Matt Levine wrote about this very thing in a recent Money Stuff (October 12):
"Kalshi gaming regulation
You know what's funny? There is a real legal dispute about whether Kalshi and other prediction markets should be allowed to offer sports bets without complying with state gaming laws. Kalshi and the US Commodity Futures Trading Commission take the view that (1) Kalshi is federally regulated by the CFTC, (2) sports bets are "swaps" under federal regulation, (3) federal regulation preempts state gaming regulation, so (4) buzz off, states. Many states disagree, and there has been litigation around the country. (We have talked about this several times.)
Two federal appellate courts have sided with the states, but another has sided with Kalshi. The state that lost that last case (New Jersey) is asking the Supreme Court to review it, and last week 39 states filed a brief supporting New Jersey's request. So did the National Football League. I assume that the Supreme Court will take the case. I have no idea what it will decide. I think this is a tough question, courts have disagreed on the answer, it is all pretty politically charged, the Supreme Court can kind of do whatever it wants, and I have no real model of what it will want. I could not tell you the probability that Kalshi will win and get to continue offering sports bets.
So, out of muscle memory, I fire up Kalshi to check that probability. "Supreme Court Will Rule Kalshi Sports Bets Are Legal, Yes/No," where is it? But Kalshi doesn't list that contract![1] Here's "A Kalshi Contract on the Legality of Kalshi Contracts," by Joseph Grundfest:
'This note proposes that Kalshi list a "Kalshi Sports Legality" contract indexed to the outcome of United States Supreme Court litigation addressing whether Kalshi's sports-indexed contracts are federally regulated in a manner that preempts state law. Kalshi has previously listed at least 16 contracts indexed to Supreme Court determinations. No rule or regulation prevents Kalshi from listing the proposed contract. The proposed contract would provide a market estimate of the probability that the Supreme Court rules that Kalshi's sports-indexed contracts are legal. The contract would thereby create valuable hedging opportunities for Kalshi investors. It would also create hedging value for Kalshi customers who might lose access to Kalshi markets. These hedging rationales are more substantial than rationales Kalshi presents to support other Kalshi contracts, such as contracts indexed to parlays or to specific in-game events, such as whether the first play in a football game leads to a touchdown.'
I mean, sure, of course. You and I and Joseph Grundfest can propose sarcastic Kalshi event contracts, but Kalshi doesn't have to list them. Hypotheticals!
If Kalshi listed this contract, and it traded in reasonable volume and showed a [90%][10%] probability of Kalshi winning, would that make it [more][less] likely that Kalshi actually would win? Would the prediction market implied probability affect the outcome? Would talented appellate lawyers look at the market and think "oh Kalshi is definitely going to [win][lose], so I should join [their][the other] legal team"? Would the Supreme Court justices, or their clerks, look at this market and think "ah, the smart money is that Kalshi will [win][lose], so that's probably right?" People have concerns like this about prediction markets on elections: A prediction market showing one candidate winning might drive money and attention and support to that candidate and become self-fulfilling. And here is a Wall Street Journal article about the effects of prediction markets on juries: "If millions are wagered on the belief that a defendant will be acquitted," it asks, "could that make a jury more reluctant to convict?" I don't think that the Supreme Court exactly works like that, but on the other hand the Supreme Court, like an election or a jury...
According to the article, Kalshi paid Trump a $3 million bribe. Do we have any idea what bribes the Republican Supreme Court Justices have taken from Kalshi?
No, the supreme court. End of the day this is a commerce clause question. Good chance even if congress fully legalizes all this supreme court could over rule that.
> End of the day this is a commerce clause question
It really isn’t. Nobody is challenging the federal government’s authority in the matter. Just whether the CFTC is reading statute correctly.
The Congress could choose to regulate or legalize prediction markets. It hasn’t. It created laws for exempted commodities with Dodd-Frank and the CFTC and Trump sort of ran with that.
These betting marketplaces that take any proposition are either dealing in gambling or futures and derivatives trading. So if they don't fall under gambling laws and regulations, they can deal with the SEC digging into their businesses instead. They might want to pick their battles.
I'm against government regulation of gambling in principle but in reality, they have an uphill battle trying to convince any reasonable person that 'its platform offers “swaps” that can only be regulated by the US Commodity Futures Exchange (CFTC)'.
How do you feel about government regulation of slavery? Surely some people would benefit from having stable for-life emplpoyment instead of current unpredictable job market.
Do you think that a state government shouldn't be permitted to regulate gambling, or do you prefer a state government that chooses not to?
I ask because there are issues where I have an opinion, but I think the "marketplace of ideas" is a reasonable solution, and there are issues where I'm a strong enough proponent of my opinion that I would prefer to live in a world where it is federal (or even global) law.
