[HN Gopher] Launch HN: Kalshi (YC W19) - A regulated exchange fo...
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Launch HN: Kalshi (YC W19) - A regulated exchange for trading on
events
Hi HN! Tarek and Luana here, co-founders of Kalshi
(https://kalshi.com/hn), a financial exchange that allows you to
trade on the outcome of events. Everyone faces different risks:
inflation, extreme weather, mortgage rates, Supreme Court
decisions, student debt, and more. Our mission is to allow people
and businesses to mitigate risks that relate to them. We got into
finance early during our time at MIT. Tarek worked at Goldman and
Citadel, Luana worked at Bridgewater and Citadel. We noticed
something common across all these places: a lot of trading stemmed
from an opinion on a future event. For example, a lot of activity
at Goldman at the time was focused on providing institutions with
exposure to, or a hedge against, Brexit. To do this, we'd sell them
complicated financial bundles (a bunch of swaps, options, etc.) at
a high price... but these bundles were proxies: basically, a bunch
of risk curves fitted together to approximate the binary/event
exposure the customers were looking for. What you couldn't do was
just trade directly on the event itself, even though that would
have been simpler and cheaper and was what people actually wanted.
The option just didn't exist. Once we identified the problem, we
noticed it everywhere. The more we thought about it, the more the
idea of an exchange for people to trade directly on events seemed
obvious. That was the inspiration for Kalshi's event contracts. We
give people the ability to trade based on their opinions about a
specific yes-or-no question. For example, if you have student debt
and are worried about relief not passing, you can purchase a
contract and get a payout even if it doesn't pass. If you're
worried about the economic fallout of another lockdown, you can
place a trade to hedge against it. If you've developed a model on
inflation, you can profit from that....and maybe even offset your
rising costs. Our markets are phrased as simple yes/no questions.
For example, "Will the Fed raise interest rates next month?". Users
place orders on either the Yes or the No side and choose a price to
purchase the contract between 1c and 99c. When there is a Yes order
and a No order on both sides where the prices sum to $1, a trade is
formed. When the event happens or doesn't happen, based on criteria
clearly defined in our contracts up front, we give back that $1 to
whoever was right. The way our markets are structured means these
trades are fully collateralized--there's no margin or leverage on
our platform. The price that a given event contract trades at is
actually the market's assessment of the probability that the event
will happen. If something happens that should increase the
probability, people will start paying more for Yes contracts,
raising the price. This market determination of the likelihood of
an event has made Kalshi the most accurate place for predicting
where inflation will be next month:
https://kalshi.com/forecasts/inflation. People have been building
forecasting dashboards on all sorts of things based on our data,
including Bloomberg and news outlets. Before Kalshi, markets that
allowed you to trade on economically relevant events were illegal
or unregulated. From day 1, we decided to take the harder path:
build a fully regulated exchange with a deep commitment to
compliance. We spent almost 3 years working with the CFTC to
develop our exchange, contracts, market structure, surveillance,
and compliance programs to provide a safe, secure and orderly
market. This finally led to us getting federal approval to launch
the first regulated exchange for this new asset class. This path
incurred the risk of launching later than anyone who opted to
eschew regulatory approval. We chose the hard path because we want
to develop this asset class in a way that is safe and responsible,
which we see as the only way to build for the long term. We make
money the way most exchanges do: we take a small fee on each
transaction on our platform (none of the weird order flow or other
stuff). Our markets are liquid, have been around for over a year
now, are fully regulated (as mentioned), and expanding. We've got
over 70 markets live, many inspired by requests from our users.
Here are some of the markets we've had so far: Will there be a Moon
landing by 2025? [1] What will monthly inflation be? [2] Will there
be a recession in 2023? [3] Will a new COVID variant of concern be
identified? [4] We'd love to hear your suggestions for others! You
can access our platform through the web, iOS, Android, and our API
- you can sign up at https://kalshi.com/hn and place your first
trade in minutes. We recently launched our mobile app after months
of hard work, which you can download at https://kalshi.app.link/hn.
