DOJ and CFTC Bring Another Insider Trading Case Involving Prediction Markets

Recent enforcement actions by the U.S. Attorney's Office for the Southern District of New York (SDNY) and the Commodity Futures Trading Commission (CFTC) highlight growing scrutiny of insider trading on prediction market platforms—as previously highlighted in our Insight published earlier this month.

The cases underscore that employees who trade event‑based contracts using confidential information obtained through their work may face significant civil and criminal exposure—even if their employers operate outside the traditional financial sector and thus that there is a growing need for companies across industries to address this conduct in policies and procedures.

On May 27, 2026, authorities charged a Google software engineer with civil violations of the Commodities Exchange Act and CFTC regulations, as well as criminal charges of commodities fraud, wire fraud, and money laundering in connection with trades placed on the prediction market platform Polymarket. According to charges filed by the U.S. Attorney's Office for the Southern District of New York and the complaint filed by the CFTC, the employee accessed internal Google tools that provided him with access to confidential, nonpublic data showing anticipated results for Google's 2025 "Year in Search" rankings and used that nonpublic information to trade more than 20 event contracts tied to those rankings before the rankings were publicly released. The trader—using the account name "AlphaRaccoon"—allegedly placed trades between October and December 2025 with near‑perfect accuracy and generated approximately $1.2 million in profits. Investigators further allege that the account was funded and paid out through cryptocurrency wallets linked to the defendant and that steps were taken to obscure the source and ownership of the proceeds.

The CFTC's complaint alleges civil violations of Section 6(c)(1) of the Commodity Exchange Act and CFTC Regulation 180.1, asserting that the event contracts at issue qualify as "swaps" because their value depends on the occurrence or non‑occurrence of future events with economic consequences. The agency seeks injunctive relief, disgorgement, restitution, civil monetary penalties, and trading bans. In parallel, DOJ criminally charged the software engineer with commodities fraud, wire fraud, and money laundering.

These actions come amid broader regulatory attention to prediction markets. Earlier this year, SDNY prosecutors charged a U.S. Army soldier with insider trading‑type offenses for allegedly placing prediction market bets based on classified information about a planned military operation in Venezuela. Regulators and exchanges have also taken disciplinary actions in situations where individuals traded event contracts tied to information they controlled or learned through their roles, including political campaigns and media production.

Regulators have signaled that enforcement in this area will likely continue. CFTC Enforcement Director David Miller has stated that the belief that insider trading rules do not apply to prediction markets is a "myth," emphasizing the agency's view that event contracts are derivatives subject to the Commodity Exchange Act's anti‑fraud provisions. Miller also recently emphasized that the CFTC is committed to "rooting out insider trading and promoting market integrity in prediction markets." SDNY U.S. Attorney Jay Clayton has similarly noted that fraud or manipulation in prediction markets "is plainly criminal," and the SEC has suggested it may assert overlapping jurisdiction where contracts resemble securities‑based swaps or relate to company‑specific events. In other words, the authorities are making themselves clear that these kinds of actions are only just beginning and will be priorities during their administration.

Because prediction markets allow trading on outcomes across a wide range of topics—including corporate announcements, product launches, entertainment programming, and political events—companies across industries may face risk if employees trade using confidential information learned at work.

Without a doubt, companies should review and update insider trading and confidentiality policies to address prediction market participation, expand training and compliance certifications, and clarify that employees and contractors may not use nonpublic information obtained through their work to trade event contracts or assist others in doing so.

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Barry O'Connell and Elizabeth Davis are partners in the financial services group in the New York and Washington, D.C. offices of DWT. For more insights, please reach out to Barry, Elizabeth, or another member of our financial services team and sign up for our alerts.