The Closing Bell: Webull Launches Kalshi Economic Prediction Markets
Roundup: The aftermath of Polymarket's Zelenskyy suit debacle; counsel for Kalshi unloads at National Council of Legislators from Gaming States event; Kalshi has another AI commercial.
The Closing Bell is a roundup of prediction market news, analysis, and other thoughts each Friday.
The financial services app Webull launched Kalshi’s economic prediction markets on Friday. From Webull on Twitter:
Have a view on upcoming US Economic data? Trade your forecast before the numbers drop, with monthly prediction markets on:
CPI & Inflation (YoY)
Jobs & Unemployment
Turn your predictions into opportunities with @Kalshi markets on Webull.
Here is what you can trade now:
Last month, Webull introduced cryptocurrency hourly contract trading via Kalshi. It’s not clear if Webull will eventually get into sports betting/sports event trading.
Kalshi CEO Tarek Mansour recently said Kalshi has 20 brokers in its pipeline to integrate prediction markets.
Meanwhile, Kalshi parnter Robinhood has also added markets for the winner of Major League Baseball’s All-Star Game and the Home Run Derby.
The roundup
Kalshi’s lawyer goes hard at state-regulated gambling (SBC Americas): From the National Council of Legislators from Gaming States event this week. “Josh Sterling, a lawyer from Milbank and former Commodity Futures Trading Commission (CFTC) employee, represents both Kalshi and Crypto.com in their legal challenges to cease and desist letters from gaming regulators in a trio of states. His comments on a panel regarding prediction markets both gave insight into Kalshi’s legal position and ruffled some feathers in a room full of regulators and lawmakers who believe sports contracts are infringing upon their turf” …
“On the consumer protection piece, though, Sterling was not swayed that it is something any regulatory body should even be worried about.”
“People are adults, and they’re allowed to spend their money however they want it, and if they lose their shirt, that’s on them.”
That last part stands out to me. I get Kalshi’s legal argument is that they aren’t gambling. But if your legal counsel is going to speak in public saying the quiet part out loud… yikes. Part of Kalshi’s communications strategy has been that they aren’t the house and that they don’t take an interest in whether a user wins or loses. That’s great, but your product is essentially gambling, and I don’t think you can just throw your arms up and say “Not our fault if you lose!” I mean you can, but that’s probably going to come back to haunt you. I wrote more about the potential problems around prediction markets and responsible/problem gambling at The Closing Line:
The aftermath of the Polymarket suit mess: The tl;dr version is that Polymarket resolved the market for whether Ukraine President Volodymyr Zelenskyy as “no,” despite the fact that there’s a pretty good argument for “Yes.”
If you are trying to get up to speed, I wrote about all this to start the week here: “The problem for Polymarket is they created a silly market with lazy criteria for resolution. Both of those things are a recipe for trouble in a yes-no market with actual money on the line. (I’d also argue you also kind of get what you deserve if you bet on a dumb market with dumb rules and you end up losing.)”
There are a lot of people that are mad at the result, and at the process that created the result. See:
Volodymyr Zelensky’s Clothing Has Sparked a Polymarket Rebellion (Wired): “…The bet has become a test case for the efficacy and reliability of Polymarket’s model for crowdsourcing truth. In the event of a dispute, the platform lets holders of a certain crypto token cast votes on the answer. That may work for bets with binary outcomes—a team wins a game or it doesn’t — but it invites chaos when many millions of dollars are on the line over more subjective topics, like what constitutes a suit.”
“Before a prediction market is resolved, Polymarket gives users a two-hour window in which they can lodge a dispute by posting a $750 bond. If a dispute is registered, it falls to Polymarket’s ‘oracle,’ a decentralized financial contracts platform called Universal Market Access (UMA), to vote on a resolution. UMA, which was founded in 2018 and operates independently from Polymarket, resolves these disputes by allowing people or organizations that hold its tokens to vote on what the truth is.
In this case, UMA voters are saying by a seemingly insurmountable margin that Zelensky did not wear a suit.”