We'd love to hear your feedback and ideas and look forward to a
good discussion in the comments! [1]
https://kalshi.com/events/MOON-25/markets/MOON-25 [2]
https://kalshi.com/events/CPI-22NOV/markets/CPI-22NOV-T0.2 [3]
https://kalshi.com/events/RECSSNBER-23/markets/RECSSNBER-23 [4]
https://kalshi.com/events/COVVC-23MAR1/markets/COVVC-23MAR1
Author : tmansour
Score : 77 points
Date : 2022-11-21 19:07 UTC (3 hours ago)
| adamsmith143 wrote:
| Why are we acting like this isn't just a prediction market? Also
| as others have said PredictIt did it first and was fine until you
| hired a former regulator and got them shut down. Questionable
| business practices. How long will you survive until the next
| upstart throws enough money at someone higher up the regulatory
| chain and you yourselves get shut down??
| einpoklum wrote:
| There used to be betting on horse races, now these guys (well,
| not just them, but still) let you bet on the results of _human_
| races. Will SCOTUS uphold civil right R ? Come make money off of
| it! Or - hedge your bets, and if the pseudo-democracy gets
| further downgraded - at least you'll be a little richer, at the
| expense of the poor saps who believed in "Golden Miller" or
| "Hoofs of Thunder". Oh, sorry, I meant to say "Elena Kagan" or
| "Brett Kavanaugh".
|
| Just wonderful!
| tmansour wrote:
| That's one view of this - I'd say it's pretty cynical though...
| Reminds me of how people reacted to insurance when it was first
| being introduced to the broader population "gambling on human
| lives/death! terrible!!".
|
| While it's true to some extent, insurance is indeed crucial:
| one of the counter-parties is meaningfully reducing the risk of
| catastrophe, or extremely detrimental outcome at the very
| least.
|
| This can be extended to all sorts of events, including Covid,
| the economy, politics (Brexit had devastating consequences),
| hurricanes, etc.
| vidalia wrote:
| Am I able to write contracts for events? And if not now, in the
| future?
| [deleted]
| clpm4j wrote:
| Who are (or who do you expect) to be your primary core of
| users/customers? I imagine professional trading firms would be
| your most profitable customers, but it seems targeted or at least
| designed for the meme stonk day trader? Just trying to understand
| who actually has this problem that Kalshi is trying to solve.
| tmansour wrote:
| Our users and their use cases vary drastically....they can be
| asset managers with acute financial risks, freight carriers
| protecting against dry van rates dropping, traders looking for
| alpha, SMBs in Florida worried about a hurricane disrupting
| their operations, everyday people looking to hedge against
| inflation, and so on.
| pea wrote:
| Very cool. Asides from geography, how does this differ in
| implementation to something like Betfair (or Betfair Exchange)
| and the UK-based bookies who allow you to bet on things like
| political outcomes, who wins a reality TV show, etc?
| JonathanBeuys wrote:
| Wouldn't such an exchange be a good use case for a smart
| contract?
|
| It would make it very transparent, if the exchange is honest. As
| a history of all bids, payouts and judgments would be recorded on
| a blockchain.
|
| It probably also would do away with the KYC, so everybody could
| participate.
|
| And nobody would have to give away their private data.
|
| Thinking about it ... if the smart contract would let users post
| new bets as tokens and appoint judges, the whole thing would be
| eternal. Individual users and judges might come and go. But the
| platform would live on forever and the history of bets would be
| recorded forever.
| nickphx wrote:
| brazed_blotch wrote:
| Care to elaborate? Sounds ideal frankly.
| melony wrote:
| The existing prediction markets have been regulated out of
| existence thanks to Kalshi.
|
| See PredictIt, Polymarket, YC is doing a great job of
| fulfilling Thiel's vision of building monopolies.
| https://astralcodexten.substack.com/p/the-passage-of-
| polymar...
|
| https://www.usbets.com/did-kalshi-kill-predictit/
|
| https://threadreaderapp.com/thread/1478370047735341056.html
| Proven wrote:
| > Wouldn't such an exchange be a good use case for a smart
| contract?
|
| There were several such "decentralized" projects (Augur, etc.),
| but I don't know of anyone who uses them. I kind of stopped
| following the "permissionless" space after several projects
| turned out to be too scammy for my liking.
|
| > It probably also would do away with the KYC, so everybody
| could participate. Nobody would have to give away their private
| data.
|
| That's exactly why they're not allowed. If you can't easily get
| fiat in and out of such contracts, they can hardly matter.
|
| Kalshi: not a novel idea, but it's good to see another
| implementation.
