After Kalshi flagged alleged insider trading involving a White House staffer, attention has turned to the prediction market's surveillance team and the systems behind its fraud detection.

It was reported on Thursday that Gabriel Perez, a longtime teleprompter operator for President Donald Trump, is being investigated over alleged insider trading on Kalshi.

The US-based platform said its surveillance team detected the activity through its monitoring systems before referring the case to the Commodity Futures Trading Commission (CFTC).

According to Reuters, Perez is cooperating with investigators, while the White House says the staffer has been placed on unpaid leave.

Disclosing the case to the media – a strategically deliberate move to reassure users and regulators that the platform is cracking down on insider trading – Kalshi’s head of enforcement Robert DeNault announced on X.

“Our surveillance team promptly flagged and referred these trades to the CFTC after an exchange investigation. We have been assisting regulators on this matter and provided evidence we collected, as we do in any referral.”

Who’s behind Kalshi’s surveillance team?

Until now, Kalshi’s surveillance team has not been front and centre of the platform, whose brand featured prominently on advertising hoardings around World Cup Stadium this month in a FIFA sponsorship deal thought to be worth around $20m.

Like stock exchanges, Kalshi is transparent about having surveillance systems, but deliberately vague about how they work.

It doesn’t publish its detection models for good reason: reveal the algorithms and rogue traders would quickly learn how to evade them.

What is publicly known suggests the company is building a surveillance capability more commonly associated with Wall Street or Silicon Valley.

Its leader DeNault is a former white-collar crime investigator, while former FBI intelligence analyst Tyler Neff recently joined to strengthen market surveillance after reports the company was clearing a backlog of suspicious activity reports.

The insider challenge

Kalshi says every trader undergoes identity verification before they can place bets, collecting names, addresses and government issued identification.

Trading activity is continuously monitored using internal detection systems that generate alerts for investigators when unusual behavior is detected.

The platform also relies on specialist third-party firms. Sports integrity company IC360 is one, while crypto surveillance specialist Solidus Labs provides market monitoring and risk analysis.

Additionally, Kalshi is partnered with the Wharton Forensic Analytics Lab, which develops statistical methods for detecting inside trading and financial fraud.

"Insider trading is incredibly difficult to prove."

Daniel Taylor, director at Wharton Forensic Analytics Lab

Daniel Taylor, director of the Wharton Forensics notes, insider trading cases are “incredibly difficult to prove,” and US prosecutors often have to rely on broader fraud statutes rather than specific insider trading laws.

For some countries including the UK, many European territories – and even some US states such as Michigan and Minnesota – it’s all too much of a regulatory headache. Kalshi isn’t able to operate because regulators classify its prediction markets as either banned financial products or unlicensed gambling.

Behavioural detectors that require sensitive data

Although the platform keeps its models secret, surveillance systems across financial markets typically look for behavioral anomalies rather than a single smoking gun.

They can include unusually profitiable accounts, trades placed immediately before market-moving news, coordinated activity across multiple accounts, shared devices or IP addresses , or users whose employment gives them privileged access to information.

More recently, Kalshi announced it would require employment disclosures for traders participating in selected high risk markets where participants may have privileged access to information.

There's also a new whistleblower portal to encourage users to discreetly report suspicious activity directly to its enforcement team.

Kalshi: a breach no one wants to predict

Kalshi faces a difficult balancing act. Detecting insider trading increasingly relies on collecting and analyzing sensitive user data, but the more information a platform holds, the more attractive it becomes to hackers.

Security experts have warned that prediction markets handling billions of dollars in user funds could become prime targets for cybercriminals, making robust data protection just as important as market surveillance.

Yet for all of Kalshi's surveillance efforts – and its recruitment of former FBI investigators – a White House teleprompter operator still managed to slip through the net.

And the challenge for Kalshi isn’t just spotting insiders but proving that the vast trove of data it collects won't become its biggest liability – a prediction the company will be hoping never comes true.