3 min read

Textbook rent seeking

The demise of PredictIt contains a potentially sinister twist; how censorship became normalised in China; and 'Xi Jinping thought' sounds miserable.
Cartoon showing the revolving door of Washington.
There appears to be a revolving door between the CFTC and Kalshi. Source.

1—Textbook rent seeking

"Rent-seeking is the effort to increase one's share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through misallocation of resources, reduced wealth creation, lost government revenue, heightened income inequality, and potential national decline."

The above quote is from Wikipedia, because why not – if it's good enough for judges, it's good enough for this. We're talking rent seeking today because that's probably what killed off PredictIt, an online prediction market that has been quite popular for tracking potential political outcomes. So writes Chris at Karlstack:

"Kalshi is PredictIt’s #1 competitor, and has the most to gain from PredictIt’s demise.

I can tell you with a high degree of certainty that almost everyone in the prediction market community believes Kalshi’s regulatory strategy was to weaponize the CFTC to crush PredictIt. It is an open secret.

[Two weeks ago], Kalshi requested CFTC permission to launch a 'Will [party] be in control of the [Chamber of congress]' financial derivative. The thing about these 'Will [party] be in control of the [Chamber of congress]' financial derivatives is that PredictIt has already been running them unmolested for 8 years now… they aren't a new concept!

Nonetheless, 2 weeks after Kalshi submitted this request to the CFTC, PredictIt was dead, and Kalshi had a monopoly on the 'Will [party] be in control of the [Chamber of congress]' financial derivative.

This is how the regulation sausage is made, this is how corrupt monopolies are allotted — the government is picking winners and losers based on who their friends are; based on who wines and dines them."

Chris notes it's not the first time this has happened – Kalshi's previous #1 competitor, Polymarket, suffered a similar regulatory fate in January 2022 "after months of Kalshi aggressively lobbying the CFTC to go after Polymarket... we are witnessing a textbook case of regulatory capture happening in real time, in front of our eyes".

It turns out the former CFTC commissioner is on the Kalshi board of directors and some ex-CFTC lawyers hold positions at Kalshi such as "Chief Regulatory Officer". Surely just a coincidence though?

You can read Chris' full article here (~8 minute read).

2—Normalising censorship

"Previous research claims that public awareness of censorship will lead to backlash against the regime. However, surveys consistently find that Chinese citizens are apathetic toward or even supportive of government censorship."

So writes Tony Yang in a recent paper on Chinese censorship, concluding that the "normalisation of repressive policies contributes to authoritarian control".

According to Yang – who cites studies from other authoritarian regimes, such as Pinochet's Chile – people exposed to censorship that "targets both political and non-political content display significantly less backlash against both the censorship policy and the regime".

In China, the country's pervasive digital surveillance and social credit systems are mostly used "to prevent crime and ensure public safety", leading "most Chinese citizens to believe that these surveillance systems are benevolent". They've effectively become so desensitised to surveillance by their government that when repression of dissent occurs – even if it would "cause outcries in the Western world" – people just shrug it off as "part of the normal life in China".

Check out Yang's full paper here (31 pages).

3—Xi Jinping thought

Tweet from Jack Dorsey.
Is this where 'Xi Jinping thought' leads? Also, Twitter and Square founder Jack Dorsey probably doesn't intend to visit China ever again.

4—Further reading...

🏥 "Western Australia recorded 18 deaths where COVID-19 was the only condition listed on the patient’s death certificate in the first six months of its Omicron wave."

⚔️ "The Chinese military will from now on conduct 'regular' drills on the eastern side of the median line of the Taiwan Strait."

📉 Will it be a soft or a hard landing? US consumer inflation expectations "declined sharply in July", on both the 1-year and 3-year time horizons.

🕵️‍♂️ "The FBI executed a search warrant Monday at Donald Trump's Mar-a-Lago resort in Palm Beach, Florida, as part of an investigation into the handling of presidential documents."