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CFTC Enforcement Division Issues Prediction Markets Advisory Following Kalshi Fraud Cases

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Nexo Partners with Bakkt for US Crypto Exchange and Yield Programs

TLDR:

  • The CFTC issued a prediction markets advisory on February 25, 2026, following two Kalshi enforcement cases.
  • A political candidate received a five-year Kalshi ban and a $2,246.36 penalty for trading on his own candidacy.
  • A YouTube editor was fined $20,397.58 and suspended two years for trading on material nonpublic information.
  • The CFTC confirmed full federal authority to prosecute fraud, insider trading, and manipulation on any DCM platform.

The CFTC Enforcement Division issued a prediction markets advisory on February 25, 2026. The advisory came after two enforcement cases surfaced involving fraudulent trading on KalshiEX, a Designated Contract Market.

Both cases involved misuse of nonpublic information on event contracts, also known as prediction markets. The CFTC used this opportunity to remind market participants that it holds full authority to prosecute illegal trading on any DCM, including Kalshi.

CFTC Confirms Full Authority Over Prediction Market Violations

The CFTC Enforcement Division made its position clear in the advisory released this week. While Kalshi handled both cases through its internal compliance program, the Division stressed it retains independent prosecutorial power.

The agency cited multiple sections of the Commodity Exchange Act to back its authority. This move signals that federal oversight of prediction markets is becoming more active.

The Division pointed to Section 6(c)(1) of the Act as the primary legal basis for action. Regulation 180.1(a)(1) and (3) also applies, covering manipulative schemes and fraudulent conduct.

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The CFTC referenced prior enforcement actions, including CFTC v. Clark, to show its track record. These citations reinforce that prediction markets are not beyond the reach of federal law.

The advisory also addressed other prohibited practices beyond insider trading. These include pre-arranged trading, wash sales, and disruptive trading under Section 4c(a).

Fraud and manipulation under various sections of the Act were also listed. The CFTC made clear these rules apply to event contracts just as they do to traditional futures markets.

The Division further noted that DCMs carry an independent duty under Section 5(d) of the Act. This includes maintaining audit trails, conducting market surveillance, and enforcing rules.

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The CFTC stated it will continue coordinating with exchanges on enforcement referrals where needed.

Two Kalshi Cases Prompted the CFTC Advisory

The first case involved a political candidate who traded on his own candidacy in May 2025. Social media videos surfaced showing the trades, prompting Kalshi’s compliance team to act immediately.

The trader admitted knowing the trades were improper under Kalshi’s rules. Kalshi imposed a $2,246.36 penalty and a five-year suspension from the exchange.

The CFTC noted this conduct potentially violated prohibitions on manipulative or deceptive trading practices. The candidate’s trades represented a direct conflict of interest with the outcome of the contract.

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This type of self-interested trading threatens the integrity of prediction markets. The Division made clear it could have pursued this matter independently.

The second case involved a YouTube channel editor who traded between August and September 2025. The trader placed bets on a prediction market tied to the very channel where they worked.

Kalshi investigated the unusually profitable trades and discovered the employment connection. The trader likely accessed material nonpublic information through their editorial role before videos were published.

Kalshi imposed a $20,397.58 penalty, including $5,397.58 in disgorgement and a $15,000 fine. A two-year suspension from the exchange was also handed down.

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The CFTC identified this as a potential misappropriation of confidential information in breach of a duty of trust. The Division’s advisory serves as a formal warning that such conduct on prediction markets carries serious federal consequences.

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Crypto World

2 Bullish Signals for Ripple’s XRP Despite Ongoing Correction

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Spot XRP ETF Inflows. Source: SoSoValue


The negative ETF streak finally came to an end, which is the first good sign for XRP.

Ripple’s native cross-border token was rejected at over $1.60 yesterday and has dropped by over 10% since that local peak to $1.45 as of press time.

Nevertheless, there are a couple of positive signs for its short-term price movements, including the reactivation of whale wallets.

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2 Bullish Signs

The spot XRP ETFs in the United States had entered their worst streak in terms of consecutive daily net outflows (or lack of any flows) that lasted nearly two straight weeks – from March 5, when investors pulled out just over $6 million, to March 16, when the withdrawals were just shy of that number. In the meantime, there were two days with zero reportable activity.

