Federal authorities are investigating former U.S. Representative George Santos over trades he allegedly placed on prediction platform Kalshi tied to his attendance at President Joe Biden’s February State of the Union address, according to people familiar with the matter.
The Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) opened parallel probes after Kalshi froze Santos’ account and referred suspicious trading activity to regulators. The trades reportedly generated tens of thousands of dollars in profit.
Focus on trades linked to public statements
Regulators are examining whether Santos publicly said he would attend the State of the Union while privately betting that he would not show up.
Santos announced in advance that he planned to attend. But during the speech he posted from an airport, a move that coincided with a sharp swing in the betting odds on Kalshi contracts tied to his attendance.
A person familiar with the inquiry said Kalshi requested an interview with Santos but did not succeed in arranging one. Reached separately, Santos denied knowing about any federal investigation.
Part of wider crackdown on prediction markets
The Santos probe is unfolding amid a broader federal push against suspected insider trading on online prediction platforms, where traders buy and sell contracts based on the outcome of real-world events.
In April, a U.S. Army Special Forces soldier was charged with using nonpublic information about a mission to capture Venezuelan leader Nicolás Maduro to make about $409,881 on another prediction platform.
In a separate case, a Google employee was accused of earning more than $1 million on prediction bets allegedly informed by private search data. Both cases have intensified scrutiny of how event-based trading platforms detect and prevent abuse.
Congress presses Kalshi and Polymarket
House Oversight and Government Reform Committee Chairman James Comer launched a congressional investigation in May focused on internal safeguards at Kalshi and rival platform Polymarket.
Lawmakers demanded details on how the firms monitor trading, enforce rules against misuse of confidential information, and respond to suspicious activity. The inquiry signaled that Congress is weighing whether existing regulatory frameworks are adequate for fast-growing event-based markets.
As part of that review, both platforms have begun tightening controls.
Platforms tighten rules and surveillance
In response to regulatory and political pressure:
- Kalshi introduced new screening tools designed to block market participants from betting on events in which they are directly involved, and to flag patterns that could suggest misuse of inside information.
Polymarket, which runs markets on blockchain infrastructure, has expanded its surveillance systems, revised its participation standards, and hired blockchain analytics firm Chainalysis to help track and analyze trading flows and wallet activity.
Kalshi reported about $16.8 billion in monthly trading volume in May, roughly double Polymarket’s estimated $7 billion for the same period. The combined volume highlights how prediction platforms have evolved into sizable financial venues rather than niche products.
Traditional insider trading rules meet new markets
The Santos investigation marks one of the clearest tests of how traditional insider trading concepts apply to event-based contracts that regulators treat as swaps or derivatives.
The fact that Kalshi itself initiated the referral to the DOJ and CFTC underscores a shift toward more aggressive, proactive compliance among market operators that know they are under close watch.
CFTC enforcement director David Miller has publicly rejected what he called the “myth” that prediction markets sit outside federal market rules. He has stated that event contracts fall under the Commodity Exchange Act’s anti-fraud and anti-manipulation provisions, and that using confidential information for profit is barred regardless of the trading venue.
Eroding anonymity and rising legal risk
For people active on digital and blockchain-based prediction platforms, the enforcement trend is narrowing room for anonymous or opaque trading.
Regulators have emphasized that cases can be built under established misappropriation theories, even when conduct occurs on international or decentralized platforms. Recent DOJ and CFTC actions against a software engineer accused of using nonpublic search data to trade on Polymarket show authorities asserting jurisdiction based on factors such as a company’s headquarters or the location of blockchain validator nodes.
The expansion of surveillance technology and stricter identity checks at leading platforms suggest an emerging industry standard in which anonymity is harder to maintain and accountability is increasingly enforced.
Surging volume draws government attention
Regulators’ focus is also being driven by the scale of money now flowing through these markets.
Combined monthly trading volume on major event-based platforms climbed from under $5 billion in September 2025 to about $24 billion in April 2026. In the first quarter of 2026 alone, Kalshi handled roughly $33 billion in trades, while Polymarket processed about $26.17 billion.
Those figures have helped move prediction platforms from the regulatory periphery into the center of debates over market integrity and systemic risk.
Legislative response gathers pace
On Capitol Hill, policy moves are accelerating in parallel with enforcement.
In April, the U.S. Senate unanimously prohibited senators and their staff from trading on prediction markets, seeking to close off potential conflicts of interest in event-based betting that touches on government actions. The House of Representatives is expected to adopt a similar ban.
Chairman Comer’s investigation into the safeguards at Kalshi and Polymarket is widely viewed as a precursor to more explicit federal rules governing how these platforms operate and how trading on political, corporate, and geopolitical events is policed.
The outcome of the Santos probe, along with other high-profile enforcement actions, is likely to shape that legislative debate and set clearer boundaries for what is permissible in this fast-growing corner of the financial system.
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