Kalshi Banned A Politician Who Bet On Himself — Nine Months After I Reported On It
Roundup: Prediction market protocol TBD raises $3M; DimeTrades registers to become a prediction market under the CFTC.
I have to admit: Kalshi’s announcement that the prediction market banned and fined a pair of insider traders was brilliant comms strategy.
Here it is, step-by-step:
Kalshi puts out the news about a crackdown involving two different insiders.
Everyone publishes a bunch of headlines that are mostly positive for Kalshi.
The Commodity Futures Trading Commission gives Kalshi a pat on the back for enforcing its rules.
10/10, no notes.
Sorry, I lied. Of course I have notes. When I first saw the news, I had two initial reactions:
This is good! That Kalshi is actually taking some material steps to stop insider trading is a positive step. There’s no denying that.
I was more than a little pissed because I had broken the news about one of those two insider traders nine months ago, and it would have been nice to get a heads-up.
When you take a magnifying glass to the whole thing, you start to see a few warts.
But first, let’s catch up with the news, if you missed it. Kalshi put out the news on Wednesday morning that it had banned a former Republican candidate for governor in California and an insider trading on a YouTube market.
Here are some excerpts from Kalshi’s post about the news:
We’ve received questions from customers about how we identify violations and enforce our rules. So, we’re releasing information about two insider trading cases we’ve recently closed. Investigations take time, and there will be more that we’ll disclose on our notices page, similar to how CME Group and others do.
Today’s cases:
The first concerns a candidate who traded about $200 on his own candidacy for Governor of California, and then posted about it on social media, a violation of several Kalshi rules. Punishment: 5-year ban + financial penalty (10 times the initial trade size). Note: this candidate recently announced he is no longer running for Governor and is now instead running for Congress.
The second concerns an insider who traded about $4,000 on YouTube streaming markets, a violation of Kalshi’s insider trading rules. Punishment: 2-year suspension + financial penalty (5 times the initial trade size).
In both of these cases, our systems flagged the trades and our surveillance team froze the traders’ accounts. Neither trader withdrew any profits. These penalties are not indicative of future penalties - everything depends on the case, including amount traded and rules violated.
We’ve reported each of these cases to the CFTC, as we are required to do, and Kalshi will be donating the fines imposed to a non-profit that provides consumer education on derivatives markets….
Here’s more on how we flagged and investigated these cases:
1/ In May, our Surveillance Department saw an online video by a candidate for Governor of California that appeared to show him trading on his own candidacy. We immediately froze his account and opened an investigation. The candidate was initially cooperative and acknowledged that this violated the exchange rules. As a candidate in a race, you can (and probably should) follow and use Kalshi’s market forecast, but you should not trade on it.
2/ The second case involved trading in markets on a popular YouTube streamer’s videos. Our surveillance systems flagged his near-perfect trading success on markets with low odds, which were statistically anomalous. At the same time, because all trading data is publicly available, a number of Kalshi users sent us tips about unusual activities they saw in the trading data. We investigated and found that the trader was employed as an editor for the streamer’s show and likely had access to material non-public information connected to his trading.
In both cases, our team collected evidence, applied Kalshi’s disciplinary process fairly, and concluded there was sufficient evidence that a trading violation occurred. No system is perfect. No financial exchange is immune from bad actors. Not stock exchanges, not banks, not prediction markets. We’re committed to deterring and finding the bad actors, manipulators, and those who willingly cheat.
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Later on Wednesday, the CFTC acknowledged the cases in a press release and commended Kalshi on social media:
The Commodity Futures Trading Commission’s Division of Enforcement today has issued an advisory following public release of two enforcement cases involving misuse of nonpublic information and fraud with respect to certain prediction markets, also known as event contracts, traded on KalshiEX, a Designated Contract Market. These enforcement cases included the following:
In May 2025, social media posts contained videos that appeared to show a political candidate trading on his own candidacy on Kalshi. Kalshi’s compliance team contacted the candidate that same day, and the trader acknowledged that he knew these trades were improper and violated Kalshi’s rules, which prohibit trading in a contract over which the trader has direct or indirect influence over the outcome. Kalshi imposed a $2,246.36 financial penalty (disgorgement of $246.36 related to the improper trading activity, plus a $2,000.00 penalty) and a 5-year suspension from direct or indirect access to the exchange. Based on this fact pattern, the trader potentially violated Section 6(c)(1) of the Commodity Exchange Act (Act), and Commission Regulation (Regulation) 180.1(a)(1) and (3) for use of a manipulative scheme or artifice to defraud, or engaging or attempting to engage in an act, practice or course of business that operates as a fraud on any other person.
