There’s a reason both Kalshi and Polymarket were quick to make political connections (aka pay bribes). They know what they are doing is illegal, and waiting for legislation like sports betting apps did would take too long. So they bought get out of jail free cards instead.
That does very little to diminish the incredibly suspicious nature of having the family members of a notoriously corrupt president on the board of a dubiously-legal-at-best company whose product is a platform for betting on major world events.
These people are seasoned grifters. They don't look for one big winning ticket, but rather multiple streams. A million here, a million there, pretty soon you're talking real money. For your rank-and-file workers that's serious.
It's shocking that 10 years in people are still falling for the "it can't be X, because X would be too obvious and stupid" trap when it comes to Trump-land.
These venues do not have enough liquidity to attract Trump and his cronies. There might be people lower down the food chain who are taking advantage though.
Donald Trump Jr. is a paid advisor and investor to Kalshi and Polymarket. Why bother betting if they will just give you cash for having the right name.
Granted, the son whose wedding you skip has got to be lower down the food chain.
It's always plainly obvious what is illegal. Given the total lack of ambiguity, why do we even need all these courts and judges to decide stuff? After all, we're all intimately familiar the Commodity Futures Trading Commission Act of 1974, relevant state laws, and how the constitution would control the interaction bewtween these. /s
I despise gambling and would very like if there was less of it. But that's not a legal opinion, those are just my feelings. There are good faith legal arguments that these state laws cannot override federal laws and that the federal laws allow these prediction markets. We live in a country with an enormously complex legal system and with a volume of legislation that is, without question, far beyond what any single individual could reasonably comprehend. This often means that what is legal and illegal is unclear. I think this is one of those circumstances.
This is a bad take. What they are doing is quite obviously legal right now. Federal law trumps state law and the feds have an opinion, despite being weird and controversial.
There are a number of ongoing legal battles about the federal laws but until they work their way through the courts, it's "legal". Also, it could all get resolved with a new presidential administration in two years. This is the correct solution.
We shouldn't cheer for personal prosecutions over definitionally legal activity. Nothing good will come of it. See also: Sending mifepristone across state lines, or traveling out of state for abortions.
Whether pre-emption applies in this case depends on whether the courts accept Kalshi/Polymarket's claim that they operate a futures trading platform, not a gambling platform. If and only if that claim is accepted is there a pre-emption argument, and only then would the opinion of the Commodity Futures Trading Commission be relevant.
And while that is winding through the legal system, courts have decided that Kalshi/Polymarket can continue to operate. That might change in the future, but it is the present reality.
As long as the business is legal to operate, there is no justification for criminally prosecuting the people engaged in that business.
That courts have not ordered them to stop operating does not mean that what they are doing is legal. They could face additional counts for their behavior while the case is pending.
"As long as the business is legal to operate, there is no justification for criminally prosecuting the people engaged in that business."
You are begging the question: assuming that the business is legal to operate in the state of Utah. You keep presenting Kalshi's arguments as though they enjoy some presumption of legality prior to a ruling.
"While gambling is legal under U.S. federal law, there are significant restrictions pertaining to interstate and online gambling, as each state is free to regulate or prohibit the practice within its borders."
If it were that simple then these markets would have been shut down already.
Matt Levine has gone into great detail about the legal chicanery that brought us here, but it summarizes as "it's not gambling, it's futures trading".
This seems like nonsense to you and me (and Matt Levine), but our opinions are irrelevant here. The courts' opinions are, and so far they've been coming down on the side of the prediction markets. Mostly.
So by definition - as weird as it is - it's legal. So far.
When will we start holding the people who found and operate companies whose sole purpose is to break the law accountable, rather than letting them hide behind "limited liability"?
These founders should be in prison for promoting illegal gambling. Same federal charges mafiosos get caught on for a "friendly card game".
"Facing felony charges" doesn't tell me much, and the current state of the world tells me those charges will be dismissed as soon as some money moves around.
This is the old, "Easier to ask for forgiveness than to ask for permission"
A lot of these companies have taken this approach. Break laws until someone finally notices AND does something about it. The runway to a slap on the wrist is often times more financially beneficial to companies - there is no incentive to stop if you run a billion dollar company and breaking the law gets you a $50M dollar fine you make back in a single month.
I thought SOX (Sarbanes–Oxley Act) was supposed to prevent a lot of this, but I guess companies just continue to find loopholes to exploit.
I think sometimes people need a visceral demonstration of what bad laws are actually preventing. Uber was a pareto improvement in my view: we are in a better world both for consumers & for low-income wages having ridesharing as a backstop.
On the other hand, I've come around to the view that sports betting is a net unqualified bad -- and I didn't necessarily feel that way before the Kalshi/PM explosion.
