[barnbuilder]

> Before Kalshi, markets that allowed you to trade on economically relevant events were illegal or unregulated.

Totally untrue. PredictIt was legal and regulated and well-loved for many years, operating with the permission of the CFTC under a no-action letter. Then Kalshi hired former CFTC commissioner Brian Quintenz and soon, PredictIt was suddenly deemed by the CFTC to have committed still-unenumerated violations of the no-action letter.

This is a rotten way to do business and shame on YC for being involved in it.

https://karlstack.substack.com/p/a-textbook-case-of-regulato...

[NoboruWataya]

Without more detail this just sounds like a conspiracy theory. Hiring a former regulator is way too weak a link to conclude that Kalshi are pulling the strings at the current regulator.

If PI were operating on the basis of a no action letter they were unregulated pretty much by definition. A no action letter is basically a regulator saying that it won't take action against a market participant for doing things that would otherwise merit regulatory action.

(I'm not affiliated with any of these parties, just going by what I read in the comments and the various publications from CFTC.)

[lapestenoire]

That is not what a no action letter is.

[tmansour]

This article had a bunch of interesting insider info on what went down (most of it was news to me as well): https://www.capitolaccountdc.com/p/gambling-on-politics-an-i...

[fallingknife]

Hard paywall. Can you archive it and post a link?

[ghufran_syed]

How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi?

And predictit will have its day in court [1] where both sides will actually need to present evidence, unlike on an internet forum

[1] https://www.globenewswire.com/en/news-release/2022/10/06/253...

[thecoppinger]

> How is a non-profit trade-size limited prediction market in any way a competitor for Kalshi?

Because it was one of the longest running and largest prediction markets to ever exist.

> trade-size limited

Kalshi is trade-size limited, too.

[mbrubeck]

Specifically, PredictIt limits positions to $850, while Kalshi limits them to $25,000.

Which is definitely a significant difference, but still seems too small for cases like tmansour’s motivating example (“providing institutions with exposure to, or a hedge against, Brexit”). Though I guess it depends; if you bet $25,000 on a 99:1 long shot, then your position could be worth $2.5 million if it pays off.

(PredictIt also limits each market to 5000 participants, while as far as I can tell Kalshi has no such limit.)

[ruuda]

Scott Alexander did a post on it too: https://astralcodexten.substack.com/p/mantic-monday-81522

[lacker]

I think it's unfair to jump to the conclusion that Kalshi is to blame for regulators banning PredictIt. From the link you posted, PredictIt promised the regulators they would:

* be small-scale and not-for-profit

* be operated for academic and research purposes only

It doesn't really say what "small-scale" means, but obviously, if PredictIt keeps being successful and growing, eventually they will no longer be small scale. PredictIt was always in a situation where they had to make a different deal with regulators, eventually, as long as they continued to grow.

If you want to blame the CFTC for shutting down PredictIt, Intrade, all of those other prediction markets, then yeah, I agree! I wish they had just been much more permissive long ago. We should blame the CFTC for being too strict. But it doesn't seem fair to blame Kalshi just because they might be the ones to finally convince the regulators to allow one of these.

I hope Kalshi is the group to figure this out, make prediction markets popular, and that prediction markets can finally get the attention from wider society that they deserve.

[fallingknife]

What a ridiculous regulatory decision. They have to be "small scale?" So it's ok for anybody to do it, but if too many people actually do it, then no one is allowed to anymore.

[thecoppinger]

I went deep doing research on prediction markets a few months ago, and no, it's not an unfair conclusion.

Brian Quintenz is a Republican financial manager who was nominated to be a commissioner of the CFTC by Trump in 2017.[1]

During his time at the CFTC, as I recall, there was heavy bipartisan action, which he was praised for.

Well, there's a slightly more cynical take that he was indeed completely crooked.

My memory is foggy, and I don't have time to grab sources just yet as I have a meeting coming up so I'll update this shortly, but he was then turfed out of the CFTC under Biden and promptly hired by Kalshi.

Given his record, it's less of a jump to see what Kalshi is doing as shady, but more of a smoking gun... PredicIt, which had been operating under a no action letter (NAL) from the CFTC since 2014 just happened to have that letter withdrawn a few months after Kalshi raises $30m at a Series A to take their platform live.[2]

From my point of view, this is classic American lobbying mafia style stuff. Prediction markets have been prevented from flourishing for decades, and now that the time has arrived, the crooked CFTC et al have cleaned the house so their chosen startup that they're deeply in bed with can thrive.