In August and September 2025, an individual traded a prediction market related to a YouTube channel while having an employment relationship or other formal affiliation with the subject of the contract, through which the trader likely had access to material non-public information related to his trades, in violation of exchange rules. Upon investigating the highly successful trades and the trader responsible, Kalshi discovered that the trader was an editor for a YouTube channel who likely had advanced knowledge of the contents of the channel’s videos prior to the time they were publicly posted. Kalshi concluded there was reasonable belief that the trades were based on material non-public information misappropriated in violation of a pre-existing duty and imposed a $20,397.58 financial penalty (disgorgement of $5,397.58 in profits from the illicit trading, plus a $15,000.00 penalty) and a 2-year suspension from direct or indirect access to the exchange. Based on this fact pattern, the trader potentially violated prohibitions on misappropriation of confidential information in breach of a pre-existing duty of trust and confidence to the source of the information (commonly known as “insider trading”) pursuant to Section 6(c)(1) of the Act, and Regulation 180.1(a)(1) and (3).
While Kalshi’s internal enforcement program handled these matters, under the Act, the Commission has full authority to police illegal trading practices occurring on any DCM, including those described above related to prediction markets. …
Here are the two reports from Kalshi:
Some thoughts from me about all of this:
Color me not so impressed with the investigation of the case involving the politician. Sure, he should have been banned, and it was good that he was! But this was nine months ago; I reported on it the day it happened (see below). He literally recorded himself placing the bet and posted it on social media. We didn’t exactly need Sherlock Holmes on the case here, did we? How could this have possibly taken this long?
California Candidate For Governor Bets On Himself To Win
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Kyle Langford, a Republican candidate for governor in California, bet on himself to win the highest office in the state at Kalshi this weekend.
The entire Langford case also underlines how, to date, it appears that Kalshi’s surveillance has been reactive, rather than proactive. Kalshi is KYC’ing people when they deposit; why was it not able to stop a candidate from betting on his own race before it happened? That seems like some pretty easy logic to build in, if you are really taking surveillance seriously.
This same concept came to light in a Politico story this week: “Major Democratic donor and former candidate Stephen Cloobeck has been blocked by the prediction market Kalshi from trading on the California governor’s race. … Cloobeck was able to bet on his own campaign months earlier, without facing the same restrictions, he told POLITICO.”
(This of course begs the question of whether this is being treated as a case of insider trading.)
We also have this case about Senate candidate Mark Moran in Virginia. Per Decrypt: “Still, in trying to leverage his social media savvy for political gain, Moran recognized that he’s capable of making the occasional mistake. That included a $125 prediction on himself winning his race in June using Kalshi’s platform, which he shared on X, and later deleted.”
Let’s move on to the other case, where again, it seems clear that someone was insider trading. Again, it’s cool that Kalshi is stopping that. However, let’s step back and realize that people are trading on/predicting things about “Mr. Beast YouTube videos." We’re told all of this is very serious business, when in fact Kalshi is creating markets here that have very little in the way of actual economic utility in the world and are ripe for insider trading. Honestly, if you’re betting on Mr. Beast YouTube videos when there are clearly people who know the information before you do, maybe you should take a hard look in the mirror. Play stupid games, win stupid prizes. There’s not a whole lot of reason for these markets to exist, other than for people to gamble/speculate/trade on this for funsies or profit.
In any event, insider trading is bad, and I am glad Kalshi is doing something about it. But before we throw a parade for Kalshi, I’d love to see some more serious examples of insider trading brought to light, and at least one more that I didn’t report on almost a year ago.
