'You're committing crime in broad daylight': Kalshi CEO defends prediction markets amid insider trading concerns

As insider trading concerns within prediction markets in Washington are accumulating following bets made on State of the Union attendance by a former lawmaker and future military actions by an active-duty Army soldier — one of the biggest platforms said its markets make it easier to suss out bad actors. 

Speaking on Wednesday at DC Fintech Week, Kalshi CEO Tarek Mansour called it a "blessing and a curse for prediction markets" between the sheer number of trades and the transparency behind the bets. 

"You're committing crime in broad daylight, and that makes it so much easier to kind of police that sort of activity," Mansour said. 

Prediction markets, like Kalshi, have ballooned in the past few years following the 2024 election and are now worth tens of billions of dollars each.

With that, there have also been instances of insider trading, including one in April where an active-duty U.S. Army soldier was charged for using confidential information to place bets on the prediction market Polymarket ahead of former Venezuelan President Nicolás Maduro’s capture earlier this year. In another, a former White House teleprompter agreed to pay more than $172,000 to settle charges that he used his advance access to President Trump's speeches to profit on Kalshi.

In August, former Rep. George Santos was the first to be permanently banned from Kalshi after he was accused of violating its rules when trading on a bet on whether he would attend the State of the Union. 

Trades on Kalshi are transparent, Mansour said. 

"So when George Santos… he got out of jail, decided the first thing he wants to do is commit crime again, he decided to insider trade on Kalshi," Mansour said. Within a few minutes, we had 100 whistleblowers complaining, being like, 'something is weird here.' You know, we caught it." 

Over the past year, lawmakers on both sides of the aisle have introduced bills to restrict trades by people who have access to non-public information. Some states, including New York, have banned state officials from using nonpublic information to profit from prediction markets. 

States v CFTC 

Another issue has been whether states or the federal government should regulate prediction markets, particularly when it comes to sports bets.

The Commodity Futures Trading Commission has argued that most contracts on prediction markets are swaps and so far under its "exclusive jurisdiction." However, states have argued that prediction market firms are operating illegally, violating their gaming laws and avoiding paying taxes. 

Since then, states have sued platforms like Kalshi and Polymarket, and the CFTC has in turn sued states in its ongoing fight for jurisdiction.

The issue could be headed to the Supreme Court as states have reached different conclusions over the past few months. Kalshi has taken the stance that it wants federal regulation, but on Wednesday said that the choice is not between state or federal. 

"I think it's a choice of whether prediction markets exist in the U.S. or they go offshore — they go back to being offshore," he said.