|
| Several solid blockchain projects (also permissioned/KYC, but
| based on blockchain, with distributed oracles) are launching
| similar markets in 2023. I think they will have an advantage
| because all participating financial institutions will be able
| to create own markets without reinventing the wheel or building
| their own in terms of underlying infrastructure (APIs, smart
| contracts, etc.). Some already have simple apps (decentralized
| price feeds, etc.) in beta now - they just need to add the
| ability to bet on outcomes. I don't want to "advertise" their
| names here but you can look them up on the Internet.
| Jerrrry wrote:
| It actually is ideal, given trusted API/Oracles, a timeout
| period to ensure mis-published data is corrected promptly, and
| a few other non-obvious gotchas.
|
| You could even have trusted middle-men that collect a Fee iff
| ambiguity is discovered and an appeal is wagered against the
| escrow.
|
| I'm sure it exists and got rugpulled already.
| JonathanBeuys wrote:
| If it is set up so that the users can put in bets and appoint
| judges, then it can't ever be rugpulled. Individual judges
| could turn hostile. But if the judges get paid for their
| work, a great track record might be worth more than any
| rugpull.
| danielmarkbruce wrote:
| So a person could build trust and society could benefit
| from their good behavior and they would make money by being
| trusted?
| ethanbond wrote:
| Such a thing exists (Polymarket) and the whole setup has
| probably precluded many, many, many people from using it
| including myself. I got halfway through setup before giving up.
|
| By contrast, I signed up for Kalshi and bought 3 contracts in
| the last 30 minutes.
|
| Additionally, smart contracts don't actually solve the primary
| source of (unaccepted) risk: the oracle.
| mritchie712 wrote:
| Did you already have Polygon and a wallet (e.g. metamask)? If
| you didn't have that, I could see it being a pain too much of
| a pain to deal with.
|
| It only took me a minute to use Polymarket, but I already had
| the prerequisites above.
| zoklet-enjoyer wrote:
| I love Polymarket. It's what dapps should aspire to be
| [deleted]
| EMM_386 wrote:
| > Kalshi is partnered with LedgerX LLC (d/b/a FTX US Derivatives)
|
| How has the FTX debacle impacted you, if at all?
|
| https://www.coindesk.com/policy/2022/11/17/cftc-has-boots-on...
| tmansour wrote:
| LedgerX is the only entity in the FTX empire that is fully
| shielded financially by virtue of being federally regulated by
| the CFTC.
|
| These are exactly the types of situations where regulation
| matters most! We have seen no impact from that fallout and our
| customer funds are fully separated in a segregated member
| account held safely at SVB.
| tmansour wrote:
| Btw we have a discord channel if you want to join - traders tend
| to chat/debate/share trading strategies/troll us there:
| https://discord.gg/rJpKGZk6Wt
| alexb_ wrote:
| Will you ever allow for the results of sports to be traded? Why
| stop at large political events?
| tmansour wrote:
| We're not doing sports for now. We're focused on events that
| have broad economic/social utility (not that sports doesn't,
| but it doesn't as clearly).
| danielmarkbruce wrote:
| This is a pretty well served market at this point.
| pizzalife wrote:
| YC are funding gambling companies now? On brand these days I
| suppose. How the mighty have fallen.
| tmansour wrote:
| YC has funded a ton of great financial companies eg. Coinbase,
| One Chronos, etc.
|
| We're a derivative exchange regulated by the CFTC. We're no
| more gambling than grain futures are!
| pizzalife wrote:
| You're not a financial company. Grain futures have an actual
| use. Come on now. You're insulting the reader base here.
| ihssant wrote:
| shmatt wrote:
| This is oversimplifying complex investments to a point where no
| one is investing in anything anymore, just a lot of hand waiving
| a money exchanging hands
|
| Bureau of Labor Statistics could announce a new equation for the
| CPI next month. Which means the inflation will be calculated to
| be much lower than everyone expected.
|
| If you're betting on Bureau of Labor Statistics press releases,
| you just lost your bet just because a human decided to word
| things differently.
