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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

#151

Post by luckylion »

thwayunion wrote: post #114
initplus wrote: post #67

Earlier quoted context omitted.

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 mon…

And all advertisers who have contracts with the teams, all shops selling their merchandise, and they'd all have a large interest in hedging their bets.

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

#152

Post by HumanReadable »

Huge development for the legitimacy of prediction markets. As a regular user of manifold, I'm really looking forward to the day this becomes available in Europe.

Prediction markets have incredible potential and I really hope that we one day will look back on this launch as we look back on the launch of the New York stock exchange.

That said the whole predictit thing strikes me as really shady. I hope it was a necessary evil to gain the authorization of this market and not just a move to secure a monopoly position.

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

#153

Post by froogle »

frankluntzPOLLS wrote: post #149
froogle wrote: post #138

Prediction markets are a fantastic concept with a ton of value I think for everyone. So I wish companies in the field success and I hope they thrive despite regulators doing their best to destroy them, like PredictIt. I think it's a shame Kalshi has managed to get their hooks into the CFTC and, rather than lobby to open the field to all prediction markets, instead lobbied for narrow permissions to operate only their…

Running a bucket shop is not innovation. Running a back-alley card game is not some brilliant new financialization of anything. Hustling financially illiterate or gambling-addicted suckers for their last quarters is really not about to herald a new era of anything interesting at all. You would have to be a modern American to have so little clue about the types of frauds and scams that continue to be perpetrated to th…

Prediction markets are a way to cut through the fog and find truth. This isn't the equivalent of playing blackjack or roulette. In today's world, it's increasingly difficult to find people in the media who are telling the truth. Pundits everywhere can proffer predictions without being on the hook for anything if they're wrong.

Prediction markets let you more accurately know in advance pretty much anything: war, economic calamity, political outcomes like who will win an election, whether a drug will be approved, etc. and they are a genuine innovation over the current media landscape. Check out Metaculus for an example of the concept with imaginary points; it'd be more accurate if real money were allowed.

Gambling and addiction is a major problem, certainly, and I'm not arguing for zero regulation on gambling. (I could quibble on prediction markets being gambling, though they are closer to it than not.)

Regulators are so useless that they are perfectly willing to allow crypto, Las Vegas casinos and sports betting to exist and be advertised broadly (things with essentially 0 value to society), but an _actually_ useful form of dealing with probability and chance that can help people chart an uncertain world isn't allowed to exist.

Well, except in limited cases if you spend enough money greasing the right pockets and can take down a competitor too. :)

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

#154

Post by LawTalkingGuy »

MrMan wrote: post #95
brap wrote: post #23

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

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.

Binary options are only thought to be bad because they traditionally have been run by scammers like bucket shops. The binary part is a distraction - it's just because they were easier to describe to the victims.

As a type of investment though, there's nothing wrong with it - if risk-mitigation is what you need.

If the binary nature was a problem they could easily structure these to be non-binary, such as bet on a game and don't return 1/0 but the actual game score 21/15.

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

#155

Post by thecoppinger »

sidcool wrote: post #143

I am naive here. But is it a platform for gambling like features for markets?

Here's a good primer on why prediction markets are actually a massive opportunity to improve society and democracy:

https://www.youtube.com/watch?v=BLS2TX1KxzI

I know that sounds hyperbolic, but once you go down the rabbit hole it will start to make sense

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

#156

Post by tmansour »

froogle wrote: post #138

Prediction markets are a fantastic concept with a ton of value I think for everyone. So I wish companies in the field success and I hope they thrive despite regulators doing their best to destroy them, like PredictIt. I think it's a shame Kalshi has managed to get their hooks into the CFTC and, rather than lobby to open the field to all prediction markets, instead lobbied for narrow permissions to operate only their…

We've been committed to battling through regulations to open and expand the market for close to 4 years now.

As I posted above, here's more (insider) information about what happened with PredictIt: https://www.capitolaccountdc.com/p/gambling-on-politics-an-i...

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

#157

Post by tmansour »

conformist wrote: post #81
Zufriedenheit wrote: post #52

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?

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)

I agree. The space is getting increasingly more savvy about how to handle this question in the derivatives markets though!

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

#158

Post by tmansour »

shmatt wrote: post #29

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…

There's a few points here - I'll try to address one by one:

1) Hand-wavy exchange of money. Most of the derivatives market, including some of the most traditional instruments like energy Futures, have massive amount of cash-settled activity, rather than physically-settled -- ie. nothing physical is actually exchange hands, and traders are purely exchange financial risk.

That doesn't make the transaction any less important and valuable: at the end of the day, participants are hedge financial exposure and cash-settlement is a great and more efficient way to get that hedge in.

2) Single-point of failure OR arbitrary change to the underlying. There's an extreme amount of scrutiny and safeguards around how CPI is calculated and how it is changed. CPI impacts trillions that are traded in traditional assets like interest rate swaps, inflation swaps, mortgages, etc. Also, CPI is a large factor in the Fed's decision to raise interest rates at every meeting. It cannot be changed by a single person, on a whim. And this tends to be true for all the data sources underlying our markets.

Arguably, a stock has much more key man risk (or "arbitrary whims risk") than something like CPI: eg. Elon ripping a bong and tweeting something's impact on Tesla stock.

3) More like roulette than actual investment. The lack of physical underlying doesn't make this any less of a financial instruments. Most liquid markets today do not actually exchange the underlying, eg. interest rate swaps, index futures, etc.

What differentiates a financial product from gambling is the presence of an economic purpose. A roulette spin does not need to happen - it happens solely to create an artificial risk for people to bet on. In the case of event contracts, things like an election or a CPI print already expose the market to risk... that risk already exists and our markets allow the transfer of said risk from people that have and can't bear it to people that have the appetite to bear it (that's actually the whole point of the commodity futures and derivatives market).

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

#159

Post by tmansour »

makestuff wrote: post #12

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 b…

It is a separate asset class yes. But it ties to other markets in a number of ways.

In your example, there's two things you could do depending on your usecase: 1) You think inflation will go up and capitalize on it. Today, you might think that a good way to do that is to short SPY. That's good, not great - because it's a proxy: inflation could still go up, and you SPY could go up as well (correlation is not 1:1 for a number of reasons).

The best way to express that view is by buying inflation event contracts: more direct, no basis risk, cleaner.

This use-case was super common when I was at Goldman and Citadel, which is where we got the idea.

2) You hold SPY but worry about the exposure of your holdings to inflation: you can use event contracts to hedge that exposure very precisely... think of it as a precise, meticulous surgery on your portfolio to eliminate (or even take) risks that are very difficult to eliminate with traditional instruments.

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

#160

Post by tmansour »

toddm wrote: post #93
tmansour wrote: post #61

Earlier quoted context omitted.

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.

That's a great model and I wish you and your team success!

thank you my friend - hope you give it a spin and send feedback my way
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