As revealed in correspondence published on Sunday by trader Caleb Davis, the company Kalshi received a warning that the streaming data underlying one of its prediction markets on Spotify appeared to have been manipulated, after which the exchange settled contracts worth more than $3.3 million. The June market posed the question of which artists would take the number one spot in the daily US Spotify chart, and trading volume reached $3,320,917.
Davis lost $4,500 at settlement, personally published information about the exchange in an authored article, and appears under the pseudonym "Informant" in a Netflix documentary about prediction markets. The manipulation was first reported by the Financial Times, and Wired obtained confirmation from Spotify that the listening data had been falsified.
Davis recounted that he first contacted Kalshi CEO Tarek Mansour after noticing, towards the end of June, an anomalous surge in streams for several songs exclusively in the US. Mansour directed him to Robert DeNault, head of compliance and legal counsel at Kalshi, and Davis sent the company his analysis of the listening activity and related trading positions.
Davis asked Kalshi to "suspend payouts on the market pending the investigation's completion." DeNault, responding that the exchange was reviewing the information received and investigating suspicious trading on its platform, noted that "the main dispute concerns Polymarket, not Kalshi."
The final market surprise was related to the song "Earrings" by Malcolm Todd, which rose approximately 70% in a day to take the number one spot on the US Spotify chart of June 29. Davis calculated that the surge from Sunday to Monday corresponded to an 11.24 sigma event, meaning the probability of it occurring randomly was approximately one in 77 octillion. Of about 200 songs that charted on both days, 195 decreased in price and four increased—two of them were the tracks he had already flagged. In the previous week, traders had estimated the probability of "Earrings" reaching number one at about 2.5%, implying roughly a 20-fold profit for those who bet on that outcome.
Davis informed DeNault that Polymarket had not even offered an outcome for "Earrings" and that Kalshi's internal records could reveal who had been accumulating positions on Todd ahead of the surge. DeNault replied six hours later that "only Spotify could confirm" whether the data reflected genuine streams or manipulation, adding that other market participants had identified "some plausible reasons" why the numbers could be natural. Kalshi settled the market just minutes after sending this reply.
DeNault also wrote that Kalshi had found no evidence that traders had suspiciously profited from these numbers. Davis counters that the open position in the "Earrings" category grew from $2,000 to over $70,000 in the days leading up to the controversial streams, while no such growth was observed in comparable low-probability-to-win categories. He also notes that the exchange did not exhibit similar urgency with indisputable results: a winning bet on Olivia Rodrigo was not paid out until he pointed it out three days later, and a payout for a bet on Michael Jackson took over a week.
The following day, Spotify removed 523,000 streams from the total count for the song "Earrings"—enough for the song to rank fourth, not first, for June 29. However, Spotify does not retroactively revise its published daily charts, so the original chart, upon which Kalshi settled the dispute, remains unchanged—a distinction several media outlets mistakenly reported as a chart adjustment.
Spotify did not determine who generated the artificial streams, nor did it prove that this activity was aimed at manipulating the prediction market. There is no evidence pointing to the involvement of Todd or his team, so any claims that a Kalshi trader purchased streams remain unproven.
According to Bloomberg, Spotify subsequently asked both Kalshi and Polymarket to remove its branding and state that neither company has any partnership with the streaming service. Kalshi removed the logo and changed wording that created the impression that Spotify had verified the validity of its markets. Spokesperson Elizabeth Diana stated that the company "is in contact with Spotify" and is actively investigating; Kalshi has not published the investigation's results, canceled the trade, or announced any refunds. Davis claims that no one from the exchange has contacted him since Spotify confirmed the fraud.
Kalshi has stopped listing new contracts related to Spotify; however, its July contract for artists reaching the number one spot in the US remains open and actively traded, having attracted about $894,000 by Monday.
This dispute occurs against the backdrop of increased federal scrutiny over event contract settlement practices. CFTC guidance issued in March already required exchanges to specify the concrete data sources upon which settlement depends and to assess their reliability, objectivity, and resistance to manipulation, and contained a warning that cash-settled contracts can create incentives to influence the data determining payouts. A second advisory letter, published on Friday, further narrowed the scope of this practice, instructing exchanges to stop self-certifying generic template contracts that bundle options with different settlement sources within a single application. Neither advisory letter mentions Kalshi, Spotify, or "Earrings."
Kalshi has strengthened oversight of its sports vertical through a partnership with Sportradar, but entertainment markets may depend on third-party sources lacking similar data-sharing systems. A similar vulnerability manifested when someone allegedly manipulated a Paris weather sensor used to settle Polymarket contracts.
