Molly White
@molly0xfff@hachyderm.io  ·  activity timestamp 10 hours ago
When Kalshi self-certifies each contract to the CFTC, it attests that these markets serve a legitimate economic purpose, such as hedging, price discovery, or risk management. But many of its offerings have no plausible connection to those functions. Sure, there are probably more sports fans recreationally placing trades on who’s going to make it to the later rounds of March Madness, but one could argue that a bar operator might theoretically use these markets to hedge against uncertain revenue if their local team fails to advance. But this kind of rationale is harder to find across many of Kalshi’s other contracts, such as who will serve as a bridesmaid at the wedding of Travis Kelce and Taylor Swift, or whether a popular YouTuber will cut his hair on stream. Polymarket, which does not yet answer to the CFTC, has even more egregious examples: Will Hailey Bieber get pregnant this year? Will the Obamas divorce? Will Trump say the word “pizza” in September? These markets seem far removed from the original purpose of futures trading — under the Commodity Exchange Act, the justification for letting futures markets exist outside gambling law has always been that they serve an economic function by giving commercial actors tools to manage risk.
When Kalshi self-certifies each contract to the CFTC, it attests that these markets serve a legitimate economic purpose, such as hedging, price discovery, or risk management. But many of its offerings have no plausible connection to those functions. Sure, there are probably more sports fans recreationally placing trades on who’s going to make it to the later rounds of March Madness, but one could argue that a bar operator might theoretically use these markets to hedge against uncertain revenue if their local team fails to advance. But this kind of rationale is harder to find across many of Kalshi’s other contracts, such as who will serve as a bridesmaid at the wedding of Travis Kelce and Taylor Swift, or whether a popular YouTuber will cut his hair on stream. Polymarket, which does not yet answer to the CFTC, has even more egregious examples: Will Hailey Bieber get pregnant this year? Will the Obamas divorce? Will Trump say the word “pizza” in September? These markets seem far removed from the original purpose of futures trading — under the Commodity Exchange Act, the justification for letting futures markets exist outside gambling law has always been that they serve an economic function by giving commercial actors tools to manage risk.
When Kalshi self-certifies each contract to the CFTC, it attests that these markets serve a legitimate economic purpose, such as hedging, price discovery, or risk management. But many of its offerings have no plausible connection to those functions. Sure, there are probably more sports fans recreationally placing trades on who’s going to make it to the later rounds of March Madness, but one could argue that a bar operator might theoretically use these markets to hedge against uncertain revenue if their local team fails to advance. But this kind of rationale is harder to find across many of Kalshi’s other contracts, such as who will serve as a bridesmaid at the wedding of Travis Kelce and Taylor Swift, or whether a popular YouTuber will cut his hair on stream. Polymarket, which does not yet answer to the CFTC, has even more egregious examples: Will Hailey Bieber get pregnant this year? Will the Obamas divorce? Will Trump say the word “pizza” in September? These markets seem far removed from the original purpose of futures trading — under the Commodity Exchange Act, the justification for letting futures markets exist outside gambling law has always been that they serve an economic function by giving commercial actors tools to manage risk.
Molly White
@molly0xfff@hachyderm.io  ·  activity timestamp 10 hours ago
Election integrity presents another major concern, as prediction markets create new financial incentives that some fear could (further) distort democratic processes. When defending its ban on Kalshi’s Congressional contracts in court, the CFTC found support from consumer rights advocacy groups like Public Citizen, whose Lisa Gilbert warned that “layering in gambling on our elections will take our democracy in precisely the wrong direction.”11 In an amicus brief, the financial reform group Better Markets argued these markets threaten both investors and democratic institutions.12 “Evidence is fast emerging that these types of election wagering contracts may already be serving as instrumentalities of either election manipulation for political gain, market manipulation for financial gain, or both,” they wrote, citing a Wall Street Journal article suggesting that Polymarket traders might have been artificially pumping up contract prices on a Trump election victory.13 Going back to Ackman’s idea: directly paying a candidate to drop out of a race is likely illegal, but it’s not clear if laws aimed at maintaining election integrity could be applied to prediction markets. Public Citizen’s government ethics expert Craig Holman is skeptical. “I do not see how that type of unethical election gambling would be illegal, even if you could prove deceptive intent,” he explains.
