The decision originates from the Commodity Futures Trading Commission (CFTC) v. Larralde et al., Case Number 6:23-cv-1445-WWB-DCI, which was filed in the United States District Court for the Middle District of Florida on July 31, 2023. The CFTC announced the decision involving the default judgment on September 30, 2026. Early and Kingrey were required to settle for $15.73 million in restitution and pay civil penalties amounting to $15.75 million.

CFTC highlights inconsistencies in Fundsz’s statement

In a complaint lodged in 2023, the CFTC claimed Fundsz made an assurance that lucrative returns of over 3% every week would be generated using a proprietary algorithm that trades crypto and precious metals. The promoters also claimed that an investment of $2,500 could snowball to an unbelievable figure of $1 million in just four years. According to the regulator, the funds of clients were never traded as stated, and the returns on the investments presented to clients were made up.

The court thereafter discovered that both Early and Kingrey committed serious misrepresentation of facts concerning profit expectations, degree of risk, and previous performance of the investment. Those allegations echo the warning signs issued by the FTC, especially in investment offers that minimize risk while promising unusually high returns. The Fundsz case is important, but is minor in relation to the big picture of investment fraud.

The FBI noted there had been 181,565 cryptocurrency-related reports in 2025 with losses totaling more than $11 billion. Investment fraud accounts for about 49% of total losses incurred due to fraud, while the over-60 age group suffered losses of $7.7 billion, a 37% rise compared to the data from 2024. In 2025, the FTC reported that scams had caused losses of over $7.9 billion, with the median loss per scam exceeding $10,000.

According to the Chainalysis report, at least $14 billion was lost through crypto-based scams and fraud in 2025, which could go over $17 billion once other unidentified illegitimate addresses are factored in. The average amount of each scam increased by 253%, reaching $2,764. Fundsz is not an isolated case. Cryptopolitan reported in August that the SEC and CFTC separately sued Goliath Ventures and founder Christopher Delgado.

The SEC alleged it raised at least $425 million from more than 1,300 investors, while the CFTC cited roughly $397 million from about 1,600 customers. Cross-border enforcement remains more difficult. An October 2025 FSB review found significant gaps and inconsistencies in national crypto frameworks, warning that uneven implementation creates opportunities for regulatory arbitrage and complicates oversight of a global market. The immediate question is how much of the ordered restitution victims ultimately recover. The CFTC has cautioned that repayment orders do not guarantee full recovery when defendants lack sufficient assets.

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In a post on X, a day after the Senate blocked the CLARITY vote, Michael Saylor wrote that regulators can act now instead of waiting on legislators. “Progress need not wait for Congress,” Saylor wrote. He said he expects banks to widen Bitcoin custody and to lend against the asset, and for more capital to move toward Bitcoin and digital credit. He also pointed to the GENIUS Act as support for stablecoin adoption. The framing marks a pivot away from the legislative route the industry spent more than a year chasing. Saylor did not treat the bill as finished, but his message was that the outcome he wants no longer depends on its passing.

Saylor makes positive remarks as CLARITY Act stalls

Cryptopolitan reported that the Senate rejected cloture on the Digital Asset Market Clarity Act by a vote of 49 to 50. The motion needed 60 votes and fell short by 11. Every vote in favor of the bill came from a Republican. However, Susan Collins of Maine, Josh Hawley of Missouri, Jerry Moran of Kansas, and Thom Tillis of North Carolina, who are all Republicans, voted no. No Democrat or independent backed the motion, and Delaware’s Chris Coons did not vote.

The measure would have split oversight of digital assets between the SEC and the CFTC and set registration rules for exchanges, brokers, and dealers. It failed at the first procedural step, so the Senate never reached amendments or a vote on passage. Republicans had presented a final revised version of the bill, saying it managed to include 126 changes requested by Democrats. Former CFTC Chairman J. Christopher Giancarlo told journalist Eleanor Terrett that the loss was a disappointment but would not stop the “march of innovation” in the United States.

