Kalshi Is Finally Taking Up Its Fight Against Insider Trading

Prediction markets have gained strong popularity and interest from users and even from Wall Street giants – take ICE’s investment in Polymarket.

But in recent months, that market growth has collided with an uncomfortable reality: insider trading. When insider information creeps in, prediction markets lose their pillars of business model – user trust and regulatory favour.

Take two instances.

One is the Maduro arrest case. Just hours before U.S. special forces captured Venezuelan President Nicolás Maduro, a newly created Polymarket account wagered more than $30,000 on his removal from power. When the news became public, the account’s payout exceeded $436,000. That indicated the trader had advance knowledge of classified military actions.

In another instance and perhaps one of the most widely scrutinized cases surfaced earlier this year when Israeli authorities accused several soldiers of using Polymarket to bet on the timing and location of military strikes. According to reports, investigators alleged that the individuals used classified operational knowledge obtained through their roles to inform wagers on imminent attacks.

The trades, placed ahead of public confirmation, generated significant profits.

These concerns have spilled into the political arena with several U.S. lawmakers calling prediction markets “gambling avenues”.

Now, Kalshi says it is drawing a hard line.

How Kalshi is Tackling Insider Trading

In a detailed public statement, Kalshi co-founder and CEO Tarek Mansour laid out the company’s most aggressive move yet to confront insider trading. treating it not as a grey area of “information efficiency,” but as a direct threat to market survival.

“Some say insider information can make prediction markets more accurate,” Mansour wrote. “But the same argument can be made for stock markets where insider trading is banned.”

Kalshi says it is policing insider trading for the same reason stock markets do. Once traders feel a market is unfair, trust breaks down and liquidity disappears. To enforce this, the platform has built a market surveillance system modeled on those used by NYSE and Nasdaq.

At the center of this effort is Poirot, a real-time monitoring tool that flags suspicious trades, especially large or unusual positions placed close to market resolution. “People don’t usually commit fraud for $25,” Mansour noted.

Once a trade is flagged, Kalshi’s market regulation team would step in. The team would review KYC details, funding sources, past trading behavior, and the rationale behind the trade. In fact, it may reach out directly to the trader for clarification.

And if wrongdoing is found, enforcement can range from warnings and fines to referrals to the CFTC and, in some cases, the DOJ.

This comes as all trades on the platform are public and reported daily to the CFTC, which has helped generate whistleblower tips from users. While investigation outcomes cannot be shared publicly, the exchange says the tips have played a meaningful role. Over the past year, Kalshi says it has run more than 200 investigations and frozen multiple accounts.

Kalshi’s Insider Trading Team

This year, Kalshi is also expanding its enforcement capabilities beyond internal teams.

The company is bringing in the Wharton Forensic Analytics Lab, led by Daniel Taylor, to help untangle complex cases involving indirect relationships. This includes the cases where insiders attempt to trade through relatives, associates, or proxy accounts.

It has also added Brian Nelson, previously Under Secretary of the Treasury for Terrorism and Financial Intelligence, to advise on financial compliance and integrity.

Kalshi is forming an independent Surveillance Audit Committee which has market integrity experts such as Lisa Pinheiro will now publish quarterly oversight reports and enforcement statistics.

On the technology front, Kalshi is integrating institutional-grade monitoring tools from Solidus Labs to further enhance behavior analysis across its markets.

Finally, Kalshi has appointed Robert J. DeNault, a former white-collar criminal attorney, as Head of Enforcement to oversee investigations and regulatory referrals.

Thus, as insider trading allegations continue to shadow the sector, Kalshi’s strategy marks one of the clearest attempts yet. It can perhaps help the industry impose Wall Street-style discipline on a still-young market structure.

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