This is branded as if it's some new type of stock exchange when in practice it's just another betting platform, no? Other than fancy UI, how is this any different in practice than oddschecker.com or betway.com (I'm not familiar with those sites, just a quick search)?
There's a fundamental difference between gambling and financial trading.
In gaming, you are trading on risks that are artificial, eg. betting on a dice roll or on a roulette spin. Those risks do not need to exist, and they risk solely for the purpose of betting.
In the derivatives markets, the risks you're trading on are not artificial, they're already existant. The purpose of markets is to transfer those risks from people that bear them and need to offload them (hedgers) to people that have appetite for them (speculators).
At the time, there was a lot of debate on whether grain futures were gambling. The final decision by justing Wendell was not because (paraphrasing) "sure a lot of people will speculate, but saying that these markets exist purely for speculation is off - there's a subset of participants that need to hedge risk, and that makes these markets crucial" (note: intent to deliver was the early form of hedging).
The original response:
"[T]he plaintiffs chamber of commerce is, in the first place, a great market, where … is transacted a large part of the grain and provision business of the world. Of course, in a modern market, contracts are not confined to sales for immediate delivery. People will endeavor to forecast the future, and to make agreements according to their prophecy. Speculation of this kind by competent men is the self-adjustment of society to the probable .... It is true that the success of the strong induces imitation by the weak, and that incompetent persons bring themselves to ruin by undertaking to speculate in their turn. But legislatures and courts generally have recognized that the natural evolutions of a complex society are to be touched only with a very cautious hand. .... It seems to us an extraordinary and unlikely proposition that the dealings which give its character to the great market for future sales in this country are to be regarded as mere wagers or as ‘pretended’ buying or selling, without any intention of receiving and paying for the property bought, or of delivering the property sold, within the meaning of the Illinois act"
There is no real market participant who could benefit from hedging in sports betting. Only sports betting operators themselves, and the teams (who are legally forbidden from participating in betting).
But in a commodity market there are real participants whose primary business model is production, being able to hedge against future price swings provides real value to these businesses.
> There is no real market participant who could benefit from hedging in sports betting.
The entire local economy surrounding sports venues. For a small bar or restaurant near a stadium, the difference between a good season and a bad season can be huge. This is magnified to the nth degree in places like Green Bay, WI where renting out one's home for a single at home post-season game can easily net a family several month's worth of mortgage payments.
And all advertisers who have contracts with the teams, all shops selling their merchandise, and they'd all have a large interest in hedging their bets.
Why is this different than the massive sports-merchandising part of a teams business, where they sell more stuff depending on whether they win or lose? I imagine they'd want to bet.. err i mean hedge to provide real value to their business.
(despite the snark, I'm also curious how the situation is different)
> The purpose of markets is to transfer those risks from people that bear them and need to offload them (hedgers) to people that have appetite for them (speculators).
Considering how Capitalist governments behave in financial crashes, you mean:
"offload them to people who have appetite for slanted bets, or in case of significant losses, to the public who has no appetite for it."
its binary options, which have long and spotty history. The payout does not cover owernship of an asset and typically the payouts are adjusted to be overall quite disadvantageous for retail bettors. I would stay away, it doesn't matter how they try to rebrand it. do your own research on binary options as they say.
Binary options are only thought to be bad because they traditionally have been run by scammers like bucket shops. The binary part is a distraction - it's just because they were easier to describe to the victims.
As a type of investment though, there's nothing wrong with it - if risk-mitigation is what you need.
If the binary nature was a problem they could easily structure these to be non-binary, such as bet on a game and don't return 1/0 but the actual game score 21/15.
An important distinction is that if you are an asset manager (i.e. gambler with other people's money), you aren't allowed on traditional betting platforms--only SEC and CFTC approved ones. Now you can bet on political outcomes with other people's money.
Asset managers aren't restricted to trading things on exchanges unless their docs explicitly say so. Many hedge funds place bets directly with investment banks, through exchanges in the US, overseas exchanges etc.
Hedge Funds were more or less created for the express purpose of getting around restrictions that traditional asset management structures place on fund usage. But yes, Hedge Funds, Private Equity, Venture Capital and Family Offices can basically do whatever they want within the confines of their investor agreements.
"traditional" = funds holding publicly listed stocks and bonds? Basically, mutual funds? If that's it, there isn't a "traditional" asset manager that is going to Kalshi to put bets on events.
Note in the post - the buyers who head to goldman to get exposure through a basket of positions are not "traditional" asset managers.
Put another way - the relevant asset managers were not restricted.
This is branded as if it's some new type of stock exchange when in practice it's just another betting platform, no? Other than fancy UI, how is this any different in practice than oddschecker.com or betway.com (I'm not familiar with those sites, just a quick search)?
>inb4 all stock exchanges are betting platforms