Today, we’re announcing an expansion of our internal capabilities and policies against insider trading and market manipulation. We’re launching new technological guardrails that preemptively block politicians, athletes, and other relevant people from trading in certain politics and sports markets. These efforts, which have been in the works for months, proactively address the CFTC’s guidance and Congressional bill proposals to prevent insider trading. Kalshi looks forward to engaging with regulators and other industry participants to make these efforts a standard across the industry.
The CFTC recently issued new federal regulatory guidance governing prediction markets. Some important aspects of the guidance relate to insider trading and market manipulation. Recently, several members of the U.S. Senate and House of Representatives have also introduced proposed legislation regarding these same issues.
All markets have bad actors, and we believe that staying ahead of bad actors means developing new technology and policies.
Here’s an overview of the new measures we put in place:
1/ Preemptive politician screening. We’ve launched tools that will aim to preemptively block political candidates if they try to trade on their own campaigns. Our policies have always prohibited this, and we already block elected officials like members of Congress. We have now built checks in our systems to also prevent candidates from trading on their own campaigns. An example of how this will work: we recently brought an enforcement action against a candidate who traded on his own election in violation of Kalshi’s exchange rules. Today’s update means that our systems will now aim to preemptively block these kinds of trades.
2/ Preemptive sports screening & new policy. We are also implementing a new policy where individuals involved in college and professional sports (including athletes, personnel, and referees) will be preemptively blocked from trading markets associated with sports they are involved in. These trades have always been banned, but in the past, we needed to investigate after trades were placed. After months of collecting and developing screening lists for both collegiate and professional sports leagues, and in partnership with our partners at IC360, known athletes, officials, and employees will be blocked from trading in associated markets.
The guardrails we built use state-of-the-art technology and screening lists, but no screening system is perfect, and motivated bad actors consistently try to find a way. To that end, we are also adding a whistleblower functionality straight in our market page, which makes it easier for our community to flag potential violations as they go through our public trading data.
Example:
Kalshi has always been defined by a commitment to compliance and regulation. Our firm belief is that prediction markets only work when users trust them. Traders on prediction markets want assurances that their counterparties are not cheating. We are committed to banning people who try to cheat. Ensuring market integrity is not just a goal – it is a cornerstone of our business model. Today is just one iteration; we will continue to innovate and improve our systems to protect consumers.