Former Congressman George Santos has been ordered to pay a $35,000 civil penalty by the Commodity Futures Trading Commission (CFTC) for insider trading on the prediction market Kalshi. The CFTC found that Santos engaged in manipulative trading by placing bets that he would not attend the State of the Union address, despite publicly indicating he would be present. This allowed him to profit from self-generated, non-public information, reportedly earning tens of thousands of dollars.
The investigation by the CFTC and the Department of Justice began after Kalshi detected Santos's suspicious trading activity, froze his account, and referred the case to federal regulators. Santos had publicly stated he would attend the event but then cited a delayed flight as the reason for his absence, leading to accusations of market manipulation. This case highlights concerns among lawmakers and regulators about the vulnerability of prediction markets to exploitation by individuals with privileged information.
Santos initially denied knowledge of the investigation when contacted by NPR, stating, "Well, that's news to me." He later called the accusations "preposterous" in a post on X and claimed his legal team was in contact with the DOJ. Kalshi had also attempted to interview Santos as part of their internal investigation, but he reportedly dodged their requests. The online prediction platform Polymarket has since ended its paid relationship with Santos amidst these allegations. This enforcement action underscores the growing scrutiny on prediction markets and the efforts to prevent insider trading within them.
