Former U.S. Representative George Santos agreed on Friday to settle Commodity Futures Trading Commission (CFTC) charges that he manipulated a Kalshi prediction-market contract tied to whether he would attend February's State of the Union address. Kalshi operates as a CFTC-regulated exchange where traders can buy positions on the outcomes of real-world events, with contract prices fluctuating based on market sentiment about each outcome's likelihood.

Under the CFTC order, Santos must disgorge $17,569.98 in profits, pay a civil monetary penalty of $17,500, comply with cease-and-desist orders, and observe a three-year trading prohibition. Santos neither admitted nor denied the agency's findings.

The CFTC determined that the conduct occurred between February 12 and February 25, characterizing it as manipulative activity in a contract whose underlying event was directly controlled by Santos himself.

How Santos Moved the Market

Kalshi users wagered more than $15 million on which political figures would attend the address. Santos took a "yes" position on his own attendance, then asked followers on X whether he should wear a "muted serious suit to the SOTU or a bedazzled one," per Forbes. The price of that position subsequently rose, and Santos exited at a profit, per The Hill.

He repeated this pattern multiple times, publicly narrating a trip toward Washington while trading based on the market reactions his social media posts generated. The day before the address, Santos stated in a video that he would be present in the gallery. The following evening, he posted that watching from an airport television had not been his original plan.

The CFTC found that Santos acted "willfully or, at the very least, recklessly" and knowingly made misleading public statements to move the contract price in his favor.

Kalshi Detected the Activity and Notified Regulators

Kalshi identified the suspicious trading, froze Santos's account, and referred the matter to both the CFTC and the Department of Justice, per NOTUS. Head of Enforcement Robert DeNault stated that the firm provided "the evidence needed to bring action against Santos." DeNault added that Kalshi intends to pursue a separate legal process for breaches of exchange rules and to compensate affected traders for any losses incurred.

As Cryptopolitan previously reported, Kalshi made more than 20 referrals to regulators and law enforcement in the first quarter of 2026, opened over 150 insider-trading investigations, and blocked more than 100 suspected trades before execution. The platform has also previously banned a California gubernatorial candidate for betting on their own race.

Santos Attributes Change of Plans to Travel Disruption

Santos's attorney, Joseph W. Murray, stated that his client had booked flights and a hotel with the intention of attending, but reversed course after winter storms disrupted East Coast travel and his flight was canceled. Murray said that once Santos realized he could not safely attend, he adopted a "no" position and concealed neither the original plan nor the change.

"There was absolutely no intent to deceive any person, nor intent to manipulate any market," Murray stated.

Murray noted that the contract was the first prediction-market bet Santos had ever placed and that his client cooperated with the CFTC investigation. However, three individuals with direct knowledge of the trades alleged the opposite, claiming Santos deliberately misled the public and profited from doing so.

Broader Implications for Prediction-Market Regulation

The ruling arrives as the CFTC struggles to retain exclusive jurisdiction over event-based contracts. The commission has filed lawsuits against nine states and, on July 14, invoked its emergency powers to prevent a Michigan court from compelling Kalshi to void executed trades. Massachusetts, Michigan, Nevada, New York, and Washington have each won rulings restricting the platform's operations. Several of those states have argued that event-based contracts amount to unlicensed gambling under state law.

Friday's order provides Kalshi with a concrete example in its broader dispute with state regulators. The exchange can now point to its own monitoring system functioning as intended: Kalshi detected the suspicious activity, froze the account, referred the case to federal regulators, and the CFTC brought a formal enforcement action.

The case also highlights a relatively novel form of prediction-market manipulation. Santos was not merely trading on public events — he was trading on an outcome he personally controlled while making public statements that influenced other traders' expectations of that outcome. Event contracts present a regulatory challenge that traditional insider-trading doctrine was not designed to address: the subjects of the contracts are frequently individuals who can directly affect the outcome. The Santos settlement marks an early test of how the CFTC applies commodities law to this dynamic.

Santos represented New York in Congress from January 2023 until his expulsion in December 2023. He was subsequently sentenced to 87 months in prison for wire fraud and aggravated identity theft before President Donald Trump commuted the sentence last fall.