Key conclusions
- Kalshi issued the first lifetime ban in its history. It was given to former congressman George Santos for betting on whether he would appear at the president’s address.
- He earned $17,839 from this. The platform imposed a fine of $71,356, or exactly four times the profit.
- That same week, Kalshi punished three candidates who bet on their own election races.
- Three days earlier, an appeals court had ruled that Kalshi’s contracts were gambling and that states could ban her.
George Santos placed his money on a bet on whether he would appear at the State of the Union address, the president’s annual address to Congress. He earned $17,839.
He was the only person in the world who knew the answer. The answer depended solely on him.
He bet on an event over which he had influence like no one else
Kalshi is an American platform with contracts settled as a result of a real event. You buy a yes contract if you think something will happen. You hit it, you collect your payout.
This is not insider trading in the classic sense. Santos didn’t overhear someone else’s decision. He took it himself, and at the same time controlled the price at which others made bets with him.
The penalty is exactly four times what he earned
The platform imposed a fine of $71,356 and a lifetime ban. The first lifetime ban in the company’s history.
In July, the same case was closed by the Commodity Futures Trading Commission, the federal supervision of futures markets. Santos then paid $35,000 and was banned from trading for three years.
Add it up. Over $106,000 in sanctions for a profit of just under $18,000. The sanction was calculated on his profit, not on the losses of people on the other side of the plant. A private stock exchange has no other tool than its own regulations.
Not only him. Candidates bet on their own races
Santos’ bet seems to be the act of a single man. That same week, Kalshi fined and suspended three more people, all for the same pattern: betting on races in which they were competing.
The list includes Ben Midgley, who lost the Republican gubernatorial primary in Maine, congressional candidate Laurie Buckhout and former California gubernatorial candidate Stephen Cloobeck.
Four settlements in one week measure the size of the hole, not the enthusiasm to clean it up.
On Friday, the watchdog also fined a former White House teleprompter operator for more than $172,000. He bet on what words would be said in the president’s speeches, which he himself had previously loaded into the device. In April, the Department of Justice detained a soldier who was betting on the capture of Nicolás Maduro at the Polymarket.
Four months, four different leak mechanisms. I believe that this is no longer a series of incidents. In this product, the outcome of an event is in the hands of the people who have an account on it.
Stock exchange or casino? The court responded three days earlier
On Aug. 28, the Ninth Circuit Court of Appeals unanimously ruled that Nevada could bar Kalshi from offering sports contracts. Justification: the essence of these contracts is sports gambling, regardless of what the platform calls them.
About two dozen states are involved in the dispute over prediction markets today. The ruling conflicts with the April ruling of the Third Circuit in the New Jersey case, so the Supreme Court will probably decide it.
Three days after this verdict, Kalshi shows the biggest disciplinary action in its history. It’s hard to find better proof that the platform guards its own trading floor like a stock exchange, and not like a bookmaker.
Santos spoiled this message with one sentence. “Thanks for the lifetime ban from your gambling platform,” he wrote on X. “We’ll see how much longer you can go on.”
He chose the word that Kalshi is defending today in courts in twenty states.
What does this mean for you
Predictive markets are now at your fingertips, without leaving your cryptocurrency wallet. Before you put a penny on them, take one thing into account.
On the other side of your bet may be the person controlling the outcome. On the stock exchange, such a person commits a crime and is punished. In the prediction market, he goes to the compliance department of a private company, and the highest penalty is giving back the profit with a multiplier and losing the account.
Does this mean that you should avoid this market? NO. This means that you are buying a product with rules written and enforced by the seller, not the legislator. When betting on the weather, it makes no difference. When betting on someone else’s decision, he makes the entire decision.
Santos was released from prison in October after Trump pardoned him on fraud and identity theft charges. A few months later, he made $17,839 on a bet on whether he would go to hear the speech.