|
| If you're investing in a complicated financial bundle, like
| actual contracts to buy sell oil, wheat, stocks. Then you could
| still be winning. Because a single politician can change your win
| to a loss when you're betting on words (like Inflation as
| calculated by a person in the US government), but a single human
| can't lose you money when you're investing in actual equities
|
| This is more like a roulette table than an actual investment
| [deleted]
| Jerrrry wrote:
| This is awesome; prediction markets have made massive strides
| recently, with applications and implementations being useful from
| crypto to sports to politics.
|
| I'm surprised if there wasn't already a pool of smart contracts
| out there basically already emulating the space.
|
| The obvious first principled questions come to mind: definition
| ambiguity in the event and thus result, the Oracle problem
| confounds this by essentially either giving leeway to the market
| deciders or by using a concrete agreed upon source of truth, such
| as data published to .Gov domains and other government/market
| API's.
|
| The need for human capital to moderate/adjudicate claims is
| apparent, but would vary per domain. No need for a human to
| decide on public CPI data (assuming no wrongdoing or
| mispublishing on the .gov part), and this could be further
| minimized by making clearer positions/events that eventually are
| glued to a dedicated Oracle API.
|
| Definitely an area that could be implemented quickly but
| haphazardly in an unregulated/cryptobro fashion via tokens and
| smart contracts, but cool to see its been developed above the
| table.
|
| Cool economic calendar too, I have been looking for exactly this.
| https://kalshi.com/economic-calendar
| tmansour wrote:
| Glad you find the economic calendar useful. We're currently
| thinking of ways to improve/expand it...any events you'd like
| to see on there?
|
| There are definitely areas where automating market
| resolutions/creating smart contracts can be useful....the most
| important thing is having a very well-defined contract upfront,
| so that outcomes are clear, the validators are authoritative,
| and unexpected edge cases don't come up. This is something we
| spend a lot of time thinking about when listing markets.
| likecarter wrote:
| I'm a big user of https://predictit.org/. But they are getting
| shutdown soon, so this is great.
|
| One thing I'd suggest: add pictures to the events. Makes it much
| easier for me to navigate and identify markets. I.e. a Biden
| picture next to a Biden event.
| tmansour wrote:
| We're evaluating the idea of adding pictures (they were there
| in an earlier version). Totally agreed it makes the site looks
| livelier.
| [deleted]
| melony wrote:
| They are getting shutdown specifically because of Kalshi, see
| the links in my other comment for some context
| likecarter wrote:
| Ah, I see. That's unfortunate. 3 years definitely requires a
| lot of resources.
|
| They'll have a monopoly for a bit then. Would 't be surprised
| if Robinhood dips their toes in.
| cdiamand wrote:
| Neat platform. I think geopolitics, currently is, and will likely
| be a heavy driver of market moving events over the next couple of
| decades.
|
| Any plans to support that space more deeply?
| tmansour wrote:
| Thanks for the input! We have plans to expand many of our
| existing markets, and introduce many new markets. Geopolitics
| is definitely an area we're excited to grow over time. If you
| have any specific suggestions, please send them our way!
| throwaway23236 wrote:
| Not sure if this is exactly how it works, but I would love to
| see things like
|
| Who will win the 2024 presidency
|
| GOP
|
| Dem
|
| Or the hundreds of scenarios that could have been bet on
| during the midterms.
| tmansour wrote:
| noted - thanks for the suggestions!
| umanwizard wrote:
| Why does this need to involve cryptocurrency, if it's centralized
| and regulated anyway?
|
| Edit: the crypto part isn't true
| tmansour wrote:
| Kalshi doesn't currently involve any crypto. We're fully
| centralized, regulated by the federal government, and customer
| funds go to a traditional bank, where they sit in segregated
| member accounts.
|
| Though we've built our exchange from the ground up, we're
| focusing on innovating on the markets side, rather than the
| financial plumbing side.
| umanwizard wrote:
| Oh, that makes sense. I was confusing you with someone else
| who is indeed web3. Mea culpa!
| barnbuilder wrote:
| > Before Kalshi, markets that allowed you to trade on
| economically relevant events were illegal or unregulated.
|
| Totally untrue. PredictIt was legal and regulated and well-loved
| for many years, operating with the permission of the CFTC under a
| no-action letter. Then Kalshi hired former CFTC commissioner
| Brian Quintenz and soon, PredictIt was suddenly deemed by the
| CFTC to have committed still-unenumerated violations of the no-
| action letter.
|
| This is a rotten way to do business and shame on YC for being
| involved in it.
