Former congressman George Santos, already ousted from office and convicted of wire fraud, is now under investigation for insider trading on the online prediction market Kalshi. The probe centers on a bet placed on whether Santos would attend President Donald Trump’s February State of the Union address. Santos publicly announced he would be there, sparking a surge in wagers, but he never showed up, instead posting from an airport as the speech aired.

The Commodity Futures Trading Commission (CFTC) and Department of Justice (DOJ) are examining whether Santos used his insider knowledge to rig the market—betting on his own absence while misleading the public. Kalshi, a federally regulated platform where users bet on real-world outcomes, has cooperated with investigators, using AI to flag suspicious activity. Santos has declined to confirm or deny having a Kalshi account.

The State of the Union Bet

On the day before Trump’s address, Santos posted on X: “I’m going to be there for the State of the Union in the gallery, guys.” The announcement triggered a spike in bets on his attendance. However, as lawmakers gathered, Santos was nowhere to be seen. He later wrote: “Watching SOTU from an airport tv was not part of the plan! FML.” The discrepancy between his public statement and his actions forms the core of the insider trading allegation.

Insider trading in prediction markets involves using non-public information to place bets. In Santos’s case, if he knew he would not attend—perhaps due to a personal decision or logistical issue—and bet on that outcome while publicly claiming he would attend, he may have violated CFTC rules. The CFTC’s director of enforcement, David Miller, has called insider trading in prediction markets a top priority, noting that “a myth has spread that insider trading is permissible, even encouraged.”

Background: George Santos’s Legal Troubles

George Santos, a Republican from New York, was expelled from Congress in December 2023 after a scathing House Ethics report detailed widespread fraud in his campaign finances and background. He was later indicted on 23 federal counts, including wire fraud, money laundering, and theft of public funds. In August 2024, he pleaded guilty to two counts and was sentenced to seven years in prison.

Yet President Trump commuted Santos’s sentence in early 2025, just three months into his term, a move that drew widespread criticism. Santos walked free only to land in fresh legal trouble. The insider trading investigation marks his second major legal battle in under two years.

Kalshi: A Regulated Prediction Market

Kalshi is one of the few federally regulated prediction markets, operating under the oversight of the CFTC. Unlike offshore betting sites, Kalshi is subject to U.S. laws against manipulation and insider trading. The platform allows users to place bets on outcomes in sports, entertainment, politics, and economics. Contracts are traded like commodities, and the CFTC treats insider trading as a criminal offense.

Donald Trump Jr. is listed as a strategic advisor to Kalshi, adding a political dimension to the Santos case. However, there is no indication that Trump Jr. was involved in the alleged insider trading.

Federal Crackdown on Prediction Market Insider Trading

The Santos investigation is part of a broader crackdown. In April 2025, U.S. prosecutors charged a U.S. Army Special Forces soldier with insider trading on the prediction market Polymarket for betting that Venezuelan leader Nicolás Maduro would be captured. More recently, the DOJ charged a Google software engineer for using internal company data to make over $1.2 million on Polymarket.

Jay Clayton, U.S. attorney for the southern district of New York, stated: “The American people want this greed-driven conduct investigated and prosecuted.” However, enforcement is challenging. Proving someone acted as an “insider” in a decentralized prediction market is difficult. The markets are also global, with trading expected to grow to $1 trillion by 2030, according to investment firm Bernstein.

Adding to the complexity, two CFTC officials were reportedly put on leave after raising concerns about the agency’s handling of prediction market cases, as reported by the New York Times.

Challenges in Proving Insider Trading

For the DOJ and CFTC, building a case against Santos will require clear evidence that he placed bets on his no-show and that his public post was a deliberate misrepresentation. The agencies must prove Santos had access to non-public information about his own plans, which is a straightforward legal argument, but tying that directly to a specific trade on Kalshi is trickier.

Kalshi’s cooperation may provide crucial data. The platform reportedly uses AI to detect unusual trading patterns and forwards suspicious accounts to federal authorities. If Santos placed large bets on the “no attendance” contract shortly after his public announcement or in a way that seemed contradictory, that could be flagged.

Santos has a history of deceptive behavior, which could work against him. During his brief congressional tenure, he fabricated major parts of his biography, including claims of Jewish heritage and a degree from Baruch College. The Ethics Committee found he used campaign funds for personal expenses, including Botox and OnlyFans subscriptions.

Legally, Santos’s defense may argue that he simply changed his mind about attending the State of the Union, which is not illegal. However, the timing and his cryptic airport post suggest he may have been following a pre-planned schedule. The investigation will likely examine his communications, travel records, and Kalshi account activity.

Trump’s Pardon and Its Fallout

Trump’s commutation of Santos’s sentence was controversial. Critics argued it rewarded a serial liar and undermines accountability. Santos had been a vocal Trump supporter during his campaign, which may have influenced the president’s decision. Now, Santos is again entangled with Trump-related events—this time the State of the Union—and his attendance bet has become a symbol of the blurred lines between politics, gambling, and insider knowledge.

The case also raises questions about prediction market regulation. While the CFTC has authority over Kalshi, the rapid growth of these platforms outpaces regulatory capacity. The Santos probe could set a precedent for how strictly the U.S. enforces insider trading laws in what many see as a relatively new financial frontier.

What’s Next for Santos?

As of now, Santos has not been charged in the insider trading investigation. He has retained legal counsel and maintains a low profile. The CFTC and DOJ are still gathering evidence, including testimony from witnesses and analysis of financial records. If charged, Santos could face additional prison time, though a conviction would require proving intent to defraud.

The public reaction has been mixed. Some see the investigation as long-overdue accountability for a man who has repeatedly flouted the law. Others view it as a politically motivated probe given his connection to Trump. Either way, the former congressman remains a magnet for controversy, and his story continues to unfold against a backdrop of legal and ethical debates over prediction markets.

For now, whether Santos faces charges is, as one commentator noted, “anyone’s bet.” The investigation may take months to conclude, as federal agencies sort through complex trading data and jurisdictional questions. The outcome will likely shape how similar cases are handled in the future, especially as prediction markets gain mainstream adoption.

Source: MSN News