Key Takeaways

• On July 31, 2026, the Commodity Futures Trading Commission (CFTC) settled its first-ever enforcement action alleging market manipulation in a prediction market, finding that former Congressman George Santos traded an event contract based on his own attendance at the 2026 State of the Union address while making misleading public statements and omissions designed to move the contract’s price in favor of his trading positions.
• Santos agreed to disgorge approximately $17,500 in trading profits, pay a $17,500 civil monetary penalty and accept a three-year ban from trading on any CFTC-registered entity.
• Prior enforcement actions relating to prediction markets have focused on insider trading. Here, because Santos traded on his own information, insider trading prohibitions did not apply. In these circumstances, a manipulation theory could still subject traders to potential liability if they trade event contracts in which they have influence—and engage in activity designed to exercise that influence—over the underlying event. 
• Rules of certain prediction markets also prohibit trading event contracts where the trader can influence the event, regardless of whether such influence is exercised. As a result, certain trading conduct may violate exchange rules relating to prohibited trading practices even if such conduct does not rise to the level of insider trading or manipulation.

Background: The Charges Against Santos

The CFTC found that Santos on multiple occasions traded an event contract based on whether he would attend the 2026 State of the Union address, held on February 24, 2026. According to the CFTC’s order, Santos took an initial “Yes” position on February 12 and continued to buy additional “yes” contracts through February 22. Early on February 22, Santos posted on X asking whether he should “wear a muted or serious suit to the SOTU… or a bedazzled one?” The “Yes” contract price rose sharply within hours, and Santos then exited his entire Yes position at a profit.

Over the next two days, Santos’s public statements tracked, and appeared to drive, further fluctuations in the event contract’s price. On February 23, he posted that his trip had become “a nightmare” and suggested the State of the Union might be cancelled due to weather, after which the “Yes” price fell substantially. Hours later, he posted a video insisting he would attend, after which the price rose again. Approximately 40 minutes after that video, Santos began building a “No” position. On the day of the address, Santos posted that “watching SOTU from an airport tv was not part of the plan,” after which the price of the “No” position rose significantly. Santos then exited his “No” position at a profit.

Under the settlement, Santos agreed to disgorge approximately $17,500 in trading profits, pay a $17,500 civil monetary penalty and accept a three-year ban from trading on any CFTC-registered entity.

The CFTC’s First Manipulation Charge Involving a Prediction Market

The order is the CFTC’s first-ever enforcement action alleging market manipulation in a prediction market. The order found that Santos engaged in manipulative conduct in violation of Section 6(c)(1) of the Commodity Exchange Act (CEA) and Regulation 180.1(a) by trading an event contract “where he could influence the outcome of the underlying event and engag[ing] in activity designed to affect the price” of the event contract. The Commission also found that Santos made misleading public statements and material omissions about his travel plans for the purpose of moving the contract price in favor of whichever position he then held.

Prior CFTC prediction market enforcement matters of note — including the parallel CFTC/SDNY actions against Gannon Ken Van Dyke (an Army soldier who traded event contracts relating to the ouster of Venezuelan President Nicolás Maduro using classified information obtained through his military service) and Michele Spagnuolo (a Google engineer who traded event contracts on Google’s “Year in Search” rankings using internal, nonpublic search data) — have proceeded on insider-trading theories. Those cases allege that the defendants misappropriated material nonpublic information (MNPI) in breach of a duty owed to the source of the information and used that information to trade event contracts for personal benefit.

Santos, by contrast, traded on his own information — his own travel plans and his own decision whether to attend a public event. He then used public statements to shape market expectations about his conduct while positioned to profit from the resulting price moves. His attendance plans may have been MNPI, but information about one’s own future conduct cannot be “misappropriated” from oneself, and Santos owed no duty of trust or confidence to any external source with respect to that information. That is presumably why the CFTC charged his conduct as manipulation, not insider trading.

The analysis would be different, however, if someone other than Santos had traded on the same information. If, for example, a Santos staffer or associate had learned of his undisclosed flight cancellation and traded the State of the Union contract before that fact became public, the staffer could face an insider-trading charge: the information would have been misappropriated from Santos, potentially in breach of a duty the staffer owed to Santos (e.g., as an employee, agent or otherwise a person entrusted with that information) not to trade on or disclose it.

“Influence” Prohibited – Beyond Insider Trading and Manipulation

Santos is not the first politician to run into trouble trading event contracts about himself. On February 25, 2026, Kalshi disciplined a candidate for governor of California who traded an event contract relating to his candidacy (fined $2,246.36 and suspended for five years). Similarly, on April 21, 2025, Kalshi disciplined a candidate in the Democratic primary for Virginia’s U.S. Senate election who traded an event contract relating to his candidacy (fined $6,229.30 and suspended for five years).

In each case, Kalshi charged the conduct as a violation of Rule 5.17(z) of its exchange rules. That rule states:

If a Trader is a decision maker, either directly or indirectly, or has any influence, either directly or indirectly, no matter the scale and importance of the influence, on the outcome of the Underlying (event) of any Contract, that Trader is prohibited from attempting to enter into any trade or entering into any trade, either directly or indirectly, on the market in such Contracts.

This rule is far broader than anything in the CEA or the CFTC’s regulations. It does not require misappropriation of MNPI, a breach of duty or a manipulative act designed to move a price — mere influence, “no matter the scale,” is disqualifying.

Takeaways for Market Participants

These cases illustrate a unique structural feature of prediction markets that sets them apart from traditional securities or commodities markets: the universe of people who can influence the outcome of an event contract can be far larger than the universe of people who can influence, say, a public company’s stock price. In equities markets, the ability to move a company’s fortunes is generally confined to a relatively small set of insiders, officers and directors. In prediction markets, by contrast, contracts can settle based on the discretionary conduct of ordinary individuals—whether a candidate stays in a race, whether a public figure attends an event, what an executive says in an interview. Any of those individuals, and potentially the many people around them, may be positioned to influence the outcome to some degree. Given the breadth of Kalshi’s Rule 5.17(z), this prohibition could catch traders unaware.

CFTC guidance has emphasized that contracts that resolve or settle based on the actions of a single individual or small group of individuals may create a heightened potential for manipulation, yet many such contracts remain widely available for trading. Individuals who are the subject of attendance or mention markets should treat the Santos settlement as a clear signal that the CFTC will pursue manipulation charges against the subject of a contract who trades on, and makes public statements timed to his or her own conduct, even without any misappropriated information.

Firms and individuals active in prediction markets should therefore think beyond insider trading and manipulation risk. Investment firms that are active in these markets should evaluate their policies and procedures in light of these cases. Depending on the circumstances, it may be advisable to restrict, or require pre-clearance for, trading or public commentary regarding event contracts tied to matters the trader, the firm or an affiliated person can influence. 

Exchange surveillance is likely to catch conduct before regulators, and exchanges increasingly serve as the first line of defense against abusive trading practices in event contracts. Exchanges also routinely refer matters to the CFTC, meaning that an exchange investigation could be just the first step in a lengthier regulatory process. Conduct that violates exchange rules but falls short of actionable fraud or manipulation could still result in significant exchange-level sanctions.