If it is not gambling then it amounts to an unregulated futures market, which is also illegal. There is no way around this for Kalshi/Polymarket, they have broken the law and the only question is which law was broken.
Right, but the point is that we don't just go from popular outrage about a shady business model to "straight to prison". The courts have to untangle the legalities of the shady business model before we can even determine what the charges would be. And that's what they're doing.
That is the federal government asserting that Kalshi is subject to federal regulation by the CFTC and not state regulation. It is not an assertion that Kalshi is actually in compliance with futures market regulations, nor is it an assertion that the contracts offered by Kalshi are actually legal (there are explicitly illegal futures contracts).
This would be a great post for Kalshi's lawyers to make. Hard to believe it though. To be clear it is a not a fundamental proposition of the legal system that every illegal activity be tested before it "actually" becomes illegal. It is a business' obligation to not violate the law, not the other way around.
I'm not going to argue the merits of their business model. But the fact that numerous lawsuits have had mixed rulings indicates that there is at least some legal gray area here.
But if you know better then maybe you should just decree from the courtroom in your house and send your ruling to the AGs of all 50 states.
I don't think there are "numerous lawsuits" which have had "mixed rulings" it's really only a subset of the cases that have had anything remotely construable as positive to these companies. And again, that doesn't excuse their behavior. Bold of you to point to one court saying "I'm not sure" when the vast majorities of the others have said "this is perfectly clear, and here's why the other court is wrong"
Like, do you have any actual argument as to why it's not gambling, or are you just going to hang it on this plausible deniability? It's not like they knew the 3rd circuit would decide in their favor anyway, so I don't really think your point is the slam dunk you're acting like it is. They knowingly engaged in activities that most states consider to be gambling. They aren't even really denying that. They are just saying it falls under federal regulation, but the argument for that is so shockingly poor, it's hard to imagine how the 3rd circuit's decision could stand, but its only on a preliminary injunction anyway, so it's still not quite a merits decision. The third circuit said that by its own logic, Congress must weigh in on whether or not "bingo" is a swap regulated by the CFTC. If you can't understand how facially stupid that is, I don't know what to say.
Apparently having a legal discussion that requires nuance is impossible in this forum.
Yes I think what they are doing is illegal and they should not be permitted to operate outside the gaming regulations of individual states.
But it doesn't matter what I think. I was trying to have a conversation about the gray areas and why we don't just send people straight to jail for trying out a new, novel, (and potentially illegal), business model.
The point of my original post, which I think the one youre responding to aligns with, is that we shouldn't have to "wait for the courts to figure it out." Illegal things should be illegal as a matter of the written law, not dicta from jurists. To do that we need legislators that will write narrow laws not influenced by the industry they are regulating, not tied to a poison pill budget proposal, etc...
I think I understand the basics of business and business law in the US. It is disgusting how easy it is to hide behind a corporation or LLC to avoid criminal charges and civil liability.
I'm not sure specifically about the moral crusade against Kalshi and Polymarket, but I am glad to see that at least one state is serious about its sovereignty and is willing to go to the mat with criminal charges. Utah 100% has a right to enforce this and I hope they are successful. And taking on the feds too, that is a gutsy move.
We need at least one state to do this when large corporations violate privacy laws.
Not sure - to the extent to which Kalshi is a nationwide futures market, it is hard to imagine a more clear "interstate commerce" example. Congress should probably just pass a law delegating regulation of "sports futures" to the states to remove any legal ambiguity. Sports gambling is obviously pretty net bad for young men.
Wonder how proxies/VPNs play into this, since Utah was recently in the news about an age verification law that basically said you're liable if anyone physically in Utah accesses a restricted site.
Prediction markets' business model is taking transaction fees from contracts between independent counterparties. Kalshi won't go bankrupt no matter how much you make there (though 'people' collectively will make negative [fees + taxes]).
A pyramid scheme uses new investor money to pay fake returns to those who have already invested.
A casino provides games to bet on where expected value for the player is negative. A sportsbook balances their book by modifying the odds to remain as neutral as possible and capture the spread (see ‘vig’).
Probably referring to online gambling specifically. And I would frame it as the folks who promote pyramid schemes are the same as those who promote online gambling.
kalshi and polymarket are quite obvious gambling sites. any pedantic arguments to the contrary are strictly financial chaff to enhance their operating margins until the regulations finally catch up.
they were never an innovating marketing play... it was the culmination of a gambling company committing to regulatory capture as evinced by Donald Trump Jr (totally not) sitting on BOTH BOARDS as a "paid strategic advisor" or whatever lie they want to spin.
There are ads on the DC Metro right now that advertise one of these as a source of truth for election polling. The poster says something like "98% accuracy" and in super fine print, specifies something like "within 2 hours of polls closing" and other normal fine print stuff.
