Prediction markets are gaining renewed interest following trading activities associated with former Republican representative George Santos that have been referred to federal authorities concerning bets related to President Donald Trump’s State of the Union address.
Kalshi, a regulated prediction market platform, has flagged unusual activity in a market regarding Santos’ attendance at the speech, as reported by sources familiar with the situation.
The platform identified Santos as the account holder, froze the account, and subsequently referred the case to the Justice Department and the Commodity Futures Trading Commission, according to reports from NPR and CNN.
The CFTC, which oversees prediction markets, is actively investigating this issue, a corroborating source affirmed to CNN. NPR has indicated that the Justice Department has also initiated an investigation.
The investigation is focused on a Kalshi market where traders wagered millions on who would attend Trump’s address. The potential attendees included Santos, Barron Trump, USA Hockey player Jack Hughes, and Nick Shirley, a MAGA journalist known for a viral fraud story from Minnesota.
Santos, previously expelled from Congress and facing imprisonment on federal fraud charges, served a seven-year term for aggravated identity theft and wire fraud linked to his 2022 midterm campaign until Trump commuted his sentence last year. He spent under three months in prison.
Sources with direct knowledge of his trades told NPR that Santos had already wagered against his attendance at the address. They accused him of misleading the public and profiting tens of thousands of dollars from these trades.
The day prior to the speech, Santos shared a video on X asserting, “I’m going to be there for the State of the Union in the gallery, guys.” This declaration increased the odds on Kalshi regarding his attendance. Yet, during Trump’s speech, Santos tweeted: “Watching SOTU from an airport TV was not part of the plan! FML,” causing the market to plummet.
In response to inquiries from NPR about an insider trading investigation linked to his Kalshi activity, Santos remarked, “Well, that’s news to me.” When asked if he had a Kalshi account, he replied, “I’m not saying yes, I’m not saying no.”
Santos remarked to NPR that Kalshi co-founder Luana Lopes Lara is “a fellow Brazilian” whom he knows well and stated he would reach out to her to verify if an investigation was underway.
Prediction markets like Kalshi and Polymarket have expanded significantly over the past year, providing contracts on various outcomes from sports and elections to entertainment events, such as predicting the winner of season 50 of “Survivor.” Lawmakers and state officials have commented that existing regulations have struggled to keep up with the rapid growth of the industry.