Michele Spagnuolo, a Google engineer arrested by U.S. authorities in May on suspicion of insider trading involving Polymarket, is making a bold legal argument. On Wednesday, his defense team filed a motion to dismiss the charges. Spagnuolo does not entirely deny profiting from information connected to Google. Instead, his lawyers argue that the Polymarket contracts were not financial products subject to regulation under the U.S. Commodity Exchange Act, but rather international gambling over which the United States has no jurisdiction.
Spagnuolo has been placed on administrative leave from Google and faces charges of product fraud, wire fraud, and money laundering. Using the alias “AlphaRaccoon,” he allegedly placed a series of bets on Polymarket, generating total profits of more than $1.2 million. According to the criminal charges, “AlphaRaccoon” correctly predicted that singer D4vd, who gained attention because of alleged links to a high-profile murder case, would be the most searched person on Google in 2025. D4vd was later charged with murder and has pleaded not guilty.
It may be unusual for a criminal defense lawyer to agree with state prosecutors, but the growing legal battle over prediction markets has created an unexpected alignment. Across the United States, state attorneys general and regulators are challenging both the federal government and prediction markets over whether event contracts should be classified as “swaps” subject to commodities laws or as gambling regulated by individual states.
Spagnuolo’s lawyers argue that defining swaps to include bets on topics such as Google’s most-searched person of the year is “contrary to the purpose and history of the law” and would produce “absurd results.” The defense says such an interpretation could classify wagers on everything from charity lotteries to local table tennis matches as financial products. “Spagnuolo is essentially making the same argument as the states suing prediction markets,” said Todd Phillips, an expert in financial services regulation. “This is an issue that will likely go all the way to the Supreme Court.”
In addition to challenging the classification of prediction-market contracts as swaps, Spagnuolo’s lawyers argue that the U.S. government lacks jurisdiction because he is not a U.S. citizen and placed the bets on a platform operating outside the country. Although Polymarket is headquartered in New York, its flagship prediction market is prohibited in the United States and is technically operated by an ostensibly Panama-based entity called Adventure One QSS.
Spagnuolo was living in Zurich, Switzerland, when he allegedly made the Google-related trades on Polymarket. “The extraterritoriality debate is interesting and raises the question of whether the United States should be the watchdog of global prediction markets,” Phillips said. Spagnuolo’s team also argues that the charges should be dismissed because the alleged insider information had no commercial value to Google. Google did not respond to a request for comment.
The Commodity Futures Trading Commission, the federal agency responsible for regulating prediction markets, and Spagnuolo’s legal team also did not respond to requests for comment. CFTC Chairman Michael Selig previously told WIRED that the agency can pursue extraterritorial jurisdiction in cases involving offshore platforms under “extreme circumstances.”
Source: www.wired.com