9th Circuit sides with states in Kalshi gambling fight
azmirror.com
azmirror.com
It doesn't have to be complicated, mind you, but right now the way the law is written is basically:
1. Transmitting sports betting info between states is a federal crime unless it's legal in both states (18 U.S.C. § 1084(a))
2. The CEA regulations ban contracts that are illegal under state law (17 CFR 40.11)
3. Other forms of gambling/betting/contracts that are not sports are generally a-ok.
4. This is not a case of first impression, it's just getting relitigated because Kalshi doesn't want to follow the actual law. This has actually been pretty settled law for a long time, with new flareups maybe once a decade. Kalshi is just hoping to be treated like Uber was.
The third circuit's decision is pretty clearly "out there" in terms of existing caselaw.
However, this will end up at SCOTUS, and everything until then just doesn't matter. That will be a coin flip even though it shouldn't be
This is not a bad strategy for a company in our asymmetric regulatory environment. Fortunes were made in crypto on exactly this one-way bet.
Go on breaking the law until you get a favorable judge/Congress. Nobody is going to jail (we don't really do that anymore), you might pay a fine. Every once in a while you'll have change the app a little to sort of comply with a judicial order. There's practically no downside to this strategy.
Binance, FTX, BitMex, Silk Road founders all went to jail - it’s a huge coin flip.
BitMex didn't go to jail, they all got probation/ankle tag, for not running a clean money org (allegedly no KYC, registering US accounts from offshore, etc.). CZ got caught in the US anti-China panic that also saw the TikTok ban pass Congress with nearly 80(!) votes in the Senate. Silk Road: drug trafficking.
FTX is the closest analog, but by all accounts they did not run a clean operation. What I have read of their operation would have been grounds for charging even if they were trading legal securities.
Seems the through line is if your main business is illegal, you need to run it as if it were going to be legalized tomorrow.
And so the circuit courts coming to very different conclusions from the 9th circuit represents the inherent political corruption involved in the court system.
Circuit splits get resolved at the Supreme Court and I would make a prediction that it isnt a coin flip, probably more of a safe bet.
e.g. make as much money as possible while you have a favorable judge/Congress/President b/c you assume the ability to make money will go away once the next regime is in power.
Existing legislation favors the haves, not the could-haves. And many people go to jail every year for breaking rules that big banks get a slap on the wrist for. Money laundering, terror financing, fraud,... Name a major bank and I'll list you some crimes no one ever spent a day in prison for. But that's fine because they have a license.
When I say "clever" I don't mean"good" I mean "crafty". You acknowledge someone has game without condoning their behavior or extolling it as virtuous.
Congress didn't eliminate the federal prohibition on sports gambling when they created the CFTC. Ergo, it is clear that Congress did not intend for sports gambling transactions to be within the jurisdiction of the CFTC.
The only clever thing they did was putting members of the Trump family on their board.
Correction: because the federal government doesn't want Kalshi to follow the actual law. CFTC ordered Kalshi to continue operating in NY when NY tried to crack down on it. Donald Trump Jr. is a paid advisor for Kalshi. The US Government's conservative leaders are ignoring states' rights in order to personally profit, using Kalshi as a tool.
> this will end up at SCOTUS, and everything until then just doesn't matter
Unless Congress passes a law so SCOTUS doesn't have to. We can't keep pretending it's normal for SCOTUS to decide everything about our society. If Congress won't do its job, why do we have them?
Then they thought it was a good idea to have two houses with different criteria, giving two chances to quash legislation. Plus the veto. Plus the Supreme Court (whose job they left almost completely undefined, so they made up a job description).
So we have them because we can't get rid of them. But they are practically useless. They can usually manage the bare minimum of reauthorizing the thing they said last year. Then they can rename a few post offices, have some grandstanding hearings, and then go home to campaign for reelection.
That’s not to say states have lost power, their reach has also grown exponentially far outpacing even the federal in terms of number of workers and written law.
It’s mostly just Congress has become self satisfied on being negotiators for spending the most money in their own states, while ignoring the minimization of their role in the greater power dynamic.
Everyone makes a big deal about president as the signal but IMO if you take a 10,000-foot view of US history Congress neutering itself is the real long term narrative. Including most major current populist issues like immigration, debt, war, abortion, etc. They are hands off unless it involves new spending.
