Daily News 19

Tag: Prediction markets

  • Kalshi Imposes First Lifetime Ban on George Santos for Market Manipulation

    Kalshi Imposes First Lifetime Ban on George Santos for Market Manipulation

    Kalshi, the regulated U.S. prediction-market exchange, has issued its first permanent trading ban, barring former Representative George Santos and fining him more than $70,000 for allegedly manipulating a contract linked to his own attendance at a public event, according to CoinDesk.

    The penalty, detailed in a disciplinary record published on Kalshi’s website and confirmed by a company spokesperson, is the most severe sanction the exchange has imposed. It comes as prediction markets face growing scrutiny over whether they can prevent trading based on public figures’ actions and non-public information.

    What Kalshi Says George Santos Did

    Kalshi’s disciplinary record says Santos made a series of large trades in a market whose contracts depended on whether he attended an appearance by President Donald Trump earlier this year. The record says Santos then made public statements about his attendance in an effort to influence the market’s outcome.

    Santos ultimately bet that he would not attend the event, and he did not appear. Kalshi imposed the fine in the final days of August, in addition to banning him from the platform for life.

    Santos did not respond to CoinDesk’s request for comment. He was expelled from Congress in 2023 amid criminal fraud investigations and was serving a prison sentence when Trump commuted his sentence last year.

    Kalshi Announces Broader Enforcement Action

    Kalshi said the Santos case was one of five new enforcement matters. The other four traders received temporary bans after cooperating with investigators.

    The exchange described the cases as part of its responsibility under its regulations to serve as a first line of defense against market manipulation. A spokesperson said Santos “faces additional financial penalties and will be banned permanently from trading on Kalshi given his lack of cooperation.”

    The action followed a separate Commodity Futures Trading Commission order issued Friday, August 28. Under that order, former White House aide Gabriel Perez was directed to pay more than $170,000 and was barred from trading for three years over bets on “mention” contracts involving Trump.

    The CFTC said Perez’s penalties were reduced because of what it described as exemplary cooperation. Perez had worked as a teleprompter operator. “Mention” contracts pay out when prominent figures speak specific words during public addresses.

    Why Prediction-Market Enforcement Matters

    Prediction markets have spent the past year seeking to reassure regulators and institutional partners that their platforms can resist manipulation. That effort has gained importance as companies such as Cantor Fitzgerald open Kalshi markets to institutional clients and trading volumes increase.

    Self-enforcement is a key part of that argument. Platforms that investigate suspicious activity and impose penalties can cite those actions as evidence that their compliance systems are working.

    Rival platform Polymarket has said it uses machine learning, blockchain analytics, trade surveillance and open-source research to identify unusual activity. The company says it has referred more than 100 cases to authorities, including bets linked to a U.S. soldier accused of using classified information to wager on the capture of Venezuela’s Nicolás Maduro and possible insider trading before U.S. military action in Iran.

    Polymarket has also said its systems block the vast majority of U.S. users from accessing its international platform, as required under a 2022 settlement with the CFTC.

    Kalshi’s disciplinary record illustrates how a lightly monitored market tied to one person’s behavior can become vulnerable to manipulation. BlockchainReporter has examined a similar dynamic in coverage of sophisticated traders’ structural advantage on Kalshi.

    Key unanswered questions include how far federal scrutiny will extend and whether other prediction-market platforms will impose permanent bans of their own. Kalshi has said federal authorities have reportedly examined the Santos trades, while the wider regulatory environment—including state efforts to prohibit prediction markets—suggests that the industry’s enforcement practices will remain under close scrutiny through the U.S. midterm elections.

  • Alpaca Opens Brokerage Infrastructure to Kalshi Event Contracts

    Alpaca Opens Brokerage Infrastructure to Kalshi Event Contracts

    Kalshi Partners With Alpaca to Expand Prediction Markets Beyond the US

    Kalshi is partnering with brokerage infrastructure provider Alpaca to expand access to its event contracts outside the United States.

    The agreement comes as financial infrastructure firms increasingly add Kalshi contracts to their platforms. Finance Magnates reported that Alpaca recently registered as a futures commission merchant (FCM) with the Commodity Futures Trading Commission, while Apex launched an API enabling brokers and fintech companies to offer Kalshi contracts without building their own FCM infrastructure or direct exchange connectivity.

    Tony Lee, Alpaca’s chief brokerage officer. Source: LinkedIn

    Alpaca Customers to Gain Access to Kalshi Contracts

    Under the agreement, financial institutions using Alpaca’s technology will be able to offer Kalshi contracts through their existing brokerage infrastructure. Availability will remain subject to regulatory approval in each market.