The whole thing, quite frankly, stinks.

[1] https://en.wikipedia.org/wiki/Brian_Quintenz

[2] https://www.pymnts.com/news/international/2022/millions-comm...

[ghufran_syed]

So the guy the administration fired is somehow also the guy to make the current CFTC do what he wants? I’m sure he knows the rules and institutional concerns of the CFTC, but why would he have undue influence over the person who replaced him?

[thecoppinger]

I hear what you're saying, but I feel there is an assumption made by your counter-argument which insinuates that the CFTC is a functional and non-corrupt organization. My perspective, based on my research, seems to suggest otherwise.

Unfortunately, this seems to be endemic of American politics and government organizations.

In Kalshi's case, Brian Quintenz aside, let's talk about Jeff Bandman, who spent close to 3 years at the CFTC.[1] Well, after doing so, he became a regulatory strategy advisor for Kalshi.

Here I quote a Bloomberg article[2] on Kalshi from earlier this year:

"Eventually they tracked down a former CFTC official, Jeff Bandman, who assured them the landscape was changing; he agreed to help them navigate the agency and its characters."

So yeah, I'll concede that there are a few un-generous assumptions that need to be made to fully paint Kalshi as a bad actor in this situation, but given the various pieces of context available, I don't feel it's an overstep to call behavior like this out.

Ultimately Kalshi is set to be a unicorn startup, and I wish the founders success in their endeavors—they appear to be exceptionally bright and hard working individuals—but what appears to have transpired for them to have their shot doesn't sit right with me.

[1] https://www.linkedin.com/in/jeffbandman/

[2] https://www.bloomberg.com/news/features/2022-05-26/kalshi-s-...

Archive link as the original has a paywall:

https://archive.ph/20220527010753/https://www.bloomberg.com/...

[ghufran_syed]

That article is super helpful - my take on it is that the fact Quintenz was a former hedge fund trader probably had a lot more to do with the approval than his later decision to work for Kalshi. And it’s interesting to note he was originally nominated to the CFTC by president Obama

[weixiyen]

I think they did the same to Polymarket in the US.

[ricardobayes]

Not only that, but at least in the UK, bookmakers take bets for newsworthy events. (Like elections)

[orangepurple]

Buying out the regulators and making competition illegal is the moat YC needed to invest

[dang]

I have no knowledge about this particular case but that is absolutely not how YC operates or thinks about its business. I've never heard a single comment from anyone at YC along such lines. I'm not moderating this subthread the way we normally would*, but IMO you guys should be more scrupulous about posting snarky smears.

* because https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...

(edit: for anyone wondering, I didn't flag the GP comment)

[species9606]

“I have no knowledge about this particular case”

Respectfully, I think you should have stopped there, or perhaps earlier. There is quite a body of evidence already provided in this thread suggesting that Kalshi is an anticompetitive regulatory-capture play.

[dang]

The GP comment was specifically a smear about YC, which is something I do have knowledge about. I don't for a moment believe that YC would invest in "buying out regulators and making competition illegal". That would go against everything I have ever heard, in public or in private, and everything I understand YC to be about.

Just because we moderate HN less when YC or a YC-funded startup is part of a story does not mean I won't respond like a normal human being.

[ghufran_syed]

perhaps you could post said evidence?

[species9606]

I added an edit, indicating that this thread already has quite a bit of it.

[tmansour]

+1 on this. This is not how any of us operate.

Regulation in this space is really tough and thorough - we've been battling through it for years now (also explains why this post is coming so long after the end of our batch!).

[Lionga]

The facts presented above make your company look very shady, and this answer is not clearing up anything.

Like this most people will have to assume you really just paid off / bribed Brian Quintenz.

[tmansour]

this insider article should clear up a few things! https://www.capitolaccountdc.com/p/gambling-on-politics-an-i...

[Lionga]

It's paywalled and you not wanting to say anything yourself just smells bad

[thwayunion]

Maybe not YC -- that's a strange thesis for seed money -- but it wouldn't surprise me if this strategy flowed from Sequoia; not as a primary investment thesis, or even the primary reason for bribing* a former regulator, but rather as a happy side pot payout.

* Yes, the revolving door is bribery-by-any-other-name. Anger at this type of legalized overt corruption of our institutions is literally ripping the country apart.

[thecoppinger]

Right on—this is my take, too.

[Lordarminius]

Wow ! .. :)