A former Republican congressman previously jailed for fraud charges is under investigation for insider trading on prediction market platform Kalshi, according to sources close to the matter.
George Santos, who has denied knowingly partaking in insider trading, is facing probes from the federal regulator Commodity Futures Trading Commission (CFTC) andthe Justice Department after being reported by Kalshi, the platform he is alleged to have used to place the trades in question.
Santos’ Kalshi account frozen
Prosecutors allege Santos lied to inflate the odds of a market tied to February’s State Of The Union address on Kalshi. Investigators suggest he publicly said he planned to attend President Donald Trump’s speech, posting a video on X the day before the speech saying he would be in the gallery.
At the time, traders on prediction market platform Kalshi were wagering on who would attend the event. Santos’ comments appeared to boost the market’s expectations that he would be present.
Santos ultimately did not attend. During the address, he posted on X that he was watching from an airport, a development that caused the odds in the Kalshi market to fall.
According to three people with direct knowledge of Santos’ trading activity who were not authorized to speak publicly, Santos had placed bets on Kalshi that he would not attend the address. Those sources alleged he profited from the trades by tens of thousands of dollars.
Kalshi froze Santos’ account and referred the matter to the CFTC and the Justice Department, according to two people familiar with the company’s review. The agencies did not respond to requests for comment. Reached by NPR, Santos said reports of an investigation were “news to me” and declined to confirm whether he had a Kalshi account.
Santos was serving a seven-year prison sentence after being convicted on federal aggravated identity theft and wire fraud charges stemming from his 2022 midterm campaign when Trump took office. He spent just three months in jail after Trump commuted the sentence.
Responding to the post, Santos wrote on social media: “My legal team and I were made aware by a report from NPR yesterday that the DOJ might be looking into me. So now my legal team is in contact with the DOJ to see what is going on. I will comment further when appropriate and clarify everything accordingly while being mindful and respectful of any process that might be underway.
“The basis (sic) of the accusation is preposterous and I look forward to supplying any information asked of me to any agency that inquires.”
Insider trading causing consternation in CFTC
The head of enforcement at the CFTC warned back in April that regulators are closely monitoring concerns about insider trading. In remarks at New York University, David Miller said the agency is aware of speculation surrounding well-timed trades linked to geopolitical events.
Miller said the CFTC plans to apply existing market abuse rules to prediction markets and other trading platforms while focusing enforcement on major violations. He identified insider trading concerns, market manipulation, spoofing and anti-money laundering violations as key priorities.
More recently, on Tuesday, a draft defense policy bill released by the House Armed Services Committee would prohibit U.S. military personnel from trading on prediction markets when they possess relevant nonpublic information. The proposal follows months of scrutiny over allegations that some service members used insider knowledge to profit from event contracts on platforms such as Kalshi and Polymarket.
Under the measure, Defense Secretary Pete Hegseth would be required to establish regulations governing prediction market participation by troops and Pentagon civilian employees, as well as penalties for violations. The proposal comes after controversy surrounding trades tied to developments in Iran and Venezuela, raising broader questions about the use of nonpublic government information in prediction markets.
CFTC to present findings of public consultation
Meanwhile, a proposal that could establish new federal rules for prediction markets is under review by the White House, according to a filing posted last Tuesday by the Office of Management and Budget. Details of the proposal were not publicly available.
The filing comes as the CFTC asserts that it has primary authority to regulate prediction markets amid ongoing disputes with some states over oversight of the rapidly growing industry.
CFTC Chairman Michael Selig said in January that the agency planned to develop rules governing prediction markets after withdrawing a proposed regulation that would have restricted contracts tied to sports and political events.
President Donald Trump weighed in on the last week, saying on social media that the CFTC’s authority over prediction markets should be preserved. The comments come as some industry critics, including former New Jersey Gov. Chris Christie, have argued that states should retain authority over sports betting and related wagering activity.