It's because the US is a presidential republic with no concept of a non-confidence vote. This makes the sitting head of the party ~impossible to remove, and when government fails to reach consensus, instead of... Having an election, and let the voters decide, power de-facto ends up in the hands of the executive.
But why are there only two parties?
The rest of the Anglosphere–Australia, Canada, Ireland, New Zealand, the UK–have multiparty systems–some are more multiparty than others, but none of them have the hard two-party system that the US has, in which third parties have a very marginal role (not completely marginal – e.g. in a close election, the decisions of New York's Conservative and Working Families parties can make a real difference to the outcome – but certainly at a national level third parties have no real power in the US.)
First-past-the-post is a popular explanation, but it can't by itself explain it, since the UK and Canada use it, yet lack a US-style hard two party system (and with the rise of the Reform party in the UK, the British system is becoming less two-party than it has been in a long time.)
Just to show up and get 1% of the vote, you would need a grassroots national movement to elect someone who was wildly popular, who could build a 50-state network of volunteers (including legal, political, financial, community organizing, etc), sponsored by someone with extremely deep pockets that doesn't want anything from established political figures. And you'd still lose.
We have representatives already. The problem is we never hold their feet to the fire. We keep voting for the same useless bastards, and we don't vote them out when they do nothing. Half the country doesn't vote. That's our own responsibility we're shirking. Rather than get a new party, we need to get off our collective asses, and use the existing power we have to force the parties to do their jobs.
Point (4) will likely strike many Americans as dubious, but the US doesn't have anything comparable to Québec – there is presently no US state where English isn't the majority language; nor anything comparable to Scotland or Northern Ireland (no state where a significant percentage of its population identify with a competing national identity). So, no matter how much (undeniable) diversity the US has, in the sense that counts for this purpose, it doesn't.
Hence: while abolishing first-past-the-post would no doubt do a lot to break the US hard two-party system, it could also be broken while retaining it if something happened to (2) or (3) or (4) instead.
But, in US politics, changing (2) or (3) is even more politically fringe than changing (1) is. Maybe that might change at some point though, who knows what the future holds.
And (4) will likely eventually cease to be true, but only in the long-run in which we are all already long-dead.
Changing that will require a radical reconsideration of democracy, like replacing FPtP with... something.
Scotland, Wales and Northern Ireland have nationalist movements that want out of the UK-state independence movements exist in the contemporary US too, but they are very fringe
But even England has not just Labor and the Tories, but also the Lib Dems, Reform, the Greens, Restore
So England proves you can have multiple parties with real power, with FPtP, even in the absence of regional-nationalist movements
If I am not mistaken all disruptions to fpp two party systems eventually settle back into them, maybe not the same parties but two nonetheless.
That's overstating it, but it's why the largest group always can form a government. They go to the same aligned parties looking for a majority.
Then when the executive takes more power they have little ability to opposite it. Especially since there is a significant Congressional delegation who believes in the Unitary Executive theory, who will interfere with attempts to rein it in.
I believe it is entirely due to the Founders being intent on pitting Congress against itself, while the President is a single person. They initially tried a half-assed version of that by making the runner up Vice President, but that was quickly seen to be useless.
There is a lot more to be said over a quarter millennium, but that is the fundamental design flaw.
Congress largely just generates new federal agencies, where there is now about 400+, and then mixing responsibilities for running them. Combine that the executive order mandate scheme and appointment/independence thing being vaguely defined. So it basically continuously empowers the executive each generation while Congress is scared to respond.
Which is other half in how the two parties perfected building loyalty schemes, where the president or leading opposition candidate can kill off a congressional candidate with their influence and easily stack congress with their people.
I’d personally ban a sitting president or ex president from getting involved in Congress or senate run. Also maybe a similar scheme for the Supreme Court.
It's not just about executive power. In recent times, Congress failed to adjust the written law when societal consensus shifted, and the discrepancy was resolved the courts, and ultimately the Supreme Court. I don't think Congress would pass something like the Civil Rights Act under the current circumstances. This isn't good for a democracy because the political debate that is part of the regular legislative process is lost.
