Kalshi has permanently banned former US Congressman George Santos, making him the first person to receive a lifetime trading ban from the prediction market platform over alleged market manipulation.
The platform said Santos generated about $18,000 by trading contracts linked to whether he would attend Donald Trump’s State of the Union address. Kalshi determined that his trading activity and subsequent public comments were intended to influence the market.
The enforcement action comes as prediction markets face increasing pressure to demonstrate that they can prevent manipulation and other forms of abusive trading. Regulators and rival platforms have recently taken similar steps to address questionable activity.
Kalshi said Santos opened a series of large positions in contracts whose outcomes depended on his own attendance at Trump’s speech. He later made several public statements about whether he planned to attend, which the platform said were designed to move the prices of the “Yes” and “No” contracts. Some of those statements were described as false or misleading.
Santos ultimately skipped the speech, matching the outcome on which he had placed his bets. Kalshi not only permanently banned him but also imposed a fine of more than $70,000 late last week. Federal authorities have reportedly reviewed the case as well. Santos did not immediately respond to CoinDesk’s request for comment.
The former lawmaker was expelled from the House of Representatives in 2023 following a series of criminal investigations. He was later serving a prison sentence for fraud when Trump commuted his sentence last year.
Kalshi said the Santos case was one of five enforcement matters it had recently resolved. The company has an obligation under its regulatory framework to act as a first line of defense against market manipulation. The other four individuals received temporary trading bans after cooperating with the platform’s investigations.
A Kalshi spokesperson said Santos would face additional financial penalties and a permanent trading ban because he did not cooperate with the company’s investigation.
Regulators Increase Scrutiny
The Commodity Futures Trading Commission, which oversees the prediction market sector, also penalized former White House staffer Gabriel Perez on Friday.
Perez was ordered to pay more than $170,000 and was barred from trading for three years. His penalties were reduced because regulators cited his “exemplary cooperation” during the investigation.
Perez previously worked as a teleprompter operator at the White House and traded Kalshi contracts based on whether Trump would use particular words during public appearances. These contracts pay out when specified words or phrases are mentioned by designated public figures.
Prediction market rival Polymarket is also facing greater scrutiny as the US midterm elections approach. The company says it has strengthened its systems to identify suspicious trading and potential market abuse.
Shana Bautista, Polymarket’s global head of investigations and intelligence, told Reuters that the platform combines machine learning, blockchain analytics, trade surveillance and open-source research to flag unusual activity.
Polymarket has referred more than 100 cases to authorities. These include bets allegedly involving a US soldier accused of using classified information to wager on the capture of Venezuelan President Nicolás Maduro, as well as suspected insider trading ahead of US military action in Iran.
The platform also said its controls prevent most US users from accessing its international service, as required under a 2022 settlement with the CFTC.
