Bits + Bips: Is Kalshi Headed to the Supreme Court Next?

The Ninth Circuit's unanimous ruling allows Nevada to enforce its gambling laws against Kalshi's sports event contracts, categorizing these contracts as a form of gambling outside the jurisdiction of the CFTC. This decision stands in stark contrast to a prior ruling from the Third Circuit, which had determined that Kalshi operates under CFTC regulation.

Kalshi expressed disappointment with the Ninth Circuit's decision, indicating that they did not anticipate this outcome. The company emphasized that prediction markets are fundamentally different from traditional sportsbooks, functioning more like a commodity exchange that fosters price discovery and transparency.

Chris highlighted the CFTC's belief in its federal preemption over derivatives related to commodities, asserting that prediction markets fall under its jurisdiction. He noted that this regulatory framework allows businesses across the U.S. to hedge risks effectively, which is advantageous for economic growth and innovation, particularly under Chairman Selig's leadership.

Despite the legal challenges, Kalshi has seen significant growth, expanding from approximately 4,000 markets to 10,000 markets within six to seven months. However, Zack Fulton contended that a derivative contract structured as a swap retains its classification as a swap, regardless of the underlying subject matter.

The CEO of the Gaming Association characterized the Ninth Circuit ruling as a major victory for consumer protections and taxpayers, framing it as a substantial setback for Kalshi. Chris clarified that he does not represent the CFTC and was speculating on their potential perspectives regarding the ruling.

A calibration study involving 2.2 million data points indicated that Cal State's model accurately predicted actual events, demonstrating a perfect prediction line one week out, even with limited trading volumes of $50,000 to $60,000. This suggests that individual traders can effectively hedge their risks in a well-priced market with a few hundred thousand dollars traded.

In the first half of the year, $540 million of concentrated liquidity remained idle in a given week, accounting for about 30% of the total value locked in DeFi. Oneinch Aqua offers liquidity providers the ability to back multiple positions with the same token balance without the need to split their tokens, although it is important to note that providing liquidity involves inherent risks and that fees are not guaranteed.