To me it's absolutely crazy that the "gamble on anything" apps are being advertised as some kind of polling software. I've already seen at least one race called into question because the gamblers bet on the wrong pony.
They're pure corruption engines designed for insider betting. The top brass of these companies need to be made example of.
I've seen those and they are crazy! Many elections are decided by the primary anyway, and then of course exit polls are going to be basically accurate 2 hours before the election. It's not even that fine print, I think they may actually just be stupid.
this is an answerable question and these markets are generally well calibrated (including on election outcomes), they have a good brier score.
i would not premise an anti-prediction market argument on their accuracy being bad, you are building on shaky foundations. the better argument is the paternalist protecting stupid people from themselves imo.
The LDS church (The Church of Jesus Christ of Latter Day Saints), which is also based in Utah has provided explicit guidance against participation in Kalshi and Polymarket as gambling.
They absolutely have been the main force behind the timing of this push. It was the main topic of General Conference a few weeks ago and one of the most eyebrow-raising articulations of official church policy.
Given the way that the church has explicitly encouraged state legislators to shoot down recent laws it's not surprising to think they'd be pushing for this.
> Given the way that the church has explicitly encouraged state legislators to shoot down recent laws it's not surprising to think they'd be pushing for this.
And the way they've influenced voters in Idaho and Arizona recently.
I thought it worth posting the stance for those not willing to click
...
Gambling is motivated by a desire to get something for nothing. This desire is spiritually destructive. It leads participants away from the Savior’s teachings of love and service and toward the selfishness of the adversary. It undermines the virtues of work and thrift and the desire to give honest effort in all we do.
Those who participate in gambling soon discover the deception in the idea that they can give little or nothing and receive something of value in return. They find that they give up large amounts of money, their own honor, and the respect of family members and friends. Deceived and addicted, they often gamble with funds they should use for other purposes, such as meeting the basic needs of their families. Gamblers sometimes become so enslaved and so desperate to pay gambling debts that they turn to stealing, giving up their own good name.
>The legislature shall never grant any divorce. Lotteries shall be prohibited except as specifically authorized upon the affirmative vote of sixty percent of the members of each house of the legislature or, notwithstanding any other provision of this Constitution, by referendum or initiative approved by a sixty percent affirmative vote of the electors voting thereon. [AMENDMENT 56, 1971 Senate Joint Resolution No. 5, p 1828. Approved November 7, 1972.]
>NOTES:
Original text — Art. 2 Section 24 LOTTERIES AND DIVORCE — The legislature shall never authorize any lottery or grant any divorce.
Ehh I wouldn't try to appeal too much to what the LDS church thinks about this. They require members to give 10% of their annual income to the church, while already having close to $300 billion in the bank.
Everyone knows the state of Utah is largely run by the church.
> Everyone knows the state of Utah is largely run by the church.
Surprisingly few people know this ime. It's worth pointing out as one of the few areas [0] where the church has as much pull as its members think it does.
While I wouldn't look to the church as a bastion of morality for So Many Reasons, it's worth looking at a hard example of how it is able to manipulate politics in Utah, and by extension nationwide.
[0] Other areas worth being aware of are Idaho and parts of Arizona of course.
I don’t see the clear difference between something like Kalshi and, say, Robinhood. I do see a clear difference between Kalshi and casinos or sports gambling sites like Fan Duel; in the latter, your counterparty is the institution itself. This creates a lot of perverse incentives on the part of sports gambling sites to maintain their edge, such as banning bettors that are too good at playing the odds. Kalshi, on the other hand, is never your counterparty in any transaction.
Now, Robinhood is a brokerage, regulated by FINRA, and has been fined for misbehavior in the past. So I am more than willing to believe that there is daylight here that I’m not seeing. But anything that lets you speculate attracts a certain clientele, and I think the most important distinction is whether or not the platform itself is an interested party.
If Kalshi is not a gambling operation then it is an unregulated futures market, which is still illegal. There are perverse incentives in futures markets too, which is why they are regulated.
Also speculators serve an important purpose: hedging strategies require speculators on the other side. It is not just a "certain clientele," there are people who run profitable businesses on speculation (it amounts to collecting insurance premiums from people who want hedges).
Describing an organization with a license from the CFTC as an "unregulated futures market" is just flat wrong, I'm not really sure why you're motte-baileying here.
They offer contracts that are almost certainly outside the scope of regulation, an appeals court has already ruled that some of their contracts are indeed subject to state laws and not CFTC regulation, and they are continuing to push the envelope. How is it wrong to call them an unregulated market under the circumstances?
Bernie Madoff's operation was also subject to a regulator and was properly registered as a broker-dealer; that did not somehow make it a regulated operation, at least not in the sense of actually complying with the regulations. Boiler rooms are also subject to a regulator (the SEC) and obviously are not regulated brokerages.