Ninth circuit case, second circuit case, and third circuit case are all different outcomes because they are judging state laws in federal courts, different states within their respective circuit
I think Nevada’s and Arkansas was also mentioned - I guess Arkansas is in the fifth circuit - those are more comprehensive and broad than New Jersey’s in the third circuit
Ultimately I expect Kalshi will have the swaps treatment reaffirmed, and the supremacy clause will override most of the state laws
But for Nevada and Arkansas residents it will be unworkable, and they will just block some forms of bets for residents in those states
The differences are blurring between gambling, stock speculation, and investing. If Kalshi is gambling, how does it differ from trading traditional financial instruments that are affected by unknown future events like Federal Reserve interest rate decisions, inflation data, and stock market indices?
The differences between "gambling on sports" and "a contract on the end results of a sports game" is the same as the difference between "driving a car" and a sovereign citizen's "traveling in a conveyance". You are playing semantic games for what are the same substance. You are conflating the issue of sports gambling (which is what the law suit is about) with interest rates and saying that it's all gambling/stock market. It's not cute or logical.
>If Kalshi is gambling, how does it differ from trading traditional financial instruments that are affected by unknown future events like Federal Reserve interest rate decisions,
Easy. Financial instruments are used to tune the resource allocation in capitalism. Gambling however is used to have fun with an idea of getting free money. As such, one is at odds with the religious beliefs based on not having fun for no good reason.
Well, if we are bringing religion into it, the Christians' problem with gambling mostly boils down to the medieval idea of work (an idea that itself was derived from Judaic philosophy at the time). In short, Work (an inherently good thing that even God engaged in) is about creating something of value. Money was the natural reward for what was made. Thus, commerce (at the time) was about circulating manufactured goods.
The ancient issue with gambling is that neither the gambler nor any operator is producing anything of value. With nothing to show from any party, medieval scholars would declare gambling undeserving of any financial flow. Most Christians are still (at least unconsciously) working from these principles, even if the operations of the economy has changed since then.
>Most Christians are still (at least unconsciously) working from these principles, even if the operations of the economy has changed since then.
Vibes and experiences are bigger part of the economy, this is true, but gambling is rightfully in the same cathegory as alcohol, (other) drugs, porn, algorithmic social media feeds etc. Some constrains are needed for all of the above, as they all create ill effects either on a person engaging in it and often on a society at large.
I think that constrains on what kind of fun you can have is big part of what religion is useful for.
Are you actually asking, or sea-lioning? I can't imagine anyone comparing these two whom has even a cursory understand of financial markets and gambling. Unless one has interests in gambling companies? Or do you gamble a lot and want to keep it legal? Why frame your question this way? Judge gambling on its merits, for which there clearly isn't any outside of entertainment.
Like, at least try to put effort to the comment to show you thought about it beyond the obvious propaganda of gambling companies. What, specifically, is the same? Why arent the differences important?
The apps know who the whales are. They make up 90% of their revenue. Ban them from taking money from whales, and the problem evaporates back to harmless $20 fun.
How to do this? Demand proof of income or assets and rent above $2000 in bets made in one year. Then audit these companies to ensure they are banning problem gamblers. If they are gambling or losing more than 5% of their net worth/income, that is a whale and they need to be play within their limits or get banned.
This is trivial to do, including at casinos. No one wants to do this because those companies have interests and that means their $100B+ scam industry is gone.
Having worked briefly in ads targeting, a big issue you'll face is that for every whale for whom this is a massive life problem, there's a whale who is just ~rich and this is their hobby.
I actually had a colleague who was a whale. Spent about $30k/yr on mobile games. He was staff level and made like $350k, single guy, so while it was hard for me to understand, it's also hard to say he was being duped or something. He just really liked the games, liked cosmetics, and liked to "support the devs".
These whales will be pissed if you ban them. Why should they be banned from their hobby because someone else can't be personally responsible?
The GP said "Demand proof of income or assets", so a 'whale' for whom $3000 a week is pocket change would still be free to squander it. There are already laws which require investors in startups to show $1M in assets but online sports books and casinos are largely free to prey on gambling addicts.
These companies post little notices like "Addicted to Gambling? Click here for help" but then relentlessly target and optimize dark patterns in their apps to target and trigger addicts. Search and you'll find documented evidence of shockingly abusive tactics.
Will never happen because state lotteries depend on whales just like all other gambling operations. You think the guy at the Quick-E-Mart buying $200 of scratch-off or Powerball tickets has enough income to call that harmless fun?
What was the point of the first two paragraphs? Can you please edit your comment to remove them? They’re not helpful and don’t add anything to the discussion - this is not a venue through which to spread your vitriol
Even if we concede that, Kalshi and Polymarket need to be better regulated with actual laws associated with it, as opposed to the quasi-wild-west thing we have now. I will acknowledge that a lot of trading isn't significantly different than gambling, when you do things to purposefully manipulate the market or gamble with non-public information, there's at least an SEC that can investigate, sue, and/or arrest. I'm not claiming it's perfect, but at least there's an attempt to make the markets more fair.
