CFTC Sues Engineer for Misappropriation of Data to Trade Event Contracts
Commentary by Steven Lofchie
The CFTC sued a Google software engineer for allegedly misappropriating confidential, nonpublic data about Google's official Year in Search list for 2025 and using it to profit on two trading event contracts.
In a Complaint filed in the U.S. District Court for the Southern District of New York, the CFTC alleged that the software engineer at Google accessed confidential information about the anticipated 2025 Year in Search rankings through an internal Google tool on two occasions, and used that information to trade at least 23 Polymarket contracts. The engineer allegedly traded through a Polymarket account opened in 2024 under the handle "AlphaRaccoon". Google released the 2025 Year in Search list in 2025.
According to the Complaint, the engineer bought "Yes" or "No" shares on contracts with what the CFTC called "near-perfect accuracy." The CFTC alleged the AlphaRaccoon account received approximately $3.9 million in USDC (tokenized coins) on resolution and then transferred about $5.045 million to the funding wallet, yielding roughly $1.2 million in net illicit profits.
The CFTC's alleged misappropriation: that the engineer, by virtue of his employment, owed a duty of trust and confidentiality to Google to maintain the secrecy of nonpublic Year in Search data, and breached that duty by trading on it. The CFTC alleged violations of CEA Section 6(c)(1) ("Prohibition regarding manipulation and false information") and CFTC Regulation 180.1(a)(1) ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices"). The Complaint characterizes Polymarket event contracts as "swaps" under CEA Section 1a(47) ("Definitions") because they pay out based on the occurrence or non-occurrence of a future event with potential financial, economic or commercial consequences. Polymarket is not a defendant in the action, and the CFTC does not name Google or Alphabet as defendants either.
The CFTC is seeking a permanent injunction against further violations, trading and registration bans, disgorgement of profits, restitution, and civil monetary penalties.
Commentary
Although the CEA makes insider trading illegal, as a practical matter that illegality has been of limited significance. For the most part, the concept of material nonpublic information is not broadly relevant as to many commodities in the way that it is to corporate issuers. With event contracts where money is at stake on very non-traditional commodities, there are clearly going to be many situations where certain individuals have information advantages. Congress, regulators and courts will have to make law as to what constitutes an improper information advantage, and the CFTC will have to devise a significant program to detect offenders.
Corporations and celebrities whose actions may become the subject of event contracts should consider putting in their employment agreements a prohibition against the use of any information obtained in the course of employment from being used in such contracts, so as to reduce somewhat their chance of being dragged into an employee's litigation and unwelcome press.
Related Articles
-
The DOJ and the CFTC filed parallel charges against an active-duty U.S. Army Master Sergeant, alleging he used classified nonpublic military information to place bets on a prediction market and profit from the capture of former Venezuelan President Nicolás Maduro.