From a $400,000 profit to the new legislation: Why Kalshi wants to distance itself from offshore platforms

The insider trading scandal in the prediction market is still unfolding. Recently, Kalshi CEO Tarek Mansour stated on LinkedIn that the company firmly prohibits insider trading and supports new regulatory legislation in the United States. However, he also pointed out that the recent insider trading incidents exposed mainly involve unregulated offshore platforms, not compliant institutions like Kalshi. Behind this statement is the regulatory storm facing the prediction market industry.

The Truth About the Insider Trading Scandal

The origin of the issue is not complicated. At the end of December 2025, a newly created Polymarket account made a “perfect bet.” This account purchased a contract betting that Maduro would step down before January 31 at a price of about $0.07, with an initial investment of only $32,500. When U.S. President Trump officially announced Maduro’s arrest, this account had gained over $400,000 in profit, a return of more than 1200%. More importantly, market data showed that the relevant contract prices started to rise abnormally hours before Trump’s official announcement.

This is not an isolated incident. Before the Nobel Peace Prize was announced, similar abnormal fluctuations also appeared in related markets on Polymarket. These events collectively point to a problem: government insider information is being used to trade in prediction markets.

Rapid Regulatory Response

The scandal triggered swift reactions from U.S. regulators. Democratic Congressman Ritchie Torres from New York plans to introduce the “2026 Financial Prediction Market Public Integrity Act” this week. The bill will explicitly prohibit federal elected officials, political appointees, and administrative employees from trading in prediction markets when they possess non-public information related to trading.

This is a clear signal: while prediction markets are legal, firewalls must be established to prevent abuse of power.

Kalshi’s Position and Differences

In this context, Kalshi’s response is particularly important. CEO Tarek Mansour emphasized that Kalshi supports this legislation and stated that the company itself has strict measures to prevent insider trading. More importantly, he pointed out that recent insider trading incidents mainly involve unregulated offshore platforms like Polymarket.

This distinction is crucial. Kalshi is a compliant U.S.-based prediction market platform regulated by the CFTC (Commodity Futures Trading Commission). While Polymarket is widely used in the U.S., its operating entity is actually located offshore with relatively lax regulation. This difference directly impacts the ability of the two platforms to prevent insider trading.

Industry Opportunities and Challenges

Ironically, despite the insider trading scandals, the prediction market industry itself continues to grow rapidly. According to the latest data, Kalshi’s annual trading volume has surpassed $100 billion, with the next target being $1 trillion. Bernstein analysts forecast that prediction market trading volume could double to $70 billion in 2026, with annual revenue around $1.4 billion.

This means regulation is not about suppressing prediction markets but about making them more compliant. Major political events like U.S. midterm elections are expected to bring more users and trading volume to platforms like Kalshi, Robinhood, Coinbase, and others.

Summary

Kalshi CEO’s recent statement essentially aims to defend compliant platforms. Insider trading is indeed a problem, but the root cause lies in unregulated offshore platforms, not prediction markets themselves. The new legislation will further strengthen the competitive advantage of compliant platforms while cracking down on offshore competitors exploiting legal loopholes. For platforms like Kalshi that are already operating in compliance, tighter regulation is actually a positive—raising industry entry barriers and consolidating leading players’ positions. The future of prediction markets belongs to those platforms that actively embrace regulation.