Stephen Cloobeck, who gained fame as the first head of a company to participate twice in "Undercover Boss," has been implicated for betting on himself to secure the California gubernatorial race using prediction market platform Kalshi. On Monday, Kalshi announced enforcement actions against Cloobeck and two other political candidates. Cloobeck received the largest penalty, amounting to a fine of $31,770, and has been banned from using the platform for three years.
Cloobeck made headlines by purchasing $10,000 in contracts tied to his own candidacy, though Kalshi did not clarify whether he bet on himself to win or against himself before withdrawing from the race. His campaign was launched in November 2024, which attracted $3.4 million in donations.
One supporter, Freda Payne, shared, "I’m putting my dollars on someone I feel can get the job done, and that is looking at what’s important to me as a citizen of California." Following Cloobeck's campaign launch, there was little trading activity until October 2025, when his trading volume surged, mirroring that of other leading candidates at the time. His odds of victory peaked at 92% before ultimately declining.
After a month of fluctuating trade activity, Cloobeck withdrew from the gubernatorial race and endorsed Representative Eric Swalwell, who had previously received poor polling numbers in support of Cloobeck, less than 1%, just before his departure. "I’m happy to say tonight that I’m going to merge my campaign into his and give him all the hard work that I’ve worked on," Cloobeck said.
However, both Swalwell and Cloobeck are currently under criminal investigation. In April 2026, Swalwell's campaign came to a halt due to allegations of rape and sexual misconduct, leading to his resignation from Congress. Cloobeck distanced himself from Swalwell amidst the scandal, stating, "Don’t bust the trust… you bust the trust, you don’t exist in my life."
The FBI recently executed a raid on Swalwell's residence and intervened at an airport to seize his electronic devices as the investigation unfolds. In parallel, Cloobeck is facing criminal charges and has pleaded not guilty to attempting to tamper with witnesses. Arrested in April, he faces three counts related to witness intimidation and one count of harassment, with accusations of threatening Lavie Adva, his former fiancée, and her family. Lavie, known for her presence on OnlyFans, faces her own legal challenges and has pleaded not guilty.
Kalshi has also distributed sanctions to other political candidates. Laurie Buckhout, running for the House of Representatives in North Carolina, was fined $2,500 for wagering on herself, while Ben Midgley, in the Maine gubernatorial race, received a fine of $5,434.30 for a similar offense. Both candidates have received bans from the platform for three years.
Additionally, Gabriel Perez and George Santos were sanctioned this week. Perez faced a hefty fine of $65,000 from the CFTC for betting on Donald Trump's speeches while working as his teleprompter operator and was subsequently banned from Kalshi for three years. Santos, however, received a lifetime ban from the platform after paying a $17,500 fine related to wagering on his own attendance at a State of the Union address.
Robert Denault, Kalshi's Head of Enforcement, emphasized the company's commitment to maintaining the integrity of its markets, stating, "It doesn’t matter who you are: violate our rules or federal law, and you will face the consequences." Critics of the system argue that instances like these reinforce concerns about the ethics of public trading in political markets. Kalshi is currently appealing a Ninth Circuit ruling categorizing its sports markets as gambling, which could lead to a significant Supreme Court case ahead.
