Kalshi’s CEO said insider trading poses a bigger threat to the stock market than to prediction markets.
In an interview with lawyer Max Raskin, published in the Washington Post on Sunday, Kalshi CEO Tarek Mansour talked about the biggest criticism of prediction markets — that it facilitates insider trading.
He said detecting insider trading in the traditional stock market is much harder than in prediction markets.
“The stock market is hard because you may have a piece of information, like a certain product is going to be released, and then you buy the stock. It’s very broad,” Mansour said to Raskin.
But in prediction markets, he said bad actors have a piece of information, such as “a certain product is going to be released,” and they place money on event contracts betting that the product will be released.
“It’s very direct. It’s very noiseless,” he said of insider trading on prediction markets.
Talking about former New York Rep. George Santos being accused of insider trading on Kalshi, Mansour said that “there will be fraudsters in any system,” but Kalshi is working on catching them “super fast.”
Santos is under investigation by the Justice Department and the Commodity Futures Trading Commission after Kalshi flagged unusual trades tied to his attendance at the State of the Union address in February.
Prediction markets function on event contracts, with people betting on the outcomes of events from pop culture to politics. To combat fears of insider trading, Kalshi has put in place several guardrails, such as requiring traders to submit employment verification before trading and making it easy for whistleblowers to flag suspicious behavior.
But lawmakers are not convinced. Numerous lawmakers have slammed the markets and proposed several bills to ban or limit their activities, including Minnesota Gov. Tim Walz, who in May signed off on a statewide ban on the markets.
