Unchained - Bits + Bips: Is Kalshi Headed to the Supreme Court Next?

Episode Date: September 2, 2026

📢 Bits + Bips has its own channel now — full episodes here: https://www.youtube.com/@Bitsandbips  A Ninth Circuit panel ruled 3-0 that Nevada can enforce its gambling laws against Kalshi's sports contracts, directly conflicting with an April ruling that put Kalshi under CFTC oversight instead. Andy Ross, Head of Institutional at Kalshi, joins the panel to make the case that prediction markets are nothing like sportsbooks, that Kalshi wants its winners to keep winning, and that its fastest-growing customers are not hedge funds but ice cream shops, kayak renters, and boat charter operators hedging ordinary business risk. Hosts: Austin Campbell - Host of Bits + Bips, Founder of Zero Knowledge Group, and Adjunct Professor at NYU Stern Ram Ahluwalia - Co-host of Bits + Bips and CEO of Lumida Chris Perkins - Co-host of Bits + Bips and Head of Franklin Crypto Guest: Andy Ross - Head of Institutional at Kalshi This clip is from a longer conversation on Kalshi's clash with state regulators over prediction markets. Full episode here: https://youtu.be/c5qwxUlaKQ4?si=9vIZPp0imIyuJIs3  We go live every Monday - subscribe to catch it live. 👉 Visit 1inch to swap tokenized securities, crypto and more. Simple. Secure. Self-custodial. Whatever asset you’re buying - swap it at http://unchainedcrypto.com/go/1inch-sn.  Chapters: ⚖️ 00:20 Ninth Circuit rules 3-0 that Nevada can enforce gambling law against Kalshi 🎯 02:16 Andy on why prediction markets are not sportsbooks 🏛️ 04:44 Chris asks whether the CFTC believes it has federal preemption 🍦 06:21 Andy on ice cream shops, kayak renters, and boat charters hedging with Kalshi 📊 08:10 Ram asks where Kalshi's real trading volume actually comes from 🔬 09:21 Andy unveils Kalshi's 2.2 million-data-point calibration study  Learn more about your ad choices. Visit megaphone.fm/adchoices

You're listening to a brief segment from one of the Bits and Bips episodes this week. The full show is now only available on its own dedicated Bits and Bips channels. So be sure to go to X, YouTube, and your favorite podcast platform and search for Bits plus sign Bips, spelled BIPS, and subscribe. But the ruling was that the Ninth Circuit ruled 30 that Nevada can enforce its gambling laws against Kalshys sports event contracts. Judge Ryan Nelson specifically said Colchie sports contracts are quote, a quintessential form of gambling outside the CFTC's purview.

This directly conflicts with the Third Circuit's April ruling that Colchie is actually regulated by the CFTC. That was in New Jersey. This means we have a live circuit split, which is why I have specifically flagged the Supreme Court part. That is catnip for the Supreme Court in the number one way.

that they end up taking cases, because to say the exact same federal law means this here, but something different over here is the exact thing they are meant to guard against. So, as you can imagine, the Gaming Association likes this. They are calling it a significant win for consumer protections and taxpayers. A big loss for Kalsh and other backdoor sports gambling operations. Again, Gaming Association CEO. But Zach Fulton, a CFTC spokesman on the split. that said a derivative contract structured as a swap, is a swap, regardless of the underlying

subject matter, the Ninth Circuit aired. Now, what this means for the industry is Robin Hood and Crypto.com have similar parallel suits in Nevada. Roughly 20 states are now in litigation over prediction markets. A Supreme Court fight is looking increasingly likely, according to CBS News. So I'm going to start, Andy, with you at Kalshi. This obviously has created a mess for you guys internally. I'll use that word so you don't have to say it because you now have two different federal courts telling you mutually contradictory things.

How did this land on the day of? How do you even think about that situation? Okay, that's a great question. I guess it's safe to say we're disappointed by the ruling. We didn't think it would go that one. Secondly, I guess from my side, prediction markets are super different for sports books. And the exchange works exactly like a commodity exchange

where buyers face the sellers. You don't face a book that is generating a price against you. It's a fair and competitive market price, just like commodities markets or just like interest rates or FX or equity markets. You know, you can see on the charts that we produce on the, you just have to go on to cartyycom and look. we see that, you know, promotes healthy price discovery. There's nothing hidden.

You know, you can see where the order book is. You can see where the depth of the market is. And if you make money on Kalshi, well, you've made money on Kalshi, and you can continue to make money on Kalshi. In fact, we like you to make money on Kashi because you're improving the aggregate quality of the prediction of the market. You're making the market a better quality. That's got a societal benefit.

If you make money on a sports book, they ban you, and say, I'm sorry, you're too clever, you're not allowed to trade with us anymore. And so to declare all those things exactly the same, that feels a little difficult to me. And the nationwide regulation, as you say, was enacted because large and diverse liquidity pools with large and diverse participants are critical. And that's what you've seen in all of our other economic markets, all of our other swap markets around the country. And so, yeah, I think that that's, you know, do we end up at the Supreme Court? The various steps occur before them, still consider.

considering the group, considering that work here. Yeah, but look, disappointed. But what we are doing, genuinely, one, following the law, and then two, just getting on with it, getting on with servicing customers, listening to clients, and our volume continues to grow, week over week, month over month. And we've got millions and millions of users on the app. And so this isn't something that has been forced down people's throats. This is something that people are either enjoying, liking, liking the price discovery of, or feeling that they've got some value to add about it. And if you go talk to the winners on Kalshi, I don't think they talk about it as gambling. They talk it about as making prices in derivative contracts that they are happy to be trading on.

