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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

#161

Post by makestuff »

tmansour wrote: post #159
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…

Yeah that is exactly what I want. I bought SPXS a few months ago and took a bath on it because irrational markets longer than i can stay solvent blah blah. Will take a look into this more thanks!

One other question, how did Citadel and Goldman do this before your platform existed? Were they big enough to just call up some bank and create a specialized product for them?

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

#162

Post by tmansour »

Jerrrry wrote: post #11
JonathanBeuys wrote: post #4

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…

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.

Augur tried this and doesn't seem to have gained a lot traction doing so. Any staking schemes that were developed were relatively easily gamed and that led to distrust in the system.

We, like traditional financial exchanges, define the contracts upfront with clear rules on how they will be settled, then follow the letter of the law very strictly when settling a market.

In general, we've found market certainty to be more important that accuracy: ie. having pre-defined rules that everyone can agree on and that are pre-set is more important than those rules being the "correct rules" (not that having correct rules isn't important).

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

#163

Post by faangiq »

tmansour wrote: post #80
faangiq wrote: post #51

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.

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.

Definitely not the main source of failure but it’s a reasonable pitch. Good luck.

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

#164

Post by tmansour »

ersiees wrote: post #142

What about inside trade? Isn’t there a big risk that people at institutions you use as source take bets last minute before they announce the critical information? Or maybe even change what they publish (maybe pretending it to be an honest mistake, which is corrected the next day) to win?

Good question.

Among a number of other safeguards that I mentioned in a reply above, we often use well established and reputable data sources that either 1) already have restrictions on their employees trading on the event or 2) we enter into data licensing agreements with and require those restrictions to be put.

We also run KYC and pass all the participants through Politically Exposed Persons (PEPs) list, which allows us to flag people that are potentially close with a lot of our data sources (BLS, Nasa, MTA, etc.).

Our surveillance systems also do a great job of flagging weird activity (more in the post above) and anyone who we find to have done something wrong can be fined all the way to criminally prosecuted by the CFTC.

In short, a lot of similar safeguards to what you have against insider trading in stocks.

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

#165

Post by tmansour »

mrcode007 wrote: post #144

Interactive Brokers startem Playing in this space too. https://eventtrader.interactivebrokers.com/en/home.php

Yepp! and other big players like CME.

I'm super excited about that: we finally opened the space in a way that is meaningful enough for the big players to start taking note and join.

I think the events trading ecosystem is still very much in its infancy and there will be a lot of movement in the space in the next few years.

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

#166

Post by tmansour »

adamsmith143 wrote: post #33

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??

It's a prediction market in some ways... though prediction markets have been historically associated with unregulated venues etc.

We're fully regulated by the federal government as a derivatives exchange, and that's a big difference in an of itself (it took us years to figure out the right model to offer derivatives dynamically, with events as underlying). Regulation allows us to plug into the financial ecosystem, and offer the asset class to hedge funds, market makers, brokers, etc.

For all intent and purposes, we're a financial exchange that offers derivatives on a broad range of things that have been offered before.

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

#167

Post by tmansour »

wanderingmind wrote: post #134

Is it possible to chain multiple linked events and trade? For example, if I want to place a bet on inflation going to 15% in next 6 months or that the BLS will change the CPI composition/metric. Although I might expect the real inflation to go high as 15%, I might also expect politicians to change the goalpost as a response.

We'll be exploring AND/OR and conditional markets at some point... liquidity permitting.

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

#168

Post by tmansour »

augasur wrote: post #148

Love the idea! Would love to try it out, but it seems it is not available in Europe. Is there any plans in the near future to open in other regions?

There's a non-trivial chance we might be available in Euro area next year, but early to tell right now as we're focused on US.

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

#169

Post by tmansour »

faangiq wrote: post #163
tmansour wrote: post #80

Earlier quoted context omitted.

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.

Definitely not the main source of failure but it’s a reasonable pitch. Good luck.

love to get your thoughts on what was the main source of failure

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

#170

Post by tmansour »

yowlingcat wrote: post #121

From what I understand, Kalshi clears on (or used to clear on) LedgerX/FTX Futures. What made you choose them over, say the CME's ErisX? Have you run into any issues given the recent FTX implosion? Where there any other options you considered and ultimately choose to not move forward with?

LedgerX team is more tech savvy and higher execution team. We considered all options and LedgerX was the superior one for our needs.

LedgerX is fully separated from rest of FTX from financial perspective by virtue of CFTC regulation, so no impact on us!

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