Election integrity presents another major concern, as prediction markets create new financial incentives that some fear could (further) distort democratic processes. When defending its ban on Kalshi’s Congressional contracts in court, the CFTC found support from consumer rights advocacy groups like Public Citizen, whose Lisa Gilbert warned that “layering in gambling on our elections will take our democracy in precisely the wrong direction.”11 In an amicus brief, the financial reform group Better Markets argued these markets threaten both investors and democratic institutions.12 “Evidence is fast emerging that these types of election wagering contracts may already be serving as instrumentalities of either election manipulation for political gain, market manipulation for financial gain, or both,” they wrote, citing a Wall Street Journal article suggesting that Polymarket traders might have been artificially pumping up contract prices on a Trump election victory.13 Going back to Ackman’s idea: directly paying a candidate to drop out of a race is likely illegal, but it’s not clear if laws aimed at maintaining election integrity could be applied to prediction markets. Public Citizen’s government ethics expert Craig Holman is skeptical. “I do not see how that type of unethical election gambling would be illegal, even if you could prove deceptive intent,” he explains.
Election integrity presents another major concern, as prediction markets create new financial incentives that some fear could (further) distort democratic processes. When defending its ban on Kalshi’s Congressional contracts in court, the CFTC found support from consumer rights advocacy groups like Public Citizen, whose Lisa Gilbert warned that “layering in gambling on our elections will take our democracy in precisely the wrong direction.”11 In an amicus brief, the financial reform group Better Markets argued these markets threaten both investors and democratic institutions.12 “Evidence is fast emerging that these types of election wagering contracts may already be serving as instrumentalities of either election manipulation for political gain, market manipulation for financial gain, or both,” they wrote, citing a Wall Street Journal article suggesting that Polymarket traders might have been artificially pumping up contract prices on a Trump election victory.13 Going back to Ackman’s idea: directly paying a candidate to drop out of a race is likely illegal, but it’s not clear if laws aimed at maintaining election integrity could be applied to prediction markets. Public Citizen’s government ethics expert Craig Holman is skeptical. “I do not see how that type of unethical election gambling would be illegal, even if you could prove deceptive intent,” he explains.
Molly White
@molly0xfff@hachyderm.io  ·  activity timestamp 10 hours ago
Finally, there’s the question of whether the CFTC is equipped to handle these surging markets, and the demographic they attract. Unlike state gambling commissions, the CFTC’s primary focus is on fraud and market integrity, not addiction or financial harm to amateur traders. Will it need to expand its mandate to address these consumer protection issues, or will some other regulator need to step in? Cristea says there isn’t a clear right answer. “Maybe there does need to be some sort of retail protection in there.” Stark offers a different possibility: “I just don’t know if anyone cares if the Polymarket marketplace is completely corrupt — that is the sole reason to police that sort of conduct. If uninformed participants don’t care that betting in Polymarket becomes like betting on a World Wrestling championship match outcome, then regulators won’t care either.”
Finally, there’s the question of whether the CFTC is equipped to handle these surging markets, and the demographic they attract. Unlike state gambling commissions, the CFTC’s primary focus is on fraud and market integrity, not addiction or financial harm to amateur traders. Will it need to expand its mandate to address these consumer protection issues, or will some other regulator need to step in? Cristea says there isn’t a clear right answer. “Maybe there does need to be some sort of retail protection in there.” Stark offers a different possibility: “I just don’t know if anyone cares if the Polymarket marketplace is completely corrupt — that is the sole reason to police that sort of conduct. If uninformed participants don’t care that betting in Polymarket becomes like betting on a World Wrestling championship match outcome, then regulators won’t care either.”
Finally, there’s the question of whether the CFTC is equipped to handle these surging markets, and the demographic they attract. Unlike state gambling commissions, the CFTC’s primary focus is on fraud and market integrity, not addiction or financial harm to amateur traders. Will it need to expand its mandate to address these consumer protection issues, or will some other regulator need to step in? Cristea says there isn’t a clear right answer. “Maybe there does need to be some sort of retail protection in there.” Stark offers a different possibility: “I just don’t know if anyone cares if the Polymarket marketplace is completely corrupt — that is the sole reason to police that sort of conduct. If uninformed participants don’t care that betting in Polymarket becomes like betting on a World Wrestling championship match outcome, then regulators won’t care either.”
Molly White
@molly0xfff@hachyderm.io  ·  activity timestamp 10 hours ago
Can the CFTC, traditionally focused on institutional traders and commercial hedgers, effectively oversee retail-heavy prediction markets? Should these platforms face the same strict integrity requirements as sportsbooks, barring insiders from trading on events they can influence? Should betting on political outcomes be allowed, or will it inevitably create perverse incentives that could undermine democracy? What types of events should be eligible for trading? Weather events and inflation rates might seem relatively uncontroversial, but what about contracts that could incentivize harmful real-world actions? And how should regulators balance consumer protection against personal responsibility when it comes to retail traders who may be, essentially, gambling beyond their means? With prediction markets already handling billions of dollars in trades and more platforms launching every month, regulators need to grapple with these questions before the industry grows too big to effectively control. The cryptocurrency industry has shown how difficult it becomes to implement meaningful oversight once a poorly regulated industry accumulates enough money and political influence to push back — and the devastating cost to everyday people who get caught in the fallout.
