George Santos, a former Republican congressman, faces a lifetime ban from Kalshi after the prediction market company concluded he misled the public to profit on its platform. Kalshi found that Santos falsely claimed he would attend President Trump’s State of the Union address, manipulating the betting market. In response, Kalshi imposed financial penalties, including a $71,356 fine.
In June, NPR reported federal authorities were investigating Santos regarding trades related to a Kalshi market about attendance at the State of the Union. Before the president’s speech, Santos uploaded a video stating his attendance, only to later reveal he watched from an airport. Unbeknownst to his followers, Santos had placed bets predicting his absence.
Kalshi confirmed that Santos earned over $17,000 from these wagers. The Commodity Futures Trading Commission (CFTC), overseeing prediction markets, mandated Santos return the profits and additionally fined him $17,500.
Santos, who represented New York until his expulsion in 2023, has a history of fraud. He pleaded guilty to federal wire fraud and identity theft, although President Trump later commuted his prison sentence. Despite multiple requests, Santos did not comment on NPR’s report. His activities led to threats against the reporter.
Earlier, Santos promoted Kalshi’s competitor, Polymarket. Polymarket severed ties with him after he faced an investigation for betting misconduct.
Sanctions on Political Candidates
Kalshi also took action against other political candidates misusing its platform. North Carolina’s Republican candidate, Laurie Buckhout, bet on her campaign and received a three-year suspension and a fine. Buckhout admitted the mistake and expressed regret.
Billionaire Stephen Cloobeck faced similar penalties for wagering $10,000 on his gubernatorial campaign in California. Former Planet Fitness President Ben Midgley, running for governor in Maine, also received a three-year suspension for betting on his candidacy. All these individuals avoided commenting on the penalties.
Gabriel Perez, Trump’s former teleprompter operator, settled with regulators after profiting from inside information about Trump’s speeches on Kalshi’s platform. Perez returned over $100,000 in profits and paid a $65,000 fine.
Regulating Prediction Markets
The booming prediction market industry lacks strong regulatory oversight. Platforms largely self-police, referring suspicious cases to federal authorities, and the CFTC has acted against traders exploiting insider information.
The debate on whether to treat prediction markets as gambling or investment products continues in court. The 9th Circuit Court of Appeals ruled Nevada could ban Kalshi as an illegal gambling operation. This contrasts with the 3rd Circuit’s prior ruling in favor of Kalshi, setting the stage for a Supreme Court decision.
Forty-four states recently urged the Trump administration to address concerns that prediction markets target vulnerable groups, characterizing them as modern casinos prone to misuse.