The oldest swindle, dressed in new technology

Kalshi has permanently banned former Representative George Santos after he allegedly traded on whether he would attend this year's State of the Union address — an event he, and he alone, could determine. CNBC reports the platform acted after Santos drew fire for exactly this conduct. I know nothing of the engineering of prediction markets; I must speak from principle. But the principle here needs no modern gloss: a man who bets on an outcome he controls is not a trader. He is a cheat.

I spent years building the architecture of American public credit precisely because I understood that markets run on trust. The moment a counterparty suspects the game is rigged, confidence drains away — and confidence, once lost, is recovered only at punishing cost. It does not matter whether the instrument is a government bond, a bank note, or a contract that settles on a politician's calendar. The logic is identical.

Prediction markets are, in their better nature, a promising institution. They aggregate dispersed judgment into a price signal; they can, in theory, discipline the fog of political uncertainty into something a merchant or planner can act upon. That is not a trivial service. But that service depends entirely on the premise that no single participant controls the underlying fact. The moment a participant is the underlying fact, you have not a market but a private printing press.

Kalshi's ban is, so far as it goes, the correct response — and I give the platform credit for acting. But I would press further. Where private markets settle on public events, and where officeholders or candidates can trade on those same events, there is a compelling case for federal oversight. The commerce power is broad enough; the mischief is plain enough. This is not a matter of aesthetic preference about new financial instruments. It is a matter of whether the market retains the integrity that makes it worth having. (I mark this as inference from the principle, not from any specific modern statute I could have known.)

The Santos affair is, in one sense, small. One disgraced former congressman, one platform, one ban. But small corruptions, left unremarked, instruct the next actor that the cost of fraud is merely expulsion — not prosecution, not ruin. A sound commercial republic does not content itself with private remedies when the conduct strikes at the foundation of market trust. It brings the law. I would recommend that Congress — or, failing Congress, the relevant regulators — examine now whether prediction markets that settle on the conduct of public officials require the same insider-trading prohibitions that govern securities markets. The principle is the same. The urgency is real.