Kalshi CEO: Prediction Markets Catch Insider Trading in Plain Sight

Prediction markets have grown into a multi-billion-dollar corner of US financial infrastructure, and they are attracting the kind of enforcement attention that normally follows rapid growth. Speaking at DC Fintech Week on 14 October 2026, Kalshi CEO Tarek Mansour made the case that his platform's very scale and transparency act as a surveillance mechanism: bad actors, he argued, are visible the moment they move. That claim sits alongside a rapidly lengthening list of real enforcement actions, a live CFTC-versus-states jurisdiction dispute, and questions that every compliance team and digital asset accounting function needs to answer now.

What Mansour Actually Said, and Why It Matters

Mansour's framing at DC Fintech Week was deliberate. He described the combination of trade volume and public transparency as "a blessing and a curse," then offered a blunt assessment of what that means for misconduct: "You're committing crime in broad daylight, and that makes it so much easier to kind of police that sort of activity."

The George Santos case as a proof point

The CEO cited the permanent ban of former Representative George Santos as the clearest example of the model working. Santos was accused of trading on a contract tied to whether he would attend the State of the Union, using knowledge he presumably had before the general public. Mansour said the platform received around 100 whistleblower alerts within minutes of the trades appearing. "We caught it," he said. Santos became the first person permanently banned from the platform under that set of circumstances.

The episode illustrates something important for compliance professionals: crowd-sourced surveillance, layered on top of platform-level transaction monitoring, can surface anomalies faster than a traditional suspicious activity reporting cycle. That is architecturally different from how most regulated financial markets operate, and it has direct implications for how firms should think about AML controls when they or their clients interact with these platforms.

The Enforcement Cases Piling Up in 2026

Santos's ban is one of three significant enforcement events the industry has had to absorb this year alone.

The Army soldier charge

In April, an active-duty US Army soldier was charged with using confidential government information to place trades on a prediction market platform ahead of former Venezuelan President Nicolás Maduro's reported capture. The allegation is that access to classified or operationally sensitive information gave the trader material non-public knowledge, which he then monetised through a publicly accessible market. The case is the clearest signal yet that traditional securities-law insider trading theory is being applied to event-contract markets, even where the underlying "asset" is a geopolitical outcome rather than a company's earnings.

The White House teleprompter settlement

A former White House teleprompter operator agreed to pay more than $172,000 to settle charges that he used advance access to speech content to profit on Kalshi. The settlement is notable because it involves someone who was not a trader by profession and whose informational advantage was operational rather than financial. For compliance officers, this expands the definition of who counts as an insider in this context: it is not limited to politicians, executives, or market professionals.

What these cases share

All three scenarios involve the use of non-public information to gain a pricing edge on an event-based contract. Regulators and platforms are treating the conduct as analogous to insider trading in conventional markets, even though the legal framework for prediction markets remains genuinely unsettled. That gap between enforcement practice and regulatory clarity is exactly the kind of environment that creates accounting and compliance risk for firms that have exposure to these instruments.

The Jurisdiction Battle: CFTC vs. the States

The enforcement picture is complicated by a live dispute over who actually has authority to regulate prediction markets. The CFTC has taken the position that most contracts on platforms like Kalshi are swaps and therefore fall under its exclusive federal jurisdiction. Several states disagree, arguing that these platforms are operating gambling businesses in violation of state gaming laws and without paying the taxes those laws typically require.

Litigation and the Supreme Court trajectory

States have sued platforms directly, and the CFTC has in turn sued states to defend its jurisdictional position. Courts in different states have reached different conclusions, creating a patchwork that is practically unworkable for any nationally active platform. Mansour acknowledged at DC Fintech Week that the real choice, in his view, is not between state and federal regulation but between regulated US markets and offshore ones. If the regulatory environment becomes untenable, he suggested, activity migrates abroad rather than disappearing.

The trajectory toward the Supreme Court matters enormously for accounting teams. If the Court ultimately confirms CFTC jurisdiction, prediction market contracts will be treated as swaps for regulatory purposes, with all the reporting, margining, and counterparty documentation obligations that follow. If state-level gaming frameworks prevail instead, the tax treatment shifts, potentially treating gains as gambling income rather than trading income, with very different deductibility rules for losses.

For context on how the CFTC's broader crypto and digital asset mandate is being contested, see our earlier analysis of the CFTC crypto framework and its 2028 election deadline risk.

Legislative activity running in parallel

Lawmakers on both sides of the aisle have introduced bills over the past year aimed at restricting trades by anyone with access to material non-public information, specifically in the prediction market context. At least one state has already enacted restrictions preventing state officials from using non-public information to profit from these markets. The legislative landscape is therefore moving even while the court cases remain unresolved, adding another layer of uncertainty for compliance planning.

