Kalshi tightens insider rules as surveillance tools roll out

Insider trading on prediction markets: defined by material non-public info

In prediction markets, insider trading hinges on material non-public information (MNPI), information that is both non-public and significant enough that a reasonable participant would consider it important to pricing an event contract. The test tracks familiar capital-markets principles: materiality (does it affect expected outcomes or prices?) and publicness (is it broadly available, not just selectively disclosed?).

Because event outcomes can turn on niche or operational details, MNPI in this context can extend beyond corporate earnings to timely, outcome-determinative facts such as unreleased decisions, embargoed announcements, or exclusive access to decision-makers. That breadth makes MNPI identification less about the asset class and more about whether a trader possessed an unfair informational advantage.

Why Kalshi’s crackdown matters to fairness and legal exposure

As reported by Yogonet, regulated U.S.-based prediction venues such as Kalshi operate under stricter oversight than many offshore or crypto platforms, a distinction that heightens expectations around market integrity and user protections (https://www.yogonet.com/international/news/2026/01/09/117057-kalshi-backs-insider-trading-bill-while-distancing-from-offshore-prediction-markets). That oversight raises the stakes: inconsistent policing of MNPI risks eroding price discovery and undermining confidence among retail and institutional participants.

According to Observer, former SEC Chair Jay Clayton has questioned when certain event contracts begin to resemble cash‑settled options rather than simple bets, underscoring the legal complexity prediction markets face as products evolve (https://observer.com/2025/12/former-sec-chair-jay-clayton-regulate-prediction-markets/). The line-drawing he highlights suggests that insider trading and fraud concepts could be applied by authorities even if an instrument is not a traditional security.

Watchdogs and some state gaming regulators have also flagged fairness and consumer‑protection concerns around prediction markets, emphasizing the need for clear rules and enforcement to prevent information asymmetries from disadvantaging users, as reported by Bookies.com (https://bookies.com/news/kalshi-expands-fight-against-insider-trading-ceo). These concerns frame why visible crackdowns, and transparent standards, matter for both credibility and legal risk.

What Kalshi is enforcing now: surveillance, investigations, freezes

Based on Kalshi’s published materials, the company has built a surveillance and compliance stack that includes KYC/AML controls, third‑party market‑monitoring tools such as Solidus Labs and Wharton Forensic Analytics, and formal internal processes overseen by a dedicated enforcement function (https://news.kalshi.com/p/kalshi-surveillance-insider-trading-prevention). The firm also describes governance workflows for reviewing suspicious activity and adjudicating potential rule breaches.

As reported by Business Insider, Kalshi ran more than 200 investigations over the past year, resulting in account freezes tied to suspicious behavior, and it plans to roll out internal rulebooks with disciplinary processes (https://www.businessinsider.com/kalshi-insider-trading-detection-enforcement-definition-2026-2). Providing context on the scope of surveillance, Robert DeNault, Head of Enforcement at Kalshi, said, “There’s lots of activity that gets flagged… it could be fraud, theft, hacking.”

How MNPI lines are drawn in event markets

Legal and industry analysts note that making “almost anything” tradable introduces gray areas in defining what is both material and non‑public, especially for culturally salient events where some participants may have early access to outcome‑relevant details, as reported by DL News (https://www.dlnews.com/articles/regulation/kalshi-ceo-tackles-difficulty-of-cracking-down-on-insider-trading/). The ambiguity does not eliminate the MNPI standard; it complicates its application on a case‑by‑case basis.

A practical yardstick applies: if information is exclusive, outcome‑determinative, and not broadly disseminated, trading on it may fall within MNPI prohibitions even in event markets. Platforms can reduce uncertainty by codifying definitions, documenting disclosure channels that render information public, and demonstrating consistent enforcement supported by surveillance and investigations.