Kalshi Makes History With Lifetime Ban of George Santos

Kalshi has permanently banned former US Representative George Santos, making him the first person to receive a lifetime trading ban from the prediction market platform for alleged market manipulation.

Santos reportedly made about $18,000 by trading contracts tied to whether he would attend Donald Trump’s State of the Union address. Kalshi said his trading activity, combined with public comments about his attendance, amounted to an attempt to influence contract prices.

The enforcement action comes as prediction markets face increasing scrutiny over market manipulation and other abusive behavior. Regulators and competing platforms have stepped up efforts to demonstrate that these markets can effectively police suspicious activity.

Kalshi said Santos placed a series of large positions in contracts whose payouts depended on whether he attended Trump’s speech. He then made several public statements about his plans, which the company said were intended to influence the prices of the “Yes” and “No” contracts. Some of his statements were allegedly false or misleading.

Santos ultimately did not attend the speech, the outcome tied to his profitable trades. In addition to the lifetime ban, Kalshi fined him more than $70,000 in an enforcement action issued last week. Federal authorities have reportedly also looked into the matter. Santos did not immediately respond to CoinDesk’s request for comment.

Santos was expelled from the House of Representatives in 2023 after becoming the subject of multiple criminal investigations. He was later serving a prison sentence for fraud before Trump commuted his sentence last year.

Kalshi said the case was one of five recent enforcement actions. Under its regulatory obligations, the platform is responsible for detecting and addressing potential manipulation. The other four traders received temporary bans after cooperating with the company’s investigations.

A Kalshi spokesperson said Santos would face additional financial penalties and remain permanently banned because he failed to cooperate with the investigation.

CFTC Targets Former White House Staffer

The Commodity Futures Trading Commission, which oversees the prediction market sector, also announced enforcement action against former White House employee Gabriel Perez.

Perez was ordered to pay more than $170,000 and received a three-year trading ban. The penalties were reduced after regulators credited him for what they described as “exemplary cooperation.”

Perez previously worked as a White House teleprompter operator and traded Kalshi “mention” contracts tied to words Trump might say during public speeches. These contracts pay out when specified words are mentioned by designated public figures.

Meanwhile, rival prediction platform Polymarket says it is increasing its surveillance efforts as the US midterm elections approach and prediction markets come under greater regulatory scrutiny.

Shana Bautista, Polymarket’s global head of investigations and intelligence, told Reuters that the company uses machine learning, blockchain analytics, trade monitoring and open-source research to identify suspicious activity.

Polymarket has referred more than 100 cases to authorities, including wagers allegedly involving a US soldier accused of using classified information to bet on the capture of Venezuelan President Nicolás Maduro. The platform has also flagged suspected insider trading ahead of US military operations in Iran.

Polymarket said its controls also prevent the vast majority of US users from accessing its international platform, in line with the terms of a 2022 settlement with the CFTC.