It doesn't really seem like Kalshi and Polymarket have nearly the same regulation. There are plenty of cases where people are purposefully betting on the market when they can easily manipulate the results, with little/no consequences.
I mean, Polymarket ran this ad during the World Series that all but encouraged using the platform to trade on insider information: https://youtu.be/x6I-ZS8hZUg
I guess the thin veneer of deniability here is that the whistleblower isn’t shown actively trading on the information lol.
Stocks are backed by something real (in general). There's a business. That business can't just manufacture new stock out of thin air without going through a regulatory process to do so and the total number of shares is publicly known.
Furthermore the institutions that allow you to trade mostly aren't taking positions on the stock price and in theory there are jail-time consequences if they cheat. In practice that isn't always the case but at least there is some limit to what they can do to screw over their customers.
These contract markets have absolutely none of that. If they decide to take up positions to stuff their own pockets you probably wouldn't even know it and it wouldn't be illegal either. They can make up contracts for anything and everything without limit. If they aren't front-running their own customers then they're idiots because that's free money. And they can just lie about the odds as they like so if bets aren't going the way they want just tip the scales.
Oh and they have absolute control over whether any event counts as success or not and how to handle edge cases. There's no one you can appeal to.
Maybe they operate above-board in all aspects. Maybe they don't. No one really knows.
IDK of anything more backing the derivatives than the funds of the bettors, and the guy with the hot-air gun heating up the official thermometer at the Paris airport... [0]
Bets on regional weather emerged as a way for farmers (especially citrus growers in marginal non-tropical zones) to hedge against weather-related crop loss.
If you're long Florida grapefruit futures, hedging against an early freeze is an economic trade on the future value of a real thing.
Futures contracts exist as insurance contracts. The fact that people can trade them as gambling items doesn't mean they exist as gambling.
Almost anything can be gambling if you make it gambling. Effectively all the assets in the securities world that can be bought and sold as derivatives exist to facilitate and existing industry by offsetting risk.
> Stocks are backed by something real (in general).
Cordially, this is kind of like saying in a discussion about mathematics, "numbers are backed by something real." And hand waving over a whole suite of objects that have no real backing at all.
Options and futures contracts have existed in some form for pretty much the entire history of commerce. The heart of the problem is that people need to be able to take risk for some endeavours, and want to have financial instruments to mitigate that risk.
In blunt terms: if it's ok for the farmer and the baker to agree on a forward futures contract for the price of wheat so they can run their business, then it should be ok for both parties to sell their contracts on the secondary market to get liquidity (e.g. a farmer is fully leveraged in seeds, has the promise to sell wheat for price x at time y, but needs cash now to fix whatever). The bank should then be able to monetize it's exposure and sell calls on the open market. At this point we're not trading on anything "real" anymore than betting whether the harvest season will be good (or bad)
That secondary market is as real as anything on kalshi. So how would you propose to craft laws to mark one as gambling and the other as investing?
Well put. Comparing the CFTC and the SEC, we see equities enjoying some consumer protection. How would you answer your own question? Do under-defined bets on prediction markets necessitate a third regulator?
You make an interesting point, I think it boils down to two primary distinctions:
- purpose: derivatives serve primarily as risk management instruments. Gambling serves pure profit and entertainment.
- topics: derivatives focus financial assets, commodities and economic risk. Gambling focuses on micro events.
Obviously you could make an argument that both instruments can be used for both purposes.
If I'm a worker at a football team who's job depends on my team qualifying to the Uefa Champions League, betting on my team not making it can be considered risk management, while futures on oil prices traded by wall street bets degenerates can be simply gambling.
In the large US professional sports leagues (NFL, NBA, MLB), it's not uncommon for some of the most long-term losing teams to be the most financially profitable.
In the case of the NFL, the league itself is owned equally by each of the 32 teams. They each get a 1/32nd share of league revenue regardless of win/loss. While many costs like player contracts are capped, other costs (like coach contracts) aren't. Since the majority of income is equally split, one way to max profits is to spend less than other teams where they can.
Don't really have a stake in this argument (pardon the pun), but if you bet on the team you work for, it doesn't matter whether you bet on them or against them, it's against the rules and you'll get into big trouble (unless you own the betting company and then it's ok).
While some choose to engage in equity & commodity trading in a way which is like gambling, that's a secondary use of an economic exchange which still fundamentally results in the transfer of an asset tied to something other than itself.
From the days of "My six sheep for your two cows" to modern derivatives, asset trading markets are useful and necessary for economic exchange, price setting and market clearing in a way that self-referential 'poker chips' are not.
Because financial instruments like stocks are contracts entitling you to future cash flows from the legal entity that issued the stock, and federal securities laws mandate strict disclosure about that entity.