Really it sounds like this is a disagreement about what it means for a market to be "regulated" -- I draw the line at compliance, you seem to draw the line elsewhere.
If the differentiating factor is just who you’re betting against, how are Kalshi et al any different from online poker? It’s still gambling, the house just takes a rake
Because you can easily collude and cheat at poker so it needs to be heavily regulated or outright illegal to prevent theft. You can't really cheat at prediction markets, unless you have insider information which they can litigate after the fact.
Surely you’re being facetious, insider trading is obviously a huge problem that is rarely enforced and we’ve already seen instances of people actively influencing events or using false information to fake the result of a bet
basically, does the government have its thumb on the scale makes it legal. Gambling is so bad and illegal, except when the pennsylvania lottery does it. Alcohol, bad and illegal, except when the state monopoly sells it.
That's such a poor argument. Illegal building is bad because it's illegal; illegal gambling is bad because it's illegal. This is just how laws work. Heck, in the US even homicide is bad because it's illegal, when you consider that there is a legal version of it.
It's really the worst of both combined. There is ample gambling like options and behavior on Kalshi
&&
policy makers, assistants, journalists, and the like are insider trading - and the president of the united states is intentionally market manipulating for profit
A week ago if you dared to say anything critical of polymarket you would be drowned out in replies talking about the "wonderful societal benefits" of gambling on daily life and how it "informs decision making" and helps the "common people".
I liked it for political races as an alternative to polls. Was terrible for several other things. 99% of it was really just sports betting, which I can't see being a good thing.
Not really. I can recall countless threads where everyone said that this improves information availability. Do you want me to go through my post history to find them?
As much as I am a fan of being able to see the current probability of a future event by checking prediction markets - the argument that there is a meaningful difference between predicting the outcome of a sports game and betting on the outcome of a sports game strains credulity.
That’s not what prediction markets give you though. They give you capital-adjusted, human perception-based odds of future events. You aren’t “seeing the probably of future events”.
You can link me studies that are paid and bought for by these companies all day long. Find me one where the guy is not a consultant to the companies themselves.
> longshots lose 6.3 cents per dollar when each contract is weighted equally but gain 4.1 cents when related contracts are first grouped by parent event; the two-sided pattern is robust in Crypto and Politics but surprisingly absent in Sports.
This seems like a relatively small inefficiency in the markets, no? If the margin of error notable in a prediction markets is <10 cents per dollar, that implies that they are pricing events pretty accurately. Especially post publication of this paper, when sophisticated traders could trade away this inefficiency.
The whole “we provide the most accurate way to predict the future” upside-as-a-counterweight-to-the-downside-of-gambling has always seemed like a hollow benefit to me. I mean, like, okay, let’s say they actually do provide that. Who’s to say that’s a beneficial result? Are we really better off having more accurate forecasting of election results? Or does that just improve boogeyman MBA-types’ abilities to affect election results?
Especially since what Kalshi is doing has existed for 25 years in Europe (we call it betting exchange) and been licenced as sports betting. It is nothing new other than them doing it without licence and that they are more generous in accepting weird market types.
Personally I’m a fan of the non sports side of these apps, Polymarket in particular. They are putting a financial incentive behind accurately predicting the future, which makes these apps basically the most accurate predictor of the future. Available to anyone to view, for free.
It makes sense why they went towards sports gambling, because the market is so big.
I think this is kind of a naive take. There's a reason why you can't take a license insurance policy out on a stranger. Being able to bet that there will be a wild fire or if a plane will be late creates terrible incentives. It's also a new way to do insider trading.
Most uncertain things that people need to hedge (currency, commodity prices) already had a hedge.
In practical terms can someone really give me an example of how they benefited from knowing the future (materially, not emotionally) from a prediction they got from Kalshi? I am honestly curious.
Most uncertain things that people need to hedge (currency, commodity prices) already had a hedge.
That's way too narrow of the categories. Here are some more cases, and you tell me where can I hedge it? And don't tell me the answer is "go to Goldman Sachs and they create any kind of derivatives to hedge for you", that only works if you are a huge enterprise. I'm talking about SME, or even one person company with $1-5M ARR.
(By the way, I do trade on Polymarket / Kalshi, had a job interview with Kalshi many years ago but did not take their offer since I disagreed a lot with their product design. So all of this is my own opinion).
1. Suppose I run an ice cream shop in midtown Manhattan, and my foot traffic depends on how good the weather is. If it's sunny and dry, I expect a lot of traffic, vice versa, if it's thunderstorm, hurricane or snow, I would run the day without any revenue (and a lot of ice cream waste). What is the way for me to hedge weather risk that could seriously affect my business?
