Release Me From This Demon

Kalshi argues that its sports contracts are swaps under the Commodity Futures Trading Commission’s exclusive jurisdiction, while states say the company is offering sports bets without following state rules, including in places where sports betting is illegal. The CFTC has backed Kalshi in court, but courts have split, and a petition for Supreme Court review has been filed. The dispute hinges in part on a 2010 law defining swaps to include contracts whose payouts depend on events with potential financial, economic or commercial consequences. The CFTC has separately said casino-style bets, including sports bets, are not swaps; Kalshi says its peer-to-peer, resalable contracts are different from one-to-many sportsbook wagers. The hosts saw plausible arguments on both sides and no clear forecast of the Supreme Court’s decision. If all sports bets were swaps, state-regulated sportsbooks might be violating federal law by serving retail customers outside a regulated exchange, but that remains a possible implication, not a settled result. Matt Levine gave inconsistent assessments of Kalshi’s odds, calling it both a slight favorite and a slight underdog, and noted that observers disagree.

Sports betting has become central to Kalshi despite its original vision of markets on elections, the economy and other events. The company says sports can attract customers and professional market makers, helping it build liquid markets for forecasting and hedging business risks. One host thought sports could bootstrap that business; another questioned whether election-only markets would provide enough activity to keep users engaged. Trader Jeremy Mallets said he traded sports because that was where the activity was, but was more interested in hedging company, election, data-center and credit risks. The hosts noted that sports dominate Kalshi’s business even as the company presents them as incidental to broader goals, and that the boundary between gambling and hedging remains uncertain. A Supreme Court ruling on live sports contracts could clarify that boundary; if such contracts were barred, Kalshi might eventually turn to risks such as data-center shutdowns, although sports betting is lucrative.

The hosts read proposed CFTC rules as seeking to discourage markets in which one person could determine the outcome, including mention markets and easily manipulated pitch-level bets. One speaker suspected that an informed teleprompter operator may have traded against them in a Kalshi market tied to a Trump speech about Iran, but presented this as speculation, not an established incident.

Goldman’s equities division earned more from prime-brokerage financing than from intermediation, illustrating a shift toward banks lending to hedge funds and proprietary trading firms rather than taking as much trading risk themselves. A well-managed trading firm might seek 10 times leverage, but a bank must weigh financing income and client relationships against the risk that positions fall sharply. Archegos was a prominent example of prime brokers losing heavily on declining positions. Situational Awareness was another financing-risk example, although Goldman was not one of its banks; banks reportedly collected substantial financing revenue before the firm’s “oopsie.” Banks may have stepped back from proprietary trading, but financing can still expose them to the same trades, higher in the capital structure yet vulnerable to sufficiently large losses. The hosts also noted that risk-taking has shifted toward private-credit funds, prop firms and hedge funds since the 2008 banking crisis, while cautioning that different funding models do not remove leverage risk.

Martin Shkreli’s securities-fraud conviction was separate from an antitrust case involving his pharmaceutical company. In the securities case, he raised investor money, lost it and misled investors; one speaker said he later rolled their equity into a pharmaceutical company that returned about 1,000 times their money and ultimately repaid them. The antitrust order imposed a large fine and barred Shkreli for life from the pharmaceutical industry, including prohibitions on acquiring or holding pharmaceutical stocks and on influencing or controlling a pharmaceutical company’s management or business. After he argued that the order restricted his right to tweet about pharmaceuticals, a judge limited speech a reasonable person would view as an attempt to influence management or control, and an appeals court upheld the restriction.

After leaving prison, Shkreli day-traded pharmaceutical stocks and tweeted about them. The FTC and seven or eight states sought a contempt order, alleging violations of the restrictions; the FTC vote was 1–0, with the chair recused and only one commissioner voting. The hosts disagreed about whether Shkreli’s posts could influence pharmaceutical businesses: one said people follow and heed him, while another viewed him mainly as a troll with little influence. They discussed whether criticism might affect a company’s strategy, such as prompting it to withdraw a drug, but did not establish that it had. They also disagreed over whether the stock ban prohibited shorting: one argued a short creates a negative position without holding stock, while another said borrowed shares must be acquired or held. Closing a short requires buying shares, but the hosts were unsure of the legal answer and said it would not alter the contempt case. They concluded that Shkreli should not short pharmaceutical stocks, while treating the legal question as uncertain; Bill Ackman’s Herbalife campaign was raised as an example of short activism that could influence a company.

The hosts also noted that Shkreli’s one-of-a-kind Wu-Tang Clan album was sold to a DAO, while he kept digital copies and livestreamed part of it to followers. The buyers subsequently sued him.