Kalshi回应多州诉讼：称运营模式不同于体育博彩

Multiple states, including New York, suing Kelsey, alleging the company is running an illegal gambling operation. This as New York City launches a separate investigation into the company and several competitors over advertising and marketing practices. This according to the Wall Street Journal. Kelsey writing in response, obligations under federal law conflict with state enforcement. This is the exact problem with states attempting to override federal preemption and why it exists in the first place.

Kelsey head of enforcement, Robert Denault, joins us now. For more. Robert, great to see you. Thank you so much for being here. Thanks for having me. So I wanna start just broadening out in this idea that an increasing number of states have gotten concerned about allegations of insider trading, stock or manipulation of prediction markets with maybe fake videos highlighting someone who's hot on a particular name or idea.

What's your response to the idea that there is more manipulation and fraud that happens in prediction markets than broader markets? So take your second point first and and address that that's a different platform and not something that Kashi's ever been accused of doing, but generally broader concerns about insider trading and prediction markets, I think, fit well within the regulatory framework that we operate under.

So CFTC regulation requires any registered and licensed prediction market here in The United States to have both real time surveillance and look back surveillance, where we have teams of people who monitor markets twenty four seven to look at individuals who might have insider information or the ability to manipulate the outcome and benefit from that. We've seen examples where Kelsey has caught individuals, investigated that activity, and referred it to our regulator, the CFTC, which has just started bringing formal enforcement cases.

I'd note that typically this takes a long time. Enforcement at the federal level can sometimes take years, but the CFTC is acting fast. And I think part of that is to show that they can and are the right regulator to police manipulation and insider trading. That can happen in a regulated marketplace. At the same time, a lot of people would argue this feels a lot like sports betting, say. It feels a lot like just gambling because you can say, I think so and so is gonna win and then put money on it much more simply.

It doesn't have the same kind of business use case that, say, hedging lumber futures does or trying to set certain prices for key other commodities. What's your response to that? So different business models are regulated differently even when they touch on the same topics. Right? So insurance and banks and broker dealers are regulated differently even though they all take money from customers and spend it in a certain way that a customer has a reasonable right to expect aligns with their interests.

I think sports specifically, this is about offering a model that a customer wants access to. The exchange model operates differently than a sportsbook model. A sportsbook profits every time somebody walks in and puts up money. If they lose, the sportsbook wins all that money. An exchange model is fundamentally different. What you're doing is pairing users who are setting the price amongst each other in an order book that is open, impartial, and fair and available nationwide.

And operating an exchange that fits that framework requires federal regulation. Every exchange in The United States that operates here in New York, NASDAQ, NICE, and CME in Chicago, they are all under the oversight of federal regulators. And there's a reason for that. Piecemeal regulation in different states, especially the types of regulations that oversee sports books, are more designed to regulate a casino that offers alcohol at the bar and chases customer losses.

Regulations that govern exchanges are about ensuring fair and impartial access, running markets whose price is accurately reflected to users, setting limit orders, market orders, etcetera. And so the product might touch on a similar topic, that doesn't mean that the business model should be regulated the same way. How does your surveillance teams actually catch some of this? It's a great question. We have round the clock surveillance that's operating twenty four seven at the exchange, some of which we use through vendors.

We have, several vendors who are running, twenty four seven surveillance on insider trading, market manipulation, like spoofing, front running, etcetera. And then we have a secondary team in the exchange that does look back reviews for every single market. We recently, just earlier this week or last week, announced a partnership with Nasdaq to enable their surveillance tool to also work on data, and that service is going to be offered to institutional clients and regulators that are interested in getting access to that data.

And so, essentially, when we see flags in markets, the team that we have at Kalshi works to either clear those alerts as false positives or escalate them to enforcement attorneys or investigators like myself, who pursue those leads, and we're able to do so because we know all the customers on the exchange. Can you give us a sense of what the report, like, internally has been on I'm sure you've seen it. The president's prompter who made over a $100,000 betting on specific words the president was going to say that, obviously, that individual had access to?

So I can't say much because it's still an ongoing investigation. But what I can say is that our surveillance system and our surveillance team identified anomalous trading behavior in the mentioned markets that that individual was trading in. And because they identified it, they were able to flag the behavior, conduct an investigation, and refer the evidence to our regular at the CFTC. And so I I'm aware that there is news out there that they're pursuing, a matter with him, but I can't comment any further.

But as an executive at Kelsey, do you think that this hurts the credibility of prediction markets? Because it looks like people inside, whether or not they're within the government or close to individuals in government, have an edge higher, have an edge on everyday Americans. I think this is true for every single financial market in The United States. Right? We're not the first financial market where insider trading poses a risk to the fairness of other people operating in that market.

And in fact, I would say the quick action that the CFTC has taken and that we take as an exchange, because we are also able to discipline our members directly, is different than what we've seen at sports books or even the stock exchanges, where it sometimes takes years to unspool much larger insider trading rings, price fixing scandals in certain leagues, and we've seen that take six, seven, eight years for it to come out.

What I think we see at Kashi is a strong concerted effort to police markets and refer cases quickly and then act on them as an exchange even if the regulator says we don't think that rises to the level of being something illegal. Another reason why local municipalities are getting a little concerned is because sometimes elections are not that big, not that popular. They're not that liquid. And so an individual can put a pretty big wager that they're gonna do x, y, and z, and then they're gonna go do x, y, and z, and they can profit off of it.

How do you avoid that type of behavior taking place? So there's two ways I think that people should understand how prediction markets are calibrating elections. Election markets, according to several academic studies on our on our exchange specifically, show that our election markets are accurate almost a 100% of the time about three months out from an election, and I think that's something sorely needed by most people.

We live in an age of information bias and inaccurate polling and social media misinformation,

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