2. Suppose I'm a restaurant owner in Koreatown in LA, and during World Cup I run a restaurant expecting a lot of Korean coming to my area (and my restaurant). So I would ramp up my business, hiring a lot of staffs, sourcing a lot of ingredients from the vendors. Then the biggest risk (and anticipation) is that Korea would be knocked out very early, which unfortunately that precisely happened. So the foot traffic evaporated, and with that the revenue. How could I hedge that risk?
3. Suppose I'm a distributor / reseller who needs to import goods and products from other countries and resells it back to US for profit. Barring the import / export regulations, the biggest risk is tariffs: the orange man can (and did) impose 50% tariffs from China, and all the sudden I face a severe supply-demand imbalance with a lot of contract cancellation and such. How can I hedge such tariff risk from the orange man? (Obviously, the alternative is that I wish we could have elected a more competent leader, but at least 75 million American disagreed with me).
The only one I can think of is, having a better idea of which way the presidential election goes might've been useful for some people, or some other large election. There's a lot of egg on the faces of all these mainstream media polls, which still continues to trigger some people.
So what happens when someone like musk spends a few hundred million to skew what the probability looks like? Suddenly people see that a politician has a 90% chance of winning, and they feel silly voting for the operation?
These are not polling places, they are places for capital to influence odds.
Eh, sounds like the excuse I kept hearing as to why Trump had favorable odds in the last election. Supposedly a foreigner trying to influence our elections, totally not the Democrats kinda not having a candidate. It would be a very expensive (on average) way to probably not make a difference. Cheaper to just buy up some media companies, which do the same thing, saying their preferred candidate is going to win.
Small elections are susceptible to corruption this way, though.
There’s been plenty of blatant voter interference, and billions spent influencing American voters, not really seeing where your point is based. More handles to steer democracy with money is not better, period.
> They are putting a financial incentive behind accurately predicting the future,
Unfortunately they also place a larger financial inventive on influencing the outcome of future events. Or incentivizing corruption within the inner circles of these events. Because the larger financial upside in these transactions is to bet against what the market thinks, and influence the outcome.
I don't think that is logically correct. Commonly perceived probability has been proven frequently wrong whether naturally or due to manipulation. The reasoning here is not exactly the same, but closely aligns to bandwagon fallacy.
It would be interesting to see how frequently Polymarket predictions bet against the most common prediction and by what margins.
It's the least inaccurate way. There's money to be made if you're sure you have a better way. The real problem is we're already seeing these markets influence the outcome.
You make two valid points, but they still do not qualify the validity of these markets as accurate predictors. There is a difference when people, like Berkshire Hathaway really dig into the financials and management of a company to predict its future versus somebody like me who just money on a stock. In one case an investor seeks to make money and actively influence an outcome, but in my case I am just dropping money and hoping it out paces the rise of inflation because banks are no longer reliable stores of financial security.
Polymarket projections do not provide investigative insight, as in the Berkshire Hathaway example. It's just gambling. Any influence drawn from these predictions is incidental and reactive, as opposed to active market forces like buying/selling.
Nobody is saying it's better than stock market predictions of assets and company financials. Though there are some asset price predictions on there that exactly match the traditional markets, so it's no worse.
The range of activities in which this effect can be harnessed for societal good is extremely narrow, but I think it's there.
I'd be in favor of a prediction market for which which asteroids are likely to collide with something, and when. Though we'll have to shut it down once it becomes feasible that somebody might go up and nudge one.
> They are putting a financial incentive behind accurately predicting the future, which makes these apps basically the most accurate predictor of the future.
There is plenty of data that shows they actually don't work very well outside of surfacing insider knowledge (which the commercial prediction markets superficially pretend to be against).
For events where you can't have full picture insider knowledge like elections, prediction markets are pretty awful at accurate predictions.
> They are putting a financial incentive behind accurately predicting the future, which makes these apps basically the most accurate predictor of the future.
This is so fallacious. Putting money behind something doesn't make a prediction of a non-knowable more accurate.
Tarot card readings by a psychic must be more accurate predictor than a tarot card reading by an amateur because professional tarot card readers have a financial incentive to be right, so people continue coming back to them for advice. Getting a tarot card reading therefore makes this basically most accurate predictor!!
Or they're creating a financial incentive for insider trading and manipulating certain events.
I mean look at all the oil market manipulation in the Iran war. The pattern was repeated so many times: short oil, announce a ceasefire deal with imminent on Sunday before the markets open, cash out on Monday, rinse and repeat.
The argument is that we get transparency on what's likely to happen. I don't think there's any evidence of this. I've seen any number of very poor predictions coming from Kalshi and Polymarket. I have also seen some clear manipulation.
> They are putting a financial incentive behind accurately predicting the future, which makes these apps basically the most accurate predictor of the future. Available to anyone to view, for free.
Here, let me predict a future where someone will die. On the other side, let me pay for a hit on the same person. /s
^It's a bit extreme and exaggerated, but it's like that on purpose to make a point.
