Kalshi banned former U.S. Congressman George Santos on the grounds of market manipulation, this action is also one of a series of measures the industry continues to showcase regarding addressing violations.

Written by: Jesse Hamilton, Francisco Rodrigues

Translated by: Chopper, Foresight News

The prediction market platform Kalshi has issued its first-ever lifetime trading ban, targeting former U.S. Congressman George Santos, with Kalshi accusing him of profiting from trading based on his attendance at President Trump's latest State of the Union address.

According to Kalshi, the ousted former U.S. Congressman George Santos has set a precedent as the first individual to be permanently banned from trading. He is suspected of conducting a series of manipulative trades, profiting approximately $18,000 by betting on whether he would attend President Trump's State of the Union address.

George Santos becomes the first individual to be permanently banned from trading by Kalshi

This punishment against Santos is just one of several recent actions in the prediction market industry to address platform abuses: regulators previously penalized a former White House employee, and competitor Polymarket is reportedly conducting a special operation to curb violators amid midterm election betting.

In the disciplinary document published on its official website, Kalshi stated, "Santos placed multiple large trading orders in a market where the underlying contract completely depended on whether he attended the event. Following this, he publicly made a series of statements related to his attendance, attempting to influence the prices of the prediction market contracts, some of which contained false or misleading content."

Ultimately, he did not attend the speech, which was precisely the result of his winning bet. In addition to the ban, Kalshi imposed a fine of over $70,000 on him last weekend, and federal authorities have already launched an investigation into Santos. CoinDesk attempted to contact Santos for comment but has not received a response yet.

In 2023, embroiled in multiple criminal investigations and tarnished reputation, Congressman Santos was expelled from Congress. While he was serving time for fraud, President Trump granted him a commutation last year.

Kalshi stated that the Santos case is one of five enforcement cases recently announced by the platform. According to regulatory rules, the platform itself needs to act as the first line of defense against market manipulation; the other four cases involved individuals who cooperated with investigations and were only subjected to temporary trading bans.

A spokesperson for the platform stated, "Due to George Santos's refusal to cooperate with the investigation, he will bear additional financial penalties and has been permanently banned from trading on Kalshi."

The U.S. Commodity Futures Trading Commission (CFTC), which regulates prediction markets, also issued a penalty for violations against a former White House aide last Friday. Gabriel Perez received a three-year trading ban; officials stated that his punishment was reduced due to "high cooperation with the investigation."

Perez formerly served as a teleprompter operator at the White House, and he traded contracts related to Trump on the Kalshi platform, where the payout rules for such contracts depend on whether public figures say specific words in public speeches.

Meanwhile, with the approach of the U.S. midterm elections, the entire risk control system of the prediction market faces stricter scrutiny, and competitor platform Polymarket claims it has established a suspicious trading identification system.

Shana Bautista, Global Investigations and Intelligence Head at Polymarket, told Reuters that Polymarket relies on machine learning, blockchain data analysis, trading monitoring, and open-source intelligence research to identify abnormal trading behaviors.

Polymarket has reported over 100 leads on cases to regulatory authorities, including a U.S. soldier suspected of betting on the arrest of Venezuelan Nicolas Maduro using classified information, and suspected trading cases relying on insider information before U.S. military actions were executed.

Polymarket also added that the platform, in accordance with a settlement agreement reached with the CFTC in 2022, has prohibited the vast majority of U.S. users from accessing its international site through technical interception.