On 22 January 2026 the designated contract market KalshiEX LLC listed an event contract titled Who will attend the State of the Union?, and within it a market on whether former congressman George Santos would attend. Three weeks later Santos opened an account on the exchange and began trading that market. On 31 July 2026 the Commodity Futures Trading Commission settled a manipulation case against him in an order instituting proceedings under Docket No. 26-05. Fifty-three days after that, on 22 September 2026, the Commission's Division of Market Oversight issued Staff Letter 26-27, an advisory setting out when a contract of that shape may be listed at all. The two documents describe the same structural problem from opposite ends. Only one of them arrives before the market opens.
That sequence is the story, not the trader. A category standard that exists only as an enforcement order has already cost somebody money.
What the Commission Found in Docket 26-05
The Commission's order records that Santos created his Kalshi account on 11 February 2026 and funded it with 1,000 US dollars, adding roughly 6,000 more between 14 and 22 February. His trading, the order states, was exclusive to the market on his own attendance. On 12 February he took a Yes position and, the same day, bought an airline ticket from La Guardia to Reagan National for 24 February. By 22 February he held 30,874 Yes contracts worth 6,695.94 dollars.
What follows in the order is a timestamped sequence of social media posts and position changes. At roughly 2:31 a.m. on 22 February he posted on X asking whether he should wear a muted suit to the address or a bedazzled one. The Yes price moved from 15 cents to 70 cents per contract, he sold all 30,874 contracts for a profit of 3,448.43 dollars, and withdrew 10,146.07 dollars to a Venmo account created four days earlier under the same phone number as the exchange account. That afternoon the airline cancelled his flight. Late that night he bought a train ticket.
The next morning he posted that the trip had become, in his words, "a nightmare" and that there was "[n]o way members will be able to fly in to DC today and tomorrow". The Yes price fell from 63 cents to 28 cents. That evening he posted twice that he would be in the gallery, and the price rose from 40 cents to 70 cents. Roughly forty minutes later he started building a No position, reaching 23,855 contracts worth 8,650.66 dollars. At about 7 p.m. the rail operator cancelled his reservation. At about 8 p.m., asked publicly whether he was going, he answered that he was, with both bookings cancelled and no replacement travel bought. The next day, according to the order, IP records place him at his residence at midday; at 6:05 p.m. he posted that watching the address from an airport television was not the plan, and the Yes price fell from 73 cents to 2 cents. He closed the No position early on 25 February for a profit of 14,390.57 dollars.
The sanctions are a cease and desist, disgorgement of 17,569.98 dollars, a civil monetary penalty of 17,500 dollars and a three year prohibition on trading on any registered entity as defined in section 1a(40) of the Act. Santos consented without admitting the findings, and the order notes the Commission's recognition of his cooperation. One detail it leaves open: the two profits it recites add up to 17,839 dollars, which is 269.02 dollars above the disgorgement figure, and the document does not reconcile the difference.
The Theory Was Deception, Not Misuse of Information
The legal route matters more for the category than the amounts do. The order finds violations of section 6(c)(1) of the Commodity Exchange Act, 7 U.S.C. section 9(1), and of Commission Regulation 180.1(a)(1) and (3), 17 C.F.R. section 180.1. It first establishes that an event contract is a swap under section 1a(47)(A), holding that the attendance contract satisfies at least two of the definitional prongs, and then applies the general anti manipulation provision to it.
Two features of that provision change what an exchange should expect. The Commission writes in the order that neither section 6(c)(1) nor Regulation 180.1 requires a showing of intent to affect prices or of an actual effect on prices, and that in a government action no reliance or harm to other participants needs to be shown. What has to be established is the intentional or reckless use of a manipulative device in connection with a swap, with scienter met by conduct the order calls an "extreme departure from the standards of ordinary care". In a market of this shape, a participant who controls the settlement condition and talks publicly about it is close to that line by default.
This is a different mechanism from the one in the order the Commission announced in press release 9289-26, where the conduct was the misuse of information about a contract somebody else would resolve. We covered that case in our piece on the mention market insider order. The distinction is not academic. Misuse of information can be addressed with a restricted list, because the question is who knew. Control of the outcome cannot, because the question is who decides, and the person who decides is named in the contract title.
Advisory 26-27 Turns the Problem Into a Filing Burden
The Division of Market Oversight advisory, signed by Acting Director Duncan Hennes and announced in press release 9302-26, groups three contract shapes under one label. Markets on whether a person will say particular words, on whether a person will attend or appear at an event, and on whether two people will interact are treated together as Mention Markets. It opens by saying that nothing in it should be read as discouraging innovation of this kind, and states that it creates no new obligations and represents staff views only.
Its analytical move is short. Most listed event contracts, the Division writes, settle on outcomes that are independently generated, externally verifiable and outside the control of any single person. Mention Markets settle instead on, in the advisory's phrase, "the discrete conduct of a named person". From that the Division concludes that staff may treat such contracts as presumptively readily susceptible to manipulation and expect a heightened showing from any exchange seeking to list one.
The statutory anchor is Core Principle 3, section 5(d)(3) of the Act, 7 U.S.C. section 7(d)(3), which obliges a designated contract market to list only contracts that are not readily susceptible to manipulation, together with the guidance in Appendix C to Part 38 on cash settled products. Self certification under Regulation 40.2, the advisory notes, carries certifications against Core Principles 2 and 12 as well. A footnote extends the concern beyond one person to a small group acting together, and another points back to the Commission's own June 2026 public interest proposal, which had already said at 91 FR 35869 that sporting contracts settling on discrete player actions raise heightened concerns for the same reason.