|
| https://karlstack.substack.com/p/a-textbook-case-of-regulato...
| NoboruWataya wrote:
| Without more detail this just sounds like a conspiracy theory.
| Hiring a former regulator is way too weak a link to conclude
| that Kalshi are pulling the strings at the current regulator.
|
| If PI were operating on the basis of a no action letter they
| were unregulated pretty much by definition. A no action letter
| is basically a regulator saying that it won't take action
| against a market participant for doing things that would
| otherwise merit regulatory action.
|
| (I'm not affiliated with any of these parties, just going by
| what I read in the comments and the various publications from
| CFTC.)
| orangepurple wrote:
| Buying out the regulators and making competition illegal is the
| moat YC needed to invest
| thwayunion wrote:
| Maybe not YC -- that's a strange thesis for seed money -- but
| it wouldn't surprise me if this strategy was okayed Sequoia
| not as a premeditated investment thesis but rather as a happy
| side pot payout from the bet on the revolving door.
| dang wrote:
| I have no knowledge about this particular case but that is
| absolutely not how YC operates or thinks about its business.
| I've never heard a single comment from anyone at YC along
| such lines. I'm not moderating this thread* but IMO you guys
| should be more scrupulous about posting snarky smears.
|
| * because https://hn.algolia.com/?dateRange=all&page=0&prefix
| =false&qu...
| species9606 wrote:
| "I have no knowledge about this particular case"
|
| Respectfully, I think you should have stopped there, or
| perhaps earlier. There is quite a body of evidence
| suggesting that Kalshi is an anticompetitive regulatory-
| capture play.
| tmansour wrote:
| +1 on this. This is not how any of us operate.
|
| Regulation in this space is really tough and thorough -
| we've been battling through it for years now (also explains
| why this post is coming so long after the end of our
| batch!).
| Lionga wrote:
| The facts presented above make your company look very
| shady, and this answer is not clearing up anything.
|
| Like this most people will have to assume you really just
| paid off / bribed Brian Quintenz.
| tmansour wrote:
| this insider article should clear up a few things!
| https://www.capitolaccountdc.com/p/gambling-on-politics-
| an-i...
| Lionga wrote:
| It's paywalled and you not wanting to say anything
| yourself just smells bad
| tmansour wrote:
| This article had a bunch of interesting insider info on what
| went down (most of it was news to me as well):
| https://www.capitolaccountdc.com/p/gambling-on-politics-an-i...
| ruuda wrote:
| Scott Alexander did a post on it too:
| https://astralcodexten.substack.com/p/mantic-monday-81522
| lacker wrote:
| I think it's unfair to jump to the conclusion that Kalshi is to
| blame for regulators banning PredictIt. From the link you
| posted, PredictIt promised the regulators they would:
|
| * be small-scale and not-for-profit
|
| * be operated for academic and research purposes only
|
| It doesn't really say what "small-scale" means, but obviously,
| if PredictIt keeps being successful and growing, eventually
| they will no longer be small scale. PredictIt was always in a
| situation where they had to make a different deal with
| regulators, eventually, as long as they continued to grow.
|
| If you want to blame the CFTC for shutting down PredictIt,
| Intrade, all of those other prediction markets, then yeah, I
| agree! I wish they had just been much more permissive long ago.
| We should blame the CFTC for being too strict. But it doesn't
| seem fair to blame Kalshi just because they might be the ones
| to finally convince the regulators to allow one of these.
|
| I hope Kalshi is the group to figure this out, make prediction
| markets popular, and that prediction markets can finally get
| the attention from wider society that they deserve.
| [deleted]
| thecoppinger wrote:
| I went deep doing research on prediction markets a few months
| ago, and no, it's not an unfair conclusion.
|
| Brian Quintenz is a Republican financial manager who was
| nominated to be a commissioner of the CFTC by Trump in
| 2017.[1]
|
| During his time at the CFTC, as I recall, there was heavy
| bipartisan action, which he was praised for.
|
| Well, there's a slightly more cynical take that he was indeed
| completely crooked.
|
| My memory is foggy, and I don't have time to grab sources
| just yet as I have a meeting coming up so I'll update this
| shortly, but he was then turfed out of the CFTC under Biden
| and promptly hired by Kalshi.
