The company run by a Brazilian billionaire at the center of controversies over ‘bets on war’

Luana Lopes Lara is co-founder and director of operations at Kalshi Getty Images via BBC Luana Lopes Lara, from Minas Gerais, gained international attention at the end of last year when she was named by Forbes magazine as “the youngest billionaire in the world who built her own fortune”. A report in the magazine highlighted Lara’s unique trajectory — her years as a Bolshoi dancer, her medals in the Brazilian astronomy and mathematics Olympics, her studies at the prestigious American university Massachusetts Institute of Technology (MIT) and the founding of a company considered innovative — which culminated in a personal fortune estimated at US$1.3 billion. 🗒️Do you have any reporting suggestions? Send it to g1 But this year, Kalshi, a company co-founded by Lara — and in which she has a 12% stake and works as director of operations (COO) —, appeared in the news amid controversy. Kalshi is one of the largest companies in the so-called prediction markets, a sector that has exploded in popularity in the United States, transacting more than US$44 billion in transactions last year. See the trending videos on g1 See the trending videos on g1 Companies like Kalshi are changing the betting market in the USA, where until 2018 it was prohibited to place sports bets. Betting on elections was banned until 2024. At Kalshi, and other rival companies like Polymarket, users can speculate on a variety of issues — such as the outcome of local elections, whether the US central bank will reduce interest rates or which year Jesus will return to Earth. These companies are not classified in the US as betting and gambling businesses. Unlike bets (traditional betting firms), where the odds are set by the company itself, prediction market platforms work more like a stock exchange, allowing users to bet against each other on the outcome of future events through something called “event contracts”. These events always result in a “yes” or “no” scenario. This model allowed these companies to come under the supervision of national financial regulators at the Commodity Futures Trading Commission (CFTC). But critics of prediction markets claim that these platforms actually carry out sports betting and gambling operations — and that they are trying to “disguise” themselves as “trading exchanges” to avoid stricter rules and taxes faced by bets, which are regulated by the States. The disagreement over who should oversee the apps has sparked dozens of legal battles in the US, as states begin to assert their right to regulate these companies, rather than leaving oversight to the CFTC. In Brazil, there are reports that Brazilians are able to use these platforms using international remittances with cryptocurrencies or international cards. According to the Folha de S. Paulo newspaper, traditional betting platforms — Brazilian bets — which paid for grants worth R$30 million to operate in Brazil, have been requesting, in meetings with the government, that the Ministry of Finance’s Prizes and Bets Secretariat block the operation of platforms like Kalshi. They argue that these companies could not operate in Brazil because they are not headquartered in the country nor have they paid for the grant. In an interview with the newspaper Valor Econômico, the founder of Kalshi said that the company is expanding and is studying the possibility of opening an office in Brazil. Bets on war Recently bets linked to military actions involving Iran, Venezuela and Israel drew public attention to Kalshi and other companies in the segment. In theory, these bets violate US financial rules, which prohibit the negotiation of contracts related to war, terrorism, murder, gambling or other illegal activities. Bets placed within companies in this prediction market could be considered contracts of this type, under the law, critics argue. But that hasn’t stopped companies like Kalshi from carrying out millions of transactions. Critics have been demanding stricter measures against the apps, which they say facilitate speculation about war — which would be potentially illegal —, creating risks to national security and opening the door to cases of privileged information and corruption. “Basically, betting on almost everything has been unleashed and turned into something very macabre, like the death of a head of state,” said Craig Holman, government affairs lobbyist for the advocacy group Public Citizen, which recently filed a complaint against prediction companies. Some cases have gained notoriety in recent days. Last month, a man from the state of Montana bet Kalshi US$10 (about R$45) on the likelihood of Iran’s supreme leader, Ayatollah Ali Khamenei, being deposed by March 1. He decided to take the bet after seeing news about the increase in pizza deliveries near the Pentagon while surfing the internet in the early hours of the morning — an indication that the American military was planning an imminent major operation. The bet on events linked to Ayatollah Khamenei ended up being canceled by Kalshi. But earlier this month, the company was sued in a class-action lawsuit for failing to pay $54 million to people who placed bets on the ayatollah. The company has rules that prohibit bets involving the deaths of people. But, according to the people suing Kalshi in California, the platform continued accepting contracts even after news of Khamenei’s death began to circulate. A Kalshi spokesperson said, according to news agency Reuters, that the company’s rules had not changed and were clear from the outset as they “included every precaution… to ensure that people cannot trade based on the outcome of the death.” “We even reimbursed all fees and net losses out of our own pocket — to the tune of millions of dollars — to ensure no one lost money in this market,” the spokesperson said. Companies like Kalshi allow users to make money by speculating on events such as the closure of the Strait of Hormuz during the war Getty Images via BBC Kalshi is not the only company in the industry involved in speculation linked to military actions. In January, bets on Polymarket (a rival platform to Kalshi, which uses cryptocurrencies) that the president of Venezuela, Nicolás Maduro, would leave power by the end of the month increased in the hours before his arrest by the American government. A gambler made nearly half a million dollars from Maduro’s capture, raising questions about whether anyone profited from insider information about the US operation. Faced with this new market, parliamentarians in the USA defended changes to the law. Congressman Ritchie Torres, Democrat of New York, has introduced a bill that seeks to ban government officials from making trades in prediction markets if they have “material non-public information” related to a bet. The sector was the target of inspection and questioning by regulators during the Biden administration. But it received a more favorable reception during Trump’s presidency. Donald Trump Jr., the president’s son, works in consulting roles at Kalshi and has investments in Polymarket. Insider trading is illegal in the stock market. A Kalshi spokesperson stated that the site “explicitly prohibits any form of insider trading, including government officials trading in prediction markets related to government activities.” Betting on state elections This week, Arizona’s attorney general formally accused Kalshi of accepting bets that would be illegal in the state on election results and sporting events. “Kalshi may present itself as a ‘prediction market,’ but what it actually does is operate an illegal gambling business and accept bets on elections in Arizona, which violates Arizona law,” said Attorney General Kristin Mayes. “No company has the right to decide which laws to follow.” Many Americans use Kalshi to bet on elections, as in the case of the last New York mayoral election Getty Images via BBC Kalshi faces similar legal problems in several other states, where regulators have filed lawsuits accusing the platform of operating gambling games without a license. The prosecution alleges that Kalshi accepted bets on the outcome of the 2028 U.S. presidential election, the 2026 Arizona gubernatorial election and its Republican primary, and the 2026 Arizona Secretary of State election. Among the specific bets cited was a $2 bet on whether (Vice President) J.D. Vance would win the presidency in 2028. The remaining charges allege that Kalshi operated an unlicensed sports betting business, accepting bets from just $1 on NFL, NBA, college basketball and Super Bowl games. New York-based Kalshi defends itself against these accusations by claiming that its activities are not gambling, but something closer to market trading, and that this would place it beyond the reach of state authorities. The company positions itself as a federally regulated “event contracts” exchange rather than a traditional sportsbook. “These allegations are baseless and we look forward to fighting them in court,” the company said. * With information from Natalie Sherman, BBC News

Source link