Four factors are offered as the route to rebutting the presumption: whether the controlling individual is under independent legal, professional, contractual, fiduciary or organisational obligations that deter conduct aimed at settlement; whether the contract can be manipulated through that individual by inducement, social engineering or public pressure; whether the outcome is independently verifiable and subject to real public scrutiny; and whether the exchange's own trading rules, surveillance and controls are robust enough to detect and deter both manipulation and misuse of non public information. On the last point the Division is explicit: obligations binding the individual are not a substitute for the exchange's own measures.
Footnote Fifteen Reads Like a Post Mortem
The advisory's longest footnote lists prophylactic measures and surveillance patterns, and it maps onto Docket 26-05 line by line. The Division tells exchanges to monitor for significant profit in the only category of contracts a participant ever trades; the order states that Santos's trading was exclusive to the market on his own attendance. It tells them to watch the timing of account creation and funding; the account was opened on 11 February and traded from 12 February. For a contract settling on the attendance of a named public official it suggests restrictions on trading by that individual and anyone acting in concert, position limits sized so that manipulation would be economically irrational relative to its cost, and heightened surveillance around the event window including review of the individual's public statements against position and trading data.
That last item describes the order itself. The evidentiary core of Docket 26-05 is a comparison of timestamped public statements against timestamped positions, assembled after the contract had expired, and every input was data the exchange held or could see. The advisory asks for the same comparison while the market is open, which makes it a surveillance design question rather than a disclosure one.
The First Factor Is Where This Contract Was Weakest
Apply the advisory's four factors to the contract as listed on 22 January 2026 and the first one fails before the others are reached. The Division suggests that exchanges identify potential controllers using public officeholder and financial disclosure sources for contracts on public officials. The order records that Santos represented New York's third congressional district from January to December 2023, which means that at the time the market was open he appeared in neither source. The obligations that the advisory treats as a deterrent, the professional and legal consequences disproportionate to the available gain, attach to office. They had lapsed more than two years before the contract was listed.
Read that way, the status of the named individual is itself a listing parameter. A sitting officeholder under ethics rules, a corporate officer under a confidentiality obligation and a private citizen under none produce three different contracts from identical wording. An exchange that screens for identity but not for the obligations attached to it will keep listing the third one by accident.
We Asked for More Than a Presumption, and Said So in March
This initiative published The Responsible Listing Standard on 25 March 2026, a month after the trading in this market and four months before the order was public. It named the category Trader Influence Markets and set the standard as never list unless the product is redesigned so that direct influence is structurally removed and restricted participants are fully excluded. It added that the industry sometimes acts as if the problem can be solved with a line in the terms of service, and that this is not enough.
Advisory 26-27 does not go that far, and pretending otherwise would be dishonest. The Division's position is a rebuttable presumption: in limited circumstances a well designed contract with adequate rules, surveillance and controls may be listed consistently with Core Principle 3. Where the two documents agree is on the sentence that matters most in practice. Our March text said a line in the terms is not enough; the advisory says independent obligations on the individual are not a substitute for the exchange's own measures. Both are saying that the paperwork has to be operational.
The difference is also an argument for writing standards early. Nothing in the March text required access to an enforcement file. It was written from the design of the contract, which was public, and it reached by a stricter route a conclusion the regulator arrived at six months later. That is what Directive 05 of our manifest means by setting standards against the jurisdiction that regulates next rather than the one that has not yet.
Position Limits Are the Arithmetic Somebody Does Anyway
One phrase in the advisory deserves to be lifted out of its footnote, because it converts a principle into a number. Position limits, the Division suggests, should be sized so that manipulation would be economically irrational relative to its cost. Docket 26-05 is that calculation performed after the fact. The gain was roughly 17,800 dollars across two positions; the order took 17,569.98 dollars in disgorgement, added a penalty of 17,500 dollars and closed access to every registered entity for three years. Ex post, the exercise cost about twice what it returned, plus the ban.
An exchange can produce that ratio in advance, and it needs no regulator to do it. Santos accumulated 30,874 contracts on one side and 23,855 on the other in a market about his own movements. A position cap set with the controller in mind, rather than with liquidity in mind, is the cheapest of the four factors to implement and the easiest to show in a filing.
What a Part 40 Filing Has to Carry Now
The advisory sets out what a submission under Regulation 40.2 or the voluntary approval route in Regulation 40.3 should contain: a thorough evaluation of each factor and the specific prophylactic measures adopted, in enough detail for staff to judge whether they fit the risks the contract presents. Read against the order, four questions follow, each answerable before a market opens.
- Who can cause, prevent or delay the settlement condition, and what obligations bind that person on the day the contract is listed rather than in general?
- What position size makes influencing the outcome worth less than the consequences of being caught, and is that number written into the contract specification?
- Which surveillance comparison runs while the market is open, and does it include the controller's public statements measured against position data, not only trade prints?
- If the settlement condition occurs in a setting without independent verification or public scrutiny, what makes this contract the exception the advisory describes rather than the rule?
Those questions also carry a resolution point that sits under Directive 01 of our manifest, which commits signatories to publishing resolution rules before a market opens and not revising them while money is at risk. An attendance contract can satisfy that commitment to the letter and still be unresolvable in substance, because the rule is fixed while the fact it points at remains one person's discretionary act. Publishing a rule is not the same as pointing it at something nobody at the table controls.
The Category Had Six Months of Notice
As of 3 October 2026, Staff Advisory 26-27 is the most recent CFTC action on this contract family; the Commission's press releases issued after it address other matters. The advisory is not a rule: it binds nobody, creates no rights and can be superseded by the public interest rulemaking it cites. What it removes is the argument that the standard was unknowable. The flaw in a market on whether a named person will do a discretionary thing was readable from the contract specification in January 2026, was described in public in March, produced an enforcement order in July and a filing standard in September. An exchange listing the next one cannot say the test had not been written.