Kalshi prediction market CEO: We already ban insider trading
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Tarek Mansour, CEO of Kalshi, during a joint SEC-CFTC roundtable at SEC headquarters in Washington, D.C., on Sept. 29. Photo: Kent Nishimura/Bloomberg via Getty Images
Kalshi's CEO on Wednesday endorsed a prediction markets ban on insider trading by government officials, saying his company already disallows it.
Why it matters: Prediction markets have come under scrutiny after multiple recent examples of traders apparently making a fortune by betting on markets with inside information.
Driving the news: Kalshi CEO Tarek Mansour said the company "is supportive" of a bill proposed by U.S. Rep. Ritchie Torres (D-New York) that would make it illegal for government officials to trade on inside information on prediction markets.
- "Why? Because we already implement" a ban, Mansour wrote on LinkedIn.
Follow the money: A major bet on Nicolás Maduro's capture before the Venezuelan president was seized in an American military raid showed how prediction markets pose a controversial new opportunity for insiders to profit on secret information.
- The newly created account on Kalshi rival Polymarket invested $30,000 Friday on Maduro's exit, pocketing $436,760 after he was captured. Nobody connected to the account has been identified.
State of play: Insider trading on the stock market is illegal, while insider trading on prediction markets is generally not — at least for now — and critics say that's a problem.
- It is against the rules on a platform like Kalshi — but that doesn't mean it'll land you in jail.
Friction point: Mansour alleged that insider trading is a problem on offshore prediction markets that are not regulated by the Commodity Futures Trading Commission, as Kalshi is.
- "Like any other regulated financial exchange, Kalshi has rules against market manipulation and abuse," Mansour said.
Reality check: Though the Polymarket bet on Maduro may have taken place offshore, Polymarket is coming to the U.S. after acquiring a CFTC-regulated exchange.
- In fact, the company is already available to a limited number of American users in beta form, though critics have said U.S. users have been able to circumvent geolocation restrictions and use the platform here before it was allowed.
- Polymarket's U.S. policy says "you should not trade" if "you possess material nonpublic information (MNPI) related to the event."
- Polymarket did not immediately respond to a request for comment.
Meanwhile, Polymarket has come under scrutiny for refusing to pay traders who bet the U.S. would invade Venezuela by a certain date.
- The prediction market clarified online that the rules of that particular contract require "U.S. military operations intended to establish control" and that "the snatch-and-extract mission to capture Maduro" does not qualify "as an invasion."
At the same time, prediction markets are becoming more normalized.
- Dow Jones — which publishes the Wall Street Journal — on Wednesday announced a deal to obtain data from Polymarket.
- Polymarket rival Kalshi had already struck a similar partnership with CNN and CNBC.
The bottom line: "Passing legislation in Congress in the current environment is of course pretty difficult," gambling industry consultant Dustin Gouker noted. "There has not been a material push at the CFTC or in Congress to rein in prediction markets or further regulate them as they have exploded in popularity in the past year."
