- The CFTC issued an enforcement advisory after two insider trading cases on KalshiEX.
- Kalshi penalized two traders for insider breaches; CFTC flags violations.
- Mike Selig warns that fraud and market manipulation won’t go unchecked.
The Commodity Futures Trading Commission has issued an enforcement advisory following two cases involving prediction markets traded on KalshiEX, a Designated Contract Market. Both cases focus on the misuse of non-public information and rule violations.
In May 2025, social media videos appeared to show a political candidate trading on a contract tied to his own candidacy. Kalshi’s compliance team contacted the trader the same day.
The individual acknowledged that the trades were improper and violated exchange rules, which prohibit trading in contracts where the trader has direct or indirect influence over the outcome.
Kalshi imposed a $2,246.36 penalty. That included $246.36 in disgorged profits and a $2,000 fine. The trader also received a five-year suspension from direct or indirect access to the exchange.
The CFTC said the conduct potentially violated Section 6(c)(1) of the Commodity Exchange Act and Regulation 180.1(a)(1) and (3), which prohibit manipulative schemes and fraud.
Insider Trading on Event Contracts
The second case occurred in August and September 2025.
An individual traded a prediction market tied to a YouTube channel while holding an employment or formal relationship with the subject of the contract. The trader was reportedly an editor with advance knowledge of video content before public release.
Kalshi concluded there was a reasonable belief that the trades were based on material non-public information.
The exchange imposed a $20,397.58 financial penalty. That included $5,397.58 in disgorged profits and a $15,000 penalty. The trader received a two-year suspension from direct or indirect access to the platform.
The CFTC stated the conduct potentially violated prohibitions on misappropriation of confidential information in breach of a duty of trust, commonly known as insider trading, under Section 6(c)(1) and Regulation 180.1(a)(1) and (3).
CFTC Retains Oversight Authority
Although Kalshi handled the cases internally and filed disciplinary notices, the CFTC made clear it retains full authority to police illegal trading on any Designated Contract Market.
The advisory listed prohibited practices that apply to prediction markets.
These include insider trading through misuse of confidential information, pre-arranged or noncompetitive trades and wash sales under Section 4c(a)(1) and (2)(A), disruptive trading under Section 4c(a)(5), and fraud and manipulation under multiple sections of the Act.
Under Section 5(d) of the Act, exchanges must maintain audit trails, conduct surveillance, and enforce rules.
The Division of Enforcement stated it will investigate and prosecute violations when appropriate and will continue coordinating with exchanges on referrals.
Also, CFTC Chairman Mike Selig said exchanges are the first line of defense in policing insider trading in prediction markets. He added that if anyone attempts manipulation, fraud, or insider trading, enforcement action will follow.
Related: Only The Federal Government Has The Power To Regulate Prediction Markets: CFTC
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Source: https://coinedition.com/cftc-warns-prediction-market-traders-after-insider-cases-on-kalshi/
