Insuring against loss. I just looked up the official name; it’s called prize indemnity insurance.

In the case of those “make a free throw from half court and win a car” competitions, the risk is a known value: the prize sponsor’s wholesale vehicle cost. The sponsor pays a premium for each contest, which is calculated based on the likelihood of someone winning.

This is a very well established insurance market. You as an individual can go out and buy hole-in-one insurance. It’s more popular in Korea and Japan where there is a strong societal expectation of throwing a lavish party if one hits a hole in one. Here in the States, it’ll cover a round of drinks for the clubhouse.

In the case of the bar, the Kalshi bet is functioning as an insurance policy against a potentially open-ended loss. The bar could be packed, the U.S. wins and everyone drinks the bar dry. So Kalshi is fulfilling a legitimate business role here.

But insurance is boring and highly regulated. The bar could likely have bought an equivalent policy from an underwriter in the Financial District. Or frankly from a rich regular. Kalshi wants to make insane amounts of money from degenerate gamblers, and to be immune from state regulators who are more answerable to citizens than the CFTC commissioners. Hence adopting the fig leaf of “futures contracts.”

If you thought I’m on Kalshi’s side here, I’m definitely not.