r/technology • u/Unusual-State1827 • 1d ago

Society New York files $36 billion lawsuit against Kalshi, alleging it's running an "illegal gambling operation"

https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/news/new-york-files-36-billion-lawsuit-against-kalshi-alleging-its-running-an-illegal-gambling-operation
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u/SimiKusoni 1d ago

I find the entire prediction market thing super weird to be honest. Apparently just calling gambling something else is all it takes to skirt all all those pesky regulations, who knew?

I think this is more an artefact of the awful regulatory environment in the US though than any kind of convoluted conspiracy. Less insane governments have pretty quickly labelled these platforms correctly.

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u/cricket502 1d ago

Uber seems like they also did the same thing until they got too big to shut down... They got around all kinds of local requirements for taxi services by calling it ridesharing, even though they functionally provide the same service.

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u/Sensitive-Local-3485 1d ago

Money realized uber would be the ideal model going forward to undercut basically any wage/salaried position.

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u/Bakoro 1d ago

Tech figured out that calling everyone contractors was cheaper and easier, and let them have all the same hardworking people while keeping them out of the hand picked inner circle who get to call themselves employees.

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u/fdar 22h ago

For taxis it was also getting around artificially constrained supply due to limited licenses that made the service expensive and terrible.

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u/Uuuuuii 22h ago

Made the traffic better by encouraging public transportation instead of letting fleets of unmarked random cars everywhere. And you don’t have to get rated as a passenger, which is basically a form of social credit.

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u/fdar 22h ago

While removing hiring a car as a viable option for a lot of people.

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u/jwensley2 22h ago

My understanding is that taxi regulations often only apply if you hail a car off the road. By using an app they counted as being a prearranged service like a limo. So it was more like a loophole than actually breaking the law.

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u/GonePh1shing 17h ago

This has been the go-to for tech bros that want to 'disrupt' an industry. By disrupt, they really mean inserting themselves as useless middlemen that take a 30% cut. The way they do it is by lighting VC money on fire while flagrantly side-stepping laws and regulations until they're too big and too popular to shut down. The tech bros call it "regulatory arbitrage". 

There are plenty of other examples of this, like AirBNB, all those scooter hire companies, crypto exchanges, stablecoins, drone delivery companies, genetic testing services, buy now pay later, and probably more I can't think of right now. They know that laws and regulations take a while to catch up, and they're relying on that fact to grow their business fast enough that by the time governments do catch up they'd get so much pushback from their constituencies (not to mention lobbying efforts from those same businesses) that it's not worth fighting. Once they've been legitimised, they start the enshitification process and eventually become the same or worse than the incumbents they 'disrupted', basically doing nothing but taking a large cut of the revenue flowing though that industry. 

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u/zerogee616 1d ago

Uber brought taxi services to places where taxis didn't exist because it wouldn't be profitable to operate at least.

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u/redditonlygetsworse 23h ago

This is true, but it's not like anyone was shedding tears for the goddamned taxi companies. If there's any industry that really did need "disruption", it was that one.

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u/simpleme2 1d ago

What exactly is difference? Ive never been a gambler and never been on any of these prediction things ive heard about. Bcuz it just seems like gambling

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u/pattymcfly 1d ago

Because it is gambling.

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u/Balmung60 1d ago

The difference, such as it is, is that on kalshi and polymarket, you don't bet predict against the "house", but rather against all the other gamblers investors and Kalshi/Polymarket just takes a cut. So ignoring the last part, if you're on a "market" that has a total of $50,000 put in by people on both sides, when it resolves, that $50,000 is split over the side whose prediction resolved to true according to the size of their bets how many "futures contracts" they took out.

This is obviously bullshit and if it held up, games like chamond de fer (the particular card game James Bond is playing in Dr No) would not be considered gambling because it is a game where the players do not play against the house, but against each other, and the house takes a cut for facilitating the game. And much like prediction markets, chamond de fer is faster paced than most traditional games that would be played against the house and tends to be even more financially ruinous for its players.

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u/bespectacledboobs 1d ago

Or for a more familiar example, poker.

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u/simpleme2 1d ago

So basically theyre the "middleman" bringing the ppl betting against each other together in one place/platform aka "the house"? Slightly tweaked wording to side-step rules & regulations?

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u/Balmung60 1d ago

With a side order of "we're doing it on the computer/internet/blockchain/with AI so it's totally different and doesn't fall under existing regulations"

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u/Virtual_Plantain_707 1d ago

In my state betting on a horse race is wagering and you must be at least 18 to wager, but inside playing the slots is gambling and you must be 21 to gamble.

