Newsletter

• NEXTPredict buys a contract on Kalshi: If more than half of the flights departing for Kennedy International Airport on October 21st are cancelled, the contract will pay out compensation.
• The premium for this coverage is $12,000, which corresponds to a protection amount of approximately $3 million, equivalent to the total investment made by the organizer for this event.
• Susquehanna acted as a market maker to undertake the transaction. Relevant parties stated that this is the first time a hedge has been completed in the predictive market through a meeting.

The organizer of a forecasting market conference actually hedged against potential risks for their event: they paid a premium of $12,000 to buy a set of contracts; if New York airports were to become paralyzed the day before the conference opened, these contracts would return approximately $3 million.

This transaction was executed through Kalshi, with Susquehanna acting as the market maker. The settlement condition for the contract is: on October 21st, which is also the main travel day before NEXTPredict holds a summit at Hudson Yards from October 22nd to 23rd at Convene, it is to determine whether more than half of the flights originally scheduled to land at New York's John F. Kennedy International Airport were cancelled. The text states that $3 million represents the total investment made by the organizers for this event.

Pierre Lindh wrote on X: "This is my announcement of a meeting that has never taken place before. Today, we hedged for the next meeting in the forecasting market. With $3 million in coverage and a premium of $12,000, it was executed through @Kalshi, with @SusquehannaSIG acting as the market maker. This is the first time anyone in our exhibition industry has done this."

NEXT.io, co-founder and managing director, Pierre Lindh, stated to Decrypt that this threshold was chosen as a proxy indicator. "We discussed it with Kalshi and Susquehanna, and we thought, 'Why not use airport disruptions as this risk variable?' Because if 50% of the flights on October 21st are cancelled by JFK, that would mean something significant has happened in the world."

This kind of risk is not just theoretical talk. In the post introducing this transaction, Lindh attached a photo of a meeting he announced in 2020 that ultimately did not take place. He wrote: “A few months later, the whole world was locked down, and we lost 100% of our income for the entire year.”

He said that over a period of 13 years, during about 800 events, this kind of risk occurred repeatedly. A few weeks before an event that the company had scheduled to hold in New York in March, the area was hit by a blizzard; and not long before the event began, the conflict in the Middle East escalated, preventing representatives from traveling, forcing the company to handle refunds. By May, as their flagship event in Malta was approaching, they were concerned about a shortage of fuel at European airports.

Lindh to Decrypt stated that "event insurance mainly focuses on what happens inside the venue," such as providing coverage for fires, structural failures during setup, and injuries to personnel. Standard force majeure insurance typically only pays out when an event is canceled. He said that if a hurricane causes an airport to close, "that doesn't mean we have to cancel the conference; it's more likely that we'll have to proceed with it despite a shortage of staff." He told industry media G3 Newswire that the costs have already been incurred and the revenue has been lost, but the insurance policy may never be triggered. "Substantial financial losses have actually occurred, but since the conference is still taking place, standard event insurance may not trigger any payouts."

He said that for a long time, force majeure has “just been accepted as part of the transaction.” “You invest millions of dollars, and then you can only pray.”

The second issue with Lindh lies in the claims process itself: insurance arrangements are very slow, and he said, “When something really goes wrong, the incentive for insurance companies is to find reasons not to pay out.”

The settlement methods differ in the market. Lindh told G3 Newswire that when making a claim with an insurance company, disputes may arise with the insurer regarding whether the event meets the conditions for compensation; while in the prediction market, "Kalshi is in the middle, responsible for determining whether the contract conditions have been met."

On July 14, Kalshi self-certified such flight cancellation contracts with the US Commodity Futures Trading Commission (CFTC), and after making contact on NEXT.io as an institutional client, it established this market as needed. Retail traders are not able to participate. The report also states that some of the reasons for the disruptions—including drone incidents and bomb threats—do not trigger compensation.

After these contracts were launched, they sparked criticism, as some feared that individuals could profit by disrupting flights. Lindh directly addressed this concern, stating that such worries were "very reasonable," and explained that this hedging mechanism represented another aspect of the same tool: "A company with real risk exposures purchases protection in a regulated environment, with an institutional market maker taking on the counterparty role."

Both parties to the transaction believe that there is a larger market behind this. Kalshi CEO Tarek Mansour stated that this represents "a shift from mere forecasting to a practical business infrastructure." Joe Grubb, who is in charge of the development of the forecasting market business at Susquehanna, indicated that this structure allows for the transfer of institutional risks, which "historically did not have any execution pathways."

Lindh It is expected that other peers will follow suit. He wrote, "Our entire industry has been bearing such risks for decades because there were simply no corresponding tools before. Now they are available."

Source attribution:Reported by Decrypt Staff. At the end of the original text, there is "Presented by NEXTPredict" and a promotion notice for cooperation, which are not part of the main text and have been omitted.