|
| Given his record, it's less of a jump to see what Kalshi is
| doing as shady, but more of a smoking gun... PredicIt, which
| had been operating under a no action letter (NAL) from the
| CFTC since 2014 just happened to have that letter withdrawn a
| few months after Kalshi raises $30m at a Series A to take
| their platform live.[2]
|
| From my point of view, this is classic American lobbying
| mafia style stuff. Prediction markets have been prevented
| from flourishing for decades, and now that the time has
| arrived, the crooked CFTC et al have cleaned the house so
| their chosen startup that they're deeply in bed with can
| thrive.
|
| The whole thing, quite frankly, stinks.
|
| [1] https://en.wikipedia.org/wiki/Brian_Quintenz
|
| [2] https://www.pymnts.com/news/international/2022/millions-
| comm...
| Lordarminius wrote:
| Wow ! .. :)
| toddm wrote:
| This sounds a lot like intrade.com, which was popular among my
| coworkers and myself in the early aughts:
|
| https://en.wikipedia.org/wiki/Intrade
| tmansour wrote:
| Intrade was awesome. Great respect for that platform.
|
| We're doing a fully regulated, full scale version of Intrade.
| Regulation allows us to take this to the next level: getting
| market makers onboard, integrating with brokers, etc.
| toddm wrote:
| That's a great model and I wish you and your team success!
| kurtreed wrote:
| Is this legal? If so, why are similar-sounding things illegal?
| tmansour wrote:
| Kalshi is the first federally (CFTC) regulated exchange allowed
| to do this. We spent 3 years working with regulators to get
| this regulated and opened up the market for events trading.
|
| Here's more about our regulatory status:
| https://kalshi.com/learn/how-is-kalshi-regulated?
| makestuff wrote:
| So lets say I think inflation is going to continue to go down and
| return to 2% by 2023. At the same time my shares of SPY and QQQ
| are continuing to go down due to increasing rates.
|
| Is the point of this platform to serve as a hedge against other
| asset classes or is this supposed to be thought of as a
| completely separate asset class and not as a hedge against other
| investments?
|
| I see the gambling aspect of it of just betting on outcomes, and
| that is interesting to me; however, I am curious how your team
| thinks about it.
| gus_massa wrote:
| Who decides the outcome of each event? The Kalshi team?
|
| For example en the Moon landing example, I guess NASA will make
| press release, but it looks impossible to automate reading it and
| deciding. (What if the starship colides with the Moon? What if
| they can't return? What if it explodes 5 seconds after landing?
| What if it's a joint NASA+ESA project?)
| tmansour wrote:
| The determination of an event will vary by contract, but are
| all external sources of validation, listed in the contract up
| front. For example, the moon landing resolves to yes if NASA
| announces by X date. GDP is resolved by Bureau of Economic
| Analysis, Inflation by the Bureau of Labor Statistics, and so
| on.
|
| Generally, event contracts are legal contracts technically. We
| have a team that spent a ton of time developing templates to
| incorporate all types of events (hard problem). Here's an
| example definition: https://kalshi-public-
| docs.s3.amazonaws.com/regulatory/ruleb...
| Jerrrry wrote:
| >Landing is defined as making contact with the surface of the
| Moon.
|
| This is hand-waving a bit, and not only doesn't address the
| OP's question (does a fatal collision count,) but is a good
| example of the ambiguities that could plague any "simple"
| contract.
|
| I would think for ultimate compliance that Kalshi would be
| the first order-judges, but if the parties disagreed, these
| ultimately get decided upon by an actual Judge giving a good-
| faith determination of the question with a reasonable
| persons' definition of the terms.
| kolbe wrote:
| He did answer. He said if NASA says so, then it's so.
| [deleted]
| faangiq wrote:
| This is one of the most common startup ideas. It doesn't work.
| Been tried dozens of times. But seems to have an unlimited supply
| of greater fools who will invest.
| tmansour wrote:
| You're right! Lots of people have tried this before. The main
| source of failure historically has been regulation.
|
| We took the approach of addressing the elephant in the room
| first. We spent 3 years to crack the regulation case and we got
| federal approval to make sure we have the potential to get this
| market to its full potential.
| brap wrote:
| So it's like placing bets?
|
| This is branded as if it's some new type of stock exchange when
| in practice it's just another betting platform, no? Other than
| fancy UI, how is this any different in practice than
| oddschecker.com or betway.com (I'm not familiar with those sites,
| just a quick search)?
