Engineer's Defense: Polymarket Bets Are Gambling, Not Regulated Swaps
Michele Spagnuolo, a Google engineer, has filed a motion to dismiss charges of insider trading on Polymarket, claiming his wagers were simple gambling rather than regulated financial contracts. His legal team argues that the US Commodities Exchange Act does not cover such bets. The case highlights the ongoing legal battle over the classification of prediction market contracts.
Spagnuolo operated under the pseudonym "AlphaRaccoon" while placing bets that earned him more than $1.2 million, including a successful wager that singer D4vd would become Google's most-searched person of 2025. He faces charges of commodities fraud, wire fraud, and money laundering, and has been placed on leave from his position at Google.
His defense rests on two pillars: that prediction market wagers are not swaps under the Commodities Exchange Act, and that as a Swiss resident betting on a platform administered by a Panama-based entity, US authorities lack jurisdiction. The case mirrors ongoing disputes between state regulators and federal agencies over how to classify event contracts, with experts suggesting the question may ultimately reach the Supreme Court.
This case could reshape how prediction markets are regulated in the US, affecting both platforms and everyday users who place bets on events. If courts side with Spagnuolo's gambling argument, state regulators may gain authority over these markets, creating a patchwork of rules. The jurisdictional question may also influence whether Americans can participate in global prediction platforms, potentially limiting access to these markets or, conversely, leaving users with fewer protections against fraud and manipulation.