Former U.S. Representative George Santos has agreed to settle Commodity Futures Trading Commission charges tied to trading on Kalshi’s prediction market over whether he would attend February’s State of the Union address. Under the order announced Friday, Santos must give up $17,569.98 in profits, pay a $17,500 civil penalty, cease the conduct cited by the agency, and stay out of trading for three years.

The CFTC said Santos did not admit or deny its findings. The agency concluded that he engaged in manipulative conduct between February 12 and February 25 in a contract linked to an event he personally controlled: his own attendance at the speech.

How the trading unfolded

According to the CFTC, Santos took a “yes” position on a Kalshi market asking whether he would attend the State of the Union, part of a broader set of contracts that drew more than $15 million in wagers on which political figures would appear at the address.

The agency said he then used public posts to influence the market price. After asking followers on X whether he should wear a “muted serious suit” or a “bedazzled” one to the event, the price of the contract moved higher, allowing him to exit at a profit. The CFTC said he repeated a similar pattern, publicly describing his travel toward Washington while trading against the market reaction those statements produced.

The day before the address, Santos said in a video that he would be present in the gallery. The next evening, after the event, he posted that watching from an airport television had not been the plan.

Regulator findings and penalties

In its order, the CFTC said Santos acted “willfully or, at the very least, recklessly” and knowingly made misleading public statements to move the contract in his favor. The case centers on a form of alleged manipulation that is unusual even for prediction markets: trading on an outcome the trader can directly influence while also shaping other traders’ expectations through public comments.

The settlement requires Santos to disgorge the profits identified by the agency and pay an additional penalty of nearly the same size. It also bars him from trading for three years and directs him to cease and desist from the conduct described in the order.

Santos disputes the intent allegation

Santos has said that travel problems changed his plans. His attorney argued that he had booked flights and a hotel with the intention of attending the State of the Union, but later changed course after winter storms disrupted travel on the U.S. East Coast and his flight was canceled.

The attorney also said Santos switched to a “no” position once he realized he could not safely attend, and did not conceal either his original plan or the later reversal. In that account, there was no intention to deceive or manipulate the market. The lawyer added that this was the first prediction-market trade Santos had ever placed and said he cooperated with the CFTC.

That description was challenged in the source reporting by three people with direct knowledge of the trades, who allegedly disputed the claim that the episode was an innocent change of plans and suggested Santos intentionally misled the public and profited from doing so.

Why the case matters for Kalshi

Kalshi detected the trading activity, froze Santos’s account, and referred the matter to both the CFTC and the Justice Department. The exchange has said it plans to pursue its own legal route over alleged violations of its rules and intends to compensate traders for any losses they suffered.

The case arrives as the CFTC continues to defend its exclusive jurisdiction over Kalshi contracts, while Kalshi expands its own regulatory and enforcement efforts. For both the exchange and the regulator, the Santos matter offers a concrete example of market surveillance leading to an enforcement outcome.

Santos represented New York in Congress from January 2023 until his expulsion in December 2023. The next confirmed steps in this matter are the settlement terms themselves and any separate action Kalshi may take over exchange-rule breaches.

Source: Cryptopolitan