Finally, Matt Levine’s newsletter at Bloomberg also got into all this:
But it does not, I think, violate Pham’s description of the law, that insider trading requires “misappropriated confidential information in breach of a pre-existing duty of trust and confidence to the source of the information,” because of “the special characteristics of the derivatives markets, where end users necessarily trade on the basis of their own proprietary information in order to hedge their risks.” This guy presumably had no duty of trust and confidence to anyone else about his candidacy; if he wanted to trade on his own plans, I don’t see why commodities law would stop him.
If you don’t subscribe to Matt’s newsletter, you should.
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Prediction markets roundup
The firm harvesting Polymarket data for wealthy clients (Sportico): “Intercontinental Exchange has said it is unperturbed by Polymarket’s operating deficit. CEO Jeffrey Sprecher said on a third-quarter earnings call his company bought into Polymarket because of how it could repurpose the company’s international prediction market for clients, not because it anticipated Polymarket itself to reach a specific valuation multiple. “We’re not a venture firm,” Sprecher said. Sprecher and senior leadership at Intercontinental Exchange have told analysts they will sell data generated from people’s Polymarket bets to clients as part of the company’s financial insight suite. This suite also includes data scraped from posts on the social media platform Reddit.”
“It’s a complete playbook that you’re getting to take advantage of on the client side, and that is what is resonating,” Christopher Edmonds, Intercontinental Exchange president of fixed income and data service, said on a fourth-quarter earnings call.
There’s a new application for a designated contract market…: …listed on the CFTC’s website, called DimeTrades. It looks like it will be a consumer-facing prediction market, from the website:
TBD Raises $3M and Launches a New Market for Human Sentiment (press release): TBD, a prediction market protocol designed to measure verified human sentiment, today announced its $3 million seed round and public launch from private beta. The round was led by CMT Digital and ParaFi, with participation from Jump Crypto.
While prediction markets have surged in popularity around elections and sports, TBD is creating an entirely new category: markets built around global human opinion. As AI-generated content and bots flood the internet, it is becoming harder to know what real people actually think. Sentiment data influences everything from business decisions to public policy, yet measuring it accurately online has become increasingly difficult. TBD ensures that every respondent is a uniquely verified human, enabling large-scale, bot-resistant inputs.
“The internet is flooded with synthetic content, and measuring what real people think is an increasingly difficult task,” said Corey Miller, Co-Founder and CEO of TBD. “We are building TBD to discover human sentiment in a digitally native, AI-resistant, and economically sustainable manner.”
The protocol enables individuals and organizations to launch polls answered exclusively by World ID–verified participants. Solana-based prediction markets are simultaneously created, where users can trade on the outcomes. The system aligns economic incentives around real human opinions, making it measurable and market-driven.
“The TBD team has the rare combination of deep mechanism-design thinking and relentless product velocity,” said Sam Hallene, Partner at CMT Digital. “TBD turns verified human sentiment into a market, which we believe will become instrumental as AI erodes trust in traditional data sources.”
TBD’s private beta concluded with over 4,000 markets created, and more than 19 million votes collected from more than 225,000 unique participants globally.
“Survivor 50” hasn’t aired yet, but Kalshi, Polymarket have picked a winner (Axios): “As prediction markets explode in popularity, a thorny question is emerging: Should people be allowed to bet on questions that have already been answered — even something as seemingly harmless as the winner of ‘Survivor’?”
“Prediction markets where the result is already known or decided are some of the silliest things that exist in the space,” Dustin Gouker, a consultant who writes a newsletter on prediction markets, tells Axios in an email.
“You aren’t predicting anything! It already happened! Events where the information is already known by some cohort probably shouldn’t be a thing, in general.”
Hey, more Substacks about prediction markets stuff!
Update in Kalshi vs. Utah:
Daniel Wallach@WALLACHLEGALUpdate: Kalshi withdraws its request for a TRO after Utah agrees to refrain from pursuing a state court civil enforcement action during the pendency of the motion for preliminary injunction. Tennessee's failure to agree to a similar request resulted in a next-day TRO.
