Joseph Grundfest (Stanford Law School) has posted A Kalshi Contract on the Legality of Kalshi Contracts on SSRN. Here is the abstract:
Kalshi is currently embroiled in “a ferocious legal battle over whether states or federal agencies should police prediction markets.” This note proposes that Kalshi list a “Kalshi Sports Legality” contract indexed to the outcome of United States Supreme Court litigation addressing whether Kalshi’s sports-indexed contracts are federally regulated in a manner that preempts state law. Kalshi has previously listed at least 16 contracts indexed to Supreme Court determinations. No rule or regulation prevents Kalshi from listing the proposed contract. The proposed contract would provide a market estimate of the probability that the Supreme Court rules that Kalshi’s sports-indexed contracts are legal. The contract would thereby create valuable hedging opportunities for Kalshi investors. It would also create hedging value for Kalshi customers who might lose access to Kalshi markets. These hedging rationales are more substantial than rationales Kalshi presents to support other Kalshi contracts, such as contracts indexed to parlays or to specific in-game events, such as whether the first play in a football game leads to a touchdown.
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