He called himself “AlphaRaccoon.”
Over a few weeks in the spring of 2026, a Google engineer turned what he knew about an unreleased company report into a string of winning bets on prediction market platforms — until people started asking how one anonymous account could be so right, so often.
He wasn’t the only one.
Around the same time, a U.S. Army sergeant allegedly used classified intelligence to bet on military outcomes, turning tens of thousands of dollars into hundreds of thousands.
Both are nowfacing federal charges. (More about that later.)
The platforms they used weren’t dark‑web exchanges. They were prediction markets — apps where anyone with a smartphone can place real‑money bets on the outcome of almost any future event, from the Federal Reserve’s next rate decision to whether a top-100 cryptocurrency would be named after a sandwich. Even President Donald Trump’s teleprompter operator is now under investigation for placing bets on words that may be said during the president’s speeches.
For compliance officers, that’s the headline: the line between “information I learned at work”and “a bet I can cash in on” has never been thinner. So, let’s take a look.
What Are Prediction Markets?
A prediction market is a platform where participants buy and sell “event contracts” — or make bets — on the likelihood of a future outcome. For many bets, someone, somewhere, already knows the answer. That’s what makes these markets powerful —and what makes them a compliance problem.
Why Should Compliance Teams Care?
The parallel to insider trading is hard to miss, and it’s the right instinct. But it’s worth being precise, because the law here is still taking shape. Classic insider trading is about trading a security while holding material non‑public information (MNPI). A prediction‑market bet isn’t a securities trade, so regulators and prosecutors are reaching for other enforcement tools, such as commodities fraud, wire fraud, market manipulation, and misappropriation of confidential information.
Here’s the practical takeaway: it can be genuinely hard to predict which statute, which regulator, or which forum will apply to a given situation. The U.S. Commodity Futures Trading Commission (CFTC) may bring a civil action; the U.S. Department of Justice (DOJ) may pursue criminal charges; the rules are unsettled, and the jurisdictional lines are still being drawn.
That uncertainty cuts both ways. Some commentators argue the company itself isn’t the victim. Sometimes a company wasn’t defrauded, and it may face no liability of its own, so it’s really an individual ethics and, potentially, a Human Resources matter — not a compliance issue. Maybe. But that debate is a distraction from what compliance teams can influence: who has access to sensitive information, how consistently misconduct is disciplined, and whether your people understand where the lines are. Those are core compliance functions regardless of how external enforcement mechanisms eventually shake out.
And the bottomline stays the same. Using confidential information to profit from a prediction market breaches the duty all employees owe to their employers — and it may expose them to civil and/or criminal liability, even where the exact enforcement path isn’t obvious.
You don’t have to wait for the regulators to catch up to tell your people a simple truth: monetizing what you learn at work is misconduct. Plain and simple.
What the Early Cases Tell Us
Two 2026 cases show how quickly this is moving from theory to enforcement.
In May, the CFTC filed a complaint against Google software engineer Michele Spagnuolo — operating on Polymarket under the handle “AlphaRaccoon” — for using confidential internal data about the company’s annual “Year in Search” results to place 23 highly accurate bets, earning roughly $1.2 million before the results went public. The U.S. Attorney’s Office for the Southern District of New York filed a parallel criminal complaint against Spagnuolo, echoing the CFTC’s warning that employees entrusted with confidential business information can’t misappropriate it for personal gain. The Spagnuolo cases are bellwethers not because of the dollar amount in question, but because the legal theories reach everyday corporate confidential information rather than more traditional MNPI, such as market‑moving financial data.
Other cases make the same point from a different angle. In United States v. Van Dyke, an Army sergeant allegedly used classified information to bet on military outcomes for personal gain, utilizing the Polymarket platform. The U.S. government charged the defendant with “unlawful use of confidential government information for personal gain, theft of nonpublic government information, commodities fraud, wire fraud, and making an unlawful monetary transaction.” It’s also worth noting that investigative reporting earlier this year tied several prediction market accounts to suspiciously accurate wagers on various U.S. military actions, prompting a Congressional inquiry.
The details vary, but the pattern is consistent: Someone took what they knew and turned it into a wager.
The Regulatory Landscape Is Moving Fast
Compliance professionals should expect the regulatory ground to keep shifting. In just a few months, the CFTC has coordinated with the U.S. Securities and Exchange Commission (SEC), issued guidance, signaled potential rulemaking, and is now seeking public comment on the proposed rule changes. Meanwhile, states that have long regulated gambling are pushing back on federal oversight. In at least one instance, a case has landed in court over a state's attempt to ban these markets.
The point isn’t to track every development. The point is that the absence of settled rules does not mean the absence of risk, and your internal standards can move faster than regulators can.
What Your Policies Need to Address
Most Codes and policies don’t mention prediction markets by name. Closing that gap doesn’t require a major overhaul, it just requires clear standards of expected behavior. We here at Rethink are currently updating our Code and policies to address prediction markets.
At a minimum, your policies should:
- Define the term clearly. Explain in plain language what prediction markets are. Don’t assume employees will connect their workplace knowledge to a betting app on their own.
- Scope the prohibition broadly. Cover all confidential information — including information about partners, vendors, customers, and other third parties — not just internal company data.
- Tie it to existing obligations. Connect prediction‑market activity to your confidentiality, conflicts of interest, and personal‑trading policies.
- Address personal gain in all forms. The duty to protect confidential information applies wherever that obligation exists — not only in a securities‑trading context.
- Make reporting easy. Tell employees how to raise a concern if they suspect a colleague is misusing confidential information.
One caution as you calibrate consequences: if the policy leans entirely on the threat of termination, it can create the wrong incentive. For example, an employee who has already decided to risk their job may place a bigger bet, or route it through an offshore platform potentially outside U.S. jurisdiction, to make that risk worth taking from their perspective. Effective messaging pairs disciplinary consequences with the criminal and civil exposure described above, so employees understand that losing their job is the least of what’s at stake.
Remember: Rethink isn’t a law firm, and this post doesn’t constitute legal advice. But when federal prosecutors are already making examples of others and the CFTC has made this a top enforcement priority, the right move is to make the rules clear, update your documentation, and make sure your people understand what’s expected.
Want to update your Code, policies, or training to address prediction markets? Reach out to us at hello@rethinkcompliance.com — we’d love to help.
This post provides general information only. Always consult with qualified legal and compliance professionals for advice specific to your situation.
Sources Cited
- White House teleprompter operator made more than $100K betting on Trump’s speeches:Sources (July 16, 2026)
- United States v. Spagnuolo — CFTC Press Release (May 27, 2026)
- United States Attorney’s Office, Southern District of New York Press Release (May 27,2026)
- United States v. Van Dyke — DOJ Press Release (April 23, 2026)
- Online prediction market traders make millions betting on U.S. military operations(June 28, 2026)
- House Oversight Committee Investigation — Press Release (May 22, 2026)
- Joint Statement from the Chairman of the SEC and Acting Chairman of the CFTC(September 5, 2025)
- CFTC Enforcement Division Issues Prediction Market Advisory (February 25, 2026)
- CFTC Seeks Public Comment on Advanced Notice of Proposed Rulemaking Relating toPrediction Markets (March 12, 2026)
- CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning Event Contracts InvolvingEnumerated Activities (June 10, 2026)
- Some states want to regulate prediction markets. Should the feds let them? (CBS News, June 24, 2026)
- CFTC Sues Minnesota to Block State Law (May 19, 2026)
