On November 27, 2025, Spagnuolo allegedly accessed the data again—learning that “d4vd” had overtaken Kendrick Lamar as the #1 searched person—and approximately three hours later wagered on d4vd taking the top spot at near-zero implied odds. In total, from approximately October 15 through December 4, 2025, Spagnuolo purchased “Yes” or “No” shares across at least 23 Year in Search contracts, with near-perfect accuracy, risking approximately $2.75 million on outcomes the market treated as unlikely. After the tech company publicly released its Year in Search 2025 results on December 4, 2025, Spagnuolo’s account realized approximately $1.2 million in profits. According to DOJ and the CFTC, the bets Spagnuolo placed on the prediction market platform are swaps that are subject to enforcement under the Commodity Exchange Act (CEA).

DOJ further alleged that Spagnuolo took deliberate steps to conceal his proceeds and identity, including routing funds through cryptocurrency swaps and a service designed to obscure blockchain wallet addresses, and deleting his “AlphaRaccoon” username after users on Discord and X (formerly Twitter) publicly speculated that the account belonged to a tech company insider. The online community’s identification of “AlphaRaccoon” as a suspected tech company insider preceded and, according to the CFTC complaint, informed the government’s investigation.

The Charges

The DOJ’s unsealed criminal complaint charges Spagnuolo with three counts: (1) commodities fraud under Section 6(c)(1) of the CEA and CFTC Rule 180.1, carrying a maximum sentence of 10 years’ imprisonment; (2) wire fraud under 18 U.S.C. § 1343, carrying a maximum sentence of 20 years; and (3) money laundering under 18 U.S.C. § 1956, also carrying a maximum sentence of 20 years. The CFTC’s parallel civil complaint charges violations of CEA Section 6(c)(1) and Regulations 180.1(a)(1) and (3), and seeks disgorgement, restitution, civil monetary penalties, and permanent trading and registration bans.

[1]See Sealed Complaint, United States v. Spagnuolo, No. 26 MAG 2020 (S.D.N.Y. filed May 27, 2026); See Complaint, CFTC v. Spagnuolo, No. 26-cv-4419 (S.D.N.Y. filed May 27, 2026).