A well-known trader on Kalshi requested a hold on a $3.3 million payout for a Spotify contest while investigators looked into possible fake streaming activity. Kalshi made the payment shortly after receiving information, just one day before Spotify removed 523,000 fraudulent streams from the winning track.
Key Takeaways
- A trader asked Kalshi to delay settlement while suspected manipulation was investigated.
- Kalshi settled the $3.32M market minutes after its enforcement chief responded.
- Open interest in the winning bracket rose from $2K to over $70K before the surge.
Kalshi Settled a $3.3M Spotify Market Minutes After a Fraud Warning
Kalshi was warned that streaming data underlying one of its Spotify prediction markets appeared to be manipulated before the exchange settled more than $3.3 million in contracts, according to correspondence published Sunday by trader Caleb Davies. The June market asked which artists would reach No. 1 on Spotify’s daily U.S. chart and recorded $3,320,917 in trading volume.
Davies lost $4,500 on the settlement, published the exchange himself as a bylined opinion piece, and is identified as “The Whistleblower” in a Netflix documentary on prediction markets. The underlying manipulation was first reported by the Financial Times, with Wired obtaining Spotify’s confirmation that the streams were fraudulent.
Davies initially reached out to Kalshi’s CEO, Tarek Mansour, when he noticed a strange surge in US-based streams for certain songs near the end of June. Mansour connected him with Robert DeNault, who leads enforcement and legal matters at Kalshi. Davies then shared his findings about the streaming patterns and how they correlated with trading activity.
Davies requested that Kalshi delay payouts on the market until an investigation concluded. DeNault confirmed Kalshi was reviewing the information and looking into any unusual trading activity, but clarified that the primary issue wasn’t with Kalshi itself, but with Polymarket.
The biggest shock of the day came from Malcolm Todd’s song “Earrings,” which saw its popularity jump around 70% in just one day and hit number one on Spotify’s US chart on June 29th. Analyst Davies determined this sudden increase was incredibly unlikely, estimating it had about a one-in-77-octillion chance of happening by random luck. Out of roughly 200 songs on the charts both days, most declined in popularity, and only five increased – two of which were songs Davies had previously identified as potential risers. Before this surge, traders valued “Earrings” at around 2.5%, meaning those who bet on its success saw a return of about 20 times their investment.
Davies informed DeNault that Polymarket hadn’t created a betting option related to “Earrings,” and suggested Kalshi’s internal data could show who bet on Todd before its popularity spiked. DeNault responded six hours later, stating only Spotify could confirm if the listening data was legitimate or artificially inflated, and mentioned others believed the increase in numbers could have been natural. Kalshi closed the market shortly after sending this reply.
DeNault also stated there was no indication of unusual trading activity suggesting someone profited from knowing the results in advance. However, Davies points out that trading volume for the “Earrings” outcome jumped significantly – from $2,000 to over $70,000 – right before the controversial streams were flagged, while similar unlikely outcomes didn’t see any such increase. He also observed that the exchange didn’t prioritize paying out undisputed winners quickly; a win for Olivia Rodrigo went unclaimed for three days, and a Michael Jackson win took more than a week to be processed.
The next day, Spotify took away 523,000 listens from the total for the song “Earrings,” which would have moved it from first to fourth place on the chart for June 29th. While Spotify doesn’t change charts after they’ve been published, some news sources mistakenly reported that the chart had been corrected. The original chart used for a previous agreement remains the same.
Spotify hasn’t figured out where the fake streams came from or if they were meant to influence betting on its predictions market. They also haven’t found anything linking Todd or his team to this activity, so it’s still just a rumor that someone using Kalshi paid for those streams.
Per Bloomberg, Spotify subsequently asked both Kalshi and Polymarket to remove its branding and state that neither company holds any partnership with the streaming service. Kalshi removed the logo and revised wording that had suggested Spotify verified its markets. Spokesperson Elisabeth Diana said the company was “in touch with Spotify” and actively investigating; Kalshi has not published an investigation result, reversed the settlement or announced reimbursements. Davies says no one at the exchange has contacted him since Spotify confirmed the fraud.
Kalshi is no longer offering contracts for predicting success in new Spotify regions. However, people are still betting on which artists will hit No. 1 in the US, with around $894,000 wagered on that particular contract as of Monday.
The dispute lands against tightening federal scrutiny of how event contracts resolve. A CFTC advisory issued in March already required exchanges to identify the specific data sources settlement depends on and to assess their reliability, objectivity and manipulation resistance, warning that cash-settled contracts can create incentives to influence the data determining payouts. A second advisory issued Friday narrowed the practice further, telling exchanges to stop self-certifying broad template contracts that bundle permutations with differing settlement sources under a single filing. Neither advisory mentions Kalshi, Spotify or “Earrings.”
Kalshi has strengthened surveillance for its sports business through a Sportradar partnership, but entertainment markets may depend on third-party sources without equivalent information-sharing systems. A similar weakness surfaced when someone allegedly manipulated a Paris weather sensor used to settle Polymarket contracts.
2026-07-28 04:28