The big prediction-market news this quarter was money. Kalshi, the largest US prediction exchange, raised $1B at a $22B valuation, which doubled what it was worth five months earlier. That is the story everyone told, and it is a good one. It is not the one I want to tell, because while I was reading about the raise I kept getting snagged on something smaller and much stranger that didn't fit.
Here it is. A hedge fund in Houston used one of these markets to hedge the price of a California carbon auction. Not a bet on an election, not a sports parlay, an actual business hedging an actual cost, the kind of trade you would expect on a commodities exchange. It went through a broker, it was cleared by a futures commission merchant, the regulated middleman that stands behind trades on real derivatives exchanges, and the trading firm Jump took the other side. If that sounds like the plumbing of grown-up finance rather than online betting, hold onto that, because it is the whole point.
“The winner isn't the sharpest forecaster. It's whoever owns settlement.”
The current issue is complimentary.
Previous issues remain with members.