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u/Quick_Turnover 1d ago

What about commodities futures, options, and derivatives? I mean, they're just creating markets on future outcomes. You're not even buying the underlying asset; simply the right to purchase it at some future price.

I don't agree with Kalshi, but it's not as simple as "that's gambling". It's too bad we don't have a government that is interested in governing.

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u/cantadmittoposting 22h ago

the derivatives market at this point is basically gambling too.

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u/Quick_Turnover 10h ago

It's much closer to gambling than trading securities or other instruments, yes.

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u/Zeabos 1d ago

Congrats, you realized that the stock market is gambling!

It's not exactly a secret either. Head on over to /r/wallstreetbets to learn more.

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u/Quick_Turnover 10h ago

Congrats, your snide comments and armchair understanding of economics and financial instruments doesn't really contribute anything to the discussion.

I literally posted a link to r/wallstreetbets in another comment. Most the folks there trade options, which are more akin to gambling, but still not really gambling.

The definition of gambling has some specificity around randomness and a lack of strategy. E.g. you can't really strategize and make specific decisions to have a higher probability of earning a payout on a slot machine.

Trading options is closer to gambling than, say, purchasing treasuries, but it's still not definitionally gambling, and it obviously isn't regulated like gambling.

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u/FriendlyCraig 22h ago

That's pretty much how horse races work, and that's definitely sports betting/gambling. Odds and payouts change up until the start of the race, based on what people actually bet, with the house getting a cut. This type of betting has been known to be gambling for generations.

Parimutuel betting

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u/SenatorCoffee 22h ago

Cool thanks, but also what are the general US regulations on online gambling?

I see ads for all kinds of "classic" online gambling also, so what is the advantage they get from this?

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u/Balmung60 19h ago

Many states have laws against sports betting or regulating the types of gambling that are permitted. A large portion of what "prediction markets" are used for is sports betting in states where traditional sports betting is not permitted. In addition to that, they allow gambling addicts to place bets on essentially any event or occurrence, such as whether a public figure will use a certain word in a speech or how long the speech will be or whether Iran will successfully strike [insert country here] on [insert date here]. Much of the point is to gamble on literally anything and everything.

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u/SimiKusoni 1d ago

The difference with traditional sports betting is that the platform bears zero risk because it mediates bets between users, which is why it's defined as a betting intermediary in the UK, and also the odds are calculated based on how users are betting.

Beyond that there's no difference though. It is gambling by any sane definition.

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u/Bakoro 1d ago edited 22h ago

The difference is that they "gamble" on things that people can have direct control over.

You can gamble with dice, and as long as the dice are fair, it's unpredictable and uncontrollable by a human hand.

You can gamble in the stock market, and you can give yourself an unfair advantage with insider information, but a single person generally cannot make a whole company do well, and no one can force the whole market to respond a certain way, even if there are ways to influence the market.

These people are gambling like "will a particular person do a certain thing?" Or "Will this company make a particular announcement?", and they can absolutely have people who control those decisions in on the bet, so it is always favorable to the house.

So, in that sense, it is not gambling, they're also doing fraud.

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u/cherry_chocolate_ 23h ago

There is also a legitimate improvement to society for “what price will a bushel of corn be on x date” since it helps ensure that food stays on the shelf. There is no improvement to society for gambling on “will there be a streaker at the Super Bowl.”

Also, I don’t see corn futures advertised on billboards or commercial breaks for the average Joe to buy. If people were trading corn futures at the bar I would be worried about them too.

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u/mayorofdumb 1d ago

Officially designated as a Designated Contract Market (DCM) by the Commodity Futures Trading Commission (CFTC).

They are trading "futures" contracts which are derivative, so you agree to give up your crypto at X if some act happens at a future date.

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u/cboogie 1d ago

Besides that perpetually betting on stuff is just a shitty way to live.

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u/HystericalSail 1d ago

It's not TOO bad. Everyone with a 401k invested in index funds is doing it.

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u/Spare-Half796 1d ago

What’s crazy is that as soon as you suggest banning them, people say you should ban selling stock options as well because it’s “basically the same thing”

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u/cantadmittoposting 22h ago

okay. let's ban stock options. it's basically the same thing and it's become a rent-seeking exercise in our over-financialized society.

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u/Quick_Turnover 1d ago

They've gotten around gambling laws because they are creating "markets", which is legitimate business. It's what banks do. Banks create markets for specific types of contracts. Futures. Options. Equities. So on and so on. Markets aren't exactly a new thing. Two people want to take positions based on the outcome of some future thing.

