DOJ, CFTC Investigate Santos Over Kalshi Event Trades

TLDR

• The Department of Justice and the Commodity Futures Trading Commission are investigating George Santos over trades tied to a February event market.
• Kalshi detected suspicious activity linked to his State of the Union attendance and froze his account.
• Santos allegedly bet he would not attend after publicly stating he planned to appear at the address.
• Kalshi referred the matter to regulators and requested an interview with Santos.
• Kalshi and Polymarket have introduced new monitoring and enforcement measures in response to recent cases.

Federal investigators have opened a probe into former U.S. Rep. George Santos over prediction market trades, according to NPR. The Department of Justice and the Commodity Futures Trading Commission began reviewing activity tied to his February attendance at President Donald Trump’s State of the Union address. Kalshi detected suspicious trading linked to the event, froze his account, and referred the matter to regulators.

Kalshi Flags Trades Tied to State of the Union Event

NPR reported that Santos allegedly placed trades predicting he would not attend the February address. Earlier, he had posted a video on X stating he would appear in the gallery during the speech. Later, he posted from an airport while President Trump spoke, and the odds on his attendance fell.

Kalshi identified the trading pattern and suspended his account after an internal review. The company then referred the activity to federal authorities for further investigation. A person familiar with the matter said Kalshi requested to interview Santos, yet he avoided those requests.

Prediction Markets Face Insider Trading Scrutiny

The Santos inquiry arrives as prediction markets face increasing regulatory attention. In April, federal prosecutors charged a U.S. Army Special Forces soldier over Polymarket bets tied to Nicolás Maduro. Prosecutors alleged he made about $409,881 from those trades.

In another case, authorities accused a Google employee of earning over $1 million from Polymarket trades linked to search data. Lawmakers have also taken action in response to these allegations. In May, House Oversight Chairman James Comer launched a congressional inquiry into insider trading safeguards at Kalshi and Polymarket.

Comer requested documents related to enforcement practices and monitoring systems at both companies. In response, Kalshi introduced screening tools designed to prevent participants from trading on events in which they are directly involved. Polymarket updated its rules, expanded surveillance standards, and engaged blockchain analytics firm Chainalysis to detect insider trading and market manipulation.

Despite the investigations, both platforms continue to lead the sector in trading activity. Kalshi recorded about $16.8 billion in monthly volume in May. Polymarket posted roughly $7 billion in volume during the same period.

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