Key Takeaways

• The U.S. Attorney’s Office for the Southern District of New York (SDNY) and the Commodity Futures Trading Commission (CFTC) have brought parallel criminal and civil charges against a Google employee for trading on nonpublic information in prediction markets.
• This action, together with the SDNY’s and CFTC’s cases last month alleging insider trading by a U.S. Army soldier in event contracts relating to the ouster of Venezuelan President Nicolás Maduro, reflects a coordinated enforcement effort targeting misuse of material nonpublic information in prediction markets.
• These cases signal that misuse of both corporate and government information may give rise to commodities fraud and wire fraud liability when used to trade event contracts.
• Market participants and business organizations, whether publicly traded or privately held, should reassess their compliance frameworks to address employee access to nonpublic information and insider trading in prediction markets.

Overview

On May 27, 2026, the SDNY and CFTC filed parallel actions against Michele Spagnuolo, a software engineer employed by Google, alleging that he misappropriated confidential corporate information and used it to trade on a decentralized prediction market platform. According to the DOJ’s and CFTC’s complaints, Spagnuolo accessed nonpublic information relating to Google’s “Year in Search 2025” data through internal corporate systems. The complaints allege that this information—reflecting the ranking of the most searched individuals during the year—was commercially valuable, subject to strict confidentiality controls and not available to the public prior to its official release. Spagnuolo allegedly used that information to trade event contracts relating to Google’s year-end search rankings, including contracts such as “Will Pope Leo XIV be the #1 searched person?” and “Will Donald Trump rank in the Top 5 most searched?”

The government alleges that Spagnuolo engaged in extensive trading activity over a multiweek period, placing trades across numerous markets with near-perfect predictive success. He is alleged to have risked approximately $2.7 million on these trades and generated approximately $1.2 million in profits. The complaints further allege that, after realizing profits, Spagnuolo used cryptocurrency transfers to conceal the source and ownership of his proceeds.

Both the SDNY and CFTC charged Spagnuolo under Section 6(c)(1) of the Commodity Exchange Act (CEA) and CFTC Regulation 180.1, the principal antifraud provisions of the CEA and regulations. In addition, the SDNY’s criminal complaint charges the same conduct as wire fraud and brings an additional charge for money laundering.

Coordinated Cross-Agency Enforcement Efforts

The Spagnuolo matter follows on the heels of the CFTC’s and SDNY’s parallel actions against Gannon Ken Van Dyke, a U.S. Army soldier who was charged in April 2026 for trading event contracts relating to the ouster of Venezuelan President Nicolás Maduro, while in possession of material nonpublic information (MNPI) gained through his military service. Together, these cases show that the agencies are working together to prosecute insider trading in prediction markets both criminally and civilly.

Both the Spagnuolo and Van Dyke cases rest on a common legal theory that sounds in fraud: individuals who obtain material, nonpublic information through a position of trust and confidence may not use that information to trade event contracts for their own personal benefit. At the same time, the cases differ in important respects. Most notably, in Van Dyke, the information at issue consisted of classified government information, which—as we recently explained in an article published in Reuters Legal News—may not qualify as “property” for purposes of the federal wire fraud statute because it does not have commercial value. In Van Dyke, both agencies charged violations of Section 4c(a) of the CEA, which specifically addresses misuse of government information and therefore is not operative in the Spagnuolo case.

In addition, Spagnuolo shows the government’s ability to prosecute misconduct occurring outside the territorial boundaries of the United States. Whereas Van Dyke’s conduct occurred within the U.S., Spagnuolo is alleged to reside in Switzerland and is not alleged to have conducted any activities in the U.S. or to have traded against any counterparty who was located in the U.S.

What This Means for Market Participants

The Spagnuolo and Van Dyke cases have significant implications for institutional investors, public companies and other market participants.

First, these cases underscore that federal authorities in the U.S. are aggressively pursuing insider trading in prediction markets. The agencies have each filed two such cases within the last month, and it is likely that other cases are under investigation. Spagnuolo and Van Dyke reflect the application of traditional insider trading principles—rooted in duties of trust and confidentiality—to trading in event-based derivatives, including contracts traded on decentralized platforms on which U.S. traders are prohibited.

Second, the cases demonstrate that a wide range of information, including corporate data such as internal metrics, as well as government or regulatory information, may be material to derivatives pricing if it bears on the likelihood of an event outcome. In the Spagnuolo matter, for example, the underlying Google “Year in Search” data would not typically be viewed as MNPI for purposes of trading in Alphabet securities, yet it became economically material when tied to the pricing of event-based contracts. The proliferation of event contracts has dramatically expanded the boundaries of potential MNPI, and these boundaries will shift as new event contracts are offered and others are discontinued. Firms should therefore evaluate internal controls around access to confidential internal information—especially when that information may be the subject of an event contract—and be aware of all event contracts that relate to company-specific information.

Third, a defendant’s location overseas will not necessarily prevent U.S. criminal and civil agencies from seeking to prosecute insider trading. Where a defendant is located abroad, agencies may bring charges if the misconduct involved U.S.-based trading platforms, blockchain infrastructure located in the U.S. or other direct or significant connections with activities in, or effects on, U.S. commerce.

Finally, as demonstrated by the cases brought to date, insider trading in prediction markets is unlikely to fit within the classical theory of insider trading, which states that corporate insiders breach their fiduciary duties to a company’s shareholders by trading in the company’s securities while in possession of MNPI. Instead, these cases will likely rest on a misappropriation theory, which requires misappropriation of MNPI in breach of duty to the source of the information. As a result, corporate policies governing confidentiality, data access and employee trading will play an increasingly important role in determining when trading in possession of company information could give rise to liability for insider trading.

Considering these developments, institutional investors, public companies and other market participants should consider whether existing compliance frameworks adequately address trading in prediction markets. Participants should consider expanding policies governing personal trading and incorporating emerging enforcement theories into training and surveillance programs.