Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Spotify has removed more than half a million streams of a song that shot to number one in its US chart after discovering that the surge in streaming coincided with a jump in suspicious wagers on prediction market Kalshi.
US streams of “Earrings”, an indie-pop track by singer-songwriter Malcolm Todd, rose almost 70 per cent between Sunday and Monday on Spotify. That propelled the song, first released in 2024, to number one on the platform’s daily US chart.
In the preceding week, traders on Kalshi had been pricing only around a 2.5 per cent probability that Todd would have a number-one song on Spotify USA before the end of June.
Following an investigation, Spotify on Wednesday released updated charts after it earlier removed streams of “Earrings” that it believed were initiated by bots, which are programmed to play tracks on repeat to artificially boost their popularity.
That would have pushed the track down to fourth in the Spotify USA chart for Monday, but by then Kalshi had already paid out to the traders who bet on the long-shot outcome.
There is no suggestion that Todd or his team were involved in any attempt to boost audience numbers on Spotify.
Traders who placed wagers on Kalshi in the week to Monday that Todd would have a number-one song on Spotify USA in June would have made a roughly 20 times return on their initial outlay.
The suspicious betting activity was first publicised by Caleb Davies, a trader on Kalshi, who shared details of the wagers in a post on X on Tuesday.
The incident comes amid rising concern that the rapid growth of prediction markets such as Kalshi and Polymarket has opened up a new avenue for lucrative insider trading and market manipulation.
US prosecutors in April charged Gannon Ken Van Dyke, a soldier involved in planning the January raid to seize Venezuelan leader Nicolás Maduro, with placing Polymarket wagers on the mission that netted more than $400,000. Van Dyke has pleaded not guilty.
France’s weather forecasting service also filed a police complaint in April after detecting anomalies in its temperature gauges in Paris, which coincided with a surge in well-timed bets on Polymarket.
Attempts to artificially boost streams of some tracks are a longstanding issue for services such as Spotify. The practice has historically centred on lesser-known songs, where fraudsters attempt to generate additional royalty fees by using bots to inflate listener numbers for their own tracks, rather than major artists.
The emergence of tools that use AI to create songs in minutes is exacerbating the issue.
Spotify said streaming services faced “ever-changing” forms of manipulation. The company added that it “has best-in-class detection and mitigation practices for manipulated streams, and we don’t pay out associated royalties”.
“We’re in touch with Spotify and are actively investigating this matter,” Kalshi said.
The incident has also highlighted tensions between Kalshi and the companies that generate the data underpinning its prediction markets.
Spotify’s legal team on Wednesday asked Kalshi to remove the company’s logo from its app and website. Kalshi has also added a disclaimer asserting that its products “have not been endorsed by Spotify”.
Credit: Source link
