When it comes to placing bets, part of the thrill is the unknown potential gain — or loss. But when Michele Spagnuolo placed a bet on Polymarket last year, he probably had a pretty good idea of what the results would be.
The 36-year-old software engineer was arrested last week and charged with commodities fraud, wire fraud, and money laundering after allegedly using confidential internal Google data to place bets on the platform’s most-searched person of 2025, according to NPR (1).
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Prosecutors say that Spagnuolo, trading under the username AlphaRaccoon, reportedly wagered $2.7 million across 25 separate bets — and walked away with $1.2 million in profit. He bet that Pope Leo XIV and Bianca Censori, who married Kanye West, would not take the top spot, but that rapper D4vd would.
“The employee accessed our marketing material using a tool available to all employees, but using such confidential information to place bets is a serious breach of our policies,” Google spokesperson Jaclyn Vazquez told NPR.
Prediction markets face continued scrutiny
This isn’t the first time prediction market bets have resulted in federal charges. Last month, a U.S. Army Special Forces soldier was charged with using classified information about the capture of Venezuelan leader Nicolás Maduro to pocket more than $400,000 on Polymarket.
In April, Kalshi suspended three accounts (2) that it believed belonged to congressional candidates Ezekiel Enriquez in Texas, Matt Klein in Minnesota, and Mark Moran in Virginia, who were bidding on their own races.
Moran allegedly placed a bet on himself under the event contract, “Who will run for public office this year?” before announcing his candidacy. Moran claimed the bet was intentional (3) to see if he would be caught. But Bobby DeNault, Kalshi’s Head of Enforcement, called the candidates’ wagers “political insider trading” in a company press release, and he said they violated the platform’s rules.
DeNault has reported that his team scours social media, employment records, and other public data, such as the FTC’s campaign data lists, and uses it to prevent insider trading.
“Those trigger flags in our systems, and we’ve prevented hundreds of cases of insider trading based on that,” DeNault told ABC (4).
These cases shine an uncomfortable spotlight on an industry that has exploded in popularity. Combined monthly global trading volume on Kalshi and Polymarket has increased from less than $5 billion (5) in September 2025 to roughly $24 billion in April 2026. For context, that’s nearly double what legal sportsbooks handle each month in the U.S.
The rise of prediction market platforms raises a question for everyday investors: Are they a legitimate investment opportunity?
Read More: Taxes are going to change under Trump’s ‘big beautiful bill’ — 4 reasons you can’t afford to waste time
What to know before participating in prediction market bets
Unlike stock markets, where insider trading rules are well-established, prediction markets are still finding their regulatory footing. Still, these recent cases make it clear that insider trading is illegal, regardless of the platform you use.
If you’re interested in trying your hand at prediction markets, here’s what you need to know.
Understand what you are actually trading.
Prediction markets allow you to buy contracts on real-world outcomes — such as who runs for president, what words a politician will use in a speech, or a Fed rate decision. If you bet “yes” on an outcome and it happens, you’ll win money. If it doesn’t happen, then you lose the funds you bet.
It sounds simple, but the amounts bet vary drastically across markets. Major sports events (think: the Super Bowl) attract much larger bets and can result in millions won or lost.
Not all prediction markets are the same.
Kalshi operates as a regulated exchange (6) under the Commodity Futures Trading Commission. Polymarket’s main platform is based in Panama and technically inaccessible to U.S. users (7) (though a U.S.-regulated version (8) launched in May 2026 (9)).
Knowing which platform you’re on matters because the rules and protections differ. No matter what platform you use, however, it’s worth noting that your funds are not protected by the FDIC the way they are in a CD or savings account.
Make sure you understand your tax obligations.
Winnings are considered taxable income, but the IRS hasn’t issued formal guidance on how prediction market winnings are taxed. That means the rules are murky at best.
Under Section 1256 (10), contracts may be taxed under a favorable 60/40 split: 60% at long-term capital gains rates and 40% at short-term capital gains rates. But whether Kalshi event contracts qualify under this rule is unclear.
Treat prediction market trading like gambling.
While trading on sites like Polymarket and Kashi might not feel the same as spinning the roulette wheel in a casino, it is more closely related to gambling than buying stocks. Data analysts say up to 70% of prediction market traders lose money (11) — and that is worth keeping in mind.
Your best bet is to keep prediction market trading as a very small portion of your portfolio, and never bet more than you can afford to lose.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
NPR (1); ABC News (2), (4); X (3); Pew Research Center (5); Kalshi (6); Polymarket (7); Polymarket (8); Betting USA (9); Camusocpa (10); Mexc (11)
This article originally appeared on Moneywise.com under the title: A Google engineer bet $2.7M on Polymarket using secret search data — and walked away with $1.2M in profit
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