|
| >inb4 all stock exchanges are betting platforms
| kolbe wrote:
| An important distinction is that if you are an asset manager
| (i.e. gambler with other people's money), you aren't allowed on
| traditional betting platforms--only SEC and CFTC approved ones.
| Now you can bet on political outcomes with other people's
| money.
| [deleted]
| danielmarkbruce wrote:
| Asset managers aren't restricted to trading things on
| exchanges unless their docs explicitly say so. Many hedge
| funds place bets directly with investment banks, through
| exchanges in the US, overseas exchanges etc.
| kolbe wrote:
| Hedge Funds were more or less created for the express
| purpose of getting around restrictions that traditional
| asset management structures place on fund usage. But yes,
| Hedge Funds, Private Equity, Venture Capital and Family
| Offices can basically do whatever they want within the
| confines of their investor agreements.
| MrMan wrote:
| its binary options, which have long and spotty history. The
| payout does not cover owernship of an asset and typically the
| payouts are adjusted to be overall quite disadvantageous for
| retail bettors. I would stay away, it doesn't matter how they
| try to rebrand it. do your own research on binary options as
| they say.
| tmansour wrote:
| There's a fundamental difference between gambling and financial
| trading.
|
| In gaming, you are trading on risks that are artificial, eg.
| betting on a dice roll or on a roulette spin. Those risks do
| not need to exist, and they risk solely for the purpose of
| betting.
|
| In the derivatives markets, the risks you're trading on are not
| artificial, they're already existant. The purpose of markets is
| to transfer those risks from people that bear them and need to
| offload them (hedgers) to people that have appetite for them
| (speculators).
|
| This debate has been at the core of these markets since the
| dawn of derivatives markets. See this fascinating Court Case on
| grain futures: https://en.wikipedia.org/wiki/Chicago_Board_of_T
| rade_v._Chri....
|
| At the time, there was a lot of debate on whether grain futures
| were gambling. The final decision by justing Wendell was not
| because (paraphrasing) "sure a lot of people will speculate,
| but saying that these markets exist purely for speculation is
| off - there's a subset of participants that need to hedge risk,
| and that makes these markets crucial" (note: intent to deliver
| was the early form of hedging).
|
| The original response:
|
| "[T]he plaintiffs chamber of commerce is, in the first place, a
| great market, where ... is transacted a large part of the grain
| and provision business of the world. Of course, in a modern
| market, contracts are not confined to sales for immediate
| delivery. People will endeavor to forecast the future, and to
| make agreements according to their prophecy. Speculation of
| this kind by competent men is the self-adjustment of society to
| the probable .... It is true that the success of the strong
| induces imitation by the weak, and that incompetent persons
| bring themselves to ruin by undertaking to speculate in their
| turn. But legislatures and courts generally have recognized
| that the natural evolutions of a complex society are to be
| touched only with a very cautious hand. .... It seems to us an
| extraordinary and unlikely proposition that the dealings which
| give its character to the great market for future sales in this
| country are to be regarded as mere wagers or as 'pretended'
| buying or selling, without any intention of receiving and
| paying for the property bought, or of delivering the property
| sold, within the meaning of the Illinois act"
| nradov wrote:
| What about sports betting? People would still play those
| games so the "risk" isn't artificial.
| initplus wrote:
| There is no real market participant who could benefit from
| hedging in sports betting. Only sports betting operators
| themselves, and the teams (who are legally forbidden from
| participating in betting).
|
| But in a commodity market there are real participants whose
| primary business model is production, being able to hedge
| against future price swings provides real value to these
| businesses.
| einpoklum wrote:
| > The purpose of markets is to transfer those risks from
| people that bear them and need to offload them (hedgers) to
| people that have appetite for them (speculators).
|
| Considering how Capitalist governments behave in financial
| crashes, you mean:
|
| "offload them to people who have appetite for slanted bets,
| or in case of significant losses, to the public who has no
| appetite for it."
| algo_trader wrote:
| Did the CFTC ever try to regulate the adtech industry?
|
| Was there ever any formal waiver or guide lines?
| rdxm wrote:
| Zufriedenheit wrote:
| How do you prevent insider trading? Does your regulation account
| for that? For example how would you prevent an high ranking NASA
| employee who knows and/or influences the decision of a moon
| landing from misusing the platform?
