Google Engineer Says Polymarket Bets Were Gambling, Not Insider Trading, in Motion to Dismiss

Michele Spagnuolo, the Google engineer charged in May with commodities fraud, wire fraud, and money laundering over alleged insider trading on Polymarket, filed a motion this week to dismiss the case entirely. His defense: the wagers weren't financial instruments at all. They were bets, plain and simple, made on a platform the United States has no authority to regulate.

Spagnuolo, who goes by the alias "AlphaRaccoon" on Polymarket, is accused of using internal Google information to correctly predict that singer D4vd would be Google's most-searched person of 2025. D4vd gained notoriety over a suspected connection to a killing and was later charged with murder; he has pleaded not guilty. Prosecutors say Spagnuolo's inside knowledge helped him net more than $1.2 million in profits, according to the criminal complaint cited by Wired. Google has placed him on leave.

Notably, Spagnuolo's lawyers aren't disputing that he used internal Google information to place the bets. They're disputing that it matters under federal law.

The Argument: It's Gambling, Not a Swap

The defense's core claim is that event contracts like the ones on Polymarket don't qualify as "swaps" under the Commodities Exchange Act, and therefore fall outside the jurisdiction of federal regulators like the Commodity Futures Trading Commission. Instead, Spagnuolo's team argues, these are wagers regulated, if at all, by individual states.

Their filing warns that treating a bet on "most-searched person of the year" as a regulated financial instrument would produce what they call "absurd results." Logic that could sweep in a church raffle or an office Ping-Pong pool as federally regulated securities.

Spagnuolo's team is also raising a jurisdictional argument on top of the swaps question. He's not a US citizen, and he placed his bets on what they describe as a non-US platform, even though Polymarket is headquartered in New York.

Strange Bedfellows

Todd Phillips, a financial services regulation expert quoted by Wired, points out the irony here. "Spagnuolo is basically making the same argument as the states that are suing prediction markets," Phillips said, adding that this exact question—whether event contracts are swaps subject to federal law or gambling subject to state law—is "the issue that will likely go up to the Supreme Court."

State attorneys general suing Polymarket and similar platforms want event contracts classified as gambling so states can regulate or shut them down. A defendant facing federal fraud charges wants the exact same classification so he can argue the feds never had jurisdiction to charge him in the first place. Same legal theory, opposite goals.

The Commodities Exchange Act was written decades before anyone dreamed up a market for betting on internet search trends. Whether Congress intended that law to cover this kind of contract is a legitimate statutory question, and one several state regulators have already put in front of courts. Spagnuolo borrowing that argument doesn't make it frivolous just because he's the one facing prison time.

A Related Mess: Politicians and Prediction Market Tips

Separately, Congress is grappling with the broader problem of insider information flowing into prediction markets through political influencers. Rep. Anna Paulina Luna (R-FL) introduced the Foreign Propaganda Registration Act, which would amend the 1938 Foreign Agents Registration Act to force influencers to disclose when foreign governments pay them to push political messaging.

Luna told Politico's Playbook that she has received briefings on foreign money "flowing to influencers on the back end," and said she has seen "contracts into the millions" tied to some of the biggest names in the influencer space. She declined to name anyone specific, saying, "I'm not going to put anyone on blast. That's not my job."

The bill has bipartisan backing, including from Democratic Reps. Jared Moskowitz (D-FL) and Vicente Gonzalez (D-TX), and Luna expects House Speaker Mike Johnson to support it.

The timing isn't coincidental. Luna herself was accused last month by The Wall Street Journal of tipping off right-wing influencer Rogan O'Handley, known as "DC Draino," about Trump's 2024 vice presidential pick, allegedly letting him place a winning Polymarket bet on JD Vance. Luna has called that report "false," and a spokesperson has denied she had definitive knowledge of the VP pick beforehand. No charges have been filed against Luna or O'Handley, and the Justice Department has not announced any investigation into the matter.

What's Next

Spagnuolo's motion to dismiss now goes before the court that will decide whether prediction market wagers count as regulated swaps or unregulated gambling, a ruling that could shape how prosecutors pursue insider trading cases on platforms like Polymarket going forward. The swaps-versus-gambling question remains untested at the appellate level, since no circuit split or appellate ruling has yet forced the issue that far. Luna's Foreign Propaganda Registration Act has not yet received a committee vote or floor schedule.