    Tony Lee, Alpaca’s chief brokerage officer, said customer demand was behind the company’s move into prediction markets.

    “Our mission is really to open up financial services to as many people around the world as possible,” Lee said. “You really have to go where the customer demand is.”

    Alpaca works with more than 300 financial institutions and reaches around 14 million brokerage accounts globally. Kalshi said the network could help support its expansion into additional markets.

    Alpaca reaches 14 million brokerage accounts across more than 300 financial institutions worldwide, giving Kalshi a potential route for international expansion.

    Alpaca API Supports Kalshi’s International Expansion

    Kalshi Vice President of Business Development Max Crowley said Alpaca’s reputation and technology were important to the partnership.

    “They’re a trusted brand, they’re technology forward,” Kalshi Vice President of Business Development Max Crowley said. “This technical partnership enables that.”

    Kalshi has also expanded through other financial firms. In June, the company partnered with Canadian financial firm Wealthsimple to offer its markets in Canada.

    Alpaca’s API has about 83,000 monthly users and enables developers to build trading applications. Its infrastructure could also support automated trading activity in prediction markets.

  • Hyperliquid Gets Its First HIP-4 Outcome DEX With OUT

    Hyperliquid Gets Its First HIP-4 Outcome DEX With OUT

    Hyperliquid has recorded its first reported builder-deployed outcome exchange after OUT completed deployment through the network’s permissionless market framework.

    Hyperliquid’s block explorer shows a successful on-chain transaction registering the Outcome DEX under the name OUT through the HIP-4 deployment framework. The transaction confirms the deployment, but does not establish whether OUT has opened markets for live trading.

    No separate announcement or verifiable website detailing OUT’s markets, liquidity, or trading activity was available at the time of writing.

    How Hyperliquid’s HIP-4 framework works

    According to Hyperliquid’s developer documentation, HIP-4 allows approved deployers to create outcome markets without seeking validator approval for each individual contract. Every market must still use a template previously approved by the validator set.

    Templates define a contract’s basic structure, possible results, and settlement process. After validators approve a template, deployers can use it to create separate markets that meet the framework’s requirements.

    A YES/NO template gives traders two possible outcomes. Multi-result templates can cover questions with several possible answers, although Hyperliquid’s main HIP-4 documentation says multi-outcome support was not included in the initial mainnet release and would be introduced in stages.

    Hyperliquid’s deployer page, updated on Aug. 13, lists functions for activating a DEX, selecting templates, setting a deployer fee scale, and creating markets. The documentation currently labels HIP-4 deployer actions as testnet-only. As a result, OUT’s deployment should not yet be described as a confirmed permissionless mainnet launch without additional evidence.

    As crypto.news previously reported in July, Hyperliquid’s permissionless deployment plan was scheduled to begin on testnet before moving to mainnet. The proposal required market operators to stake 500,000 $HYPE and allowed validators to slash deployers for incorrect or delayed settlement, according to the July report.

    Hyperliquid’s framework also requires separate stakes for HIP-3 and HIP-4 operations because a single $HYPE allocation cannot support both deployments simultaneously. At current prices, that requirement could create a substantial entry cost for independent teams seeking to operate both perpetual and outcome exchanges.

    HIP-4 outcome contracts avoid leverage and liquidations

    Hyperliquid introduced HIP-4 on testnet in February and activated its first outcome contracts on mainnet on May 2. A July explainer described the products as fully collateralized contracts that settle within a fixed range at expiration.

    Unlike perpetual futures, an outcome position does not use borrowed funds or recurring payments between long and short traders. HIP-4 has no funding rate, while fully funded positions eliminate the liquidation process used to close leveraged trades when collateral falls below maintenance requirements.

    In a binary market, a YES token settles at 1 if the stated event occurs and at 0 if it does not. The NO side receives the opposite result. A trader who buys YES at 0.60 can earn 0.40 per contract if the event occurs, while the purchase price represents the maximum possible loss.

    Hyperliquid’s documentation presents HIP-4 as a general-purpose tool rather than a system limited to conventional prediction questions. Its fixed-range structure can also support bounded, options-style products with known maximum payouts and losses when positions open.

    Trading takes place through HyperCore, Hyperliquid’s on-chain order-book engine. HyperCore also powers the network’s spot, perpetual, and HIP-3 builder-deployed markets, allowing HIP-4 products to use the same matching infrastructure and order types.

    Protocol documentation states that fees are not charged when an outcome position opens. Charges may apply when a trader closes, burns, or settles a position, although Hyperliquid waived outcome-market fees during the initial testing period.

