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Read Full BioMelania Trump gave a speech over Zoom at the AI for Tomorrow’s Leaders Event last week. Unfortunately for Kalshi users wagering on what she would say, the audio was muted for the first 30 seconds.
After the event, the video of Melania’s speech became available on YouTube, where those first 30 seconds are clearly audible. In that time, she clearly says two terms from Kalshi’s mention market: Zoom and education.
However, as the live recording could not be heard, Kalshi has settled both those terms as words she did not say in the speech. In total, $521,818 was traded on the market.
Both terms seemed likely to be said. Education traded at 82 cents (an 82% likelihood), while Zoom was at 78 cents shortly before the speech.
She said Zoom within three seconds of the speech starting, and education at around 16 seconds. The rules of the market, however, state that “For the purpose of this market, the live broadcast or stream will be used to resolve this event.”
Because the first 30 seconds were inaudible, Kalshi resolved the two terms as losers, despite Trump saying them.
User Vows to Fight Kalshi Over Settlement
A disgruntled user who held positions in both education and Zoom posted their frustration on Reddit, calling out the settlement as a “scandal.”
The Kalshi trader went on to say they would be taking action against what they perceive as injustice, adding, “I am not letting this go. I am filing a formal complaint with the CFTC Reparations Program today.
“Kalshi is a federal ‘Designated Contract Market.’ They are legally required to follow their own filed rulebooks. If they settle against the literal video evidence, they are in violation of the Commodity Exchange Act.”
The user also referenced a previous settlement error at Kalshi, where the company incorrectly settled total wins markets for several NFL teams. Despite initially refusing to pay out winners on the markets, Kalshi reversed course and paid out the winning predictions.
In that case, Kalshi made a clear error and admitted it. The company incorrectly closed the market early, leading to a refund of all positions.
In the case of Trump’s speech, the outcome is less clear. The user claims, “The contract is about whether she said the word at the event, not whether their specific stream’s audio encoder worked perfectly in real-time.”
In other markets, such as sports, users would likely feel aggrieved if cameras did not capture a player scoring a touchdown, and the market would settle as if the player had not scored. In those cases, however, the rules would likely not follow the live stream of the game, but the actual result of the game.
Bigger Picture: Kalshi Not Held Accountable, Says User
The user goes on to say that this case demonstrates a potential problem with prediction markets like Kalshi. They state, “This isn’t just about one trade. Kalshi is currently fighting dozens of lawsuits across the country (including a major class action by Lieff Cabraser) for ‘unfair and improper practices.'”
The lawsuit mentioned was filed by the legal firm Lieff Cabraser in New York at the end of November. It alleges that, while Kalshi claims to be an exchange, it takes on a role akin to a sportsbook through its affiliate, Kalshi Trading.
This, the suit claims, deceives users into placing wagers against the house. The claim seeks to recover losses suffered by users on the platform. Kalshi co-founder Luana Lopes Lara called the lawsuit “a pure smear campaign” driven by “entrenched interests” opposed to the growth of prediction markets.
The Trump trader went on to say Kalshi lacks the same consumer protections as sportsbooks, adding, “They constantly hide behind their status as a ‘regulated exchange’ to avoid being treated like a sportsbook, but then they refuse to follow the very regulations that protect us.”
Mention Markets Susceptible to Problems
There have been several cases of mention markets causing problems in the past. A speech by President Donald Trump was allegedly hijacked by a Kalshi trader who yelled out words for him to say.
The user celebrated the market manipulation in a since-deleted post on X, writing, “You are very welcome all prediction market traders. I was literally yelling every single word right behind Trump and he’d just repeat what I say.”
While some users may have benefited from Trump listing several words on the market, those who took the ‘No’ position would not have been happy. The lawsuit against Kalshi argues that this may have been the company itself.
In another incident, Coinbase CEO Brian Armstrong deliberately manipulated Kalshi and Polymarket prediction markets during the company’s earnings call in November. Armstrong ended the call by reeling off words in the mention market, leading users who had backed the terms to profit.
While relatively small sums of money are traded on these markets, the cases point to the risks involved in offering users the chance to trade in something so easily manipulated.
The disgruntled Kalshi user added, “If we let them settle based on ‘convenience’ rather than the ‘Source of Truth’ defined in the contract, the entire platform is a sham.”
