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Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

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Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#111

Post by thecoppinger »

ghufran_syed wrote: post #103
barnbuilder wrote: post #31

> 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…

How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi? And predictit will have its day in court [1] where both sides will actually need to present evidence, unlike on an internet forum [1] https://www.globenewswire.com/en/news-release/2022/10/06/253...

> How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi?

Because it was one of the longest running and largest prediction markets to ever exist.

> trade-size limited

Kalshi is trade-size limited, too.

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#112

Post by thecoppinger »

thwayunion wrote: post #89
orangepurple wrote: post #37

Earlier quoted context omitted.

Buying out the regulators and making competition illegal is the moat YC needed to invest

Maybe not YC -- that's a strange thesis for seed money -- but it wouldn't surprise me if this strategy flowed from Sequoia; not as a primary investment thesis, or even the primary reason for bribing* a former regulator, but rather as a happy side pot payout. * Yes, the revolving door is bribery-by-any-other-name. Anger at this type of legalized overt corruption of our institutions is literally ripping the country apa…

Right on—this is my take, too.

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#113

Post by danielmarkbruce »

kolbe wrote: post #98
danielmarkbruce wrote: post #43

Earlier quoted context omitted.

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.

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.

"traditional" = funds holding publicly listed stocks and bonds? Basically, mutual funds? If that's it, there isn't a "traditional" asset manager that is going to Kalshi to put bets on events.

Note in the post - the buyers who head to goldman to get exposure through a basket of positions are not "traditional" asset managers.

Put another way - the relevant asset managers were not restricted.

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#114

Post by thwayunion »

initplus wrote: post #67
nradov wrote: post #59

Earlier quoted context omitted.

What about sports betting? People would still play those games so the "risk" isn't artificial.

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.

> There is no real market participant who could benefit from hedging in sports betting.

The entire local economy surrounding sports venues. For a small bar or restaurant near a stadium, the difference between a good season and a bad season can be huge. This is magnified to the nth degree in places like Green Bay, WI where renting out one's home for a single at home post-season game can easily net a family several month's worth of mortgage payments.

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#115

Post by mbrubeck »

thecoppinger wrote: post #111
ghufran_syed wrote: post #103

Earlier quoted context omitted.

How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi? And predictit will have its day in court [1] where both sides will actually need to present evidence, unlike on an internet forum [1] https://www.globenewswire.com/en/news-release/2022/10/06/253...

> How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi? Because it was one of the longest running and largest prediction markets to ever exist. > trade-size limited Kalshi is trade-size limited, too.

Specifically, PredictIt limits positions to $850, while Kalshi limits them to $25,000.

Which is definitely a significant difference, but still seems too small for cases like tmansour’s motivating example (“providing institutions with exposure to, or a hedge against, Brexit”). Though I guess it depends; if you bet $25,000 on a 99:1 long shot, then your position could be worth $2.5 million if it pays off.

(PredictIt also limits each market to 5000 participants, while as far as I can tell Kalshi has no such limit.)

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#116

Post by ghufran_syed »

thecoppinger wrote: post #108
ghufran_syed wrote: post #101

Earlier quoted context omitted.

So the guy the administration fired is somehow also the guy to make the current CFTC do what he wants? I’m sure he knows the rules and institutional concerns of the CFTC, but why would he have undue influence over the person who replaced him?

I hear what you're saying, but I feel there is an assumption made by your counter-argument which insinuates that the CFTC is a functional and non-corrupt organization. My perspective, based on my research, seems to suggest otherwise. Unfortunately, this seems to be endemic of American politics and government organizations. In Kalshi's case, Brian Quintenz aside, let's talk about Jeff Bandman, who spent close to 3 yea…

That article is super helpful - my take on it is that the fact Quintenz was a former hedge fund trader probably had a lot more to do with the approval than his later decision to work for Kalshi. And it’s interesting to note he was originally nominated to the CFTC by president Obama

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#117

Post by thwayunion »

The fees on these contracts, and the selection of the contracts, is such that you're essentially playing the "picking up pennies in front of a steamroller" game. That's a bit of a silly game to play when the risk free rate of return is 4%-5%.

Eg, to meaningfully hedge against tail risk of hurricanes I'd need to put in so much money that I might as well just buy some bonds with the principal and self-insure.

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#118

Post by barbazoo »

tmansour wrote: post #82
einpoklum wrote: post #68

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…

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 ex…

I'm not quite getting it yet.

"Biden approval rating" https://kalshi.com/events/538APPROVE-22NOV23/markets/538APPR...

How is that comparable to an insurance and not just simple betting?

Re: Launch HN: Kalshi (YC W19) – A regulated exchange for trading on events

#120

Post by renewiltord »

nl wrote: post #107
pizzalife wrote: post #99

Earlier quoted context omitted.

You're not a financial company. Grain futures have an actual use. Come on now. You're insulting the reader base here.

There are a vast number of use cases here. A simple one is the peak mortgage rate market[1]. That allows you to create hedges against movement on variable rate homeloans directly. There's a number of unemployment-related markets that allow you to create insurance for yourself against unemployment. And these are just things I've thought up of in a couple of minutes, not even considering what actual financial markets m…

That's neat but how does one hedge a $800k loan with a max position of $25k? Idea seems spurious. The difference is substantially higher. Compare a pre-hike 2.8% with a present 6.8%. Your $25k hedge is going to be pointless.
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