Two insider cases we've recently closed

Source: Hacker News

As a regulated exchange, we ban insider trading. In the past year we opened 200 investigations and froze a number of flagged accounts; over a dozen of those investigations have become active cases.

We’ve received questions from customers about how we identify violations and enforce our rules, so we’re releasing information about two insider‑trading cases we’ve recently closed. Investigations take time, and more disclosures will appear on our notices page, similar to how CME Group and others do.

Today’s cases

• Case 1 – Political candidacy trade
  A candidate traded about $200 on his own candidacy for Governor of California and then posted about it on social media, violating several Kalshi rules.
  Penalty: 5‑year ban + financial penalty equal to 10 × the initial trade size.
  Note: The candidate later announced he is no longer running for Governor and is now running for Congress.

• Case 2 – YouTube streaming markets
  An insider traded about $4,000 on markets linked to a popular YouTube streamer’s videos, violating Kalshi’s insider‑trading rules.
  Penalty: 2‑year suspension + financial penalty equal to 5 × the initial trade size.

In both cases our systems flagged the trades, the surveillance team froze the accounts, and neither trader withdrew any profits. Penalties are case‑specific and depend on factors such as trade size and the rules violated.

We reported each case to the CFTC as required. Kalshi will donate the imposed fines to a non‑profit that provides consumer education on derivatives markets. We also recently announced an independent Surveillance Audit Committee, which will produce quarterly reports on flagged trades, investigations, and cases referred to regulators.

How we flagged and investigated these cases

1. May – Political candidate video
   The Surveillance Department identified an online video of a California gubernatorial candidate appearing to trade on his own candidacy. We immediately froze his account and opened an investigation. The candidate cooperated and acknowledged the rule violation. While following market forecasts is permissible, trading on one’s own candidacy is not.

2. YouTube streamer market
   Our surveillance systems flagged a trader’s near‑perfect success in markets tied to a popular YouTube streamer’s videos. The performance was statistically anomalous, and multiple Kalshi users submitted tips about the unusual activity. Investigation revealed the trader was employed as an editor for the streamer’s show, giving him access to material non‑public information related to the trades.

In both instances, our team collected evidence, applied Kalshi’s disciplinary process fairly, and concluded there was sufficient evidence of a trading violation. No system is perfect, and no financial exchange is immune from bad actors. We remain committed to deterring and identifying manipulators and cheaters.