Kalshi has handed former US Representative George Santos the first lifetime trading ban in the prediction market industry, citing alleged manipulation tied to wagers on his own attendance at Donald Trump’s State of the Union address.
According to Kalshi, Santos made around $18,000 from a series of trades involving contracts that would pay based on whether he attended the event. The platform concluded that his trading activity, combined with public statements about his plans, amounted to an attempt to influence market prices.
The case comes as prediction markets face growing scrutiny over their ability to prevent manipulation and other forms of misconduct. Regulators have recently taken action against individuals accused of exploiting inside information, while rival platforms are also strengthening their monitoring systems ahead of the US midterm elections.
Kalshi said Santos placed substantial trades in contracts directly linked to his attendance at Trump’s speech. He subsequently made public comments about whether he would appear at the event, which the platform said were intended to affect the prices of both “Yes” and “No” contracts. Some of those comments were allegedly false or misleading.
Santos ultimately did not attend the speech, the outcome associated with his profitable position. Kalshi also fined him more than $70,000 and imposed the permanent ban last week. Federal authorities have reportedly examined the trading activity as well. Santos did not immediately respond to CoinDesk’s request for comment.
Santos was expelled from the US House in 2023 following multiple criminal investigations. He was later serving a prison sentence for fraud before Trump commuted his sentence last year.
Kalshi said the Santos case was one of five recent enforcement matters. The platform is required under its regulatory framework to take steps to detect and prevent market manipulation. The other four individuals received temporary trading restrictions after cooperating with investigators.
A Kalshi spokesperson said Santos would face additional financial penalties and remain permanently barred from trading because he did not cooperate with the investigation.
Prediction Markets Face Greater Oversight
The Commodity Futures Trading Commission, which regulates the sector, also announced enforcement action against former White House staffer Gabriel Perez.
Perez was ordered to pay more than $170,000 and received a three-year trading ban. Regulators said his cooperation during the investigation helped reduce the penalties imposed against him.
Perez previously worked as a White House teleprompter operator and traded Kalshi “mention” contracts tied to words Trump might use during public speeches. Such contracts pay out when specified words or phrases are spoken by designated public figures.
Meanwhile, Polymarket says it is stepping up its efforts to detect suspicious trading as prediction markets prepare for heightened activity surrounding the US midterm elections.
Shana Bautista, Polymarket’s global head of investigations and intelligence, told Reuters that the company uses machine learning, blockchain analytics, trade surveillance and open-source research to identify potentially irregular trading patterns.
Polymarket said it has referred more than 100 cases to authorities. The cases include wagers allegedly linked to a US soldier accused of using classified information to bet on the capture of Venezuelan President Nicolás Maduro, along with suspected insider trading ahead of US military action in Iran.
The platform also said its controls block most US users from accessing its international platform, following requirements established under a 2022 settlement with the CFTC.