Nobody should ever be threatened with prison time because of a jurisdictional dispute between federal and state governments. That's antithetical to the rule of law, regardless of the specifics of the law or the jurisdictional dispute.
Creating a company with the intent to circumvent the law is definitely something that should be punishable with stricter measures than simply breaking the law directly.
It is the same argument that a "sovereign citizen". The "I do not recognize your law" kind of stupidity. The only reason they have not been long in prison is corruption at the highest level at the White House.
They're being threatened with prion time because they broke state law. That the federal government is looking one way while states another is not the cause of the jail time threat.
They should be thrown in prison for knowingly violating a law. Trying to play a semantics game (prediction market vs gambling) to get out of it is just scummy. Everybody knows it is gambling.
If you have advance knowledge of an attack, there are much less conspicuous ways to profit off that.
What about this administration makes you think that's important to them?
Granted, the son whose wedding you skip has got to be lower down the food chain.
I despise gambling and would very like if there was less of it. But that's not a legal opinion, those are just my feelings. There are good faith legal arguments that these state laws cannot override federal laws and that the federal laws allow these prediction markets. We live in a country with an enormously complex legal system and with a volume of legislation that is, without question, far beyond what any single individual could reasonably comprehend. This often means that what is legal and illegal is unclear. I think this is one of those circumstances.
This is a bad take. What they are doing is quite obviously legal right now. Federal law trumps state law and the feds have an opinion, despite being weird and controversial.
There are a number of ongoing legal battles about the federal laws but until they work their way through the courts, it's "legal". Also, it could all get resolved with a new presidential administration in two years. This is the correct solution.
We shouldn't cheer for personal prosecutions over definitionally legal activity. Nothing good will come of it. See also: Sending mifepristone across state lines, or traveling out of state for abortions.
Federal law does not categorically trump state law.
https://en.wikipedia.org/wiki/Federal_preemption
Whether pre-emption applies in this case depends on whether the courts accept Kalshi/Polymarket's claim that they operate a futures trading platform, not a gambling platform. If and only if that claim is accepted is there a pre-emption argument, and only then would the opinion of the Commodity Futures Trading Commission be relevant.
As long as the business is legal to operate, there is no justification for criminally prosecuting the people engaged in that business.
"As long as the business is legal to operate, there is no justification for criminally prosecuting the people engaged in that business."
You are begging the question: assuming that the business is legal to operate in the state of Utah. You keep presenting Kalshi's arguments as though they enjoy some presumption of legality prior to a ruling.
No. There's no "states must permit gambling" Federal law for state bans to conflict with currently; states are free to ban it.
https://en.wikipedia.org/wiki/Gambling_in_the_United_States
"While gambling is legal under U.S. federal law, there are significant restrictions pertaining to interstate and online gambling, as each state is free to regulate or prohibit the practice within its borders."
Matt Levine has gone into great detail about the legal chicanery that brought us here, but it summarizes as "it's not gambling, it's futures trading".
This seems like nonsense to you and me (and Matt Levine), but our opinions are irrelevant here. The courts' opinions are, and so far they've been coming down on the side of the prediction markets. Mostly.
So by definition - as weird as it is - it's legal. So far.
Sure, just like storing a bunch of classified docs in a Mar-a-Lago bathroom was.
You are mixing up "currently getting away with it" for legal.
These founders should be in prison for promoting illegal gambling. Same federal charges mafiosos get caught on for a "friendly card game".
You don’t even have to read the article, the headline says it all…
I would amend your “breaking the law” comment to “willfully ignoring all regulation, taxes, and labor provisions” perhaps but, same sentiment.
A lot of these companies have taken this approach. Break laws until someone finally notices AND does something about it. The runway to a slap on the wrist is often times more financially beneficial to companies - there is no incentive to stop if you run a billion dollar company and breaking the law gets you a $50M dollar fine you make back in a single month.
I thought SOX (Sarbanes–Oxley Act) was supposed to prevent a lot of this, but I guess companies just continue to find loopholes to exploit.
On the other hand, I've come around to the view that sports betting is a net unqualified bad -- and I didn't necessarily feel that way before the Kalshi/PM explosion.
The problem lies in the legal gray area of what constitutes gambling, and therefore "illegal" gambling. That's what the courts have to decide.
I think most people would say this is gambling. But our legal system has to rule on that before we can start putting people in jail for it.
We should! Finally incentivize rich people to not screw over the rest of society for a quick buck.
https://www.cftc.gov/PressRoom/PressReleases/9281-26
Why are casinos operated by Native Americans legal but casinos operated by black people illegal?
I don't think "illegal gambling" is illegal for the reasons you want it to be illegal.
But if you know better then maybe you should just decree from the courtroom in your house and send your ruling to the AGs of all 50 states.
