WASHINGTON, July 31 (Reuters) – The top U.S. derivatives regulator said on Friday it had ordered former Republican Representative George Santos to pay $35,000 for alleged manipulative trading.
Santos, who was expelled from the House of Representatives in 2023, traded event contracts earlier this year on the prediction market platform Kalshi that hinged on whether he would attend President Donald Trump’s State of the Union address to Congress.
According to the Commodity Futures Trading Commission, Santos made false statements on social media that benefited his wagers and then did not attend the address, earning him nearly $18,000. The CFTC order requires him to repay that amount, with the remainder constituting a fine.
A lawyer for Santos said in a statement that his client had settled the CFTC’s allegations to avoid litigation but did not admit to them.
According to the lawyer’s statement, Santos had honestly wagered that he would attend Trump’s address but then changed his position to “no” due to winter weather travel disruptions in the eastern U.S.
“Mr. Santos concealed neither his intention to attend, nor his change of plans to not attend … from anyone,” attorney Joseph Murray said. “There was absolutely no intent to deceive any person nor intent to manipulate any market.”
Kalshi said it had referred Santos’ trading activity to regulators. “Earlier this year, Kalshi flagged trades by George Santos in connection with markets related to the State of the Union,” Robert DeNault, the company’s enforcement director, said in a statement. “We investigated and quickly referred the matter to the CFTC, providing the evidence needed to secure an action against him.”
Kalshi would also pursue its own enforcement action for violations of exchange rules and would seek to reimburse affected traders if it recovered any monetary penalties, DeNault said.
Reuters and others reported earlier that the company had referred Santos’ trading activity to the Justice Department, which was investigating. The Justice Department said on Friday it was not investigating Santos, however.
The boom in election betting is likely to test the ability of prediction markets such as Kalshi to police insider trading, according to experts and data shared with Reuters. Kalshi has said it is equipped to identify and block suspicious activity and protect the integrity of its markets.
Earlier this month, sources said a White House teleprompter operator was under investigation over potential insider trading on Kalshi.
Lawmakers in 2023 voted to expel Santos over criminal corruption charges and accusations of misspending campaign money.
(Reporting by Douglas Gillison in Washington; Editing by Nick Zieminski, Rod Nickel and Sanjeev Miglani)
Comments