Yes, their value fluctuates on the market from lots of different factors. But the thing you're buying is very real and very well regulated compared to a prediction bet.
> differences are blurring between gambling, stock speculation, and investing
In part, in part not. Insurance and gambling are inherently similar—they’re both negative-sum games taken alone. (Insurance can become positive sum when one considers what one is protecting.) Investing and gambling are fundamentally different—the former is a positive-sum game.
That doesn’t mean you can’t gamble in the stock-market. Options are, for a non-hedging buyer, negative sum. Someone day trading meme stocks, similarly, would be expected to lose their money in the long run. On the other side, a professional poker player may be able to play a gambling game as a non-gambler.
So no, differences aren’t blurring. But awareness is, and companies like Kalshi are predating on that.
> The differences are blurring between gambling, stock speculation, and investing.
That may just mean you don’t understand the regulations and legal definitions involved. Shares of stock are portions of a company entitling the owner to dividends and possibly influence over company direction. Do shares on Kalshi represent a portion of a company and entitle you to a dividend?
No. So the line remains clear: You are allowed to trade stock as long as you follow the stock trading rules. You are not allowed to trade “Kalshi market shares” unless the rules change. You can say that they should change, but there’s no confusion about what is stock and what is illegal gambling.
Kalshi could perhaps try to list their company on the stock exhange and have the market shares become actual stock somehow, but they’d quickly run afoul of the stock trading rules if they tried to give larger dividends to some shareholders than others based on which markets they’d invested in. It would become an impossible headache, which is why they won’t do it.
In traditional regular investment you give companies money so they can make more money off them by creating value, and also you get some control of the company.
Note that commercial companies are obliged by law to maximize shareholders value, government can punish them if they don't.
Gambling, on the other hand, only redistributes capital around, without creating any value, which would be at least benign, if it didn't _attract_ all kinds of crime: drug abuse, human trafficking, fraud and violence.
But when I buy stock it doesn't give money to the company. It gives money to the previous stock holder that I bought the stock from. From the company's perspective all that happened is that a small share of the company has changed ownership.
You probably talking about publicly traded companies: If you buy stock at IPO, direct listing or any other follow-on offering -- it goes directly to the company.
And the price you pay then already accounts for your future ability to resell your stock to anyone else later, stocks would valued way less if you could only sell it back to the company.
But also don't forget that public trading is only one market, there's also a huge market for private companies stocks. Those go directly to the company for its operations.
I mean, prediction markets are gambling by all accounts, so this should have been expected no? On a personal level I'm really hoping this is the end of the massive rise in "swaps" over the last few years since it's been an obnoxious trend.
I've seen plenty of lawsuits and dirt specifically on Kalshi, but have yet to see one on Polymarket. Is there anything specific states have against Kalshi over other prediction markets, or are they just the first/most prominent of what will be a wave of lawsuits against these kinds of companies generally?
In some cases, Kalshi brought the lawsuit against the state(s). Others, where the state(s) initiated the action, name Kalshi and not Polymarket because only Kalshi is operating (legally) in US. Polymarket doesn't offer as many markets on its US-facing entity as it does on its main international site, and not exactly sure but I believe they have not included many of the markets on their US site that are causing Kalshi issues here.
The main thing getting Kalshi all the attention from the states is their sports gambling markets. Not sure if polymarket offers those to US.
> The main thing getting Kalshi all the attention from the states is their sports gambling markets.
There are 3 separate reasons WHY states are so strongly opposing Kalshi's sports gambling: 1) Kalshi is doing it in a way that avoids state taxation, licensing and regulation, 2) the online sports gambling companies spending billions on TV commercials don't want untaxed, unregulated competition, 3) The major sports leagues are concerned it will undermine the integrity of the 'product'.
Of course, there's no material difference in actual harm to the public between Kalshi sports betting and Online Sportsbook Apps, they both enable gambling addicts, cheating, etc. The hardball reaction is about ensuring Kalshi sends tax, licensing and lobbying money to each state government. The sportsbooks have spent billions ramming gambling legalization through and don't want Kalshi getting a 'free ride' on the bus they paid for.
Even the sports league's opposition isn't as 'pure' as it appears. While they don't want players, coaches or referees to undermine game outcomes, but at the same time they sell exclusive access to real-time on-field data feeds to sportsbooks for hundreds of millions of dollars. The TV feeds we watch at home are ~8 to 15 seconds delayed. Getting the real-time outcome data from every pass, kick and run in 800ms vs ~8s on TV is worth hundreds of millions to online sports apps. When people at home make real-time prop bets on the next play, many times the company already knows the outcome. Something to remember next you see a spinner in a betting app saying "odds updating" and then "bet expired". It be might because your bet was going to win, while if you'd taken the other side, it would have accepted the bet and taken your money. Yeah, that's against the law in a casino but not in an online sports app.
