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Kalshi kicked three congressional candidates off its platform on April 22. The reason? They bet on their own races.
The prediction market suspended them for five years and hit them with fines between $539.85 and $6,229.30. Kalshi called it political insider trading, plain and simple. The company said it caught the candidates through new engineering safeguards rolled out in March, designed specifically to stop this kind of thing. The platform didn’t name the candidates publicly, but the fines and bans are real. Each candidate wagered different amounts on their own electoral outcomes, which Kalshi’s compliance team flagged pretty fast once the new systems went live.
Blumenthal Questions CFTC Oversight
Senator Richard Blumenthal sent a letter to the CFTC on April 21, one day before Kalshi’s announcement. He wants answers.
His main gripe? How does the CFTC actually resolve disputed bets on prediction markets? Blumenthal zeroed in on military action contracts, the kind Kalshi and Polymarket both run. These contracts depend on fuzzy definitions—words like “invasion” that people interpret different ways. When a contract settles and traders disagree about whether the event actually happened, who decides? Blumenthal thinks the rules are too vague. He also took shots at Polymarket’s know-your-customer practices, saying they’re not strict enough. The senator referenced his own bill, the Prediction Market Security & Integrity Act, which he’s been pushing to create clearer federal guidelines for these platforms. Right now, there’s no binding framework for how disputes get handled, and Blumenthal thinks that’s a problem. The CFTC has a comment deadline coming up on April 30, and he wants them to spell out their role before then.
Platforms go crypto.
Perpetual Futures Enter the Game
Kalshi’s moving into cryptocurrency perpetual futures. Launch date looks like April 27, based on a teaser video the company put out. Details are scarce, but the shift is big. Kalshi’s been focused on event contracts—elections, economic data, stuff like that. Perpetuals are different. They’re leveraged derivatives that track crypto prices without expiration dates, popular with traders who want exposure without holding actual coins. Polymarket’s doing something similar. The offshore platform signaled it’s exploring perpetuals too, though it hasn’t set a firm date. Both companies are branching out from their core business, which means they’ll compete with Coinbase and Cboe, two exchanges that already offer these products. Kalshi plans to operate under U.S. regulatory oversight, keeping everything CFTC-compliant. Polymarket, based offshore, has more flexibility to expand globally without the same constraints. The competition’s about to get interesting. Established crypto venues have infrastructure and liquidity. Kalshi and Polymarket bring user bases built on prediction markets, but perpetuals require different tech and risk management. It’s unclear how fast they can scale or whether traders will migrate from existing platforms.
New York Attorney General Letitia James filed a lawsuit against Coinbase and Gemini. Her office says their prediction market offerings are illegal gambling under state law. The case adds another layer of legal uncertainty for the industry. And there’s criminal charges now. A U.S. Army soldier got hit with insider trading accusations for allegedly making $409,881 on prediction markets using classified information. That’s a first. Nobody’s faced criminal prosecution for this kind of conduct before. The soldier reportedly used Polymarket contracts, betting on outcomes he knew about through his military access. The case went public recently, and it’s raising questions about how platforms police insider information. Kalshi’s self-policing caught the congressional candidates, but that was after they’d already placed bets. The Army case involved classified data, which is harder to detect without cooperation from government agencies.
Kalshi’s enforcement actions show the platform can regulate itself to some degree. The company identified the candidates, fined them, and banned them—all without CFTC intervention. But Blumenthal’s letter suggests self-regulation isn’t enough. He wants federal rules that apply across the board, not just voluntary compliance from individual platforms. The senator’s concerns about disputed contracts highlight a gap. When traders disagree about whether a contract’s conditions were met, there’s no clear process for resolution. Some platforms use their own judgment. Others rely on third-party data providers. Neither approach is standardized, and that creates room for manipulation or error.
The April 30 deadline matters. The CFTC has to respond to public comments about prediction market oversight. Whatever they say could shape the industry for years. Will they establish binding rules for dispute resolution? Will they require stricter know-your-customer practices? Or will they leave it to platforms like Kalshi and Polymarket to figure out on their own? Nobody knows yet. The insider trading case complicates things. If a soldier can profit from classified information on prediction markets, what’s stopping others? Kalshi’s safeguards caught candidates betting on themselves, but that’s a narrow use case. Detecting insider information in broader contexts—military actions, corporate announcements, economic data—is way harder. Platforms don’t have access to classified databases or corporate email servers. They rely on patterns and anomalies, which can miss sophisticated actors.
Kalshi and Polymarket’s pivot to perpetuals is partly about diversification. Event contracts are seasonal. Elections happen every few years. Economic data releases are regular but limited. Perpetuals offer continuous trading, which means more volume and more revenue. But the move also brings new risks. Perpetuals are leveraged products. Traders can lose more than they deposit. Platforms need robust risk management systems to prevent cascading liquidations and market disruptions. Coinbase and Cboe already have those systems. Kalshi and Polymarket are building them from scratch.
The legal challenges won’t disappear. New York’s lawsuit against Coinbase and Gemini argues that prediction markets on U.S. elections constitute gambling, not financial instruments. If James wins, it could set a precedent that forces platforms to shut down certain contracts or face state-level prosecution. The case is still early, but the implications are huge. Kalshi operates under CFTC approval, which it thinks shields it from state gambling laws. Polymarket, offshore, avoids U.S. jurisdiction entirely. Coinbase and Gemini are caught in between, offering products that might be legal under federal commodity law but illegal under state gambling statutes.
Blumenthal’s proposed legislation could clarify some of this. The Prediction Market Security & Integrity Act would establish federal standards for platform operations, dispute resolution, and customer protections. But Congress hasn’t moved on it yet, and there’s no timeline for a vote. Until then, platforms operate in a gray zone, balancing CFTC approval with state-level legal risks and self-regulation with federal scrutiny.
The soldier’s case is going to trial. Prosecutors say he earned over $400,000 betting on events he knew would happen because of his military access. If convicted, it’s the first criminal insider trading case tied to prediction markets. That precedent could change how platforms think about compliance. Right now, most focus on preventing self-dealing and obvious manipulation. Detecting insider information requires different tools—behavioral analysis, transaction monitoring, cross-referencing with public records. Kalshi’s March safeguards caught the congressional candidates, but those were low-hanging fruit. The Army case involved classified data, which platforms can’t access or verify. They’re dependent on external enforcement, which means gaps will persist.
Kalshi’s fines ranged from $539.85 to $6,229.30, based on how much each candidate wagered. The amounts are small compared to the soldier’s alleged $409,881 profit, but the principle is the same. People with inside information shouldn’t profit from it. Kalshi enforced that principle. The question is whether other platforms will do the same, and whether federal regulators will require it.
Frequently Asked Questions
Why did Kalshi fine the congressional candidates?
Kalshi fined three congressional candidates between $539.85 and $6,229.30 for betting on their own races, which the platform classified as political insider trading, and banned them for five years.
What is Senator Blumenthal asking the CFTC to do?
Senator Blumenthal sent a letter on April 21 asking the CFTC to clarify how it resolves disputed bets on prediction markets, particularly contracts involving military actions and vague definitions, and called for stricter oversight through his Prediction Market Security & Integrity Act.
When is Kalshi launching cryptocurrency perpetual futures?
Kalshi is expected to launch cryptocurrency perpetual futures around April 27, based on a teaser video released by the company, though specific details about the offering remain limited.