That is also the core problem for reestablishing trust with the rest of the world: Even if a Democrat or just a sane Republican wins in 28 and tries to revert many of the destructive policies the current administration enacted, there is now solid evidence the much-hailed system of checks and balances doesn’t work as advertised. And that means there is not really a legitimate argument to trust the US as much as countries and businesses did, which calls a lot of things into question—the bond market, the petrodollar, investments in the USA, dependency on American services…
The US Founders also did not have political parties, and the tribal/clan thinking that goes along with them.
Not that the other house isn't also tilted that way, but it seems to be that they, and the appointments approved by them, are functioning exactly as was intended (as shown by the supreme court suddenly caring about executive overreach when it came to money). Who knows whether they would care about the social issues affecting the poors nowadays, but they certainly didn't care to let the people be in charge without a veto from that opulent minority.
As for me, i've never pretended it's either normal or desired for the courts to make policy, whether congress is dysfunctional or not. Among other things. My comment was basically pointing out that the current supreme court seems perfectly willing to throw out decades of settled law on an ideological whim, and actually, for that matter, happily interpret very clear congressional statutes in very odd ways.
So your comment there is mistargeted, at least as applied to me.
Fortunately or unfortunately, the Supreme Court has always been willing to do that. This court has been overruling decisions of the Warren Court, just as the Warren Court overruled decisions from the Lochner Era.
> decades of settled law on an ideological whim, and actually, for that matter, happily interpret very clear congressional statutes in very odd ways
This court is not like the previos one. Things are not the same
That's not what this is. As the 9th Circuit points out, states already have quite extensive laws about gambling. We don't need Congress to step in to either reinforce or displace them. The courts are doing their job by ruling on existing laws.
Congress doesn't need to pass a new law. Federal gambling laws were not removed from the books when Congress created the CFTC because they did not intend for gambling transactions to be regulated by the CFTC. (Federal gambling laws were not struck down until 2018, by SCOTUS, on First Amendment grounds. Yes, the decision was written by one of the justices known to have accepted gifts from companies doing business before the Court.)
we're essentially one year of three into one of the least effective lame duck legislative bodies we'll ever see
I call $50 on Tails!
unfortunately - as you pointed out the outcome of the cases being a coin flip at the supreme court is the tragedy in all of this.
Incredible that it's taken this long to arrive at the obvious.
Gambling takes advantage of the poor, under-educated, and addictive personalities and puts them into financial distress. This places burden on families, the state, and local municipalities. It creates strain on the workforce and deflects legitimate economic activity that would otherwise strengthen the economy.
We're a free society. I'm fine with gambling from a personal liberty perspective, but the companies that facilitate and profit need to pay 40-50% of their gross revenue to the government. That's comparable to tobacco.
Companies also need to be restricted in how they are able to advertise their vices. Never to children, and never targeted to at-risk personality types.
They also need to be tightly regulated and kept from using dark patterns and addictive gotcha mechanics to cause even greater harm to those most at risk.
taxing a vice is worth it on paper, but the second-order effects (nonstop alcohol ads, pervasive gambling app dark patterns) aren't worth it imo
Those second-order effects are easy to mitigate with sensible public policy. And it's not like we have to invent the solution from scratch — we've done it before, very effectively.
Seems like they can, or you mean they can't 'make laws' that you personally care about?
100 years ago, the 69th congress passed over 1500 laws, plus hundreds of continuing resolutions, treaties, etc https://www.loc.gov/collections/united-states-statutes-at-la...
Regrettably, sensible public policy seems to be in remarkably short supply these days.
Today at the gas station on the outside of the pump and the store door.
I'll bet you didn't see any cartoon camels or doctors recomending a brand though, because even where tobacco ads are legal, many tobacco ads are no longer legal.
Whether you see ads, and what kind of ads you see is highly regulated. That's the whole point,
We clearly don't live in the same states.
I live in a different country since we don't have states here.
biological organisms develop addiction much faster than political processes
legality itself never stopped a vice from being indulged :) it's the cost / benefit that brings back repeat customers and encourages addictive behaviors
It will either push them out of business, or they'll find a way to screw the player to increase margin through even more deceptive products.