Right, kalshi (and the cftc) wants the cftc to be its regulator bc of the current corrupt administration. The states are saying no we have the power to regulate gaming and prediction markets qualify as such.
“Donald Trump Jr was handed about $300,000 worth of equity in Kalshi after joining the prediction market platform as a strategic adviser in early 2025” [1].
If you’re in a state with a Democrat AG which is also pursuing Kalshi in court, look up your state’s bribery laws and see if your AG can open an investigation into criminal conduct under state law.
If their lawyers are at all competent, they structured it so it's not illegal (though it's pretty obviously adjacent to bribery). With both houses of Congress turning blue, I 'predict' they'll dump Don Jr by the end of January to claw back the unvested equity.
> they structured it so it's not illegal (though it's pretty obviously adjacent to bribery)
Maybe. One usually can't structure around criminal law. If they managed to, somehow, the Congress needs to investigate to amend the law to ensure you can't structure around obvious bribery.
Either way, a criminal investigation by the states is warranted.
> One usually can't structure around criminal law.
I don't see how that applies in this context which is pretty simple. The transaction with Don Jr. was a board advisory role in exchange for equity. Broadly, bribery is "paying to influence the actions or decisions of a public official." Don Jr. isn't an official. He signed a contract to provide board advisory services. The contract wouldn't say anything about anything else. I've been a board advisor and signed a similar contract (if not the same one, they're quite pro forma).
Absent a secret recording establishing payment for influence, there's nothing to prove bribery. Do I think making him an advisor was done in the hope it would influence his father to promote and sign favorable legislation? Absolutely. Do I think there's any chance evidence exists to prosecute that? No.
> bribery is "paying to influence the actions or decisions of a public official." Don Jr. isn't an official
Nadine Menendez wasn't an official. She still went to jail for corruption [1].
> Absent a secret recording establishing payment for influence, there's nothing to prove bribery
Or a text. Or demonstration of policy moves by the Trump administration that benefited Kalshi.
Even if the criminal investigation doesn't yield proof beyond reasonable doubt, it could then be turned into a civil case against Kalshi's officers and Don Jr.
> Democrat controlled congressional committee
Sure. It should also be pursued by state AGs. Trump can't pardon a state conviction.
Unfortunately this is routine and common. The Biden family received over a million dollars from Chinese state energy company State Energy HK, among other conflicts of interest.
This stuff goes back decades, and I suspect both parties look the other way because when they get in power they're doing the exact same thing.
> The Biden family received over a million dollars from Chinese state energy company State Energy HK
...at a time when no Biden family member held elected office or was running for elected office and no Biden family member worked for the federal government.
Are you seriously going to compare that to things the Trump family does while Trump is President?!
What about the things Hunter did while Biden was SoS? That's a pretty direct link given Biden pressured Ukraine to fire a prosecutor that was entangled with his son's business dealings.
"Nearly 20 million Americans show signs of problem gambling, which can include incessantly thinking about gambling, feeling irritable when not betting and continuing to gamble more money after a loss in a panicked attempt to win it back, according to the National Council on Problem Gambling. In May, Kalshi became a member of the council and donated $2 million to the group."
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[ 3.9 ms ] story [ 180 ms ] thread"Kalshi gaming regulation
You know what's funny? There is a real legal dispute about whether Kalshi and other prediction markets should be allowed to offer sports bets without complying with state gaming laws. Kalshi and the US Commodity Futures Trading Commission take the view that (1) Kalshi is federally regulated by the CFTC, (2) sports bets are "swaps" under federal regulation, (3) federal regulation preempts state gaming regulation, so (4) buzz off, states. Many states disagree, and there has been litigation around the country. (We have talked about this several times.)
Two federal appellate courts have sided with the states, but another has sided with Kalshi. The state that lost that last case (New Jersey) is asking the Supreme Court to review it, and last week 39 states filed a brief supporting New Jersey's request. So did the National Football League. I assume that the Supreme Court will take the case. I have no idea what it will decide. I think this is a tough question, courts have disagreed on the answer, it is all pretty politically charged, the Supreme Court can kind of do whatever it wants, and I have no real model of what it will want. I could not tell you the probability that Kalshi will win and get to continue offering sports bets.
So, out of muscle memory, I fire up Kalshi to check that probability. "Supreme Court Will Rule Kalshi Sports Bets Are Legal, Yes/No," where is it? But Kalshi doesn't list that contract![1] Here's "A Kalshi Contract on the Legality of Kalshi Contracts," by Joseph Grundfest:
'This note proposes that Kalshi list a "Kalshi Sports Legality" contract indexed to the outcome of United States Supreme Court litigation addressing whether Kalshi's sports-indexed contracts are federally regulated in a manner that preempts state law. Kalshi has previously listed at least 16 contracts indexed to Supreme Court determinations. No rule or regulation prevents Kalshi from listing the proposed contract. The proposed contract would provide a market estimate of the probability that the Supreme Court rules that Kalshi's sports-indexed contracts are legal. The contract would thereby create valuable hedging opportunities for Kalshi investors. It would also create hedging value for Kalshi customers who might lose access to Kalshi markets. These hedging rationales are more substantial than rationales Kalshi presents to support other Kalshi contracts, such as contracts indexed to parlays or to specific in-game events, such as whether the first play in a football game leads to a touchdown.'
