MINNEAPOLIS — The prediction market platform Kalshi caught a Minnesota politician who traded on the outcome of his own election, the platform said Wednesday.

Kalshi’s surveillance team was alerted that a candidate in the DFL primary for Minnesota’s 2nd Congressional District traded a small amount in his own race. The platform confirmed that the identity of the trader Minnesota state Sen. Matt Klein, matched the candidate.

Klein is one of three candidates vying for the DFL endorsement in the race to replace longtime Rep. Angie Craig. He is a physician who has represented Mendota Heights in the state Legislature for nearly a decade.

Klein purchased less than $100 worth of contracts related to his own candidacy in the 2nd Congressional District race, in violation of the platform’s rules, they said.

“Just like in traditional financial markets, bad actors will try to cheat,” Kalshi said in a statement.

Kalshi is a federally regulated exchange that allows for trading on the outcome of future events like political races, sporting events and other cultural events — even though most proposition bets are illegal in Minnesota.

The platform was alerted to Klein’s rule violation and negotiated a settlement on April 10.

As part of that settlement, Klein acknowledged that the trading activity violated Kalshi exchange rules and agreed to pay a fine of $539.85. The settlement included a five-year suspension from Kalshi.

“No matter how small the size of the trade, any trade that is found to have violated our exchange rules will be punished,” Kalsi said in a statement.

Last fall, Klein said he heard from friends that there were wagers on his primary race on the prediction site. He’d never wagered on a predictions market previously, Klein said in a statement, and set up an account to see how it worked. He bet $50 of his own funds that he would win the primary, Klein said.

It was the only wager he’d made on a predictions market, Klein said, apologizing for what he called a mistake.

“My experience, like many other Minnesotans, points to the need for clearer rules and regulations for these types of markets,” Klein said.

Klein is a co-sponsor of a bill moving through the Minnesota Legislature that would ban prediction markets like Kalshi. He chairs the Commerce and Consumer Protection Committee, which the bill passed through.

State Rep. Kaela Berg of Burnsville and former Lakeville Mayor Matt Little, the two other Democrats vying to replace Craig along with Klein, both said the state senator’s bet raised ethical concerns.

“Insider trading is wrong — whether it’s on stocks or politics. This calls attention to how important it is to regulate these markets and put an end to Congressional stock trading,” Berg said in a statement.

Little facetiously asked: “Did he bet on me to win? Because I could understand that. But clearly, we need to regulate these markets to stop manipulation and insider trading.”

Two other candidates for political office, in Texas’ Republican primary and Virginia’s Democratic primary, also traded on their own races on Kalshi, the platform said in the same statement.

Cases like these violate the platform’s exchange rules that are approved by the Commodity Futures Trading Commission (CFTC). More serious matters are referred to the CFTC or the Department of Justice for further investigation and prosecution, which did not happen in this case, Kalshi said.

Within hours of the news breaking, the odds of Klein winning the primary dropped on Kalshi.

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