Prediction-market company Kalshi has permanently banned former U.S. congressman George Santos after concluding that he may have used information about his own plans to profit from bets concerning whether he would attend the State of the Union address.
The company said its compliance team found reasonable grounds to believe Santos engaged in insider trading, making him the first person to receive a permanent trading ban in Kalshi’s history.
Santos was also hit with a $71,356 penalty over his activity on the platform.
Santos Made Thousands From His Own Attendance
The controversy centred on contracts linked to Santos’ appearance at the State of the Union.
In the weeks before the event, Santos repeatedly spoke about his intention to attend.
Kalshi’s market eventually placed the probability of his appearance at almost 75%.
According to the company’s investigation, Santos placed multiple substantial bets between February 2 and February 25 on whether he would attend.
When he ultimately did not appear, his trading activity generated a profit of $17,839.
Kalshi said Santos was not permitted to trade on the question because his own actions could directly influence the outcome of the market.
Social Media Posts Added to the Controversy
The situation became even more contentious when Santos publicly discussed the issue and appeared to influence sentiment around the contracts.
Minutes after the State of the Union began, he posted on X that he had been delayed at an airport.
The explanation quickly attracted criticism online, with social media users accusing the former congressman of manipulating the prediction market.
Kalshi’s compliance investigation subsequently concluded that Santos had made statements it characterized as false or misleading while discussing the market.
Santos Pushes Back Against Kalshi’s Decision
Santos has rejected the company’s action and responded angrily on social media.
He described Kalshi as an “unserious company” and dismissed the lifetime ban as “frivolous nonsense.”
In another post, he sarcastically thanked the company for banning him from what he called its gambling platform while questioning how long Kalshi itself would remain in business.
Santos did not immediately respond to an email requesting comment about the latest enforcement action.
Former Congressman Already Faced Federal Scrutiny
The Kalshi punishment is not the first consequence Santos has faced over the controversial trades.
A month earlier, he agreed to pay $35,000 to resolve a federal investigation by the Commodity Futures Trading Commission into his prediction-market activity.
The federal investigation had already had repercussions elsewhere.
Rival platform Polymarket ended its relationship with Santos in June following scrutiny surrounding the trades.
Santos’ Political History Adds Another Layer
The controversy comes against the backdrop of Santos’ extraordinary political downfall.
The former Republican congressman was expelled from the U.S. House after his fabricated biography and financial misconduct became the subject of intense scrutiny.
He had claimed a background as a successful Wall Street dealmaker despite numerous falsehoods about his education, employment and personal history.
Santos later pleaded guilty to fraud and identity theft in 2024 and was sentenced to seven years in prison.
Trump Clemency Put Santos Back in the Spotlight
Santos served only 84 days before President Donald Trump ordered his release.
Trump described Santos as a “rogue” but argued that the former congressman had already suffered enough punishment and deserved consideration for having supported Republican positions while in Congress.
The State of the Union appearance became particularly notable because it took place only months after Santos received clemency.
Santos had publicly maintained that he intended to attend, making the prediction-market controversy especially sensitive.
Other Political Candidates Also Punished
Kalshi’s latest enforcement announcement was not limited to Santos.
Republican congressional candidate Laurie Buckhout received a $2,589 fine and a three-year trading ban after admitting that she had placed bets of less than $1,000 on her own campaign.
Buckhout, a retired colonel, is running against Democratic Rep. Don Davis in a competitive district in northeastern North Carolina.
She acknowledged the violation, describing her decision as a “dumb mistake” and saying she acted to correct the situation once she learned there was a problem.
Former Governor Candidates Caught Up in the Crackdown
Kalshi also announced temporary three-year bans for Stephen Cloobeck and Ben Midgley, former candidates who sought Republican nominations for governor in California and Maine respectively.
Cloobeck, a timeshare businessman, reportedly purchased $10,000 worth of contracts linked to his own California campaign.
Midgley, a businessman who briefly pursued the Republican nomination for Maine governor, placed bets worth less than $1,000 on his campaign.
Both cases involved candidates trading on markets connected to their own political campaigns.
Candidates Say They Were Unaware of the Rules
Midgley said he had not known that candidates were prohibited from betting on themselves.
He described Kalshi as a novelty and entertainment platform and said he stopped participating immediately after learning that the company did not want candidates supporting their own campaigns through its markets.
Midgley also said he had not made any winnings and had donated money to charity in accordance with Kalshi’s policies.
Cloobeck was not immediately available for comment.
Kalshi Defends Its Enforcement Approach
Kalshi spokesperson Elisabeth Diana said the Santos case was different from the other enforcement actions announced at the same time.
While Santos received a permanent ban, the other individuals were temporarily prohibited from trading after cooperating with the company’s investigation.
The company said its latest actions demonstrate that it is prepared to enforce restrictions when traders have the ability to influence the outcomes of markets in which they hold positions.
The Bigger Debate Over Prediction Markets
The cases have renewed questions about how prediction markets should handle participants who have direct influence over the events being traded.
Markets such as Kalshi allow users to buy and sell contracts based on the outcomes of political, economic, sporting and other events.
But when a trader can potentially affect the outcome themselves, concerns about fairness and market integrity become more complicated.
The Santos case provides a particularly striking example because the question being traded involved his own conduct.
Santos Previously Commented on the Market
Santos discussed the controversy on his podcast in March, acknowledging that some traders had lost money while others had unexpectedly profited.
He used the episode to argue that the incident demonstrated how vulnerable prediction markets can be.
His comments have since taken on greater significance following Kalshi’s decision to permanently remove him from the platform.
What Happens Next?
Santos’ permanent ban means he can no longer access Kalshi directly or indirectly, while the financial penalty adds another consequence to the prediction-market controversy.
The company is also moving forward with temporary restrictions against the other political figures involved in the latest cases.
The enforcement actions are likely to keep attention focused on the rules governing prediction markets, particularly when politicians and political candidates attempt to trade contracts connected to their own activities.
Summary
Kalshi has permanently banned George Santos and imposed a $71,356 penalty after determining that his trades concerning his own State of the Union attendance raised serious insider-trading concerns.
Santos reportedly earned $17,839 from the activity after repeatedly discussing his intention to attend before ultimately missing the event.
He has rejected Kalshi’s decision and mocked the company publicly.
The platform also fined Laurie Buckhout $2,589 and banned her for three years after she admitted betting on her own congressional campaign.
Former California and Maine gubernatorial candidates Stephen Cloobeck and Ben Midgley were similarly handed three-year bans.
The crackdown highlights a growing challenge for prediction markets: preventing people who can directly influence an outcome from profiting by trading on it.