I mean, sure, of course. You and I and Joseph Grundfest can propose sarcastic Kalshi event contracts, but Kalshi doesn't have to list them. Hypotheticals!
If Kalshi listed this contract, and it traded in reasonable volume and showed a [90%][10%] probability of Kalshi winning, would that make it [more][less] likely that Kalshi actually would win? Would the prediction market implied probability affect the outcome? Would talented appellate lawyers look at the market and think "oh Kalshi is definitely going to [win][lose], so I should join [their][the other] legal team"? Would the Supreme Court justices, or their clerks, look at this market and think "ah, the smart money is that Kalshi will [win][lose], so that's probably right?" People have concerns like this about prediction markets on elections: A prediction market showing one candidate winning might drive money and attention and support to that candidate and become self-fulfilling. And here is a Wall Street Journal article about the effects of prediction markets on juries: "If millions are wagered on the belief that a defendant will be acquitted," it asks, "could that make a jury more reluctant to convict?" I don't think that the Supreme Court exactly works like that, but on the other hand the Supreme Court, like an election or a jury...
You’d be hard pressed to argue that states should be individually able to control futures trading
It really isn’t. Nobody is challenging the federal government’s authority in the matter. Just whether the CFTC is reading statute correctly.
The Congress could choose to regulate or legalize prediction markets. It hasn’t. It created laws for exempted commodities with Dodd-Frank and the CFTC and Trump sort of ran with that.
https://news.ycombinator.com/newsguidelines.html
I ask because there are issues where I have an opinion, but I think the "marketplace of ideas" is a reasonable solution, and there are issues where I'm a strong enough proponent of my opinion that I would prefer to live in a world where it is federal (or even global) law.
I think Nevada’s and Arkansas was also mentioned - I guess Arkansas is in the fifth circuit - those are more comprehensive and broad than New Jersey’s in the third circuit
Ultimately I expect Kalshi will have the swaps treatment reaffirmed, and the supremacy clause will override most of the state laws
But for Nevada and Arkansas residents it will be unworkable, and they will just block some forms of bets for residents in those states
Easy. Financial instruments are used to tune the resource allocation in capitalism. Gambling however is used to have fun with an idea of getting free money. As such, one is at odds with the religious beliefs based on not having fun for no good reason.
The ancient issue with gambling is that neither the gambler nor any operator is producing anything of value. With nothing to show from any party, medieval scholars would declare gambling undeserving of any financial flow. Most Christians are still (at least unconsciously) working from these principles, even if the operations of the economy has changed since then.
Vibes and experiences are bigger part of the economy, this is true, but gambling is rightfully in the same cathegory as alcohol, (other) drugs, porn, algorithmic social media feeds etc. Some constrains are needed for all of the above, as they all create ill effects either on a person engaging in it and often on a society at large.
I think that constrains on what kind of fun you can have is big part of what religion is useful for.
Like, at least try to put effort to the comment to show you thought about it beyond the obvious propaganda of gambling companies. What, specifically, is the same? Why arent the differences important?
The apps know who the whales are. They make up 90% of their revenue. Ban them from taking money from whales, and the problem evaporates back to harmless $20 fun.
How to do this? Demand proof of income or assets and rent above $2000 in bets made in one year. Then audit these companies to ensure they are banning problem gamblers. If they are gambling or losing more than 5% of their net worth/income, that is a whale and they need to be play within their limits or get banned.
This is trivial to do, including at casinos. No one wants to do this because those companies have interests and that means their $100B+ scam industry is gone.
I actually had a colleague who was a whale. Spent about $30k/yr on mobile games. He was staff level and made like $350k, single guy, so while it was hard for me to understand, it's also hard to say he was being duped or something. He just really liked the games, liked cosmetics, and liked to "support the devs".
These whales will be pissed if you ban them. Why should they be banned from their hobby because someone else can't be personally responsible?
The GP said "Demand proof of income or assets", so a 'whale' for whom $3000 a week is pocket change would still be free to squander it. There are already laws which require investors in startups to show $1M in assets but online sports books and casinos are largely free to prey on gambling addicts.
These companies post little notices like "Addicted to Gambling? Click here for help" but then relentlessly target and optimize dark patterns in their apps to target and trigger addicts. Search and you'll find documented evidence of shockingly abusive tactics.
It doesn't really seem like Kalshi and Polymarket have nearly the same regulation. There are plenty of cases where people are purposefully betting on the market when they can easily manipulate the results, with little/no consequences.