Like, do you have any actual argument as to why it's not gambling, or are you just going to hang it on this plausible deniability? It's not like they knew the 3rd circuit would decide in their favor anyway, so I don't really think your point is the slam dunk you're acting like it is. They knowingly engaged in activities that most states consider to be gambling. They aren't even really denying that. They are just saying it falls under federal regulation, but the argument for that is so shockingly poor, it's hard to imagine how the 3rd circuit's decision could stand, but its only on a preliminary injunction anyway, so it's still not quite a merits decision. The third circuit said that by its own logic, Congress must weigh in on whether or not "bingo" is a swap regulated by the CFTC. If you can't understand how facially stupid that is, I don't know what to say.
Yes I think what they are doing is illegal and they should not be permitted to operate outside the gaming regulations of individual states.
But it doesn't matter what I think. I was trying to have a conversation about the gray areas and why we don't just send people straight to jail for trying out a new, novel, (and potentially illegal), business model.
The courts are figuring it out.
We need at least one state to do this when large corporations violate privacy laws.
Somebody needs to tell Utah it needs to change its laws to adapt to their business plan, ASAP.
A pyramid scheme uses new investor money to pay fake returns to those who have already invested.
A casino provides games to bet on where expected value for the player is negative. A sportsbook balances their book by modifying the odds to remain as neutral as possible and capture the spread (see ‘vig’).
There’s not a whole lot of similarity there.
Closes tab.
they were never an innovating marketing play... it was the culmination of a gambling company committing to regulatory capture as evinced by Donald Trump Jr (totally not) sitting on BOTH BOARDS as a "paid strategic advisor" or whatever lie they want to spin.
To me it's absolutely crazy that the "gamble on anything" apps are being advertised as some kind of polling software. I've already seen at least one race called into question because the gamblers bet on the wrong pony.
They're pure corruption engines designed for insider betting. The top brass of these companies need to be made example of.
i would not premise an anti-prediction market argument on their accuracy being bad, you are building on shaky foundations. the better argument is the paternalist protecting stupid people from themselves imo.
is there any surprise then that Trumps are on the boards of both?
Here is their official stance on gambling: https://www.churchofjesuschrist.org/study/manual/gospel-topi...
I am not sure how much, if any, impact or influence this has had on Utah law.
Given the way that the church has explicitly encouraged state legislators to shoot down recent laws it's not surprising to think they'd be pushing for this.
And the way they've influenced voters in Idaho and Arizona recently.
... Gambling is motivated by a desire to get something for nothing. This desire is spiritually destructive. It leads participants away from the Savior’s teachings of love and service and toward the selfishness of the adversary. It undermines the virtues of work and thrift and the desire to give honest effort in all we do.
Those who participate in gambling soon discover the deception in the idea that they can give little or nothing and receive something of value in return. They find that they give up large amounts of money, their own honor, and the respect of family members and friends. Deceived and addicted, they often gamble with funds they should use for other purposes, such as meeting the basic needs of their families. Gamblers sometimes become so enslaved and so desperate to pay gambling debts that they turn to stealing, giving up their own good name.
https://leg.wa.gov/state-laws-and-rules/washington-state-con...
>SECTION 24. LOTTERIES AND DIVORCE
>The legislature shall never grant any divorce. Lotteries shall be prohibited except as specifically authorized upon the affirmative vote of sixty percent of the members of each house of the legislature or, notwithstanding any other provision of this Constitution, by referendum or initiative approved by a sixty percent affirmative vote of the electors voting thereon. [AMENDMENT 56, 1971 Senate Joint Resolution No. 5, p 1828. Approved November 7, 1972.]
>NOTES: Original text — Art. 2 Section 24 LOTTERIES AND DIVORCE — The legislature shall never authorize any lottery or grant any divorce.
Everyone knows the state of Utah is largely run by the church.
Surprisingly few people know this ime. It's worth pointing out as one of the few areas [0] where the church has as much pull as its members think it does.
While I wouldn't look to the church as a bastion of morality for So Many Reasons, it's worth looking at a hard example of how it is able to manipulate politics in Utah, and by extension nationwide.
[0] Other areas worth being aware of are Idaho and parts of Arizona of course.
Now, Robinhood is a brokerage, regulated by FINRA, and has been fined for misbehavior in the past. So I am more than willing to believe that there is daylight here that I’m not seeing. But anything that lets you speculate attracts a certain clientele, and I think the most important distinction is whether or not the platform itself is an interested party.
Also speculators serve an important purpose: hedging strategies require speculators on the other side. It is not just a "certain clientele," there are people who run profitable businesses on speculation (it amounts to collecting insurance premiums from people who want hedges).
Really it sounds like this is a disagreement about what it means for a market to be "regulated" -- I draw the line at compliance, you seem to draw the line elsewhere.
