StockX, the Stock Exchange of the Collectible Market, Adds Futures Contracts With Kalshi

Prediction markets are eating the world. For a few years, platforms like Kalshi have allowed users to wager on political and other predictable events, such as presidential elections. But larger market sizes and a friendlier regulatory environment have enabled these companies to expand, letting users bet on more things and collaborating with brands such as Coinbase and CNN to make that happen.But it was one of Kalshi’s first announced partners, with collectibles trading platform StockX, that remains the most interesting. For unfamiliar readers, StockX is the premier platform for buying unused sneakers and other pop-culture collectibles, like trading cards — not just because of its size, but because of its format. Where other platforms model themselves after eBay, StockX is the New York Stock Exchange of hype items. Buyers place bids for an amount they’re willing to pay, sellers list what they’re asking, and transactions happen when the two meet (buyers can choose a buy-now option, or a prospective seller decides to accept the highest bid). It’s a clean, efficient market, and Kalshi’s addition is interesting because it extends StockX’s Wall Street analogy.With the collaboration, Kalshi has its first product event contracts, and StockX users can now bet on whether an item will reach a certain price threshold within a specific timeframe after release. The sneaker game has a futures market.Sneaker social media influencers reacted to the news with incurious surprise, little thought, and faux outrage. And, in their defense, if set up incorrectly, it doesn’t take a genius to figure out how adding prediction markets to a product marketplace could go badly.To get “high heat” desirable sneakers, retailers have commitments to purchase large volumes of less desirable SKUs, which they then sell at retail or below cost on platforms like StockX. With a completely free futures market, a retailer could offset some of those losses by taking an enormous short position against the price of those shoes right before dumping them. Similarly, very high-value sneakers — valued at more than $10,000 — sell very infrequently. If you were considering buying a pair, you could bet on what a specific pair would sell for to recoup some of the purchase price. In both examples, the trader would need a fool to take the opposite side of an obvious inside bet — but even so, it’s clear how adding unconstrained futures contracts to a platform like StockX could cause havoc.But this isn’t the situation, as StockX informed The New York Sun in response to our questions.To start, StockX users don’t pick the markets. Teams at both companies identify the markets on “popular items that would garner the most interest from consumers” and use Kalshi’s expertise to put “several protections for market safety and integrity.”In practice, that means selecting markets “for high volume products with sufficient time frames, meaning that wildly low or high sales won’t dramatically shift the average price data” and time “increments that are large enough to prevent a person from influencing the price between options.” These contracts are also about average prices, and that average is set by the middle 90 percent of transactions, excluding the bottom and top 5 percent outliers. StockX also said that they “only factor in the first five purchases of a buyer,” preventing dumping, washing, or other forms of market manipulation.If anything, this makes their prediction market slightly too safe and conservative to be useful or interesting — at least currently. There are only five current available markets on the Kalshi x StockX page, and they are in stepped price increments of “over” specific amounts. It’s not surprising then that their market volume has been relatively modest. The largest is about $26,000, or a tenth of the Kalshi market for whether it will snow in New York in December.StockX also provided clarifying information about where this prediction information will be available. If you visit StockX’s page for the New Balance 204L “Mushroom Arid Stone” you will see the current buy now price, the current asks and bid prices, and then — scrolling down — the number of sales, price range, price history chart, price volatility, price premium, and average sale price over the past 3 months. It doesn’t note that this information is also part of an ongoing prediction market or its current state.StockX has said that — “for now” at least — this will stay the case, with StockX product pages looking the same, and trading info reserved for Kalshi’s site.

StockX, the Stock Exchange of the Collectible Market, Adds Futures Contracts With Kalshi

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