I guess the thin veneer of deniability here is that the whistleblower isn’t shown actively trading on the information lol.
Furthermore the institutions that allow you to trade mostly aren't taking positions on the stock price and in theory there are jail-time consequences if they cheat. In practice that isn't always the case but at least there is some limit to what they can do to screw over their customers.
These contract markets have absolutely none of that. If they decide to take up positions to stuff their own pockets you probably wouldn't even know it and it wouldn't be illegal either. They can make up contracts for anything and everything without limit. If they aren't front-running their own customers then they're idiots because that's free money. And they can just lie about the odds as they like so if bets aren't going the way they want just tip the scales.
Oh and they have absolute control over whether any event counts as success or not and how to handle edge cases. There's no one you can appeal to.
Maybe they operate above-board in all aspects. Maybe they don't. No one really knows.
[0] https://www.businessinsider.com/polymarket-paris-weather-bet...
If you're long Florida grapefruit futures, hedging against an early freeze is an economic trade on the future value of a real thing.
Almost anything can be gambling if you make it gambling. Effectively all the assets in the securities world that can be bought and sold as derivatives exist to facilitate and existing industry by offsetting risk.
Cordially, this is kind of like saying in a discussion about mathematics, "numbers are backed by something real." And hand waving over a whole suite of objects that have no real backing at all.
Options and futures contracts have existed in some form for pretty much the entire history of commerce. The heart of the problem is that people need to be able to take risk for some endeavours, and want to have financial instruments to mitigate that risk.
In blunt terms: if it's ok for the farmer and the baker to agree on a forward futures contract for the price of wheat so they can run their business, then it should be ok for both parties to sell their contracts on the secondary market to get liquidity (e.g. a farmer is fully leveraged in seeds, has the promise to sell wheat for price x at time y, but needs cash now to fix whatever). The bank should then be able to monetize it's exposure and sell calls on the open market. At this point we're not trading on anything "real" anymore than betting whether the harvest season will be good (or bad)
That secondary market is as real as anything on kalshi. So how would you propose to craft laws to mark one as gambling and the other as investing?
Why wouldn't they be regulated any differently?
- purpose: derivatives serve primarily as risk management instruments. Gambling serves pure profit and entertainment.
- topics: derivatives focus financial assets, commodities and economic risk. Gambling focuses on micro events.
Obviously you could make an argument that both instruments can be used for both purposes.
If I'm a worker at a football team who's job depends on my team qualifying to the Uefa Champions League, betting on my team not making it can be considered risk management, while futures on oil prices traded by wall street bets degenerates can be simply gambling.
This is the ideal, yes. But I'd bet about 99% do the opposite and double their risk by betting on their preferred outcome.
Also, betting on something you have control over introduces perverse incentives. It's easier to sabotage an effort than make it succeed.
That should be plain illegal, in the same way sportsmen are barred and punished for being anywhere near betting.
But we have politicians, their staff and administrations openly trading and betting on outcomes they can influence.
In the large US professional sports leagues (NFL, NBA, MLB), it's not uncommon for some of the most long-term losing teams to be the most financially profitable.
In the case of the NFL, the league itself is owned equally by each of the 32 teams. They each get a 1/32nd share of league revenue regardless of win/loss. While many costs like player contracts are capped, other costs (like coach contracts) aren't. Since the majority of income is equally split, one way to max profits is to spend less than other teams where they can.
From the days of "My six sheep for your two cows" to modern derivatives, asset trading markets are useful and necessary for economic exchange, price setting and market clearing in a way that self-referential 'poker chips' are not.
Yes, their value fluctuates on the market from lots of different factors. But the thing you're buying is very real and very well regulated compared to a prediction bet.
In part, in part not. Insurance and gambling are inherently similar—they’re both negative-sum games taken alone. (Insurance can become positive sum when one considers what one is protecting.) Investing and gambling are fundamentally different—the former is a positive-sum game.
That doesn’t mean you can’t gamble in the stock-market. Options are, for a non-hedging buyer, negative sum. Someone day trading meme stocks, similarly, would be expected to lose their money in the long run. On the other side, a professional poker player may be able to play a gambling game as a non-gambler.
So no, differences aren’t blurring. But awareness is, and companies like Kalshi are predating on that.
That may just mean you don’t understand the regulations and legal definitions involved. Shares of stock are portions of a company entitling the owner to dividends and possibly influence over company direction. Do shares on Kalshi represent a portion of a company and entitle you to a dividend?
No. So the line remains clear: You are allowed to trade stock as long as you follow the stock trading rules. You are not allowed to trade “Kalshi market shares” unless the rules change. You can say that they should change, but there’s no confusion about what is stock and what is illegal gambling.
Kalshi could perhaps try to list their company on the stock exhange and have the market shares become actual stock somehow, but they’d quickly run afoul of the stock trading rules if they tried to give larger dividends to some shareholders than others based on which markets they’d invested in. It would become an impossible headache, which is why they won’t do it.