If the legal entity can't operate because of a tax on revenue than illegal offshore entities will gladly take their place and do.
The only solution really is sharia law, a complete ban and harsh punsihments for all operators and customers. I say this ironically but it actually is really the only solution, and even this doesnt work entirely.
In all reality, the NASDAQ does the entire yearly turnover Klashi and Polymarket combined in a few minutes. It hasnt become as big of a problem as people make it out, but its still a problem.
But there's no going back to the status quo with 1990s methods of enforcement. Everyone knows how to use crypto and VPNs, you'd just be pushing people into shady offshore.
Not everyone who has placed a bet on Kalshi or Polymarket necessarily knows how to use these tools.
> you'd just be pushing people into shady offshore.
Hurdles help. Not everyone will know how to jump every hurdle. Not everyone will be willing to put forth the effort. Will some people? Sure. But hurdles do cut down on the overall participation.
Few here would be a good politician or law maker.
That being said I still don’t think taxing on revenue is a good idea.
Gambling in contrast is strictly zero sum at best and always negative sum in reality. A group of people puts in 1x capital, the house takes a cut of that, and then the <1x gets unevenly redistributed and that's it. Nothing is generated, the collective set of people is strictly worse off after the gamble, with a few making gains off the backs of loss distributed amongst everyone else. All while hacking dopamine reward centers that didn't evolve for that.
It appears to be the case that we can't perfectly stop 100% of all IRL gambling without a cost that exceeds the benefit. That's life. But that doesn't mean we shouldn't be picking as much low hanging fruit as possible, same as with other negative sum brain hacks.
The stock market was so gambling that we had 'bucket shops' where people would just buy and sell fake stocks that tracked real stock prices.
Now we have public companies directly selling shares with no voting rights and no plans to ever pay dividends, which is the same thing.
No, that is not a strict definition of gambling, that is your own loose, personal and casual definition. The strict definition of the gambling in question under Arizona law (the subject of this article) is I believe partly under 13-3301 [0] and has a number of criteria that clearly differentiate it from investment (whether it be stock, loan by a bank or any other entity/person, or whatever else). Other polities will have their own flavors, but all of them are aimed at a net negative, destructive social activity. That's the whole point of regulating it, it's not some metaphysical philosophy thing about life having uncertainty it's about long experienced concrete harm. Trying to argue that buying shares in a broad index fund is a "wager that a meteor will not hit the Earth" is uninteresting.
>Just because it (often) is positive sum doesn't mean it isn't an unknown that people are betting money on.
It does actually! Positive sum changes everything in terms of collective incentives, strategies available and how investors can hedge risk. You may not choose to make use of all the tools available, but that doesn't make investment the equivalent of gambling. Part of the whole point of markets is to manage changing risk and information discovery (including dead ends) such that we still continue to grow overall.
----
Wait, no I didn't. That's absurd. Tylenol can cause long term health issues if used in excess (or death, for extreme overdoses), but most illegal drugs are illegal because they can cause immediate death even at normal usage amounts.
Huh. The amount used on the street is not a "normal usage amount". Most fentanyl deaths are due to the fact that the medical usage amount is not something you can generally measure with your dealer's scale or the scale you bought at the local head shop (we, as paramedics, would typically administer 50-100 micrograms, and for anything more than 300 we needed to consult with a physician).
In those use cases, properly dosed, fentanyl is an exceptional, powerful, and short-lived, analgesic.
When people die from fentanyl ODs they're taking dozens, hundreds, or more, than the "normal usage amounts".
If cocaine was really a problem then C-suites and politicians would be regularly dieing.
No drug I'm aware of causes immediate death in normal usage, except perhaps those used for lethal injection. Would you like to elaborate on that? Tylenol, on the other hand, causes an unpreventable (no antidote) slow drawn out death over about a week, where your body will be slowly decaying and you have time to say goodbye to all your loved ones, if you take a few times the normal dose by mistake
A drug is dangerous when it is toxic at an easily obtainable dose AND there is a clear incentive for people to consume it in that dose, such as addiction and tolerance. While acetaminophen is unusually toxic at doses only slightly higher than regular treatment doses, there is actually very little that compels people to use those doses, and acetaminophen toxicity is not an epidemic-level health problem the way many other drugs have become.
