DOJ Applies Insider Trading Theories to Novel Prediction Market Contract Case

On May 27, 2026, the U.S. Department of Justice (“DOJ”) unsealed a criminal complaint against a Google employee, Michael Spagnuolo, accusing him of generating more than a million dollars in profits by using confidential internal data to trade on the prediction market platform Polymarket. 

This case follows the April 2026 federal indictment that charged a U.S. Army soldier with using non-public classified government information to enter into prediction market contracts. This latest case is the first to involve the alleged use of nonpublic private sector data to profit from prediction market contracts and significantly broadens the enforcement landscape from the national security context to the corporate realm. 

This client alert summarizes the case, identifies potential compliance implications and offers some recommendations for how corporate compliance policies might be improved based on this development.

The Criminal Complaint

According to DOJ’s complaint, Spagnuolo, a staff software engineer at Google, accessed confidential, nonpublic Google search trend data in the course of his employment and used that data to engage in event trading on the Polymarket prediction market platform.  Specifically, it is alleged that he traded in Polymarket contracts related to outcomes tied to Google’s “Year in Search” results, executing approximately $2.7 million in trades and realizing $1.2 million in profits. The complaint charges Spagnuolo with commodities fraud, wire fraud and money laundering. In addition, parallel civil charges were filed by the Commodity Futures Trading Commission (“CFTC”) alleging insider trading on a prediction market platform. 

DOJ’s Legal Theories

Although the case resembles a classic insider trading-type prosecution, DOJ did not charge securities fraud as the alleged conduct did not involve actual corporate securities. Instead, as noted above, the complaint charges that the alleged conduct constituted commodities fraud in violation of 7 U.S.C. Sections 9(1), 13(a)(5) and 17 C.F.R. Section 180.1, wire fraud in violation of 18 U.S.C. Sections 1343, and money laundering in violation of 18 U.S.C. Section 1956. The complaint alleges that the defendant’s conduct constituted commodities fraud in violation of the Commodity Exchange Act, which prohibits a trader from using deceptive or unfair means, such as insider information, to gain an advantage and thus giving rise to the fraud. 

The wire fraud charge is based on both a broad interpretation of the wire fraud statute as including all schemes to defraud involving interstate communications and a related deprivation of honest services or property, in this case, Google’s confidential business information. In other words, DOJ characterizes the conduct as a scheme to exploit commercially valuable proprietary data using the wires. The money laundering charge stems from the defendant’s efforts to conceal his profits through a series of transfers that are well-documented in the complaint. At bottom, DOJ seems to be pursuing a misappropriation theory based on the defendant’s status as a Google employee.

Broader Enforcement Significance

This case would appear to reflect a few important enforcement trends. First, it shows DOJ’s willingness to apply insider trading-type theories to transactions that do not involve actual securities. Here, as noted above, the defendant’s employment relationship with the victim seems central to the legal theory of criminal liability. 

Second, the parallel nature of this enforcement action, with DOJ and the CFTC clearly working together, suggests the agencies’ intent to cooperate in an effort to target conduct that undermines the integrity of new markets and novel trading ecosystems. This type of cooperation is likely to continue as prediction markets continue to grow in popularity and increasingly become an attractive target for fraudsters. 

Third, this case would seem to underscore that corporate information including internal analytics, user data, business metrics and the like may constitute the type of “material nonpublic information” that can be the basis of an enforcement action. 

Implications for Corporate Compliance

Companies, especially in the technology and financial spaces, should see this case as a catalyst for reexamining certain internal controls and policies, including the following:

• Insider Trading Policies;  Traditional policies should be reviewed with an eye toward addressing a broader set of scenarios, to include prediction markets and event contract and betting platforms.  “Prohibited trading” should be defined to include any transaction where internal data provides informational advantage.
  
  
• Data Confidentiality and Use Restrictions: Policies should clearly state that confidential business data may not be used for any personal financial activity, including betting. And policies should make clear that internal analytics of all types are protected information.
  
  
• Training and Certifications: Training requirements and documentation of training should be regular and documented with more intensive training requirements for employees and vendors in certain high-risk roles. 
  
  
• Access Monitoring: This case underscores the risks associated with broad internal access tools and suggests robust limits and controls and strict audit logs and data query monitoring.
  
  
• Access Policies:  Policies should include explicit language regarding misappropriation and employee duties of loyalty and confidentiality.
  
  

Why It Matters

This case clearly signals that both DOJ and the CFTC intend to aggressively extend insider trading principles to new platforms and asset classes with prediction markets squarely within the federal enforcement focus. Companies should proactively review and, where appropriate, update compliance programs and policies to clearly address the risks to internal data posed by nontraditional trading platforms. 

Brownstein’s corporate compliance and government investigations practice groups are following these developments closely.  For more information or specific guidance on how to respond to these enforcement trends, please contact Greg Brower or Brianna Smith. 

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This document is intended to provide you with general information regarding prediction market contract prosecutions. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.