He stated that SEC Chairman Paul Atkins and the current CFTC Chairman Michael Selig would continue to develop the industry under their current authority. Atkins has also said the agency will keep going regardless of what Congress does. For example, in August, the SEC proposed what it called Regulation Crypto Assets, which would let firms issue up to $5 million in tokens over four years and up to $75 million over 12 months. It also includes a provision for a safe harbor, keeping some cryptocurrencies from being treated as investment contracts.

Selig, meanwhile, directed CFTC staff to draft market-structure rules for crypto using powers the agency already holds, including a purpose-built designated contract market framework for leveraged trading, as Cryptopolitan reported in August. Coinbase CEO Brian Armstrong also argued after the vote that both the CFTC and SEC already have the tools to set clear rules.

Ripple CEO Brad Garlinghouse also called on Atkins and Selig to act, and Senate Banking Committee Chairman Tim Scott said the agencies should write rules until lawmakers pass a bill. Analysts at Bernstein expect “aggressive and swift” rulemaking from the SEC and CFTC to recover the time spent negotiating CLARITY.

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The CFTC, which oversees derivatives markets, approved it this week, and the contracts went live on Thursday through Kalshi’s website. The company entered the perp market through crypto first. Regulators cleared those products in late May, bringing a market that handled about $90 trillion in yearly volume during 2025 into a regulated U.S. venue for the first time. Kalshi says its crypto perps have since reached $44 billion in notional volume, based on figures published on its platform.

Kalshi says users can trade markets round the clock

Udesh Jha, chief risk officer at Kalshi Klear, the company’s clearing house, said trader demand made metals the next target. “Metals, especially gold and silver, have a story to tell because of inflation,” Udesh said. The event markets at Kalshi were already attracting investments even before the announcement of the launch. The company revealed that the trading volume of its contracts on metals and oil went past $400 million within seven months.

The crypto event markets, meanwhile, took double the time to reach the same mark. A perp is similar to a futures contract in the sense that it has no expiration date. The trader does not have to own the asset but just has to trade according to the price fluctuations in the market. Funding payments in regular intervals will help align the perp with the spot price of the asset.

Meanwhile, in August, Kalshi filed for approval to introduce perps on U.S. equities, copper and foreign currencies. Gold and silver become the first non-crypto assets that have been cleared by the CFTC to be traded as perps. It also comes at a time when there is competition among the derivatives exchanges. The shares of Cboe Global Markets (NYSE: CBOE) and CME Group (NASDAQ: CME) have dropped due to the regulation by US regulators to allow perpetual futures, since there were fears that it might affect regular futures.

CME Group has taken the fight to court. The exchange sued the CFTC and is trying to block U.S. approvals for perps, arguing that the regulator allowed the contracts through an improper process. Udesh said Kalshi believes regulation is a major reason its perp business has grown so quickly. “It all goes back to the regulated platform,” he said. “Doing it the right way, a way with proper risk controls… Unregulated platforms, they have always hit a ceiling.”

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Prediction markets have rapidly gained popularity in 2026, and this settlement is the first known case of a White House insider caught trading on the platform. Regulators have also issued warnings to government staff that their access to nonpublic information is not a betting edge. Gabriel Perez, President Trump’s longtime teleprompter, has been charged by the CFTC with placing bets on Kalshi’s “mention markets” where traders can guess whether a public figure will utter a specific word or phrase during an event.

CFTC says Perez used words he read to bet on markets

Perez had an unfair advantage because he was often the last aide to see Trump’s remarks before delivery. The CFTC found he traded on that confidential text for “his own personal, financial benefit.” The regulator counted 49 trades between December 2025 and February 2026, of which Perez won 39, clearing north of $107,000. He made bets on what Trump might say at the State of the Union, the National Prayer Breakfast, a Medal of Honor ceremony and assorted rallies.

The CFTC has ordered Perez to give up $107,539.02 in trading profits and pay a separate civil penalty of $65,000. Kalshi also banned him from the platform for three years. The CFTC said Perez’s penalty was reduced because he showed “exemplary co-operation.” They took into consideration that he voluntarily admitted his guilt in an interview, saying that his trading decisions were indeed based on the confidential information he had learned from his review of the speeches.