However, that negative trend was finally broken yesterday as the funds attracted $4.64 million – the highest single-day figure since March 3. As such, the total net inflows have remained above $1.2 billion.

Spot XRP ETF Inflows. Source: SoSoValue
Spot XRP ETF Inflows. Source: SoSoValue

The second positive news for the XRP Army comes from whales. After a prolonged period of lack of any substantial activity, these large market participants have resumed their accumulation spree. Citing data from Santiment, Ali Martinez asserted that they have bought 200 million tokens in the past two weeks. In terms of USD, this stash is worth roughly $300 million at current prices.

XRP Price Rejected

Yesterday’s positive net inflow day for the ETFs, aligned with the accumulation from whales and the overall market-wide resurgence, led to an impressive rally for XRP. The token surpassed BNB in terms of market cap after it jumped to a monthly high of around $1.63.

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Although analysts began praising the move and setting new big targets ahead, XRP was rejected at that point and driven south by over 10%. It currently struggles to remain above $1.45. This correction comes despite the recent expansion news from the company behind the asset, as well as the fact that the top traders on Binance have been “quietly buying XRP long positions,” according to data from popular analyst CW.

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FTX Recovery Trust Announces Fourth Round of Creditor Repayments

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Bankruptcy, Sam Bankman-Fried, FTX

Additional reporting by Turner Wright.

The FTX Recovery Trust, which oversees the distribution of funds to creditors and former customers of the failed crypto exchange, announced on Wednesday that it will distribute $2.2 billion to creditors on March 31, 2026.

Eligible creditors will receive their funds through their chosen distribution provider within one to three business days, according to an announcement from the Trust. 

The fourth distribution includes a 18% payout for Dotcom Customer claims, a 5% distribution for US Customer Entitlement Claims and a 15% distribution for both General Unsecured Claims and Digital Asset Loan Claims.

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Convenience claims will receive a 120% reimbursement under the recovery plan, according to the announcement.

Following the fourth round of distributions, about $10 billion will have been paid out to creditors and former customers of the exchange. The fifth round of payments is scheduled for May 29, 2026, according to the trust. 

The reimbursements could effect crypto prices in the short term if creditors and former customers of the FTX exchange, which collapsed in 2022, invest the recovery funds in digital assets. 

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Related: Court sets deadline for US to address Bankman-Fried’s new trial motion

FTX recovers billions in payouts, but creditors say it isn’t nearly enough

The FTX Recovery Estate began creditor payments in February 2025, with a $1.2 billion payment, followed by a $5 billion distribution the following May. The third round of creditor payments was distributed in September 2025 and totaled $1.6 billion. 

Despite the billions of dollars recovered, creditors and former customers of the FTX exchange say they were short-changed by the recovery plan.

Creditors and former customers were reimbursed according to crypto asset values at the petition date in 2022, when legal action was taken against the exchange by creditors and customers.

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Bankruptcy, Sam Bankman-Fried, FTX
Source: Sunil Kavuri

Crypto asset values were much lower when the petition was filed, with Bitcoin (BTC) then trading at about $16,871, and Ether (ETH) at about $1,258. 

“FTX creditors are not whole,” FTX creditor and creditor advocate Sunil Kavuri said in response to the reimbursement plan.

Convicted founder “SBF” pursues appeal, prison change

The latest effort to make victims whole comes amid appeal efforts by Sam “SBF” Bankman-Fried, the former CEO of FTX, who was sentenced to 25 years in prison following his 2023 conviction related to the misuse of customer funds.

He has posted to his X account using a proxy, often praising US President Donald Trump’s actions in the country’s conflict with Iran and his approach to regulating digital assets. Many experts speculate that the former CEO is lobbying the president for a pardon, but Trump reportedly said in January that he would not consider it.

As of Wednesday, Bankman-Fried was housed at the Federal Correctional Institution Terminal Island in the Los Angeles area. However, a Monday court filing by his mother claimed that he would be relocated “sometime in the next couple of weeks.”

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Magazine: The $2,500 doco about FTX collapse on Amazon Prime… with help from mom