Federal investigators have opened a probe into former U.S. Rep. George Santos after unusual activity on prediction-market platform Kalshi tied to President Trump’s February State of the Union address.
NPR reports the Department of Justice and the Commodity Futures Trading Commission are investigating trades that allegedly generated tens of thousands of dollars on a Kalshi contract about whether Santos would attend the speech. Kalshi flagged the activity, froze the account and referred the matter to regulators after its review, the outlet says.
What happened
- Kalshi detected a flurry of bets on a contract asking whether Santos would be in the gallery for the State of the Union. According to NPR, Santos reportedly bet that he would not attend even though he posted a video on X indicating he planned to be there. During the speech, Santos posted from an airport; market odds on his attendance then dropped sharply.
- Kalshi has sought to interview Santos as part of its internal review, people familiar with the matter told NPR. Santos has not participated in those interviews and told the outlet, “Well, that’s news to me.”
Why it matters for prediction markets and crypto
The Santos case revives scrutiny over how prediction exchanges police users who may have inside knowledge of an event’s outcome. Kalshi disciplined several federal candidates in April after finding they’d bet on their own races — a rule violation, CEO-level enforcement has said — but those earlier incidents resulted in exchange penalties and did not trigger referrals to the DOJ or CFTC. This matter appears to have followed a different path.
Regulatory and industry backdrop
- Kalshi has been beefing up screening and surveillance tools aimed at preventing people from trading on events in which they’re directly involved.
- The Santos probe comes amid a wave of high-profile enforcement actions tied to prediction markets and nonpublic information: prosecutors charged a U.S. Army Special Forces soldier in April for allegedly making roughly $409,881 on Polymarket bets tied to an operation involving Venezuelan President Nicolás Maduro. Separately, the DOJ and CFTC charged Google engineer Michele Spagnuolo with allegedly using confidential search-ranking data to place $2.7 million in Polymarket wagers, generating about $1.2 million in profit.
- CFTC Enforcement Director David Miller has publicly stated that insider-trading laws apply to prediction markets, rejecting arguments that event contracts sit outside traditional market-abuse rules.
- Congress is also examining the space: House Oversight Chairman James Comer launched an inquiry in May into insider trading safeguards at Kalshi and Polymarket, requesting details about monitoring and enforcement practices.
Exchanges respond
Heightened scrutiny has pushed both Kalshi and Polymarket to expand compliance programs. Kalshi says it’s focused on identifying participants with direct involvement in markets, while Polymarket has tightened rules, increased surveillance and contracted Chainalysis for blockchain analytics support.
What to watch
The Santos probe will test how aggressively federal agencies apply insider-trading and market-manipulation rules to prediction markets — platforms that sit at the intersection of traditional financial regulation and crypto-native trading models. Regulators’ next moves, and any enforcement outcomes, could shape compliance standards across the growing event-contract market.
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