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Kalshi CEO expects US DOJ to prosecute insider trading cases

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Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#21

Post by alephnerd »

Karrot_Kream wrote: post #15
ssharp wrote: post #9

Earlier quoted context omitted.

On the Polymarket homepage right now, one of the featured markets is whether or not Bitcoin will be up or down over the next 5 minutes. It's hard to justify that as anything more than illegal gambling. I find prediction markets to be interesting on two fronts: 1) They like a really good way to determine the probability of something happening, which is interesting for events like elections 2) It provides an avenue for…

Polymarket is not CFTC regulated, it's considered illegal in the US. CFTC does not allow betting on securities prices. Cryptocurrency is a bit of a gray area because it's not considered a registered security. N.B. it becomes a bit frustrating to talk about financial and regulatory things on this site because the level of knowledge is generally "I read some articles on social media about markets" level.

> Cryptocurrency is a bit of a gray area because it's not considered a registered security

Additionally, the SEC and CFTC guidance on what digital asset can be treated as a security and what can be treated as a commodity was only released a couple weeks ago [0].

Stuff is changing rapidly so it's best to keep an experienced regulatory lawyer on retainer.

> N.B. it becomes a bit frustrating to talk about financial and regulatory things on this site because the level of knowledge is generally "I read some articles on social media about markets" level.

Yep. It is what it is.

[0] - https://www.morganlewis.com/pubs/2026/03/crypto-clarity-sec-...

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#22

Post by SpaceManNabs »

Isn't the entire point of prediction markets to surface insider trading as a feature and not a bug?

Short, casual reads

- https://jamaalglenn.substack.com/p/prediction-markets-were-d...

- https://money.com/prediction-markets-insider-trading/

More academic?

- https://mason.gmu.edu/~rhanson/insiderbet.pdf

AND

- https://www.youtube.com/watch?v=4yZKGbq1YmA

Discussion on possible solutions that references the academic view

- https://www.dopaminemarkets.com/p/how-to-solve-insider-tradi...

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#24

Post by lowkey_ »

> “If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,”

Am I misunderstanding? It seems like two different statements he always conflates.

If it becomes a federal crime at some point, it will become illegal from that point — you can't prosecute people for acts committed before they were crimes.

The only way that this could be a federal crime right now is if the government starts prosecuting it under existing laws without any changes. I don't see that as likely.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#25

Post by Karrot_Kream »

pwillia7 wrote: post #17
Karrot_Kream wrote: post #11

Earlier quoted context omitted.

Prediction Markets, unlike many gambling sites, create a marketplace for odds. There's no house taking positions like in certain casinos or on DraftKings. Market makers offer shares in Yes and No while bettors buy and sell these odds to each other or to market makers.

when have we ever defined gaming/gambling as 'a thing where the house takes a rake' ? I don't understand this argument and it always feels disingenuous when brought up.

Er it's not. Gambling where the house takes a cut is considered a form of commercial gambling and is often made illegal or has stipulations applied to it.

If you're asking about why prediction markets fall under the CFTC, this is actively evolving but generally prediction markets are considered to be under the CFTC because they can be used to hedge against events.

For example if you're trying to do business in Oman but you're worried about Iran tensions spilling over, you could take a Yes position on an Iran conflict bet as a hedge. You may lose business but can make some of it up in the hedge.

"Gambling" the concept legally is very complicated and has a lot to be understood, so I'd suggest doing some searching or LLM asking if you want an intro on philosophical definitions or the legal landscape.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#26

Post by maplant »

pwillia7 wrote: post #17
Karrot_Kream wrote: post #11

Earlier quoted context omitted.

Prediction Markets, unlike many gambling sites, create a marketplace for odds. There's no house taking positions like in certain casinos or on DraftKings. Market makers offer shares in Yes and No while bettors buy and sell these odds to each other or to market makers.

when have we ever defined gaming/gambling as 'a thing where the house takes a rake' ? I don't understand this argument and it always feels disingenuous when brought up.

I'm not really sure what position you're taking but taking a rake can certainly change the legality of an activity; in California, playing poker in private is considered a social game and is legal, _except_ if party is taking a rake.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#27

Post by SpaceManNabs »

alephnerd wrote: post #5
georgemcbay wrote: post #3

Ok, but isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling? So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?

> isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling No. Their defense is that they are a gamified platform for futures contracts and hence should fall under CFTC regulation. The CFTC also cracks down on insider trading, but it took time for them to write regulations to catch up with prediction markets. It is now a priorit…

> Their defense is that they are a gamified futures contracts and hence should fall under CFTC regulation.

That might be the defense. They are inherently designed to leverage insider trading though. I made a top level comment with links/resources that argues why.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#28

Post by Onavo »

pwillia7 wrote: post #17
Karrot_Kream wrote: post #11

Earlier quoted context omitted.

Prediction Markets, unlike many gambling sites, create a marketplace for odds. There's no house taking positions like in certain casinos or on DraftKings. Market makers offer shares in Yes and No while bettors buy and sell these odds to each other or to market makers.

when have we ever defined gaming/gambling as 'a thing where the house takes a rake' ? I don't understand this argument and it always feels disingenuous when brought up.

Legally, they have to disclose all their probabilities (under most regulatory regimes).

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#29

Post by bowmessage »

georgemcbay wrote: post #3

Ok, but isn't the idea that prediction markets surface private knowledge a big part of the defense as to why they shouldn't be treated as illegal gambling? So like, which is it, is insider trading expected, or are these just gambling sites that should be illegal in many jurisdictions?

Agreed. So who are the outsider chumps taking the other ends of these bets? At this point, it doesn’t make sense to participate unless you’re an insider.

Re: Kalshi CEO expects US DOJ to prosecute insider trading cases

#30

Post by echelon »

lowkey_ wrote: post #24

> “If you commit insider trading on Kalshi, that can and will at some point be a federal crime. It is a federal crime,” Am I misunderstanding? It seems like two different statements he always conflates. If it becomes a federal crime at some point, it will become illegal from that point — you can't prosecute people for acts committed before they were crimes. The only way that this could be a federal crime right now is…

IANAL, but my understanding is that they can make it a retroactive crime or clarify existing laws in ways that include prediction markets.

Don't assume safety.

Edit - was curious:

https://en.wikipedia.org/wiki/Ex_post_facto_law

So maybe not?

I'd love a judicial scholar's input.

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