    Bitcoin and CPI contracts tested HIP-4 settlement

    Hyperliquid’s first mainnet HIP-4 product was a recurring Bitcoin binary contract. The market settled each day at 06:00 UTC against the $BTC mark price published through HyperCore, providing an objective data point for determining whether YES or NO tokens received the payout.

    The network later expanded beyond crypto prices. In May, a U.S. CPI contract allowed traders to take positions on the annual inflation rate reported by the Bureau of Labor Statistics.

    The CPI market offered three possible results: below 4.3%, exactly 4.3%, or above 4.3%. It used USDC as collateral and was scheduled to settle using the official BLS release. Early activity stood at approximately $3,000 in volume and $5,000 in open interest.

    According to Galaxy Research, validator-settled markets later covered Federal Reserve decisions and sporting events. The research firm said validators could publish approved off-chain results through regular network operations, reducing reliance on a separate oracle provider.

    Galaxy reported that HIP-4 recorded $2.38 million in 24-hour Bitcoin outcome volume by its 25th day. The figure represented about 20% of the combined $BTC prediction-market volume measured between Hyperliquid and Polymarket during that period, according to the firm’s June report.

    Activity later declined after an initial increase linked to World Cup markets. Blockworks data cited in a July market report placed HIP-4 open interest at about $182,000 and cumulative notional activity at approximately $881,000 at the time. Those figures covered a later snapshot and used a different measurement period.

    U.S. access depends on event-contract regulation

    For American traders, OUT does not have the same regulatory status as Kalshi, which offers event contracts through a Commodity Futures Trading Commission-registered designated contract market. Hyperliquid has not announced that OUT is registered with the CFTC or available to U.S. users.

    Hyperliquid Policy Center and Multicoin Capital addressed the regulatory divide in a July prediction-market rules filing. The groups asked the CFTC to publish clear federal standards for reviewing event contracts and to explain publicly why specific contracts are approved or rejected.

    Their submission said settlement terms should determine whether a contract falls into restricted categories involving gaming, war, assassination, or unlawful activity. The filing was an industry policy request and did not authorize HIP-4 exchanges to serve U.S. traders.

    State and federal regulators have also disputed whether some sports event contracts qualify as federally regulated derivatives or state-regulated wagers. Kalshi, Crypto.com, and Robinhood have faced state challenges over sports-related products even when the contracts were offered through federally regulated market structures.

    Users in the United States remain unable to access Hyperliquid, according to an August filing cited by Hyperliquid Strategies. The company said it was unaware of a pending CFTC approval process for the network and warned that a route into the regulated U.S. market could not be assured.

  • Kalshi Faces Legal Setback as Court Ruling Upholds State Authority Over Prediction Markets

    Kalshi Faces Legal Setback as Court Ruling Upholds State Authority Over Prediction Markets

    Rather than shutting down the increasingly popular prediction markets industry, the ruling has deepened the legal uncertainty surrounding retail trading. In April, another federal court reached the opposite conclusion, ruling that New Jersey had no authority to regulate Kalshi. The conflicting decisions increase the likelihood that the U.S. Supreme Court will eventually address the industry’s central legal question.

    “The Ninth Circuit has now teed up a circuit split that calls out for resolution by the Supreme Court,” said CFTC spokesman Zach Fulton in an email, accusing the judges of misreading the law. “A derivative contract structured as a swap is a swap regardless of the underlying subject matter; the only exceptions in statute are onions and movie box office receipts. The Ninth Circuit erred today when it invented a new and atextual exception to the CEA.”

    Nevada calls Kalshi contracts illegal wagering

    Nevada state authorities have opposed prediction market businesses since 2025. On Friday, they reiterated that Kalshi had engaged in illegal wagering under Nevada gambling law, although the company had already withdrawn from Nevada and other jurisdictions following orders from local authorities.

    “This completely vindicates what we have been saying all along,” Nevada Gaming Control Board Chairman Mike Dreitzer said in a statement responding to the ruling, which also referenced betting products offered by Robinhood and Crypto.com. “This is sports betting and needs to be properly regulated by the state.”

  • Ninth Circuit Ruling Clears Way for Nevada to Enforce Gambling Rules on Kalshi

    Ninth Circuit Ruling Clears Way for Nevada to Enforce Gambling Rules on Kalshi

    Ninth Circuit Allows Nevada to Enforce Gambling Rules Against Kalshi

    The U.S. Court of Appeals for the Ninth Circuit has ruled against prediction market platform Kalshi in a dispute over whether state or federal authorities have the power to regulate sports event contracts.

