CFTC Targets Alleged Insider Trading on Polymarket in Expanding Prediction Market Enforcement Push

The CFTC’s latest enforcement action against a Google employee for alleged insider trading on Polymarket marks another significant step in the Commission’s effort to apply traditional market abuse principles to prediction markets and event contracts.

On May 27, 2026, the CFTC filed a civil enforcement action in the Southern District of New York against Michele Spagnuolo, a Google software engineer accused of misappropriating confidential information concerning Google’s 2025 “Year in Search” rankings and using that information to trade related event contracts on Polymarket. According to the complaint, Spagnuolo allegedly traded with near-perfect accuracy across at least twenty-three contracts tied to Google search trends, generating approximately $1.2 million in profits.

The action appears grounded principally in Section 6(c)(1) of the Commodity Exchange Act (“CEA”), which makes it unlawful to use or employ “any manipulative or deceptive device or contrivance” in connection with swaps or contracts of sale of commodities in interstate commerce. 7 U.S.C. § 9(1). The CFTC also invoked Rule 180.1, promulgated under the Dodd-Frank Act, which broadly prohibits employing “any manipulative device, scheme, or artifice to defraud,” making materially misleading statements or omissions, or engaging in any act that “operates or would operate as a fraud or deceit upon any person.” 17 C.F.R. § 180.1(a).

Rule 180.1 was intentionally modeled on SEC Rule 10b-5 and has become the CFTC’s principal anti-fraud enforcement mechanism in insider trading-style cases. In adopting the rule, the Commission expressly stated that Section 6(c)(1) and Rule 180.1 reach “trading on the basis of material nonpublic information in breach of a pre-existing duty.” Prohibition on the Employment, or Attempted Employment, of Manipulative and Deceptive Devices and Prohibition on Price Manipulation, 76 Fed. Reg. 41,398, 41,404 (July 14, 2011).

According to the complaint, Spagnuolo allegedly acquired confidential information regarding Google’s Year in Search rankings through his employment and breached duties of trust and confidence owed to Google by using that information for personal trading activity on Polymarket. The theory closely parallels the “misappropriation theory” recognized in securities insider trading jurisprudence under Section 10(b) of the Securities Exchange Act and Rule 10b-5. See United States v. O’Hagan, 521 U.S. 642, 652 (1997) (holding that a person commits fraud “when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information”).

The case is also notable because it further demonstrates the CFTC’s willingness to treat prediction market contracts as falling squarely within its anti-fraud jurisdiction. While event contracts occupy a novel and evolving regulatory space, the Commission has increasingly taken the position that such contracts may constitute swaps or commodity interests subject to the CEA’s market integrity provisions.

Chairman Michael S. Selig reinforced that position in announcing the case, stating that the Commission “will not tolerate fraud, manipulation, or insider trading, regardless of the technology or platform that is used.” Likewise, Director of Enforcement David I. Miller described the Division as “a cop on the beat” policing “the illegal use of inside information in the prediction markets and other markets within the CFTC’s jurisdiction.”

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The parallel criminal action brought by the U.S. Attorney’s Office for the Southern District of New York further underscores the growing coordination between DOJ and the CFTC in policing conduct involving digital asset platforms and event-driven markets. According to public statements, the criminal case alleges substantially similar conduct arising from the same trading activity.

Taken together, the recent actions suggest that regulators increasingly view trading on material nonpublic information in prediction markets as functionally analogous to insider trading in more traditional financial products. For companies whose employees possess commercially sensitive information, the implications are significant. Confidential business information concerning consumer behavior, platform metrics, rankings, trends, or internal analytics may now present enforcement risk extending beyond equities and securities markets into adjacent digital trading ecosystems.

Meet the AuthorBraeden AndersonPartner