A POTENTIALLY DISRUPTIVE NEW PLATFORM FOR BETTING ON FUTURE EVENTS

A brand-new federally regulated betting exchange called Kalshi (the Arab word for “everything”) is up and running and lets people trade on disparate event outcomes.  Kalshi, founded by two twenty-something entrepreneurs with M.I. T. backgrounds, has already raised over $36 million from prominent investors.  A Kalshi user is able to buy a “yes” or “no” contract on a wide range of topics, regarding their belief that a future event will or will not occur.  (Per federal law, events must preclude war, terrorism, assassinations, or gaming.) 

A contract will pay $1 if the user makes the correct yes-or-no prediction.  The user will purchase a contract for between $0 and $1, depending on where the market is trading at a given time.   A Kalshi user will be able to exit a trade before the outcome of an event is determined.  For instance, suppose in June 2020 someone had bought an existing contract for 40 cents that would pay off if a COVID-19 vaccine would be approved by the FDA before the end of 2020.  As the prospects grew brighter for vaccine approval by late 2020, the user could sell the contract for, say, 80 cents.

A few of the current events open on Kalshi are:

Will the real GDP increase this quarter?

Will the Toyko Summer Olympics be cancelled?

Will the CPI increase this month?

Will the high in Central Park, NY be above 100 degrees this week (August 1, 2021)?

If Kalshi proves to be successful, look for competitors to come into the market.  Whether Churchill Downs, Inc., Penn, and other major players in the racing industry could get regulatory approval for a Kalshi-like operation is unknown.  Certainly, for instance, Churchill Downs could not post an event that management can control, such as:  Will the Kentucky Derby in 2022 be run with attendance at Churchill Downs limited to less than 80% of capacity?  But other events could be crafted that would permit “yes” or “no” betting:

Will the winning time for the 2021 Kentucky Derby be 2:02 minutes or less?

Will all-sources wagering on the 2021 Kentucky Derby race itself surpass $160 million?

Will the high temperature in Louisville, Kentucky on Kentucky Derby day 2021 exceed 74 degrees fahrenheit?

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