AML and KYC Obligations: Where Prediction Markets Sit Today

The AML and KYC obligations that apply to prediction market platforms depend almost entirely on how they are classified by federal and state regulators, a question that, as noted above, is not yet settled. What is settled is that the CFTC-registered platforms operating in the US are subject to the agency's customer protection rules, and that the Bank Secrecy Act's suspicious activity reporting requirements apply to futures commission merchants and swap dealers. Whether a given prediction market firm falls cleanly into one of those categories is a fact-specific analysis.

Implications for accounting firms and CFOs

For accounting firms advising clients with prediction market exposure, and for CFOs whose entities hold or have traded event contracts, several practical questions need answers before year-end:

• Are the contracts being classified as derivatives, gambling instruments, or something else for financial reporting purposes? The answer affects balance sheet presentation and any fair value measurement requirements under US GAAP or IFRS.
• If a client settled gains from prediction market trades, how are those gains characterised for federal income tax purposes? The swap versus gambling income distinction carries real rate and deductibility consequences.
• Has the firm considered whether its own employees or those of its clients might have access to material non-public information that could trigger insider trading exposure if they trade on these platforms? The Santos and teleprompter cases suggest the risk is not confined to sophisticated market participants.

Digital asset accounting software used to record and classify these positions needs to be configured to handle the instrument type correctly. Misclassifying an event contract as a simple spot trade will produce errors in both the financial statements and the tax return. Teams should review their chart-of-accounts mapping and instrument taxonomy now, while the regulatory picture is still forming, rather than waiting for a court ruling that may or may not arrive before the filing deadline.

For a related enforcement and licensing parallel from Asia, the analysis of how Kalshi and Polymarket were excluded from the FTC's sports gambling probe provides useful context on how regulators are drawing boundaries around these platforms.

What the Transparency Argument Gets Right, and What It Misses

Mansour's "broad daylight" argument has genuine analytical merit. Public order books and on-chain settlement records do create an audit trail that is, in some respects, more legible than the over-the-counter equity and options markets where insider trading has historically been hardest to detect. The crowd-sourced whistleblowing that flagged the Santos trades within minutes is a real operational advantage.

The limits of transparency as a compliance substitute

Transparency is necessary but not sufficient. The Army soldier case illustrates the gap: the trade was visible, but the information asymmetry that made it improper was classified and therefore not visible to the public or to the platform at the time of execution. Detection came after the fact. That sequence, trade first, detection later, is identical to the pattern in conventional insider trading cases and does not eliminate the harm to market integrity in the interim.

For compliance teams, this means that relying on platform surveillance alone is not an adequate control. Firms that allow employee participation in prediction markets should consider whether their existing personal account dealing policies extend to event contracts, and whether their AML transaction monitoring systems are configured to flag concentration or timing anomalies in those instruments.

Frequently Asked Questions

Are prediction market gains taxed as trading income or gambling income in the US?

That question is currently unsettled and depends on how the underlying contracts are classified. If a platform is CFTC-regulated and the contracts are treated as swaps, gains would generally follow derivatives tax treatment, including potential Section 1256 mark-to-market rules for certain contracts. If state gaming law ultimately governs instead, gains could be taxable as gambling income with different loss deductibility rules. Firms should document their classification rationale now and revisit it as the legal landscape develops.

Do standard AML and KYC obligations apply to prediction market platforms?

CFTC-registered platforms operating in the US are subject to the agency's customer protection rules and, as futures commission merchants or swap dealers, to Bank Secrecy Act requirements including suspicious activity reporting. The precise scope depends on the platform's registration status and the instrument types it offers. Unregistered or offshore platforms may fall outside these obligations, which itself creates risk for institutional counterparties.

How should a CFO classify prediction market contracts on the balance sheet?

Under US GAAP, the starting point is ASC 815 (derivatives and hedging). If the contract meets the definition of a derivative and no scope exception applies, it would be measured at fair value through earnings. Under IFRS, IFRS 9 governs. The classification analysis is fact-specific and should be documented. Misclassification affects both the income statement and any hedge accounting eligibility.

What does the CFTC-versus-states dispute mean for firms with multi-state clients?

It means the compliance posture for a client active in multiple states may vary by state until the Supreme Court or Congress resolves the question. A firm operating legally under CFTC rules in one state may simultaneously be in breach of a state gaming statute in another. Compliance teams should map client exposure by state and monitor the litigation calendar closely.

Should employee personal account dealing policies cover prediction markets?

Yes, if employees could plausibly have access to material non-public information relevant to the events being traded. The White House teleprompter and Army soldier cases show that the relevant information does not have to be financial in nature. Firms in government contracting, defence, healthcare, and politics-adjacent industries face elevated exposure and should review their policies accordingly.

Source: The Block