Kalshi, a prediction market startup, is using its federal financial license to offer sports betting nationwide, even in states where it’s not legal. The move has earned them cease-and-desist letters from state gaming regulators, but CEO Tarek Mansour isn’t backing down:
We can go one by one for every financial market and it would fall under the definition of gambling. So what’s the difference?
It’s a question that cuts to the heart of modern finance. The founders argue that Wall Street blurred the line between investing and gambling long ago, and casting Kalshi as the latter is inconsistent at best. They have a point—if you can bet on oil futures, Nvidia’s stock price, or interest rate movements, why is wagering on NFL touchdowns more objectionable?
Benefiting from the Trump administration’s hands-off regulatory approach, with the CFTC dropping its legal challenge to their election contracts the odds might be in their favour. Even better, a Kalshi board member is awaiting confirmation to lead the very agency that was previously their biggest antagonist.
The technical distinction matters: Kalshi operates as an exchange between traders rather than a house taking bets against customers. But functionally, with 79% of their recent trading volume being sports-related, they’re forcing us to confront an uncomfortable reality about risk, speculation, and what we choose to call “investing.”
Whether you call it innovation or regulatory arbitrage, Kalshi is exposing the arbitrary nature of the lines we’ve drawn around acceptable financial speculation.
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(17/06/205) Update: Matt Levine - one of the Finance columnist I enjoy reading most - just published a long piece “It’s Not Gambling, It’s Predicting” in his newsletter on exactly this issue:
Kalshi offers a prediction market where you can bet on sports. No! Sorry! Wrong! It offers a prediction market where you can predict which team will win a sports game, and if you predict correctly you make money, and if you predict incorrectly you lose money. Not “bet on sports.” “Predict sports outcomes for money.” Completely different.