Aaaah, more real-world use cases for prediction markets!! #1525792

In hindsight, the most obvious one! Everybody knows that ice cream sales are negatively correlated with temperature!

The basic situation with Kalshi is that it really wants to be perceived as a useful platform for lovable Main Street businesses to hedge real-world risks, but it is mostly a sports gambling website. So there is a steady stream of stories about companies (bars, sports teams) using Kalshi to hedge real-world sports risk with sports bets. But Kalshi is not exclusively a sports gambling website.

It also offers weather bets. An ice cream shop cannot control the weather, but it can hedge its weather risk with weather bets. Cutesy Financial Derivatives 101.

Aaand, in a perfectly scripted old-world-finance meets new-world-finance, we get crop insurance!

Despite the name (“crop insurance”), US crop insurance is often structured as a bet on rainfall: It pays out “when there is less than the usual amount of precipitation” in a given area, as measured by the government weather service, “even if the relevant farmland suffers no loss in productivity.” (It is parametric insurance, rather than loss-based insurance.)

Done so because it's easier to monitor, the dilly-dallying of assessing how much, precisely, the claimant/farmer lost is too difficult and fraught with difficulties... whereas rainfall is, basically, objective -- exceeeept:

Apparently the way that the weather service measures precipitation is by putting out buckets and seeing how much water falls into them. We talked about this because some farmers were convicted of manipulating the precipitation numbers by doing things like (1) putting covers on the buckets so rain didn’t fall into them or (2) dumping out the buckets when rain did fall into them.

Every measure becomes a target, blah-blah #1520598. I need to read this story: (here, in case some stacker wanna beat me to it)

"You start by dumping out rain buckets, one thing leads to another, and eventually there are prison escapes and dead bodies.""You start by dumping out rain buckets, one thing leads to another, and eventually there are prison escapes and dead bodies."

Weather hedging is a lot older than prediction markets, and manipulating weather sensors to cheat on weather hedging is also a lot older than prediction markets. But prediction markets have, ehhhhhhhh, democratized it.

Anyway if you run an ice cream shop and you’re pouring cold water on weather gauges to make your Kalshi bets pay off, please be in touch. The first, like, three ice cream shops that do that will definitely get mentioned in Money Stuff.

archived: https://newsletterhunt.com/emails/419537

ALso, real-world bitcoin usage: buying drugs online. SAY HI TO THE NEW BOSS, SAME AS THE OLD BOSS!