“The problem with such a system, critics claim, is that it’s vulnerable to abuse by so-called whales — holders of large amounts of tokens with an outsized influence over decisions. To avoid having to wade into every Polymarket dispute or otherwise incur a financial penalty for missing a vote, smaller UMA holders frequently loan their tokens to delegates who vote on their behalf, further concentrating the supply. According to data platform Sentora, 95 percent of UMA tokens are controlled by whales. ‘It’s not decentralized—nowhere near decentralized,’ says an independent crypto trader who goes by the username defipolice, who stands to lose roughly $450,000 on his Zelensky bet.”
Will all of this matter to Polymarket in the long run? We’ll find out. If people lose faith in the system behind Polymarket, that’s potentially an existential crisis for its business. None of this has been good for its brand as a “source of truth.” Polymarket has been quiet about what has been a pretty big mess.
What Kalshi CEO Tarek Mansour said this week: Mansour was on social media with a couple of interesting posts this week.
LinkedIn No. 1: "Prediction markets will die after the election" - basically everyone. June was our best month yet.
I mean, if everyone knew that you would 1. launch sports betting in January and 2. no one would tell you to stop, I don’t think anyone would have said that. Almost all of Kalshi’s growth is because of sports. To wit, see last week’s trading volume report:
Kalshi Volume Report: Tennis, Baseball, And Hot Dog Eating Dominate (The Event Horizon): “Eight of the top ten markets for the week ending July 6 were sports markets, and 12 of the top 20. Trading volume is still down from when NBA and NHL betting were available. Here’s a look at the top 20 markets from June 30-July 6.”
Mansour also had a very long post recapping a lot of Kalshi’s recent growth here. I unpacked and summarized that over at The Closing Line. The idea that Kalshi’s legal battles are a “bloody, brutal war” caused me to raise my eyebrow:
Kalshi’s download numbers still doing well: Kalshi has been between No. 30-60 for free finance app downloads in the App Store in recent weeks, according to Sensor Tower. That’s far ahead of what it did for much of the spring. Trailing-month downloads are in excess of 100,000:
Kalshi’s new commercial: You can see it below; like its last commercial, this was also made with AI:
I generally hate everything, and I think this is again cool. Although some people could be risking going to hell by using an image of Jesus to promote gambling.
It seems like this went pretty viral, but maybe not as viral, as the first ad.
I am not a marketing genius, but Kalshi should probably settle on a tagline/identity and stick with it. We have the core one (Trade/Bet the headlines), the other AI ad (“The world’s gone mad, trade it”) and now “It’s your turn to defy the odds.”
Prediction markets are just gambling. Kansas must regulate them that way | Opinion (Kansas City Star, paywall): American Gaming Association president Bill Miller wrote the op-ed:
“In Kansas and across the country, lawmakers, regulators and gaming operators have spent years building a safe, transparent and effective regulatory system for legal gambling. Whether it’s sports betting or casino gaming, state laws are clear: Gambling must be conducted responsibly, licensed through state or tribal compacts and monitored for integrity. But a new threat is emerging that risks undermining this structure — prediction market platforms offering gambling products under the auspices of Commodity Futures Trading Commission regulation.”
It’s interesting to see the AGA do some pretty granular PR work here. Kansas is one of the states that didn’t join the 34 attorneys general who supported New Jersey in its case against Kalshi offering sports betting.
New Mexico tribe to seek state’s help cracking down on prediction markets (Source NM): “The vice president of a local tribe is asking the New Mexico Attorney General and the state Legislature to intervene against online gambling apps that he says are using a backdoor to allow illegal sports gambling here and, in doing so, threatening tribal gaming rights. Mescalero Apache Reservation Vice President Duane Duffy told a panel of state lawmakers this week that platforms like Kalshi allow customers to do online sports betting under the guise of commodity futures trading. The companies are ‘wiggling’ their way into New Mexico, a state where online sports betting is illegal, he said.”