Christy Goldsmith Romero, a former CFTC commissioner appointed under President Joe Biden, stated that the CFTC missed an opportunity to “send a strong message” to future insider traders. Perez was discovered after Kalshi’s surveillance team spotted abnormal activity on Trump-related mention markets, traced the account and linked it to a federal employee running White House teleprompters. The matter was then referred to the CFTC. Bobby DeNault, who heads enforcement at Kalshi, said on X that anyone who violates the company’s rules or federal law would “face the consequences.”

Perez, who had worked for Trump since the 2016 campaign and earned $175,000 a year as a deputy assistant to the president, was placed on unpaid leave in July. Then-press secretary Karoline Leavitt called the conduct “a disgrace,” and by late that month, Perez was reportedly no longer working for the federal government. Cryptopolitan reported that the CFTC settled with former Republican Rep. George Santos in August over a Kalshi contract on whether he would attend the State of the Union.

Federal prosecutors have also charged an Army soldier over Polymarket bets tied to the capture of Venezuelan leader Nicolás Maduro and a Google engineer who made roughly $1.2 million trading on internal search data. CFTC Chairman Michael Selig, a Trump appointee, has backed the prediction-market industry but also pledged to police insider trading inside it.

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Perez, who operated Trump’s teleprompter for nearly a decade, was accused of using advance access to prepared remarks to place wagers on Kalshi mention markets. The contracts allowed traders to bet on whether Trump would use particular words or phrases during public appearances. The case comes as prediction markets expand rapidly.

CFTC Details Perez Trading Activity

The CFTC said Perez made 49 trades between December 2025 and February 2026 and won 39 of them. His profits exceeded $107,000, according to the regulator.

The trades involved events including the State of the Union, the National Prayer Breakfast, a Medal of Honor ceremony and several rallies. Investigators said Perez often reviewed Trump’s remarks shortly before delivery and used the confidential text for “his own personal, financial benefit.”

Perez was ordered to surrender $107,539.02 in trading profits and pay a $65,000 civil penalty. Kalshi separately banned him from trading on the platform for three years.

The CFTC said the penalty was reduced because Perez provided “exemplary co-operation.” Regulators said he voluntarily acknowledged during an interview that his trading decisions were based on confidential information obtained while reviewing speeches.

Kalshi Surveillance Flagged Suspicious Bets

Kalshi’s surveillance team identified unusual activity in Trump-related mention markets and traced the account to a federal employee responsible for White House teleprompters. The company then referred the matter to the CFTC.

Bobby DeNault, Kalshi’s head of enforcement, said on X that anyone who breaks company rules or federal law would “face the consequences.”

Perez had worked for Trump since the 2016 campaign and earned $175,000 annually as a deputy assistant to the president. He was placed on unpaid leave in July, and then-press secretary Karoline Leavitt called the conduct “a disgrace.” Perez was reportedly no longer employed by the federal government by late July.

Prediction Market Enforcement Expands

Christy Goldsmith Romero, a former CFTC commissioner appointed under President Joe Biden, said the regulator missed an opportunity to “send a strong message” to future insider traders.

The CFTC also settled with former Republican Representative George Santos in August over a Kalshi contract involving whether he would attend the State of the Union.

Federal prosecutors have separately charged an Army soldier over Polymarket bets connected to the capture of Venezuelan leader Nicolás Maduro. A Google engineer was also charged after making about $1.2 million from trades based on internal search data.

CFTC Chairman Michael Selig, a Trump appointee, has supported the prediction-market industry while pledging to enforce rules against insider trading.

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In addition, the CFTC has ordered him to pay a civil monetary penalty of $17,500, cease and desist orders, and a trading prohibition for a period of three years. He did not admit or deny the findings. The CFTC found the conduct occurred between February 12 and February 25, and described it as manipulative activity in a contract whose underlying event Santos controlled. Kalshi users wagered more than $15 million on which political figures would attend the address. Santos took a yes position on himself, then asked followers on X whether he should wear a “muted serious suit to the SOTU or a bedazzled one,” per Forbes.

