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.
Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
51–60 of 185 posts
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#52How 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?
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#53So 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
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_Trade_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"
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#54> 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 o…
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.)
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#55Why does this need to involve cryptocurrency, if it’s centralized and regulated anyway? Edit: the crypto part isn’t true
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.
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#56I'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.
We're evaluating the idea of adding pictures (they were there in an earlier version). Totally agreed it makes the site looks livelier.
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#57Why does this need to involve cryptocurrency, if it’s centralized and regulated anyway? Edit: the crypto part isn’t true
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.
Oh, that makes sense. I was confusing you with someone else who is indeed web3. Mea culpa!
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#58Is this legal? If so, why are similar-sounding things illegal?
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?
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#59So 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
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…
What about sports betting? People would still play those games so the "risk" isn't artificial.
Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events
#60This 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 essentia…
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.