    In a unanimous 3-0 decision, the court allowed Nevada gambling regulators to enforce state rules against Kalshi. The ruling reverses a lower court’s preliminary injunction, which had temporarily blocked Nevada from taking enforcement action.

    Why the Ninth Circuit Ruled Against Kalshi

    Kalshi operates a federally regulated exchange for event contracts. The company argued that the Commodity Exchange Act (CEA) preempts Nevada’s gambling regulations and sought to prevent the state from treating its sports event contracts as unlawful gambling.

    The Ninth Circuit concluded that Kalshi had not shown that the CEA explicitly preempts state gambling laws, which the court identified as a key requirement for its preemption claim.

    The decision clarifies the relationship between federal commodities regulation and state gambling oversight. Although the Commodity Futures Trading Commission (CFTC) supervises Kalshi’s exchange, states generally retain the authority to enforce their own gambling laws unless Congress has clearly indicated otherwise.

    What the Ruling Means for Kalshi

    The ruling does not determine whether Kalshi’s sports contracts are ultimately legal in Nevada. However, it removes the legal barrier that had prevented state regulators from pursuing enforcement action.

    Kalshi may seek further appeals, but Nevada can now proceed with its case. The company has not been shut down nationwide, and the decision does not resolve the final merits of the state’s claims.

    Potential Impact on Prediction Markets

    The case highlights the growing tension between innovative financial products and traditional state gambling laws. Prediction markets allow users to speculate on the outcomes of events, including elections and sports games. Their rising popularity has also exposed them to a patchwork of state regulations.

    The Ninth Circuit’s decision could influence how other states regulate similar platforms. Businesses operating in the prediction market sector may face increased pressure to comply with state gambling laws even when they operate under federal oversight.

    Legal experts have indicated that the ruling could encourage additional states to assert jurisdiction over prediction market operators. That could contribute to a more fragmented regulatory environment across the United States.

    Investors and users should be aware that the legal status of prediction markets can vary by state. The decision creates particular uncertainty in jurisdictions with strict gambling laws, even though it does not prohibit Kalshi from operating nationwide.

    Frequently Asked Questions

    What did the Ninth Circuit decide in the Kalshi case?

    The court ruled that Kalshi failed to show that the Commodity Exchange Act preempts Nevada’s gambling rules governing sports event contracts. As a result, Nevada can enforce its regulations while the case proceeds.

    Does the ruling ban Kalshi from operating in Nevada?

    No. The decision does not ban Kalshi outright. It allows Nevada regulators to pursue enforcement action, while the final outcome will depend on further proceedings in the lower courts.

    How could the decision affect other prediction markets?

    The ruling may encourage other states to assert jurisdiction over similar platforms, potentially resulting in greater state-level regulation of prediction markets.

    Source: cryptonews.net

  • Connecticut Sues Kalshi Over Sports Prediction Contracts

    Connecticut Sues Kalshi Over Sports Prediction Contracts

    Connecticut has filed a lawsuit against prediction market operator Kalshi, escalating a nationwide legal battle over whether such platforms can offer sports-related contracts without state gambling licenses. The action, filed Thursday by Attorney General William Tong, alleges that Kalshi’s sports contracts function as traditional sports wagers and violate state consumer protection laws.

    State Alleges Unlicensed Sports Gambling

    The complaint targets contracts covering team wins, game scores, and point spreads. Connecticut officials contend these products cross the line into unlicensed sports gambling, an activity reserved for licensed operators under state law. The lawsuit follows a 2023 enforcement order directing Kalshi and two other platforms to cease offering unlicensed sports wagering to Connecticut residents.

    Kalshi Claims Federal Preemption

    Kalshi has challenged Connecticut’s authority in federal court, arguing its contracts qualify as regulated financial instruments under the Commodity Exchange Act. The company maintains that the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over its markets, preempting state gambling regulations.

    Regulatory Conflict Expands Across States

    Connecticut’s lawsuit opens a new front in Kalshi’s growing regulatory challenges. New York has launched a similar challenge against the company’s sports prediction markets. Meanwhile, a federal court recently blocked Minnesota from enforcing a ban against prediction markets, a ruling that bolstered Kalshi’s argument for federal oversight.

    However, a Connecticut judge recently denied Kalshi’s motion to halt the state’s enforcement efforts. The company has appealed that decision.

    National Implications for Prediction Markets

    The outcomes of these cases could define how regulators classify prediction markets across the United States. The central question remains whether states retain the power to regulate sports-related event contracts independently, or whether federal commodities law provides a complete shield for platforms like Kalshi.