Kalshi to Crack Down Against Insider Trading by Seeking Employer Info From Users

Prediction marketplace Kalshi has released a raft of sweeping measures to combat insider trading on its platform amid growing criticism from regulators. Under the new measure, Kalshi will obtain employer information from users on certain markets, with the platform also enhancing its whistleblower functionalities.

Kalshi introduces employer verification for certain markets

According to a recent disclosure, Kalshi will soon require users to disclose their workplace before placing trades on markets with heightened insider trading or manipulation risk. The move will allow Kalshi to identify individuals with “material and non-public information” about a market’s outcome that gives them an unfair advantage over other users.“

For markets with heightened insider or manipulation risk, we now collect employment information before traders can participate,” said Kalshi in a note. “This lets us identify presumptive insiders and screen them out before a trade.”

Prediction markets have surged in popularity in recent years, with Kalshi leading trading volumes, drawing thousands of users betting on the outcome of future events ranging from crypto, politics and sports. However, concerns of market manipulation have trailed the industry, forcing lawmakers to beam a searchlight into the internal operations of industry service providers.

Ahead of the rollout of the employer verification measure, Kalshi says it has developed a risk scoring model to identify markets prone to insider trading. To determine which markets will require users to submit their verification status, the proprietary system will weigh its market manipulation on several rubrics.

Source: Kalshi

The rubrics include event risk, outcome concentration risk, market importance, regulatory risk, non-traditional insider risk, and national security risk. Kalshi added that less important markets with high insider risk may be rejected from listing as part of measures to prevent manipulation.

The new measures follow the recommendations of an Independent Surveillance Audit Committee appointed to stress-test its internal monitoring and enforcement measures. While users affected by the new employer disclosure will submit their workplaces via an online form, it remains unclear how Kalshi will verify the authenticity.

Policing itself amid rising legislative interest

Apart from the employment verification and the risk scoring rubric, Kalshi shared plans for an improved whistleblower policy. Under the enhancements, users can directly report abusive trading on markets, with Kalshi confirming a “dedicated intake system” monitored 24/7. “Additionally, we have built internal alerting controls to receive and handle whistleblower tips we receive from our traders,” read the announcement.

As part of its self-policing measures, Kalshi disclosed that it had opened over 150 investigations into potential insider trading cases. From the lot, the prediction marketplace forwarded over 20 cases to law enforcement while dishing out internal disciplinary measures for policy violations. 

The company added that previous measures against manipulation have recorded a streak of success, with new screening tools halting over 100 potential insider trades. While Kalshi has taken measures to curtail insider trading, Polymarket has unveiled plans of its own to combat the menace after high-profile incidents previously rocked the platform.