Former Congressman George Santos has been permanently banned from Kalshi, a prediction market site, following allegations of insider trading involving betting markets. The company investigated and concluded he misled the public about attending President Trump’s State of the Union address for personal gain.
Kalshi possesses the federal authority to impose financial repercussions. Consequently, Santos was fined $71,356. In reaction, Santos posted on X, questioning Kalshi’s longevity and acknowledging the ban.
Federal scrutiny began after NPR disclosed in June that Santos was under investigation for trades tied to attendance at the State of the Union. A video posted by Santos prior to the event suggested he would be present; however, he later admitted to watching the speech remotely. Crucially, Santos had already placed bets on Kalshi, resulting in profits exceeding $17,000.
In response, the Commodity Futures Trading Commission required Santos to refund these earnings. Additionally, the regulator fined him $17,500. Santos, who was expelled from Congress in 2023 and later pleaded guilty to wire fraud and identity theft charges, faced a reduced prison sentence via a commutation by President Trump.
Despite NPR’s attempts to reach Santos for comment, they were met with violent threats. Santos previously engaged in promotional activities for Polymarket, a rival to Kalshi, but was dropped following the investigation.
Disciplinary Actions Extend to Other Political Figures
Kalshi has also disciplined several political figures for betting on their own campaigns. Laurie Buckhout, a Republican Congressional candidate from North Carolina, faced a three-year suspension and fines after wagering on her race. Buckhout expressed regret over her decision.
Similarly, Stephen Cloobeck, a billionaire and former timeshare company founder, was fined and suspended for three years for betting on his gubernatorial race in California. Ben Midgley, a former gubernatorial candidate in Maine, received equivalent penalties for similar conduct.
Regulatory Challenges and Investigations
The crackdown follows a settlement with Gabriel Perez, a former teleprompter operator for President Trump. Perez was accused of profiting from insider knowledge related to presidential speeches, making over $100,000 in bets on Kalshi.
The industry struggles with inadequate federal guidelines, leading platforms to self-regulate. While some traders face criminal charges, initial referrals stem from entities like Kalshi and Polymarket. The Commodity Futures Trading Commission has even initiated lawsuits against states attempting to classify prediction markets as gambling, highlighting a novel legal strategy.
Debate persists over whether prediction markets are gambling or financial products. The U.S. Court of Appeals for the 9th Circuit sided with Nevada to ban Kalshi as gambling, contrasting earlier decisions supporting the platform. Legal finality awaits the Supreme Court’s involvement.
Recently, 44 states pressured the Trump administration to address concerns that prediction markets exploit young and vulnerable individuals as a predatory form of gambling.