Two US congressional candidates and one sitting lawmaker have received fines and bans from Kalshi after they were found betting on the outcomes of their election races, as prediction market platforms crack down on insider trading.
Matt Klein, a sitting member of the Minnesota State Senate, was fined $539 for betting on his primary race in his bid for the US House of Representatives, which is set to take place in August. Ezekiel Enriquez, who ran for a US House seat in March, received a $784 penalty, according to Kalshi’s notice of settlement.
Another case involved Mark Moran, a candidate in Virginia’s US Senate race, who received a $6,229 penalty and was ordered to return any profits from his trades after allegedly refusing to cooperate with Kalshi to resolve the issue. All three were banned from the platform for five years.
Prediction markets, which let users trade contracts on the outcomes of future events, have faced growing scrutiny over insider trading and possible violations of gambling laws. Kalshi and Polymarket, the two largest platforms, have pledged to introduce stricter controls and crack down on unlawful activity.
Lawmakers offer reasons for insider trades
Moran said in a statement on X that he placed his wager to test Kalshi’s procedures and see how the platform would respond to insider trading.
“YES, I did bet ~$100 on myself on Kalshi because I wanted to get caught,” he said, adding that he “wanted to see (1) if Kalshi would come after me and (2) what their path would be.”
Klein said in a statement that he placed the wager out of curiosity about how prediction markets worked, but later learned it violated platform rules.
“In compliance with their request, I paid a penalty and agreed to be suspended from the platform. That was the only wager I have ever made on a predictions market,” he added.
Klein is a co-sponsor of a bill in the Minnesota Legislature that aims to ban wagers on the outcomes of real-world events such as elections or policy decisions.
Cointelegraph was unable to reach Ezekiel Enriquez for comment.
Kalshi’s ongoing insider trading crack down
Bobby DeNault, Kalshi’s head of enforcement, said Tuesday these cases violated Kalshi’s exchange rules but didn’t warrant referral to the US Commodity Futures Trading Commission or the Department of Justice for further investigation and prosecution.
Related: Charles Schwab, Citadel Securities are eying prediction markets
“Regardless of the size of a trade, political candidates who can influence a market based on whether they stay in or out of a race violate our rules. No matter how small the size of the trade, any trade that is found to have violated our exchange rules will be punished,” he added.
The platform issued a $2,000 fine and a five-year ban in February to a former California gubernatorial contender for betting on his own candidacy last year.
Magazine: How to fix suspected insider trading on Polymarket and Kalshi