So, Chris, I want to ask you here, because I know both of us have some friends at the CFTC, and I know you've met on some of their advisory boards. How was the CFC? FTC looking at events contracts writ large. Did that have any specific implications for, call it the sports vertical? And how do you think they are proceeding in light of this? And again, I'm asking you to speculate here. Everybody, please remember, Chris is not a CFTC employee, but curious. Yeah, definitely they don't represent the CFTC. I don't represent anything but myself. I think they feel very strongly. I mean, look at what, what Chairman Seelagis said. They, They believe that they have federal preemption.

These are, the thing about crypto people they didn't understand for a long time was that derivatives on commodities have always been regulated. And that regulation is very, very clear Commodies Exchange Act, 1974, don't hold me to it. I think it's like 74. So these are, derrisms on commodities are federally regulated. That's within the CFTC's jurisdiction. They have a very strong view that this is their market,

and they have incredible discretion on the underlying markets. that they regulate. So we've seen the CFTC. I mean, Andy, I've loved to get your, they required you to stay, keep markets open in New York, right? Yeah, look, correct. And so we're, you know, again, one of those uncomfortable positions where the CFTC is telling you to do one thing

and a local area is telling you to do something else. It's like that, that's a difficult position to be in as well. But ultimately, we've got customers. I mean, you've actual real people. people who are using this every day. And it's not just individuals. It's like we have ice cream shops who are hedging their rent based on whether it's going to rain or whether it's going to be cold. We have kayak renters who are, you know, who say, well, we don't run a lot of kayaks if it's windy. We have, you know, people who run boat charters who say, well, look, if we're going to get a

hurricane, we're not going to run a lot of boats. We've got huge. numbers of individual, and then people obviously hedging promotions as well. We've got people hedging the risks of running their business on a day-to-day basis. And those risks used to be available for the very biggest guys. If you were a big, huge company, yeah, sure, you could go and arrange an insurance, or you could buy a CDS on your credit risk or whatever it was. Now, individual mom-and-pops, individual enterprises across the U.S. can hedge their own risks of running their business.

That's just way better for enterprises, way better for growth of America. It's way better if you want to invest in your company. It's derisking you. And I think you've got to just say that's a really exciting development, I think, in markets and US Inc. And I come from Europe and you comment earlier on about plastic bottle tops is absolutely right. You know, we're debating the financial equivalent here in Europe. Meanwhile, the US is developing, bringing innovation on share.

under the leadership of Chairman Selling, and I think that's going to drive growth and drive innovation and safe innovation within a regulatory perimeter, whether that be prediction markets or crypto, and maybe some people don't like that. I get it. Where do you see the most volume,

like those novel use cases you mention on, like hedging for a small business, they make for a great storytelling and, oh, that seems really interesting, I could see more of that, but is there real volume there or is most of the volume around liquid contract markets referencing like various asset classes and will the Fed raise or lower rates? So a few months ago, I was comfortable saying, look, sports volumes decreasing in size

and then we had the World Cup and sports volume increased rapidly, right? And so, you know, that is what it is. sports volume again is is reduced and we're continuing to get that development of um we're continuing to get that development of more markets more more liquid products i started at calccius or six seven months ago we had about four thousand markets we're now out of the point where we've got 10,000 markets i don't mean 10,000 strikes we've got multiple strikes in those markets we've got 10,000 markets and so we're seeing the development and interest in those and some of them as you say a big like you know where will the fed be but some of

of them are much smaller. But what's super interesting is we did a calibration study and we published this, oh, a couple of weeks ago now. And if you go into Kalshi research, you can go and find this calibration study. And we looked at 2.2 million data points. And what it said was that if you imagine that you had a straight line, which is a perfect prediction, i.e. Kalshi's model was perfectly calibrated to what actually happened in events. You'd expect our markets to sit absolutely. along that straight line. And you know what? They pretty much sit along that straight line.

But what's really, really interesting is they sit along that straight line one week out and they sit along that straight line when maybe only $50,000, $60,000 has traded on that market. So you don't need institutional size to have a really well-calibrated market. And I think, again, going back to that question, what's it for?

If an individual can hedge your risk and there's a couple hundred thousand trading on that market, It's a perfectly good, well-priced market. And we're happy to offer that service, and that individual or company gets a great hedge. That's a brilliant opportunity for us and a brilliant opportunity for them. We don't just need to have everybody correlated

around the very biggest, most liquid points. Now, clearly we do and have work on those as well. But it's broad as well as deep. If you like this segment, please like, subscribe, and tune in every Monday at 4.30 p.m. Eastern Time. I'm Austin Campbell, the host of Bips and Bips, along with my friends Rahm Alawalia and Chris Perkins and our slate of exceptional guests. Every week, we're going to discuss macro, crypto, crypto, and the collision of worlds, covering topics that move markets and shape the financial landscape.

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