This week's market forecast was dominated by three things: suspicions of insider trading by a former congressman, a new tax bill in one state, and a bar's NBA Finals hedging experiment. First, Polymarket quickly terminated its paid partnership with George Santos on Wednesday—against the backdrop of the Justice Department investigating whether the former New York State Assemblyman bet on the market during his State of the Union address. Then, Illinois became the second state in the US to impose a new tax on prediction markets. Meanwhile, the owner of a bar in the Upper East Side of New York, by betting $5,000 on the Knicks to win on Kalshi, gave all customers a free pass. These three events together perfectly outline the current three facets of the prediction market: regulation, taxation, and commercial imagination.
Santos bets on not attending? Former congressman triggers another federal investigation
The name George Santos has become synonymous with "trouble" in American political circles. In April last year, he was sentenced by a federal judge to 87 months in prison for wire and check fraud felonies; a few months into his sentence, Trump signed a pardon in 2025, and Santos was released on the spot. After his release, he transformed into a paid internet celebrity for Polymarket. But the good times did not last long—this week, multiple media outlets reported that Santos was suspected of betting on his own political activities on the Kalshi platform, and the Justice Department has launched an investigation.
The incident dates back to the State of the Union address on February 24 this year. The day before, Santos posted on X: "Guys, I'll be at the State of the Union." The market on Kalshi about "whether a specific person will appear at the annual speech" immediately saw millions of dollars in transactions. During the speech, Santos posted again, saying he couldn't make it due to flight issues. NPR cited three anonymous sources saying that Santos bet exactly on "not attending". After detecting the related transactions, Kalshi froze his account and handed the case over to federal authorities. When NPR asked Santos if he had an account on Kalshi, his answer was textbook vague: "I didn't say yes, and I didn't say no."
Polymarket reacted very quickly—announcing on Wednesday that it was cutting off all paid cooperation with Santos. For a platform that is trying hard to prove to regulators that it "does not welcome insider trading," this decision was almost a no-brainer.
Illinois joins the tax brigade: Prediction markets face double taxation
The regulatory hammer is not only striking individuals but also the business model itself. This week, Illinois became the second state in the US after Kentucky to approve a tax on prediction market operators. This tax measure, embedded in SB 3019, also imposes new taxes on prediction markets, fantasy sports, digital assets, and social media companies, expected to bring in about $65 million in revenue for the state. The entire tax reform package is part of Governor Pritzker's $56 billion budget for fiscal year 2027.
However, the specific tax rate was still not announced by Friday, and implementation may face a long legal battle. The American Gaming Association has always been a staunch opponent of prediction markets, estimating that states have already lost at least $1 billion in tax revenue due to the explosive growth of sports event contracts. Supporters of prediction markets, however, believe that this kind of taxation is essentially double taxation—just like online broker transactions, profits from prediction market transactions exceeding a certain threshold are already subject to capital gains tax. Currently, more than twenty states are advancing legislation restricting prediction markets, and this track is quickly sliding from a "regulatory vacuum" to a "regulatory siege."
The bar owner's hedging experiment: $5,000 bet leads to free meals for all
If the first two stories were about "trouble," the case of The Jeffrey bar in the Upper East Side of New York shows the practical side of prediction markets. In the first game of the NBA Finals, the Knicks faced the Spurs, and owner Andy Freedman bet $5,000 on the Knicks to win on Kalshi, with a 37% odds, which would yield about **$12,940 (2.59 times)** if successful. At the same time, the bar launched a promotion—if the Knicks won, each customer's food and drink expenses would be covered by the establishment, up to $100 (excluding tax and tips).
The Knicks ultimately secured their first NBA Finals victory in 27 years, and the cheering customers in the bar realized: tonight was a night of free food and drinks. Before the game, Kalshi issued a statement saying that this operation was essentially turning a "high-risk marketing activity" into a "fully insured certain expense." Nicolas Hull of Kalshi further explained: "Small businesses face real-world operational risks every day, and traditional insurance is not designed for these kinds of operations. Kalshi changes this equation—a highly liquid, completely transparent market that allows any business to hedge against their bottom line risks."
Of course, whether Freedman made a profit depends on how much the customers consumed that night—the bar did not release specific consumption data. However, the story itself is enough to illustrate the point: prediction markets are trying to evolve from "speculative tools" to "business risk management infrastructure." PASA's official website will continue to monitor the development of this track. As of Friday afternoon, the odds of the Knicks winning the championship on Kalshi were 53%.
————
This article is from "PASA-Global iGaming Leader," a gambling industry news channel: https://t.me/pasa_news
Original deep channel for gambling: https://t.me/gamblingdeep
Free data report: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