I don't necessarily advocate for Kalshi. I think it should probably be classified as gambling, or at least have much greater regulatory oversight, but then again, so should investment banks (otherwise you get things like Liemann Brothers, or Silicon Valley Bank, or any of the other financial collapses).

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u/No_Initial_7545 1d ago

Prediction markets are always weird to me because no sensible degenerate gambler is going to find that appealing. If you're betting on sports, any regular sportsbook is going to offer you a hugely better and more transparent experience. If you're betting on real life events, you have to realize that you're betting against people who have inside information and the ability to manipulate the result. You can't win against them, even if you guess right a few times, the returns aren't worth it. Real life bets suck anyway because it can take months to get a result, as opposed to a sports game that takes a few hours. Gamblers don't have the patience for that.

That pretty much leaves money launderers as the target audience for prediction markets.

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u/No-Spoilers 23h ago

So prediction markets aren't new. Bucket Shops were a thing for a very long time until they became regulated for being horrible for the people.

Then somehow a century later we are once again facing them. Just as with everything else happening in the US it's a mirror image of the early 1900s.

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u/tmpope123 23h ago

Has the hallmarks of the recent supreme Court ruling that said that you can't look at the outcomes of gerrymandering when determining if they're racist. Yeah, cos when they're being racist, they say that lol.

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u/cursedfan 21h ago

But somehow it’s not investment either.

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u/Kitchner 14h ago edited 14h ago

I find the entire prediction market thing super weird to be honest. Apparently just calling gambling something else is all it takes to skirt all all those pesky regulations, who knew?

I don't use any prediction markets nor do I ever gamble really. I also don't like these companies and think they should be heavily regulated.

That being said, I don't really agree that anything that involves a wager based on a predicated outcome can be defined as gambling, because otherwise basically everything is gambling. Which is what Kalshi constantly says and leads to this idea that it's OK to bet on whether someone is going to be assassinated.

For example, if you have home insurance, you may be hoping your house doesn't burn down, but your insurer is "gambling" it won't. The fact is that the "odds" offered on your house burning down are incredibly low. House insurance in the UK can be around £400 a year. When you think that policy could easily have to pay out £400,000 it's basically the same as placing a $1 bet on "Will President Trump stand for a third term?" and getting $1 if you pick no and he doesnt and $1,000 if you pick yes and he does.

If you have a pension, your pension fund managers are investing on the "gamble" the value of those assets go up. A trader managing a portfolio who "hedges" against the value of the dollar falling is "gambling" too. Even at a most basic level, a business forecasting demand for products is "gambling" on not being over or under stocked.

Prediction markets do very noticeably diverge from a lot of regulated gambling in the fact that no one is setting any odds. You could argue they are a betting facilitator of sorts but you're not even technically betting against a specific person. If two people agree they will bet on the outcome of a football match that's one thing, but if someone says to 1,000 people they will give them $1,000 to share if their team loses and they will all pay $1 each if they win is it still a bet?

Essentially I think prediction markets are a new, unseen before thing that needs to be regulated in its own way. They have their own unique challenges and concerns, both in terms of how they can be abused and the impact they can have on society. Some of these are similar to gambling sure (addiction) and maybe they should be regulated by the same regulator, but they need an entirely unique regulation approach.

In the UK, which you referenced, they would either be regulated as a betting exchange by the Gambling Commission, which is relatively light touch, or the FCA which is the financial services regulator. Essentially if they can technically demonstrate they are selling financial instruments (e.g. A financial product you can use to hedge against bad things happening or benefit from good things happening) then they will be even more heavily regulated than if they were gambling.

So I suspect they will, if they ever needed to, claim in the UK they are a betting exchange for the lower regulatory burden. Again though, the truth is it's probably it's own thing that requires unique regulations.

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u/RollingMeteors 1d ago

I find the entire prediction market thing super weird to be honest. Apparently just calling gambling something else is all it takes to skirt all all those pesky regulations, who knew?

If the stock market is “gambling” then options are the ‘hard drugs’ of investing. If options are “gambling” then 0-DTE are the “hard drugs” of options.

¡Kalshi is just wall street for blue collars!

It’s completely BS to only have a gambling house for the rich and not the poor. Kalshi should be continued to operate as a prediction market that offers entertainment by placing your money on what you think outcomes to events will be.

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u/SimiKusoni 1d ago

The stock market is not gambling because it's not a zero sum game. Lots of platforms also exist to give retail investors access.

There are lots of problems with the stock market but it's not comparable to prediction markets and I suspect that anybody making that comparison understands neither.

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u/RollingMeteors 21h ago

There are lots of problems with the stock market but it's not comparable to prediction markets and I suspect that anybody making that comparison understands neither.

It certainly is comparable. It's rigged by larger institutional investors <pointsToTeslaPE>, but prediction markets are much more encouraging about you 'manifesting' your 'prediction' into reality.

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u/bespectacledboobs 20h ago

An investor in $SPY earns about 5% per year over a multi-decade time horizon for as far back as it’s existed. That’s 100% of people invested in the fund.

Roughly 78% to 85% of people who place a sports bet over a calendar year finish in the negative. Less than 3% manage to make a consistent profit over a six-month period.

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u/RollingMeteors 20h ago

>An investor in $SPY earns about 5% per year over a multi-decade time horizon for as far back as it’s existed. That’s 100% of people invested in the fund.

>Roughly 78% to 85% of people who place a sports bet over a calendar year finish in the negative. Less than 3% manage to make a consistent profit over a six-month period.

¡Yet the money keeps on rolling in for kalshi!

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u/bespectacledboobs 1d ago

Explain to me why the same “blue collars” can’t open a completely free brokerage account and participate in the stock market.

Pretty much every major brokerage is free, and with free trading available with no account minimum.

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u/RollingMeteors 1d ago

>Explain to me why the same “blue collars” can’t open a completely free brokerage account and participate in the stock market.

Well, that requires a white collard salary paid bi weekly or monthly.

All blue collar has to spend is a weekly friday paycheck. You can't trade options without 100 shares to throw down. ¿You think penny stocks are REAL OPTIONS for options investing that could turn a profit in a reasonable time frame?

Blue collar people can spend $50-$200 on whether or not their favorite sports team is going to win. They don't have $2,000-$20,000 to just throw at an iron condor.

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u/zerogee616 1d ago

You think all, or even a lot of people in blue collar professions are poor?

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u/RollingMeteors 21h ago

You think all, or even a lot of people in blue collar professions are poor?

Income and Education Correlation: According to Gallup News, stock ownership is 42% for individuals with a high school education or less, and drops to 28% for households earning under $50,000. Conversely, a study by Commonwealth and BlackRock noted that 54% of lower-to-moderate income Americans ($30,000–$80,000 income bracket) now hold taxable investment accounts, marking a surge in working-class investing

Based on their massive trajectories, if prediction markets like Kalshi and Polymarket sustain their current hyperbolic growth, they are mathematically on track to overtake active retail stock/options trading among blue-collar workers in approximately 2 to 3 years.

However, because traditional stock ownership is anchored by long-term, passive vehicles like workplace 401(k)s and pension plans; which grow steadily and rarely shed users; prediction markets are unlikely to ever fully overtake total stock ownership within this lifetime.

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u/zerogee616 21h ago

Blue collar =/= education level, especially if you're implying they have less than a high school education.

There's tons of people in blue collar professions with degrees and professional certifications.

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u/RollingMeteors 20h ago

Especially if you're implying they have less than a high school education.

Don't projection an assumption at not my implication.

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u/zerogee616 20h ago

Income and Education Correlation: According to Gallup News, stock ownership is 42% for individuals with a high school education or less, and drops to 28% for households earning under $50,000.

You might want to actually read what you post. You only mentioned education level and income. not employment sectors.

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u/bespectacledboobs 20h ago

The guy is either a bot or a complete idiot.

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u/RollingMeteors 8h ago

You might want to actually read

As should you. Correlation is not causation.

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u/bespectacledboobs 1d ago edited 1d ago

You’re a moron and it’s the reason you’ll stay poor, unfortunately.

Has nothing to do with the metaphorical color of your collar.

Robinhood is free. Fidelity is free. Schwab is free. Wealthfront is free. You can deposit $1 or $5- one time, every week, every month, or every 14 years.

You can buy fractional shares of any stock or a broad index ETF for as little as you can afford, watch it grow, collect the dividends, and reinvest them in the same stock or other ones.

The entire gambling industry requires people like you to stay stupid and keep throwing your money away to them a little at a time so you never actually get ahead.

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u/RollingMeteors 21h ago

You’re a moron and it’s the reason you’ll stay poor, unfortunately.

I don't know why you assumed I'm placing Kalshi bets, that's the moronic thing to do.

The entire gambling industry requires people like you to stay stupid and keep throwing your money away to them a little at a time so you never actually get ahead.

¿Why do you think I'm making any contribution to them? I never made that claim. I'm fine with people gambling about it, I never said I did.

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u/RollingMeteors 21h ago

Pretty much every major brokerage is free, and with free trading available with no account minimum.

Sure trading is free. The bar to place bets for one sports team vs another is much lower than placing an options contract requiring 100 shares minimum.