Note that commercial companies are obliged by law to maximize shareholders value, government can punish them if they don't.
Gambling, on the other hand, only redistributes capital around, without creating any value, which would be at least benign, if it didn't _attract_ all kinds of crime: drug abuse, human trafficking, fraud and violence.
And the price you pay then already accounts for your future ability to resell your stock to anyone else later, stocks would valued way less if you could only sell it back to the company.
But also don't forget that public trading is only one market, there's also a huge market for private companies stocks. Those go directly to the company for its operations.
And I also haven't touched dividends.
The main thing getting Kalshi all the attention from the states is their sports gambling markets. Not sure if polymarket offers those to US.
There are 3 separate reasons WHY states are so strongly opposing Kalshi's sports gambling: 1) Kalshi is doing it in a way that avoids state taxation, licensing and regulation, 2) the online sports gambling companies spending billions on TV commercials don't want untaxed, unregulated competition, 3) The major sports leagues are concerned it will undermine the integrity of the 'product'.
Of course, there's no material difference in actual harm to the public between Kalshi sports betting and Online Sportsbook Apps, they both enable gambling addicts, cheating, etc. The hardball reaction is about ensuring Kalshi sends tax, licensing and lobbying money to each state government. The sportsbooks have spent billions ramming gambling legalization through and don't want Kalshi getting a 'free ride' on the bus they paid for.
Even the sports league's opposition isn't as 'pure' as it appears. While they don't want players, coaches or referees to undermine game outcomes, but at the same time they sell exclusive access to real-time on-field data feeds to sportsbooks for hundreds of millions of dollars. The TV feeds we watch at home are ~8 to 15 seconds delayed. Getting the real-time outcome data from every pass, kick and run in 800ms vs ~8s on TV is worth hundreds of millions to online sports apps. When people at home make real-time prop bets on the next play, many times the company already knows the outcome. Something to remember next you see a spinner in a betting app saying "odds updating" and then "bet expired". It be might because your bet was going to win, while if you'd taken the other side, it would have accepted the bet and taken your money. Yeah, that's against the law in a casino but not in an online sports app.
If you’re in a state with a Democrat AG which is also pursuing Kalshi in court, look up your state’s bribery laws and see if your AG can open an investigation into criminal conduct under state law.
[1] https://www.ft.com/content/f70147b1-ee77-4d75-8587-707a49ddb...
Maybe. One usually can't structure around criminal law. If they managed to, somehow, the Congress needs to investigate to amend the law to ensure you can't structure around obvious bribery.
Either way, a criminal investigation by the states is warranted.
I don't see how that applies in this context which is pretty simple. The transaction with Don Jr. was a board advisory role in exchange for equity. Broadly, bribery is "paying to influence the actions or decisions of a public official." Don Jr. isn't an official. He signed a contract to provide board advisory services. The contract wouldn't say anything about anything else. I've been a board advisor and signed a similar contract (if not the same one, they're quite pro forma).
Absent a secret recording establishing payment for influence, there's nothing to prove bribery. Do I think making him an advisor was done in the hope it would influence his father to promote and sign favorable legislation? Absolutely. Do I think there's any chance evidence exists to prosecute that? No.
Nadine Menendez wasn't an official. She still went to jail for corruption [1].
> Absent a secret recording establishing payment for influence, there's nothing to prove bribery
Or a text. Or demonstration of policy moves by the Trump administration that benefited Kalshi.
Even if the criminal investigation doesn't yield proof beyond reasonable doubt, it could then be turned into a civil case against Kalshi's officers and Don Jr.
> Democrat controlled congressional committee
Sure. It should also be pursued by state AGs. Trump can't pardon a state conviction.
[1] https://www.justice.gov/usao-sdny/pr/nadine-menendez-sentenc...
This stuff goes back decades, and I suspect both parties look the other way because when they get in power they're doing the exact same thing.
...at a time when no Biden family member held elected office or was running for elected office and no Biden family member worked for the federal government.
Are you seriously going to compare that to things the Trump family does while Trump is President?!
"Nearly 20 million Americans show signs of problem gambling, which can include incessantly thinking about gambling, feeling irritable when not betting and continuing to gamble more money after a loss in a panicked attempt to win it back, according to the National Council on Problem Gambling. In May, Kalshi became a member of the council and donated $2 million to the group."
1791627120 | Gambling Addiction Group in Shambles After It Turns Out It's Funded by Kalshi | https://futurism.com/future-society/gambling-addiction-group... | not submitted
1793885715 | Ties to Kalshi Throw Gambling Addiction Group into Disarray | https://www.barrons.com/articles/kalshi-prediction-market-ga... | https://news.ycombinator.com/item?id=50378891
If it's not gambling then why donate to NCPG