Prediction Markets May Be Solution For Overtaxed Bettors — Or They May Not (InGame): “Congress’ decision to bring in a surprise 90% cap on deductible losses for gamblers earlier this month has left many high-volume sports bettors wondering how to ensure their pastime — or job, for some — can remain viable. … But among the simplest proposed solutions is to just switch to a prediction market. … Unlike traditional sportsbooks, prediction markets like Kalshi are regulated by the Commodity Futures Trading Commission (CFTC) and these exchanges argue their contracts — even on sports — are “swaps,” a form of financial product. So that means winnings should be taxed as capital gains, with all losses being deductible, right? Well, maybe.”
“There’s a lot of uncertainty about not only the regulatory side, but the tax side as well,” Robert Stoddard, lead U.S. tax partner for gaming at KPMG, tells InGame.
Before everyone starts doing all their gambling at prediction markets, realize that something's legal status doesn't always correlate with how it's taxed. Talk to an accountant.
Gambling or hedging on bad outcomes?: A couple of interesting pieces this week, followed by my thoughts:
Kalshi Allows Gambling On How Many People Will Lose Healthcare (Gambling Harm): “Wagering on the extent of human suffering? A market on the popular platform Kalshi allows users to essentially bet on how many millions of Americans would lose healthcare because of the Republican-backed reconciliation bill. … At this stage, it’s hard to argue the market is anything more than speculative gambling.”
Opinion: Let Wagers Fly on Grim Futures (Prediction News): “Last week, Congress passed and President Trump signed the so-called ‘Big Beautiful Bill,’ a sprawling reconciliation package that rewires vast stretches of the federal budget. Tucked inside is a brutal outcome: the Congressional Budget Office projects the law will push at least 11 million Americans off the health-insurance rolls by 2034. While lawmakers were busy sparring over the measure, the prediction market platform Kalshi opened a market letting users trade on the CBO’s final estimate of how many people would lose coverage once the bill went into effect. … Should society even be allowed to put money on stakes so high? It’s a fair question, and an important one. My answer: Not only are these markets permissible, but they should be scaled — and here’s why.”
There is a ton to unpack on this issue… but the bottom line is not every market like this is inherently a bad idea. I think it’s a case-by-case basis. More on that in a bit, but let’s take this specific example first.
Is there a real-world economic-use case for hedging bad outcomes in this market on health-care coverage from Kalshi? Absolutely! This has far more economic value in the world (at least in theory) than probably 90% of the stuff Kalshi offers.
On the flip side, there are a couple of other issues. 1. How many people are actually using this (or any Kalshi market) for hedging vs. pure speculation/gambling? We’ll never have much insight into that, but I suspect it’s almost always way more of the latter vs. the former. Even at scale, that’s probably not likely to change. 2. On this health-care market in particular, should we really be encouraging people to hedge outcomes at Kalshi? The folks who need assistance from Medicaid and Medicare — generally low-income people and families — are on the whole not the most technically savvy folks in the world. Do we really expect they are going to get on Kalshi and start hedging outcomes? Even if they do sign up at Kalshi, is it a good idea to tell them to start trying to put money on how many people will lose insurance? They could end up losing money if they don’t understand what they are doing. These are not people that have tons of liquid cash in the first place.
In any event, this market isn’t a bad idea in and of itself, and there’s a pretty good case for its existence.
I don’t think we can say with a blanket statement that every “grim” market that involves death and suffering should get a pass. Every time you see or list a market like this, it probably takes a bit of analysis. Namely, is there a 1. real-world economic case for the market existing? and 2. is there potential value to knowing the probabilities via a prediction market? For example:
“Will a hurricane hit Florida in August?” Something like that ticks both boxes. “How many people will die because of hurricanes in August?” Nope. I think Kalshi, for all my criticism, usually does a pretty good job of staying out of the worst markets, with some exceptions.
Again, my issue comes with the idea that a lot of the people trading these markets probably have no skin in the game and are just speculating on outcomes. That might help us with No. 2 above, which is sometimes important and useful and sometimes not. I am cynical and it often seems like these markets exist mostly to provide another thing for people to bet on.