Doubling your meds on a bad pain day can put you way beyond the safe limits. People think it’s safe because basically every other OTC has a huge therapeutic band, and double dosing is not recommended but not really dangerous.
CDC estimates it at 56,000 ER visits a year, 26,000 hospitalizations, 458 deaths, about a hundred unintentional deaths per year. As a point of reference, it’s about 3 accidental overdose deaths per child that dies from being locked in a hot car.
Either way, we don't have to assume, we can directly check the numbers. Per another commenter, Tylenol kills about 458 people in the USA every year. In contrast, death from overdose on illegal stimulants was estimated at ~33.000 people in the USA.
Now, is it fair to say that Tylenol is more dangerous than marijuana? Of course. But to say it's more dangerous than most illegal drugs? Obviously not.
I have a very difficult time taking an argument plausibly that compares Tylenol (acetaminophen, an antipyretic analgesic) to illegal stimulant use (immediately following a discussion on fentanyl, which is an opioid - about as close to opposite a stimulant as possible) - i.e. generally amphetamines.
Or comparing Tylenol to marijuana in a very apples and oranges comparison - Tylenol's dangers come from very direct hepatotoxicity (i.e. liver damage), versus marijuana's most real risks coming from impairment and intoxication (driving, judgment, panic) and their effects than toxicity of the drug itself.
It's all mixing and matching in a way that doesn't make for a sensical argument.
Of course, most illegal drugs, even very light ones like marijuana, have other risks, like DUI or the general ills of addiction (money issues, increased criminality from the desperation of getting another hit, etc). But even ignoring those, I thought the death numbers make it very clear that Tylenol is nowhere near "less dangerous than most illegal drugs".
I know that a lot of illegal drug overdoses are caused by people who thought they were taking a normal dose but got the wrong substance, wrong amount or wrong concentration from their dealer - who in many cases also didn't know about the discrepancy because of unreliable supply chains and difficulty of testing, both caused by illegality.
Unlike sports gambling or casinos, the stock market actually does have some legitimate utility, as compared to being (at best) pure entertainment.
Theoretically, more gamblers should mean better price discovery because the payouts for correctly taking the opposing side of the trade are higher.
The market solution would be that the gambling will eventually solve itself. They’ll either learn enough to be trading on knowledge rather than vibes, fueling price discovery, or they’ll exit the market when they’ve lost too much or everything.
My sticking point is that a lot of brokers offer leverage to people they really shouldn’t. I could have sworn you had to be a qualified investor to get leverage, but if that isn’t law it should be. Show the brokerage your certification, or a pile of cash large enough to convince them you can afford to lose the whole thing.
My theory is mostly that "gambling" seems like it inherently means "buying stocks based on something other than their concrete value". More gambling means stocks drift further from their "true value", which means a higher payout for correcting them back to what their price should actually be.
The whole thing does get very fuzzy because of the "market can stay irrational longer than you can stay solvent" aspect. It's not enough to know what the correct price is, you have to know when other people will realize that as well, or else convince people that your price is "correct".
That said, I recognize the broader point. Betting on everything, especially things that betters can directly influence is incredibly dangerous.
https://www.agweb.com/news/business/rain-robbers-how-four-fa...
The difficulty with taxing prediction markets is that encouraging gambling on some events incentivizes gamblers to try to influence those events in a way contrary to how people would want to influence them in the absence of gambling, which typically means gamblers are incentivized to influence events in a way that will increase societal harms. For some events, resolving one way or the other is inconsequential, but this is not true for many of the events I see people gambling on in prediction markets.
gacha mechanics
I view favored house-odds, on arbitrary games or not, as unethical and predatory. This is the classic casino slot machine and related. However, Poker doesn't have house odds, it is a fair game.
Move one level up: prediction markets don't have house-odds if implemented plainly. On non-game events, they also have a positive externality, which already contradicts your claim: prediction markets predict quite well.
Yet another level up: investing in the stock market. The same authentic gambler who burns money into a slot machine can play the stock market to similarly disastrous ends. But if you define this as gambling and want to outlaw or limit it to 'professionals' then you bar people from capital markets which is absurd.