Daniel Wallach @WALLACHLEGALNEW: Kalshi has filed a motion for preliminary injunction and TRO against the Governor of Utah (@GovCox) and Utah Attorney General (@AGDerekBrown), seeking to immediately bar them from enforcing Utah's strict anti-gambling laws vs. Kalshi while the newly-filed lawsuit is pending.3:34 AM · Feb 26, 2026 · 435 Views3 LikesEverything can be a bet now – the rise and risks of prediction markets (The Conversation): “As a geographer, I’m fascinated by how online gambling is now a global game, in many cases bypassing national legislation on gambling laws via VPNs. My latest project charts how traditional political gambling – through licensed bookmakers or online gambling companies – is now simultaneously bordered and borderless. National laws on gambling remain important, but there is increasing fluidity with the rise of VPNs and digital platforms. This trend is creeping into prediction markets too. …”
“Even if countries don’t allow their citizens to access prediction markets, the world is still betting on those nations and their next election or leadership contest. This could be the future of election betting – and possibly the future of geopolitics – if world events can be influenced by prediction market activity.”
This Looks Like an Insider Bet on Aliens (The Atlantic): “On Monday night, someone placed a peculiar bet on the prediction market Kalshi. At 7:45 p.m. eastern time, a single trader put down nearly $100,000 on the claim that, by the end of December, the Trump administration will confirm that alien life or technology exists elsewhere in our universe. According to The Atlantic’s review of Kalshi’s trading data, about 35 minutes after this bet was executed, it was followed by another that was almost twice as large (possibly from the same person). These were market-moving events: For one brief stretch, the market appeared to think that there was at least a one-in-three chance that the U.S. government will announce the existence of aliens this year. Perhaps this was just some overexcited UFO diehard with a hunch and money to burn. Or maybe, as some observers quickly noted, it was a trader with inside knowledge.”
The worrying new gambling trend luring boys to bet on airstrikes, Epstein and aliens (The Independent): “With a survey from Coefficient Capital showing that awareness of the platforms skews heavily towards Gen-Zers, and as gambling, crypto and sensationalist politics are helpful prerequisites, prediction markets are providing another trap to lure in young men.”
“Only in America? Don’t bet on it. It’s coming to the UK any day now.”
The Tax Nerd Who Bet His Life Savings Against DOGE (WSJ, paywall): “Alan Cole put his life savings, all $342,195.63, into a prediction-market wager. He insists he’s not really a betting man. Cole is a 37-year-old tax economist with Ivy League degrees, a mortgage and a young child. Until Elon Musk’s Department of Government Efficiency came roaring into the nation’s capital last year, he was largely a plain-vanilla investor or, as he puts it, a ‘normal, conventional Wall Street Journal-reading adult.’”
Kalshi Taps Standard Chartered’s Ross for Institutional Business (Bloomberg): “Prediction-markets platform Kalshi Inc. tapped the former head of prime and financing at Standard Chartered Plc to help build its business serving institutional investors, according to people with knowledge of the matter. Kalshi hired Andy Ross as head of institutional business, the people said, asking not to be identified discussing information that isn’t public. He starts in his new role in March, following a period of gardening leave after leaving Standard Chartered last year, the people said.”
Prediction markets offer real-time insight into possible primary election outcomes (Spectrum News): “The immediate impact of the text messages that appear to confirm Republican U.S. Rep. Tony Gonzales’ affair with his former staffer was shown on a prediction market site called Polymarket. Prediction markets are where people can wager money to predict the outcome of anything from sports to world events. The prediction markets turned against Gonzales and now favor his top Republican opponent, Brandon Herrera. Some of the state’s top pollsters say people should take this information with a grain of salt.”
“The idea that like tons of people are paying attention to that, or the right people are paying attention to it within the district who are ultimately going to make the actual decision, is an open question,” said Joshua Blank, the research director of the Texas Politics Project at the University of Texas at Austin.
UI professors’ prediction market site gains national recognition (Daily Iowan): “Back in the late 1980s, three University of Iowa professors believed they could predict polling data better than the pollsters at that time, leading to the creation of a site allowing users to place bets on political events. Now, the prediction market site has become a learning tool at the UI and has influenced other companies to replicate the concept.”