New comment on prediction markets to CFTC: This one is from the Lincoln Policy Group. The letter was penned by founder and former US senator Blanche Lincoln:
“In conclusion, my experience tells me it is absolutely critical that U.S. futures markets remain the sole authority of the CFTC. We should not open up our regulatory structure to a chaotic system where states and other jurisdictions reject contracts at will. Such a regime would breed uncertainty, which is what companies and financial markets dread most and is most dangerous to our overall economic stability. I also want to share my view that prediction markets appear to be the latest iteration of a policy framework that is built on the following premise: we should encourage a broad range of financial products, as long as we ensure that they are appropriately regulated.”
Odds and ends and other reads:
I haven’t seen one of these markets listed yet, but Kalshi recently self-certified markets with the construction “Will sports event experience a weather delay?”
Prediction markets have become a barometer for investors, says WSJ's Gunjan Banerji | Watch here:
Cardano Midnight Network Integrates Polymarket Competitor (Coin Republic): “The Cardano Midnight Network has announced the integration of Bodega Market, a competitor to Polymarket. This major integration took place within the Midnight Ecosystem, involving a direct partnership between the Midnight and Bodega teams. The move aimed to expand predictive markets and boost user engagement on the broader Cardano ecosystem.”
Here is Bodega Market.
Star Pollster Says Prediction Markets Don’t Threaten Political Polling (Casino.org): “At least one top pollster doesn’t view prediction markets as a threat to the high-quality firms in his industry. Rather, Trafalgar Group Chief Pollster Robert Cahaly believes there are synergies between elite polling and prediction markets. In a Wednesday interview on the Newsmax show “Finnerty,” the pollster noted professional participants in prediction markets use reliable polling information, including Trafalgar data, to make informed decisions.”
Kalshi’s Latest Fee Change May Mean Higher Costs For Sports Traders (InGame): “Prediction market Kalshi’s new formula for “maker fees” doesn’t work out as a significant fee increase on the whole, but is likely to mean higher payments for those using the platform to bet on sports, especially major U.S. pro sports leagues, InGame analysis shows.”
Kalshi Keeps Promoting Fake Parlays On Social Media (The Event Horizon): “Kalshi has been promoting fake parlay slips on social media that are also being shared by CEO Tarek Mansour. You cannot currently bet parlays on Kalshi, although at one point the prediction market platform offered a limited parlay functionality…”
Interview w/ Stuart Stott CEO of Galactic (European Gaming): “The inspiration for Galactic’s SI Predict platform comes from a desire to engage fans in a more holistic and immersive way. The platform aims to capture the broader cultural and social aspects of sports fandom, allowing users to predict events tied to athletes’ off-field activities, fan experiences, and lifestyle trends surrounding sports. This approach recognises that modern sports engagement extends beyond the game itself, encompassing moments like celebrity appearances at events, athlete endorsements, or fan-driven cultural phenomena. By focusing on these elements, SI Predict seeks to create a unique, interactive experience that captures the wider zeitgeist of sports culture, differentiating it from traditional sports betting, which is focused on game outcomes.”
For what it’s worth, there are only 11 markets available on the platform for US users when I log into the site.
What We Know About Railbird Exchange (InGame): “Railbird Exchange’s founders waited three years to be certified by the Commodity Futures Trading Commission (CFTC) as a designated contract market, allowing the startup to launch a prediction market. The announcement was made June 18, a notable nugget to a prediction market news cycle that seemingly churns everyday on what legal filings are being made by or against Kalshi as it defends its asserted CFTC-backed right to offer sports events contracts nationally. The news has since gone silent on the Railbird front. The company has so far eschewed media interviews, leaving two press releases and LinkedIn as the only source of information for so many questions, including, ‘Who’s the horse racing fan over there that came up with the name?’”
Kalshi Changed The Title Of A Market About X's CEO, And It Seems Like A Problem (Event Horizon)
Ridiculous things you can
bettrade on at prediction markets:
