Wager Your Future on the Future

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If only Nostradamus was alive to see this, he’d be set to rake it in.

Kalshi, a new online trading-platform with plans to let people wager on future events — the weather, the economy, public health — has raised $30 million and is set to launch in March.

Kalshi users will be able to bet on “yes” or “no” questions about the world to come, an idea now backed by the likes of Sequoia Capital and Chuck Schwab himself.

Inspired by a Brexit Hedge

Founded by a pair of 24-year-old MIT grads, Kalshi hopes to make it easier for individuals and businesses to hedge against risks they face from uncertain future events.

No doubt, it will also seek to capitalize on the “risk-on” zeitgeist currently seen in the public markets. Kalshi’s product mechanism will be relatively straightforward:

  • The platform will allow users to price yes-or-no contracts, which will pay out $1 if they are right and nothing if they are wrong. For example, “will the 2021 Toyko Olympics be canceled.”
  • A participant wouldn’t have to wait for final outcomes to exit trades, either, as the value of a bet would fluctuate as sentiment around the probability changes.

The Risk: These types of “binary” securities have faced scrutiny from regulators in the past. In order to reduce the risk of the platform, users will not be able to employ leverage on their trades.

the takeaway

But federal laws put a cheque on just how depressing and cynical things can get, Kalshi will not be allowed to list contracts in areas such as war, terrorism, or assassinations. Smart.