Lots of folks gripe about how Kalshi adjudicates contracts.
&&
policy makers, assistants, journalists, and the like are insider trading - and the president of the united states is intentionally market manipulating for profit
Bots Rule Everything Around Me BREAM dollar dollar bill yall.
like, of course the gambling halls drop big money on online marketing
And it's terrible and going to destroy sports.
With enough funds, smaller political races can be gamed.
https://marginalrevolution.com/marginalrevolution/2026/10/pr...
Obviously not compelling on its own though.
This seems like a relatively small inefficiency in the markets, no? If the margin of error notable in a prediction markets is <10 cents per dollar, that implies that they are pricing events pretty accurately. Especially post publication of this paper, when sophisticated traders could trade away this inefficiency.
It makes sense why they went towards sports gambling, because the market is so big.
Most uncertain things that people need to hedge (currency, commodity prices) already had a hedge.
In practical terms can someone really give me an example of how they benefited from knowing the future (materially, not emotionally) from a prediction they got from Kalshi? I am honestly curious.
That's way too narrow of the categories. Here are some more cases, and you tell me where can I hedge it? And don't tell me the answer is "go to Goldman Sachs and they create any kind of derivatives to hedge for you", that only works if you are a huge enterprise. I'm talking about SME, or even one person company with $1-5M ARR.
(By the way, I do trade on Polymarket / Kalshi, had a job interview with Kalshi many years ago but did not take their offer since I disagreed a lot with their product design. So all of this is my own opinion).
1. Suppose I run an ice cream shop in midtown Manhattan, and my foot traffic depends on how good the weather is. If it's sunny and dry, I expect a lot of traffic, vice versa, if it's thunderstorm, hurricane or snow, I would run the day without any revenue (and a lot of ice cream waste). What is the way for me to hedge weather risk that could seriously affect my business?
2. Suppose I'm a restaurant owner in Koreatown in LA, and during World Cup I run a restaurant expecting a lot of Korean coming to my area (and my restaurant). So I would ramp up my business, hiring a lot of staffs, sourcing a lot of ingredients from the vendors. Then the biggest risk (and anticipation) is that Korea would be knocked out very early, which unfortunately that precisely happened. So the foot traffic evaporated, and with that the revenue. How could I hedge that risk?
3. Suppose I'm a distributor / reseller who needs to import goods and products from other countries and resells it back to US for profit. Barring the import / export regulations, the biggest risk is tariffs: the orange man can (and did) impose 50% tariffs from China, and all the sudden I face a severe supply-demand imbalance with a lot of contract cancellation and such. How can I hedge such tariff risk from the orange man? (Obviously, the alternative is that I wish we could have elected a more competent leader, but at least 75 million American disagreed with me).
These are not polling places, they are places for capital to influence odds.
Small elections are susceptible to corruption this way, though.
Unfortunately they also place a larger financial inventive on influencing the outcome of future events. Or incentivizing corruption within the inner circles of these events. Because the larger financial upside in these transactions is to bet against what the market thinks, and influence the outcome.
It would be interesting to see how frequently Polymarket predictions bet against the most common prediction and by what margins.
Polymarket projections do not provide investigative insight, as in the Berkshire Hathaway example. It's just gambling. Any influence drawn from these predictions is incidental and reactive, as opposed to active market forces like buying/selling.
I'd be in favor of a prediction market for which which asteroids are likely to collide with something, and when. Though we'll have to shut it down once it becomes feasible that somebody might go up and nudge one.
There is plenty of data that shows they actually don't work very well outside of surfacing insider knowledge (which the commercial prediction markets superficially pretend to be against).
For events where you can't have full picture insider knowledge like elections, prediction markets are pretty awful at accurate predictions.
This is so fallacious. Putting money behind something doesn't make a prediction of a non-knowable more accurate.
Tarot card readings by a psychic must be more accurate predictor than a tarot card reading by an amateur because professional tarot card readers have a financial incentive to be right, so people continue coming back to them for advice. Getting a tarot card reading therefore makes this basically most accurate predictor!!
I mean look at all the oil market manipulation in the Iran war. The pattern was repeated so many times: short oil, announce a ceasefire deal with imminent on Sunday before the markets open, cash out on Monday, rinse and repeat.
The argument is that we get transparency on what's likely to happen. I don't think there's any evidence of this. I've seen any number of very poor predictions coming from Kalshi and Polymarket. I have also seen some clear manipulation.
We should call this what this is: gambling.
Here, let me predict a future where someone will die. On the other side, let me pay for a hit on the same person. /s
^It's a bit extreme and exaggerated, but it's like that on purpose to make a point.
In addition to being utterly terrifying, this would fall afoul of the "cruel and unusual punishments" thing /s
(What a typo)