According to NPR, former U.S. Congressman George Santos is under investigation by the U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) for trading on the prediction market Kalshi in connection with his travel plans. Sources say Kalshi has frozen his accounts and transferred the case to federal agencies.
The transaction revolves around whether the person will attend.
The report states that the controversial deal occurred around the time of Trump's State of the Union address in February. Santos publicly stated that he would attend, but sources familiar with the matter said he had previously bet on Kalshi that he would not attend. This statement likely influenced market pricing, and he subsequently profited tens of thousands of dollars by not showing up.
The day before Trump's speech, Santos posted on social media that he would be in the stands. This statement initially increased the market's perception of his attendance. During the speech, he posted again that he was watching it on television from the airport.
Kalshi has frozen the account and reported the incident.
NPR reports that Kalshi suspended Santos's account after discovering the transactions during an internal review and filed a case with the CFTC and the Department of Justice. Santos responded that he was unaware of the transactions and had not confirmed whether he owned a Kalshi account.
George Santos, the CFTC, the Department of Justice, and Kalshi did not immediately respond to requests for comment. The report comes as U.S. regulators are increasing their scrutiny of prediction markets, with investigations into suspicious transactions involving Kalshi and Polymarket rising in recent months.
The focus of law may shift to manipulative behavior.
Legal experts say this case may not fully meet the traditional definition of insider trading. Yuriy Brisov, a partner at Digital & Analogue Partners, told Decrypt that this type of behavior is closer to market manipulation by influencing prices with false signals and then profiting by trading in the opposite direction.
He also stated that existing securities and commodity laws primarily target the misuse of confidential information, but are insufficiently prepared for situations such as "betting on the outcome of one's own actions." What platforms really need to restrict are those participants who can directly influence the outcome.
The prediction market has been investigated one after another recently.
In recent months, U.S. prosecutors have taken action in several cases involving prediction markets. Last month, a Google engineer was indicted for allegedly using internal data to participate in Polymarket trading; earlier, a U.S. Army sergeant was also indicted for allegedly using classified intelligence to bet on international political events.
Meanwhile, James Comer, chairman of the House Oversight Committee, has launched an insider trading investigation into Kalshi and Polymarket, demanding that both platforms provide records related to KYC controls and war-themed markets. Previously, a New York Times investigation uncovered more than 80 suspicious transactions on Polymarket.
Additional information:Santos has a history of involvement with the crypto industry. He received donations from FTX executives during his 2022 campaign and briefly supported a Solana ecosystem Meme coin project in 2024 before quickly distancing himself from it.
