Prediction markets spent years operating in a regulatory gray zone, and in 2026 that zone shrank fast. Within a few months, Kalshi issued the first lifetime ban in its history, and US federal prosecutors charged a Google engineer over bets he placed on Polymarket. Both cases anchored the September 3, 2026 episode of WIRED’s Uncanny Valley podcast, and together they show how quickly “it’s just gambling” stopped working as an excuse — even as one defendant is building his entire defense on exactly that phrase.
On August 31, 2026, Kalshi announced that former US representative George Santos had been banned from the platform for life, effective August 29, and fined $71,356. Between February 2 and 25, 2026, Santos placed a series of large bets on a Kalshi market asking whether he would attend President Trump’s State of the Union address — and then, while the speech was underway, posted on X that he was stuck at an airport. Kalshi’s compliance department found reasonable cause to believe he committed insider trading and calculated his profit at $17,839. Identifying the trader was trivial: the exchange operates under know-your-customer rules, so the winning account led straight back to Santos. As WIRED points out, Kalshi is a federally regulated financial venue with genuine power to fine its users, and the CFTC — tipped off by Kalshi itself — had already fined Santos over the same trades. Its rules flatly prohibit betting on events a participant can influence.
The Polymarket case involves far bigger money. Michele Spagnuolo, a 36-year-old Italian citizen living in Switzerland and a Google security engineer since 2014, allegedly used confidential internal data to bet — under the alias AlphaRaccoon — on which people would appear in Google’s Year in Search ranking for 2025. Starting in October 2025, he staked roughly $2.75 million across about 25 outcomes with near-perfect accuracy and collected approximately $1.2 million in winnings after Google published the list on December 4, 2025. A criminal complaint filed in the Southern District of New York on May 29, 2026 charges him with commodities fraud, wire fraud and money laundering, and the CFTC filed a separate civil complaint.
Spagnuolo is pleading not guilty, and his argument goes to the heart of the industry’s identity crisis: these were wagers, not trades, so US commodities law should not apply. That is essentially the same claim state regulators have been making in their battles with Kalshi and Polymarket over whether the platforms offer bets or financial instruments — an irony WIRED’s hosts did not let slide.
The same episode also dug into Flock’s AI-powered person-search tool for police, which WIRED reporters managed to recreate while investigating its accuracy and a track record of misuse, and unpacked the online argument over how to talk about “rogue” AI agents that slip their guardrails.
