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The
Tuesday announcement follows several incidents where traders
have used inside information to profit on prediction market
platforms like Kalshi and Polymarket. Just last week, it was
disclosed that former Congressman George Santos was under
investigation for allegedly illegally betting he wouldn't attend
President Donald Trump's State of the Union address after
initially saying he would. In April, a U.S. Army soldier was
charged with using classified information to make a $400,000
profit trading on Polymarket on the timing of the U.S. military
operations in Venezuela earlier this year.
Kalshi will now assign a score to new markets, and the score
will determine how much Kalshi believes that particular market
is at risk of insider trading or market manipulation. If a
market scores high on these metrics, Kalshi will require its
customers to provide employment information to trade on that
market. Those who Kalshi identify as a presumptive insider on
that particular market will be banned from trading in those
markets as they are created, the company said.
“By implementing these new integrity measures, we continue to
lead the industry on the issue of market integrity among
federally regulated prediction markets,” said Robert DeNault,
head of enforcement at Kalshi, in a statement.
The employment information collected on users will only be used
if suspicious activity is seen on the market in question, the
company said. The company says these new screening tools have
stopped at least 100 potential insider trades.
“This lets us identify presumptive insiders – people who have
material, nonpublic information about a market’s outcome – and
screen them out before a trade is ever placed,” Kalshi said in a
statement.
Prediction markets have been pushing hard to gain legitimacy
among the public and policymakers as a legitimate platform where
users can bet on everything from sports to the weather to
elections. Kalshi, in particular, has been trying to
differentiate itself from its major competitor Polymarket, whose
primary operations are outside of U.S. jurisdiction. Kalshi also
disclosed that it has made at least 20 referrals to law
enforcement or securities regulators for market manipulation or
insider trading.
Kalshi announced in February that it was creating an Independent
Surveillance Audit Committee to help it combat market
manipulation and insider trading. The changes announced this
week resulted partly from the committee's work, the company
said.
The Wall Street Journal first reported Kalshi's changes earlier
Tuesday.
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