Can the CFTC, traditionally focused on institutional traders and commercial hedgers, effectively oversee retail-heavy prediction markets? Should these platforms face the same strict integrity requirements as sportsbooks, barring insiders from trading on events they can influence? Should betting on political outcomes be allowed, or will it inevitably create perverse incentives that could undermine democracy? What types of events should be eligible for trading? Weather events and inflation rates might seem relatively uncontroversial, but what about contracts that could incentivize harmful real-world actions? And how should regulators balance consumer protection against personal responsibility when it comes to retail traders who may be, essentially, gambling beyond their means? With prediction markets already handling billions of dollars in trades and more platforms launching every month, regulators need to grapple with these questions before the industry grows too big to effectively control. The cryptocurrency industry has shown how difficult it becomes to implement meaningful oversight once a poorly regulated industry accumulates enough money and political influence to push back — and the devastating cost to everyday people who get caught in the fallout.
Can the CFTC, traditionally focused on institutional traders and commercial hedgers, effectively oversee retail-heavy prediction markets? Should these platforms face the same strict integrity requirements as sportsbooks, barring insiders from trading on events they can influence? Should betting on political outcomes be allowed, or will it inevitably create perverse incentives that could undermine democracy? What types of events should be eligible for trading? Weather events and inflation rates might seem relatively uncontroversial, but what about contracts that could incentivize harmful real-world actions? And how should regulators balance consumer protection against personal responsibility when it comes to retail traders who may be, essentially, gambling beyond their means? With prediction markets already handling billions of dollars in trades and more platforms launching every month, regulators need to grapple with these questions before the industry grows too big to effectively control. The cryptocurrency industry has shown how difficult it becomes to implement meaningful oversight once a poorly regulated industry accumulates enough money and political influence to push back — and the devastating cost to everyday people who get caught in the fallout.
Unanswered questions When Bill Ackman casually suggested Eric Adams could “fund his future” by betting on his own withdrawal from the mayoral race, he inadvertently highlighted some of the thorny questions around prediction markets. The industry’s growth under Trump’s deregulatory agenda is likely just beginning, and more companies are entering the space — from crypto exchanges to gambling platforms. Some will probably follow Kalshi’s playbook of aggressive litigation to expand the range of permissible contracts. Others may copy Polymarket’s approach of trying to skirt regulatory authority with crypto-denominated trades. Some gambling platforms may attempt a version of regulatory arbitrage, particularly if the outcomes of ongoing court cases suggest that such companies can dodge heavy taxes and onerous compliance burdens by reinventing themselves as trading platforms. Without much oversight, these markets are ripe for manipulation. The gambling-like nature of many markets, combined with limited addiction prevention programs, likely puts vulnerable users at risk. And election markets create concerning new financial incentives that could further corrupt democratic processes.
Unanswered questions When Bill Ackman casually suggested Eric Adams could “fund his future” by betting on his own withdrawal from the mayoral race, he inadvertently highlighted some of the thorny questions around prediction markets. The industry’s growth under Trump’s deregulatory agenda is likely just beginning, and more companies are entering the space — from crypto exchanges to gambling platforms. Some will probably follow Kalshi’s playbook of aggressive litigation to expand the range of permissible contracts. Others may copy Polymarket’s approach of trying to skirt regulatory authority with crypto-denominated trades. Some gambling platforms may attempt a version of regulatory arbitrage, particularly if the outcomes of ongoing court cases suggest that such companies can dodge heavy taxes and onerous compliance burdens by reinventing themselves as trading platforms. Without much oversight, these markets are ripe for manipulation. The gambling-like nature of many markets, combined with limited addiction prevention programs, likely puts vulnerable users at risk. And election markets create concerning new financial incentives that could further corrupt democratic processes.
Unanswered questions When Bill Ackman casually suggested Eric Adams could “fund his future” by betting on his own withdrawal from the mayoral race, he inadvertently highlighted some of the thorny questions around prediction markets. The industry’s growth under Trump’s deregulatory agenda is likely just beginning, and more companies are entering the space — from crypto exchanges to gambling platforms. Some will probably follow Kalshi’s playbook of aggressive litigation to expand the range of permissible contracts. Others may copy Polymarket’s approach of trying to skirt regulatory authority with crypto-denominated trades. Some gambling platforms may attempt a version of regulatory arbitrage, particularly if the outcomes of ongoing court cases suggest that such companies can dodge heavy taxes and onerous compliance burdens by reinventing themselves as trading platforms. Without much oversight, these markets are ripe for manipulation. The gambling-like nature of many markets, combined with limited addiction prevention programs, likely puts vulnerable users at risk. And election markets create concerning new financial incentives that could further corrupt democratic processes.
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