The Department of Justice and the Commodity Futures Trading Commission have opened investigations into trades that pardoned former congressman George Santos allegedly placed on prediction market Kalshi, according to NPR. Santos allegedly wagered he would skip President Donald Trump's State of the Union address while publicly promising to attend, clearing tens of thousands of dollars in profit. Kalshi froze Santos' account and referred the case to both federal agencies after detecting the activity, two people familiar with the exchange's review told NPR. The probes extend a run of prediction market insider trading investigations that have surfaced in the last few months, amid rising scrutiny of prediction markets across the country.
Santos Publicly Promised Attendance While Betting Against Himself
The day before President Trump's State of the Union address, Santos tweeted, "I'm going to be there for the State of Union in the gallery, guys," boosting the odds that he would attend. During the speech, he posted, "Watching SOTU from an airport tv was not part of the plan! FML," as sources told NPR he had already wagered against his own appearance. Santos pocketed tens of thousands of dollars by deceiving bettors about his February plans, according to NPR, which cited three people with direct knowledge of the trades who were not authorized to speak publicly.
Asked about the probe, Santos told NPR, "Well, that's news to me," and declined to confirm or deny having a Kalshi account, saying, "I'm not saying yes, I'm not saying no." George Santos, the CFTC, the DOJ, and Kalshi did not respond immediately to Decrypt's requests for comment.
Federal Prosecutors Charge Multiple Prediction Market Cases
Last month, federal prosecutors charged Google engineer Michele Spagnuolo with commodities fraud, wire fraud, and money laundering over roughly $2.75 million in Polymarket bets that netted about $1.2 million, allegedly placed using confidential internal "Year in Search" data. It was the second federal prosecution tied to the sector, following Army Master Sergeant Gannon Ken Van Dyke, who pleaded not guilty to charges he used classified intelligence to win Polymarket bets on the capture of Venezuelan leader Nicolás Maduro.
House Oversight Chair James Comer (R-KY) opened an insider trading investigation into Kalshi and Polymarket, demanding records on their KYC controls and war-related markets after a New York Times review flagged more than 80 suspicious Polymarket trades.
In February, Kalshi disclosed that it had fined and suspended a MrBeast employee and a California political candidate for betting on outcomes they could influence, referring both cases to the CFTC.
Legal Framework Challenges for Self-Directed Trades
The allegations against Santos may not fit neatly into traditional insider trading law, Yuriy Brisov, partner at Digital & Analogue Partners, told Decrypt. Unlike recent prosecutions, Santos allegedly "misappropriated nothing," Brisov said, adding instead that the case appears "closer to manipulation: move a price with a false signal, then trade against it."
"Trading on your own conduct is a category that the inherited rulebook never anticipated," Brisov said, noting how existing securities and commodities laws were built around the misuse of confidential information, not wagers tied to a person's own actions. Brisov said prediction markets themselves are not the problem and that platforms should instead restrict participants who can control outcomes, noting that recent safeguards adopted by Kalshi and Polymarket are "why Santos was caught."
"The lesson here is not that prediction markets are lawless," Brisov added. "It is that the platforms are the fastest regulators in the room."
Santos Previously Received FTX Campaign Donations and Backed Solana Meme Coin
Executives at collapsed exchange FTX, including former co-CEO Ryan Salame, were among the maximum donors to Santos' 2022 congressional campaign. Two years later, Santos briefly backed a Solana meme coin before abruptly distancing himself from the project.
The New York Republican was sworn into Congress in January 2023 after a campaign later found to contain numerous fabrications about his personal and professional history. Federal prosecutors indicted him in May 2023 on charges including wire fraud, money laundering, and theft from campaign donors. He was expelled from Congress in December 2023 and later sentenced to more than seven years in federal prison. Trump commuted Santos' sentence last October, resulting in his release after four months behind bars.
FAQ
What did George Santos allegedly do on Kalshi?
George Santos allegedly placed bets on Kalshi wagering he would skip President Donald Trump's State of the Union address while publicly promising to attend, clearing tens of thousands of dollars in profit. Kalshi froze his account and referred the case to the CFTC and DOJ.
Why are federal agencies investigating prediction market trades?
The DOJ and CFTC have opened multiple investigations into prediction market insider trading. Last month, federal prosecutors charged Google engineer Michele Spagnuolo with commodities fraud over Polymarket bets allegedly placed using confidential internal data, and House Oversight Chair James Comer opened an investigation into Kalshi and Polymarket after a New York Times review flagged more than 80 suspicious Polymarket trades.
How does trading on your own conduct differ from traditional insider trading?
Yuriy Brisov, partner at Digital & Analogue Partners, told Decrypt that Santos allegedly "misappropriated nothing," and the case appears "closer to manipulation: move a price with a false signal, then trade against it." He noted that "trading on your own conduct is a category that the inherited rulebook never anticipated," as existing securities and commodities laws were built around the misuse of confidential information, not wagers tied to a person's own actions.