CFTC reveals sanctions against Santos for the violation

According to reports, after everything Santos did, the price of that position climbed, and he exited at a profit. He ran the sequence repeatedly, narrating a trip toward Washington while trading against the reactions his posts produced. The day before the address, he said in a video that he would be there in the gallery. The following evening, he posted that watching from an airport television had not been the plan. The CFTC found he acted “willfully or, at the very least, recklessly” and knowingly made misleading public statements to move the contract his way.

According to NOTUS, after Kalshi detected the trading, the platform froze Santos’s account and referred it to both the CFTC and the Justice Department. According to Head of Enforcement Robert DeNault, the firm provided “the evidence needed to bring action against Santos,” and also said that Kalshi intends to take a separate legal course for breaches of exchange rules, as well as try to compensate traders for any losses incurred.

As Cryptopolitan earlier reported, Kalshi made more than 20 referrals to regulators and law enforcement in the first quarter of 2026, opened over 150 insider trading investigations, and blocked more than 100 suspected trades before execution. It has previously banned a California gubernatorial candidate for betting on his own race. Santos’s attorney, Joseph W. Murray, said his client booked flights and a hotel intending to attend, then reversed after winter storms disrupted East Coast travel and his flight was canceled.

Once Santos realized he could not safely attend, Murray said, he adopted a no position and hid neither the original plan nor the change. “There was absolutely no intent to deceive any person, nor intent to manipulate any market,” Murray said. He noted the contract was the first prediction-market bet Santos had ever placed and that his client cooperated with the agency. Three people with direct knowledge of the trades said the opposite, alleging that Santos deliberately misled the public and profited from it.

The ruling comes amid the commission’s struggle to retain exclusive jurisdiction over the contracts made for events. The CFTC has filed lawsuits against nine states and, on July 14, invoked its emergency powers to stop a Michigan court from compelling Kalshi to void executed trades. Massachusetts, Michigan, Nevada, New York, and Washington have all won rulings restricting the platform. Friday’s order gives Kalshi a useful example in its wider fight with state regulators. The exchange can now argue that its own monitoring system worked.

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Researchers from Stanford University and Singapore Management University reviewed about 16,000 five-minute Bitcoin contracts over two months and found patterns pointing to possible manipulation.

The study focused on contracts that resolve according to whether Bitcoin finishes above or below a set price. Researchers found that Binance spot order flow increased sharply before settlement, moving prices before they reversed soon afterward.

“In the final seconds before settlement, Binance spot order flow spikes, resulting in price movements that revert shortly after settlement,” the paper said. “Clearly, this is a transitory push to manipulate the spot price, not trading on information.”

Binance Prices Closely Track Oracle Results

Polymarket uses a Chainlink oracle to settle its five-minute Bitcoin markets. The oracle calculates an average Bitcoin price from spot exchanges. However, researchers described Binance as “an economically tight proxy” for that settlement price due to its trading volume.

According to the study, Binance’s midpoint price stayed extremely close to the oracle value. Researchers said a trader could push Binance’s midpoint several basis points beyond the contract strike and affect the final result.

The paper found that contracts settled on the same side as Binance’s price 85% of the time. Researchers therefore linked the observed order flow to efforts aimed at influencing contract outcomes rather than responding to new market information.

Structural Risk May Extend Beyond Polymarket

The researchers said the issue may not be limited to Polymarket. Other platforms offering contracts with similar settlement structures could face the same weakness when outcomes depend on an underlying market that participants can trade.

“These contracts have a structural vulnerability,” one paper author said. “They settle on a price that traders can move by trading the underlying asset itself.”

The findings center on how short-duration markets determine outcomes, particularly when settlement depends on a price measured at a narrow moment. The study traced the activity to Binance spot trading before contract expiration.

Polymarket Reviews Longer Settlement Windows

A Polymarket spokesperson said the company is looking to move some markets toward settlement methods using prices measured over longer periods instead of a single point in time during the coming year.

