Kalshi ties up with Nasdaq to bolster trade surveillance

Prediction market specialist Kalshi has entered into a multi-year arrangement with American exchange giant Nasdaq to incorporate the latter’s market surveillance technology. The accord, disclosed on Monday, signals Kalshi’s intensified focus on enhancing monitoring and control of trading activity on its platform. The alliance demonstrates a wider industry-wide move to fortify trade surveillance, as prediction markets have come under intensified regulatory scrutiny due to high-profile alleged insider trading instances that have accentuated concerns over illicit trades.

Kalshi intends to roll out Nasdaq’s market surveillance software gradually, merging its current surveillance framework with enhanced monitoring tools designed specifically for prediction markets and perpetual-style derivatives. This accord solidifies Kalshi’s dedication to maintaining market integrity, stated Max Crowley, Kalshi’s vice president of business development.

The partnership grants Kalshi access to surveillance data utilized by the world’s leading exchanges. By incorporating Nasdaq’s 24/7 surveillance platform with its own trading operations, the move aims to facilitate real-time identification of illicit market practices including manipulation, abuse, and insider trading, and facilitate the submission of trade data to the Commodity Futures Trading Commission in the required format.

The U.S. top derivatives regulator recently imposed a $35,000 fine on former Republican Representative George Santos for alleged manipulative trading on Kalshi. Additionally, a White House teleprompter operator is currently under investigation over potential insider trading on the Kalshi platform. Kalshi has also stepped up recruitment in its surveillance division this year, alerting regulators about suspicious trading activity in both cases.

The platform strictly prohibits market manipulation and insider trading. Nasdaq’s market surveillance platform caters to over 50 exchanges and 20 international regulators globally, playing a crucial role in detecting potentially abusive trading behaviors across various asset classes. According to Tony Sio, head of regulatory strategy and innovation at Nasdaq, prediction markets represent one of the fastest-growing segments of the financial realm, necessitating surveillance infrastructure that can match their rapid pace and scale.