This is often called "insider trading" instead of "house odds", but it is ultimately the same thing, the same moral hazard. And note that this is illegal, both in the stock market and in commodities trading - though enforcement varies, and is not very easy anyway.
I'd also note that there are significant problems with random reward games / gambling even when there is no house advantage. Gambling addiction is a real problem that destroys some people's lives, just like alcoholism. And people can become addicted and lose their houses by playing poker just as much as they can by betting on roulette.
These laws have profound effects and it takes people time to learn about what they pertain to, especially new technology or new ways of using it. It's good to have periods of feedback between the public, the courts, the legislature and the executive branch. The same things that slow down what we most want to happen quickly also slow down the things we desperately want to avoid.
"If only the law moved as quickly as an individual" is great until you get a guy like Trump in power.
The legal system tells itself this noble story of measured action without realizing it actually became the bad guy many decades ago.
My brief little opinion here is half informed from dating a lawyer for a few years.
What does 9th circuit or some circuit court mean?
It some name of a specific court, just not the place name?
Or is it special kind of court and “9” is some sort of level? Importance or hierarchy related? Escalation level? (Assuming your SC eventually is also at the top like in India)
Other appeals courts have jurisdiction over other areas of the country - and there is no question of level between them, as they have completely separate jurisdictions.
It's important also that every circuit court is beholden to its own precedent, and every court below them is beholden to the precedent set by their appeals court. But courts in other areas of the country are not - it's perfectly legal (though not extremely common) for one appeals court to decide one way and another to decide a different way on the same matter of Federal law. Unless the SC intervenes, the appeals court of your particular jurisdiction is the ultimate authority on how that federal law is to be interpreted in your jurisdiction.
So, the fact that the 9th circuit decided that Kalshi is a gambling site and not a commodity futures trading platform means that they have to be treated this way by all federal and state agencies in California, Arizona, etc; but they could still be recognized as falling under CFTC rules in Texas or New York, as the 9th circuit decision is not applicable in those jurisdictions.
And I learned an interesting tidbit from one of the commenters here.
That said, I've never touched Kalshi or that other one or the lottery. It's all a scam anyway.
It's the regulated gambling corporations who are rattling their sabres right now.
if an online sales provider could hedge against the risk of that win, the gamble would help pay for all the chaos as a result
Lloyds will insure your rocket cargo or even provide terrorist strikes.
Doesn’t mean we need people wagering at kalshi on “number of terrorism fatalities in London before end of 2025”.
Reminds me of something from the last decade, but I am not sure anymore if it was a discussion or a desceiption: how to structure a "murder for hire" platform to give it plausible deniability/legality by turning it into bets. "I bet $100.000 @ketzu lives to the end of the year" can be read as life insurance, tasteless betting, or as a challenge to someone betting against it. (which is why here you need a legitimate interest to buy life insurance on someone)
I'm sorry, Lloyd's will _what_??
This level of parsing looks like judicial legislation to me. Isn't it one occurrence if the Rams win and another if the Packers win? Better that they declare the law void for vagueness and give the legislature another shot at it. Guessing what the words mean, when it is not at all clear to professionals let alone to the average citizen does not give proper notification of what the law is to the people subject to it.
The key is that up until a few years ago basically the universal consensus was that sports gambling was not possible on a CFTC regulated exchange, then all of a sudden Kalshi did it and now they are trying to pay enough lawyers to get them to justify it. This ruling is not judicial legislation, this is demanding that companies actually follow the law.
You could live in Germany or France if you prefer a legal system more ruled by clear statute?
The statute gives the general intent, but with an understanding that until the shit hits the fan in an actual court case, noone will have truly considered the detailed ramifications, so leave some intentional ambiguity there for the courts to resolve on real, actual, grounded cases rather than theorizing.
And if the legislature disagrees with a courts opinion about the ambiguity it left, it is very free to clarify in statute, which will override the court! (Unless the issue is constitutional, in which case the legislature is very free to draft a constitutional amendment!)
"Because the definitions of event and occurrence do not resolve the issue before us, we must also consider the statutory context"
They talk about this and the exact definitions for basically the entire opinion. It's not just "meh, I felt like it". They are dealing with how these words have been defined in prior statutes.