| conformist wrote:
| The definition and prosecution of insider trading in CFTC
| regulated markets has a much shorter history than SEC regulated
| markets, see e.g.: https://www.hflawreport.com/2550376/cftc-
| resolves-its-first-...
| https://www.lw.com/admin/upload/SiteAttachments/Alert%202827...
|
| So, in a way, this is a good and tricky questions that applies
| much more broadly to non-securities markets (e.g. commodity
| futures). (IANAL)
| tmansour wrote:
| Great question. A few things here.
|
| 1. we spent years working with the regulators on defining and
| building our surveillance systems. They basically ingest data
| from the exchange and run stats/some ML to flag suspicious
| trading patterns to an investigation team in our compliance
| department (similar to when NYSE flags a Goldman trader for
| insider trading) -- our systems have gotten really
| sophisticated and you'd be surprised by the amount of
| commonality there is in cases of fraud/insider
| trading/manipulation/collusion and so on...
|
| 2. we tie people's trading activity to KYC we run at signup. We
| also pass people through Politically Exposed Persons (PEP)
| lists, that flag anyone that works in gov and their relatives
| etc.
|
| 3. when we investigate cases of inappropriate behaviors, the
| consequences can range from fines to criminal prosecution by
| the CFTC (similar to stock trading)
|
| 4. obv all the above are not a single hammer solution, they're
| heuristics, but people generally don't commit a federal crime
| to trade with $100, they tend to trade with much more
| meaningful sums, which fortunately and intuitively is much
| easier for our oversight programs to flag.
|
| Overall, this question presents a number of fascinating
| challenges/questions, but it's not a more difficult problem
| than flagging insider trading/market manipulation in
| traditional markets like stocks and commodities.
| quickthrower2 wrote:
| > Everyone faces different risks: inflation, extreme weather,
| mortgage rates
|
| Even as a relatively sophisticated investor (compared to the
| median) I wouldn't really know how to hedge correctly on these
| markets.
|
| For example if inflation is high, how many units do I buy. Am I
| fully hedged, or can I lose the bet AND lose in real life?
|
| I think users need to understand these things to use it. Some of
| that is education, and some will be tools.
|
| For example, enter your salary, expenses, budget etc, and it
| recommends a bet, and then shows you the outcomes if you win or
| lose.
|
| It should be clear that for example YOUR cost of living might go
| up more than inflation because you buy different things from the
| inflation basket.
|
| This is a bit like insurance, in the sense you may pay for health
| insurance, or travel insurance then find your thing isn't
| covered.
|
| I would also be interested in the tax implications. For example
| you do a bet to hedge your foreign holdings of say GBP. GBP goes
| down so you win from the bet and lose in real life. But you still
| pay tax on the bet (or do you ... ?).
|
| I think this is a cool idea.
|
| I think the more useful idea for the everyday person is something
| akin to a "1kg of tomatos a week prepaid subscription for 5
| years" aggregated over their typical shopping.
|
| That all said trying to tame the future is a hard beast. And
| expensive to insure yourself against all the things. Especially
| likely things, like shit getting more expensive!
| Kkoala wrote:
| Is this U.S. only?
|
| Edit: Found the answer, yes "Only US residents are currently
| accepted."
| conformist wrote:
| In the UK, betting websites such as e.g. https://smarkets.com/
| have often got reasonably liquid & transparent markets for
| political outcomes and similar.
| tmansour wrote:
| For now we're focusing on the US. We're expanding to other
| jurisdiction soon... potentially in 2023.
| jonluca wrote:
| How many markets do you anticipate adding next year?
| tmansour wrote:
| It's really hard to say. We tend to be dynamic in how list
| markets: we monitor whatever is trending every week/month, and
| create a market out of those things.
|
| I guess the number of markets we post next year will be a
| function of how crazy 2023 will be. In some ways, we capitalize
| on volatility.
|
| Antifragile...
| dibt wrote:
| What's HN's stance on tracking links? This post is filled with
| them. I thought I remember Dang saying something about it.
| tmansour wrote:
| That's a good point - I didn't really think about this when
| posting (growth team really wanted those in).
|
| Dang let me know if I should take them down/if they're super
| annoying.
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