Polymarket Cuts Ties With George Santos Amid Insider Trading Investigation

Prediction markets faced renewed scrutiny this week following reports that former US Congressman George Santos is under investigation over alleged trading activity linked to his attendance at the State of the Union address.

The controversy centres on a market offered by Kalshi ahead of President Donald Trump’s speech on 24 February. Millions of dollars were reportedly traded on whether specific public figures would attend the event.

A day before the address, Santos publicly stated on X that he planned to attend. “I’m going to be there for the State of Union in the gallery, guys,” Santos wrote.

However, Santos later posted during the speech that flight problems had prevented him from attending. Multiple reports claim Santos had placed wagers on Kalshi predicting that he would not appear at the event.

According to NPR, Kalshi detected the trades, froze Santos’ account and referred the matter to federal authorities. When questioned about whether he held a Kalshi account, Santos responded: “I’m not saying yes, I’m not saying no.”

Illinois Introduces New Tax Measures For Prediction Markets

Away from the Santos investigation, Illinois became the second US state after Kentucky to approve a tax on prediction market operators. The measure forms part of Governor JB Pritzker’s $56bn budget for fiscal year 2027. 

Under SB 3019, Illinois approved new taxes covering prediction markets, fantasy sports, digital assets and social media companies. State officials estimate the broader package could generate around $65m in additional revenue. 

Specific tax rates for prediction market operators had not been disclosed as of Friday. Supporters argue the sector should contribute tax revenue in a similar way to other wagering-related activities. But many critics share a different sentiment. The American Gaming Association has previously estimated that sports event contracts have cost US states more than $1bn in potential tax revenue. 

Prediction market supporters counter that traders already pay capital gains taxes on qualifying profits and argue that additional levies could amount to double taxation. More than two dozen states are currently considering legislation for prediction markets.

New York Bar Uses Kalshi To Hedge Knicks Promotion

Prediction markets also generated attention in New York through an unusual business promotion linked to the NBA Finals. The Jeffrey, a bar located on Manhattan’s Upper East Side, promised customers free food and drinks if the New York Knicks won Game 1.

Owner Andy Freedman hedged the promotion by placing a $5,000 position on Kalshi. “Thanks fans, you’re eating and drinking on the house tonight,” Freedman said after the Knicks secured victory.

At the time, Kalshi priced the Knicks’ chances of winning at 37%. The trade generated a payout of approximately $12,940, representing a 2.59x return. The promotion covered customer purchases up to $100, excluding taxes and tips.

The Knicks had a 53% chance of claiming the NBA title by Friday afternoon on Kalshi.

Businesses Explore Prediction Markets As Risk Management Tools

Kalshi presented the promotion as an example of how prediction markets can serve practical business purposes beyond speculation. The platform argued that businesses often face risks that traditional insurance products do not address effectively.

“Small businesses are exposed to real-world risk … traditional insurance is not built for this kind of operational exposure,” said Kalshi’s Nicolas Hull.

“Kalshi changes the equation: liquid, transparent markets that let any business take an offsetting position on the risks that affect their bottom line. This is the beginning of a fundamental shift in how small businesses approach risk.”

George Santos is currently under investigation for insider trading connected to his attendance at a State of the Union address. He has failed to reveal if he holds a Kalshi account or not. In other news, Illinois becomes the first state to impose a tax on prediction markets within the United States.