Two confidential cases recently resolved by our team

over a dozen have progressed into active cases. Customers have been curious about our procedures for identifying violations and upholding regulations, prompting us to share details on two recent cases of insider trading that we have resolved. Additional cases will be disclosed on our notices page, similar to practices followed by institutions like CME Group.

The first case pertains to a candidate who engaged in trading related to his own campaign for Governor of California, amounting to approximately $200, which he later publicized on social media. Such actions contravene a multitude of Kalshi regulations and have resulted in a penalty involving a 5-year ban from trading and a financial fine equivalent to ten times the initial trade amount. Notably, this candidate has since abandoned his gubernatorial aspirations in favor of running for Congress.

The second case involves an individual with insider knowledge who undertook trades valued at around $4,000 in YouTube streaming markets, violating Kalshi’s prohibitions on insider trading. As a consequence, this individual faces a suspension from trading for two years and a financial penalty equating to five times the initial trade size. In both instances, our monitoring systems flagged the trades, prompting our surveillance team to freeze the traders’ accounts. It is important to clarify that neither trader managed to withdraw any profits resulting from these trades.

The penalties meted out in these cases do not serve as definitive benchmarks for future instances. Rather, each situation is evaluated on a case-by-case basis, considering factors such as the trade amount and the specific rules violated. Following protocol, we have reported these incidents to the Commodity Futures Trading Commission (CFTC) as required, with Kalshi intending to donate the fines collected to an educational nonprofit focused on increasing consumer awareness around derivatives markets. Furthermore, we have introduced an independent Surveillance Audit Committee to provide regular reports on flagged trades, ongoing investigations, and cases referred for further action by authorities.

The methods employed in uncovering and scrutinizing these cases exemplify our commitment to ensuring fair and transparent trading environments. For instance, one case emerged from our Surveillance Department identifying a gubernatorial candidate engaging in trades linked to his campaign, prompting swift action. Subsequently, we initiated an investigation resulting in the candidate acknowledging the breach of exchange rules. Similarly, a separate case involving suspicious trading patterns in relation to a popular YouTube channel led to the discovery of an individual with inside information abusing their position for personal gain.

Both cases underscore the necessity of vigilance in monitoring and addressing potential violations within financial exchanges. While no system is infallible, we remain dedicated to combatting malpractice and upholding integrity within the trading landscape. By deterring bad actors, manipulators, and those seeking to undermine fair practices, we aim to uphold the principles of accountability and transparency in all transactions within our purview. For more updates, follow Kalshi on X: @Kalshi.