The platform has faced earlier questions about market integrity. A Columbia University study reported last year that 25% of Polymarket trading activity during the previous three years was artificial and arranged through wash trading.

In March 2026, Polymarket strengthened market integrity rules covering its CFTC-regulated United States exchange and decentralized finance platform. Those rules address market design standards, resolution criteria, and data sourcing requirements across the company’s trading operations.

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According to a CFTC press release, the regulator named Trevor L. Vernon and his firm Argent Capital Management LLC as the defendants in the case. The lawsuit accuses Argent Capital Management, a Delaware company based in Franklin, North Carolina, of what the CFTC describes as commodity pool fraud. The pool put money into equity index futures, options on those futures, as well as crypto assets, the regulator said. The case landed in the U.S. District Court for the Western District of North Carolina.

CFTC launches legal action against Vernon and Argent Capital Management

The court documents mentioned that Vernon pitched himself as a winning trader and marketed the commodity pool as unusually profitable. The CFTC said he told at least 60 investors that his fund consistently beat major stock indexes. However, according to the agency, there was in fact a long run of losses. “In reality, his trading of participants’ funds resulted in consistent and catastrophic losses,” the CFTC said.

Per multiple reports, Vernon dropped at least $8.6 million across futures, options, and cryptocurrencies. To keep the losses hidden, Vernon sent participants monthly performance emails and quarterly updates that showed account balances climbing on gains that were never real. The scheme ran from March 2022 to February 2026. The CFTC drew comparisons to a Ponzi scheme because the funds used in the pool moved between the investors.

The regulator also alleges that Vernon misappropriated pool funds and paid earlier participants with cash from newer ones, a rotation that masked the losses and ongoing fraud for years. The CFTC also claims that Vernon lied to its investigators. He knowingly made false statements during sworn testimony taken during the Commission’s probe, according to the complaint. In addition to the fraud counts, the agency alleges that Vernon and Argent Capital Management violated several registration requirements under the Commodity Exchange Act.

The Commodity Exchange Act requires commodity pool operators to register with the CFTC and join the National Futures Association. An investor can check a pool operator’s status for free through the NFA’s BASIC database in about half a minute, a step that would have helped to prevent the issues these investors ran into. The regulator is asking the court for restitution to the defrauded investors, disgorgement of any ill-gotten gains, and civil monetary penalties. The agency also wants trading and registration bans ordered against Vernon, along with a permanent injunction barring further violations of the Commodity Exchange Act and CFTC rules.

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The FIFA World Cup, which took effect earlier this month, has also increased interest around prediction markets, as thousands of contracts connected to sports outcomes pulled in an insane wave of activity. Numbers tracked by Dune Analytics show a dramatic jump in activity on the U.S. side of Polymarket. Daily turnover was sitting near $50 million around the middle of May. By June 20, that figure had climbed beyond $200 million. Overseas trading also accelerated. Weekly volume on the international platform reached new highs after softer conditions earlier in April and May.

Polymarket hits $1 billion revenue amid FIFA World Cup frenzy

The American exchange first went live in December. Its arrival followed years of regulatory issues that kept Polymarket out of the U.S. market. Back in 2022, the company could not legally operate there because registration requirements had not been met. The situation changed after both the Commodity Futures Trading Commission and the Department of Justice ended their reviews without filing charges.

The US operation now runs under CFTC oversight. A Polymarket spokesperson allegedly told CNBC, “Polymarket is a product-led company. We spent the last five years building the world’s largest prediction market and understanding how people engage with markets at scale. We are applying those learnings to our U.S. platform, where our focus is on intuitive market experiences, institutional-grade liquidity, and a consumer experience that sets the standard for the category.”

While trading activity is climbing, two US senators recently asked for federal scrutiny of the online presence of the platform, according to the Wall Street Journal. In a letter sent to CFTC Chairman Michael Selig, John Curtis and Adam Schiff wrote that the allegations were “deeply troubling and demand immediate scrutiny.” The lawmakers noted that the public-facing behavior alleged here does not resemble a sober financial market designed for hedging or price discovery.

