Kalshi, one of the leading prediction market firms, said it caught and punished two users for insider trading on its platform, including an editor for popular social media star MrBeast.
The company said it has more than a dozen active insider trading cases among 200 it has investigated. On Wednesday, Kalshi revealed the details of two it settled, including against Artem Kaptur, who was identified as working for James Donaldson, known for his MrBeast persona linked to its massive social media presence as well as the reality competition show “Beast Games”.
Kaptur is said to have made $4,000 in deals regarding what would happen on the MrBeast show, for which he worked as a visual effects editor. Kalshi suspended him for two years and fined him more than $20,000.
“Beast Industries has zero tolerance for this behavior, either by participants or our own employees,” the company that employed Kaptur said in a statement. “We have a long-standing policy in place against employees using proprietary company information that ensures the highest standards and ethics throughout our organization.”
Beast Industries said it has “already launched an independent investigation” into that matter, although it urged Kalshi to “be more open” in communicating its findings in the future.
Insider trading is prohibited at Kalshi, a regulated exchange licensed as a “designated contract market” with the US Commodity Futures Trading Commission, and the company described its actions against Kaptur and another user who exploited (CFTC) their unique knowledge in violation of user policy.
In the second case, user Kyle Langford was told to bet $200 on his own run for California governor and wrote about it on social media, earning him a 5-year ban and a penalty of 10 times the trade amount.
Langford, who is now running for Congress, did not immediately respond to a request for comment. The CFTC also did not immediately respond to questions about its role in these matters.
The two cases at Kalshi further underscore one of the concerns of the US derivatives regulator, the CFTC. While that agency is now working on rules to govern the prediction markets, its former chairman during the administration of former President Joe Biden had often lamented that the CFTC is unable to oversee the entire world. Markets that stretch to minimum bets on topics both broad and obscure and in jurisdictions around the world could pose a potential challenge to — at last count — about 114 U.S. enforcement officials.
In a recent CNBC interview, Kalshi CEO Tarek Mansour struggled to draw the line on what constitutes insider trading when asked about a hypothetical example of people in the stadium before the Super Bowl knowing what performer Bad Bunny would do as his opening song — a case that drew Kalshi contracts.
Mansour likened it to controls at stock market firms, saying, “we do the same at Kalshi. We have the same mechanism for enforcement.” However, he said that Kalshi users need to recognize the risk of betting on information under insecure constraints. “We want to work with policymakers and regulators to get it right,” he said.
Read more: Richest YouTube star MrBeast’s company files trademark with crypto ambitions
