Good morning, this is Bruce! Here’s what’s up.
Poll Results
Last week I asked, “In 2026, is writing everything using AI justifiable for the same reason you would use a calculator to do math problems?”
The People have spoken (70% of you) — NO.
Clips ✂️
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Kalshi Permanently Bars George Santos From the Platform
The prediction market Kalshi said on Monday that it had permanently barred George Santos, the former representative from New York, and fined him $71,356 after finding evidence he engaged in insider trading. It is the first such ban by the platform.
Mr. Santos faced allegations of insider trading after he placed bets on Kalshi about whether he would attend President Trump’s State of the Union address in February. Before the speech, he posted on social media that he planned to attend but then didn’t.
“The Kalshi compliance department has established reasonable cause to believe that George Santos engaged in trading activity in certain markets related to his attendance at the State of the Union address,” the company said in a statement.
by NYT
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👉 On X, a not-very-contrite Santos called Kalshi "unserious" and "pathetic" and added, "thanks for the lifetime ban from your gambling platform. Let’s see how much longer you guys are around for. 💋"
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SEC Presses Investment Firms to Prove They Have Access to Shares in Hot Startups
The Securities and Exchange Commission has stepped up its examinations of firms behind so-called special purpose vehicles that purport to offer exposure to private company investments.
SEC examiners have been asking registered investment advisers for proof that their SPVs own or have exposure to the shares in private companies that they claim to, according to people familiar with the matter.
Regulators decided to take a closer look following increased investor complaints and a marketing blitz by such funds ahead of SpaceX’s blockbuster initial public offering and Anthropic’s planned IPO, some of the people said.
by WSJ
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Prediction Market Law Keeps Veering, Inviting Supreme Court
The Ninth Circuit opened a circuit split over whether sports prediction markets are closer to casinos or to Wall Street, slicing through a muddle of lower court decisions over control of the multibillion-dollar industry and suggesting the Supreme Court will step in.
A panel of President Donald Trump appointees said last week that Kalshi Inc.'s reading of a type of hedging tool was overly broad and that its sports event contracts contained all the hallmarks of betting.
Congress didn’t mean to make the US derivatives regulator the gambling police through an amendment to federal commodity law, the court also said.
The opinion starkly differed with an April one from the US Court of Appeals for the Third Circuit, which said a “swap” encompasses sports event contracts.
“This decision reflects the zig-zag of rulings on this space, given the early win by Kalshi before a reversal by the same judge in the same lower court,” said Morgan, Lewis & Bockius LLP’s Stacie Hartman, who has defended clients before the CFTC.
by Bloomberg Law
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SEC and FDA Announce MOU to Bolster Cooperation and Ensure Market Integrity
The Securities and Exchange Commission and the Food and Drug Administration today announced that they have entered into a Memorandum of Understanding (MOU) designed to assist the agencies in carrying out their respective missions of ensuring the integrity of the financial markets and protecting public health.
The MOU establishes a framework for the agencies to enhance cooperation in their regulatory and enforcement responsibilities in order to improve market oversight and compliance. Among other things, the MOU includes information-sharing protocols to facilitate the exchange of information between the SEC and FDA that is relevant to both agencies’ important missions.
by SEC.gov Enforcement
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👉 The MOU is here. It states that it is intended to "ensure that information relevant to public health and the integrity of financial markets is appropriately shared in accordance with applicable laws and policies."
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A Plausible Loss
Should a court consider stock market index movements in evaluating whether a plaintiff has plausibly plead the existence of loss causation? In an interesting decision issued this summer, the U.S. Court of Appeals for the Second Circuit has held that stock market indexes are subject to judicial notice and may be a useful tool in assessing loss causation.
In Huey v. Anavex Life Sciences Corp., 180 F.4th 56 (2d Cir. 2026), the court considered a case where the company’s stock price rose the day of the alleged corrective disclosure, but then declined over the next two trading days. The court’s decision contains several significant holdings.
As a threshold matter, the court held that the element of loss causation in a federal securities fraud case is governed by the PSLRA’s requirement that “the plaintiff shall have the burden of proving that the act or omission of the defendant alleged to violate this chapter caused the loss for which the plaintiff seeks to recover damages....”
by The 10b-5 Daily
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👉 The latest from Lyle Roberts.
Securities Enforcement Forum Central 2026 is set for Thursday, October 1, 2026 at the Ritz-Carlton Chicago! Join us in person or tune in virtually to hear from 35+ luminaries in the securities enforcement field—including numerous in-house counsel from major corporations, and lawyers and consultants from the best firms in the world.
👉 Please register here. See you October 1 in Chicago!!!
Q&A with Jina Choi, Partner at Gibson Dunn
In advance of Securities Enforcement Forum Central we asked Jina Choi, a panelist on "Defending Parallel Investigations Involving the SEC, USAO, State AGs, and Others" the following question:
SDNY recently brought two insider trading cases, both alleging an employee traded on financial information misappropriated from their own employer. On their face, the cases seem indistinguishable: one involved a FP&A manager trading ahead of his company's earnings announcements for a profit of $338,000, and in the second, a director of operations trading ahead of his company's earnings announcement for a profit of $37,000. SDNY acknowledged the SEC's assistance in both matters, but the SEC has apparently only filed a parallel action in the first matter.
You've sat on every side of parallel investigations: as Director of the SEC's Regional Office, federal prosecutor, and defense counsel. Reading only what's public, what's your best guess as to why the SEC filed in one case and not the other? Is the SEC's decision still open?
Jina's take: For years, a criminal insider-trading case almost always had a parallel SEC complaint. That is not necessarily the case under this Commission. With finite resources and an express focus on investor protection rather than case counts, the question is increasingly: what does the SEC add once DOJ is already pursuing a criminal case, where the defendant is facing potential imprisonment and forfeiture?
In SEC v. Mitchell, you have a Senior Director of Financial Planning and Analysis at a public company who allegedly made more than $338,000 by trading across two earnings events, and a requested officer-and-director bar – relief only the Commission can obtain. In U.S. v. Pidgeon, the alleged profit was about $37,000 from one earnings event. In a garden-variety insider trading case where the defendant faces prison and criminal forfeiture of the same profits, this Commission may see a parallel civil action as largely duplicative and not a good use of litigation resources, given the specific and general deterrent of a criminal case.
So yes, a later SEC filing remains possible. But I would not assume the absence of one is simply delay. We’ve been noticing this trend for a while now: not every criminal insider-trading case has a parallel SEC filing.
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