They also claimed that they remain concerned that the Commission is neither enforcing the law appropriately nor is equipped to serve as a federal gambling regulator. Their request asked whether regulators are examining Polymarket and whether the conduct described in the reporting could violate federal rules. At the same time, a separate CFTC inquiry into Polymarket is underway. News of that review surfaced after the agency had already closed a broader investigation last year.

The Journal reported that the company paid content creators to record simulated trades on imitation websites and used workers outside the United States to help spread those clips online. The report said the campaign targeted American audiences despite restrictions that have blocked US users from trading on the international website since 2022. Journal reporters examined 1,105 videos, most of them featuring college-age creators. None disclosed payment from Polymarket.

According to the reports, nearly 10% allegedly used modified headlines or old footage to create the impression that traders had earned almost $900,000. The report said those positions would actually have produced losses exceeding $166,000. Several clips described the activity as “free money.” Meanwhile, the consumer advocacy group National Association of Consumer Advocates (NACA) filed a lawsuit against Polymarket, CEO Shayne Coplan, and CMO Matthew Modabber earlier today.

The complaint alleges that college students were targeted through misleading advertising that did not properly communicate the risk of losing money. The filing said that: “Polymarket aimed to attract young people to place bets on their platforms using a method likely to be effective: showing them social media videos of popular and respected young people enjoying a Polymarket platform. But rather than pursue this goal lawfully, Defendants used many layers of manipulation to trick college-aged consumers, who suffered significant harm as a result.”

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The state accused Kalshi of illegally operating sports gambling markets without a license and sought an injunction blocking operations and sports-event marketing.

CFTC Asserts Federal Authority

The Commodity Futures Trading Commission filed in federal court to stop New Mexico from applying state gaming laws to federally regulated contract markets. 

The agency asked for a declaratory judgment confirming its exclusive authority over event contracts under federal law. It also requested a permanent order barring enforcement of preempted state laws against registrants.

New Mexico said Kalshi lacked licensing and allowed users below the state’s legal gambling age of 21. Attorney General Raúl Torrez said gaming is legal only through tribal-state compacts or strong state rules protecting honest play.

The CFTC said New Mexico’s actions undermine its authority and hinder oversight of swaps under the Commodity Exchange Act.

States Press Sports Market Claims

The dispute is part of a wider clash over whether prediction platforms can offer sports-related contracts without following state gambling laws. The CFTC has sued Wisconsin, Minnesota, Illinois, Arizona, Rhode Island, Connecticut, New York, and New Mexico while seeking federal control.

CFTC Chairman Michael S. Selig said, “New Mexico is the latest state seeking to nullify black letter law and decades of judicial precedent by imposing state gaming laws on federally regulated derivatives exchanges subject to the CFTC’s exclusive jurisdiction.”

Selig said the commission is obligated to safeguard its regulatory authority over commodity derivatives.

Platforms Welcome Rulemaking

The CFTC proposed rules last week that would let it ban wagers vulnerable to manipulation or inconsistent with the public good. Most sports-related contracts would remain legal, except for injury markets and first-pitch events such as pitch speed. The proposal could also prohibit contracts tied to armed conflict, assassinations, and terrorism.

A Polymarket spokesperson said, “We are fully supportive of the CFTC’s initiative to provide clarity for prediction markets and remain committed to working toward a federal framework that protects the public and supports innovation — we look forward to commenting on the Commission’s proposed rule.”

Kalshi spokeswoman Dani Lever said war-related action markets are already banned on Kalshi. However, prediction-market trading has risen, with suspected insiders reportedly making more than $1 million from contracts tied to the Iran airstrike.

Kalshi CEO Tarek Mansour said traders targeting high-risk markets must submit employment disclosure forms to prevent manipulation. In May, House Oversight Chair James Comer asked Kalshi and Polymarket executives for records after insider trading allegations. Former Rep. George Santos is also under inquiry for using Kalshi to bet on his own State of the Union appearance.

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