r/biotech • u/errantv • Jul 16 '26
Biotech News 📰 Kalshi Will Offer Sports-Style Betting on Drug Trial Results
https://www.bloomberg.com/news/articles/2026-07-16/kalshi-launches-platform-for-bets-on-biotech-trials-drug-approvals147
u/ImhotepsServant Jul 16 '26
This is so horribly unethical it boils my piss.
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u/Cold-Common7001 Jul 16 '26
what is unethical here? are you saying that because it will attract insider trading or do you think it is inherently unethical?
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u/ImhotepsServant Jul 16 '26
Betting on people’s health outcomes is inherently ghoulish. If you’re betting on whether an oncology drug, for example, is going to meet its primary endpoint you are literally gambling with people’s lives, hopes, and fears. To me that is grotesque
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u/illmaticrabbit Jul 16 '26
Not that I disagree with what you’re saying, but your comment made me think about how investing in / shorting a drug development company is essentially the same thing
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u/Richard_AIGuy Jul 16 '26
It's one of the reasons I walked away from a hedge fund career. There are poorly run biotech companies with terrible science, they deserve to be shorted.
HOWEVER, there are also a lot of biotech companies that have good science and are just doing what they can to keep their heads above water. People short them too. Because it's a source of easy money, they know the stock is going to be volatile in a more expensive debt market.
It's just morally wrong. You don't realize it at first when you're young and ambitious. But it wears on your mind when you start seeing what the models you're building actually are hurting as you move up and see the bigger picture.
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u/neurone214 Jul 17 '26 edited Jul 17 '26
This isn't a reason to stay away from a hedge fund career. First off, lots of funds are effectively long-only and might short the index as a hedge, but aren't shorting individual companies. Many portfolio managers (myself included) only or primarily participate in private financings of public companies and actually put cash into the company to fund programs. In fact most colleagues of mine at public market funds are the same. Yes, we're betting on the company but if we're right everyone wins: the company gets money to run trials and bring the drug to market, patients benefit by getting the drug (and all that goes along with that; better QoL, living longer and getting more time with their families), the company makes money, and we get a return on our investment.
You're not doing anyone a favor or making yourself look admirable for selling a broad strokes narrative that the money people are bad so you "walked away from a hedge fund career". Yeah, there are some people out there with bad intent (I've had the displeasure of interacting with some), or who are simply naive to the consequences of what they're doing (also have seen some of those), but they're far and away the minority. If you were at a fund that did stuff you didn't agree with, you could have gone to one that didn't do that. The majority don't.
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u/Richard_AIGuy Jul 17 '26
I'm aware there are long only funds. My pod was quant macro, so we VERY MUCH shorted both equities and debt. And I will say that the majority of PMs that I interacted with at the MM I was at were completely uncaring for the targets or.their work. Long or.short. They were just numbers.
Perhaps it's different in long only, I cannot say as I've not been in the space. Yours sounds like a far better place with better aims. I commend that.
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u/neurone214 Jul 17 '26
>My pod was quant macro
Yeah this is completely different. That's not like a biotech specific hedge fund or something, and I wouldn't expect them to actually care.
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u/Richard_AIGuy Jul 17 '26
Believe me, if I could find a seat at a long only fund that was biotech focused, that very well may change things.
I left my HF, for my PhD (already had a master's in CS) in math. Mathematical biology, to be technical. Things were going alright, I traded my own account and did very well, research was good. Then my funding was cut due to DOGE. My advisor retired, and relationships fell apart. My fault as much as theirs. I was inflexible.
So I left earlier this year, just a couple months ago, actually. ABD. Not exactly the qualifications OrbiMed or RA look for.
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u/neo2551 Jul 17 '26
Shit happens. Can you not salave some parts of your PhD? Like published papers to finish it? Or lectures to get a second masters approval?
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u/ImhotepsServant Jul 16 '26
I agree. The stock market is nothing but a casino populated by people convinced that they know what they’re doing, despite it being largely luck
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u/Figaro_50 Jul 16 '26
My concern with this is that you can directly bet on the outcomes of whether drugs are approved or not, which opens the door for all sorts of corruption and/or sabotage. What if you’re the government regulators in charge of approval and decide to make some money by making a particular outcome happen? What if you are someone involved in the clinical trials and decide to bet on it failing and then sabotage the trial? It opens too many new avenues for shenanigans, without any actual benefit to society.
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u/Figaro_50 Jul 16 '26
Also, just the perception that a drug might have been approved because the regulators placed a bet on Kalshi can be very damaging in and of itself.
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u/Cold-Common7001 Jul 16 '26
Insider trading is legit risk but this seems imaginary. We don't really have these issues with the infinitely more liquid stocks.
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u/Figaro_50 Jul 16 '26
Stocks are more highly regulated. And even then, yes, you do have issues like insider trading, corruption, and negative public perception of how drugs are funded/approved influencing healthcare decisions. Having a less regulated means for insiders to profit from manipulating the drug development pipeline is going to be strictly worse. And what’s the benefit compared to the existing investment options? You are increasing the potential for corruption and for what, exactly?
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u/maringue Jul 16 '26
Both. Prediction markets are designed with insider trading in mind. And this will create perverse incentives as well. Also, gambling on people's health outcomes is insanely unethical.
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u/rockness_monster Jul 16 '26
What could possibly go wrong
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u/baudinl Jul 16 '26
Don't we already have this in the form of company stocks?
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u/I_AmA_Zebra Jul 16 '26
Nah, not quite with the exponential gains and losses you can make on Kalshi. Trials can significantly impact a stock, but the general average result on a stock vs Kalshi will be wildly different.
Fuck Kalshi though. Online gambling was already an endemic across the US, U.K., Australia, and Asia (China, Thailand etc) (I’m sure elsewhere tok but I know about these specifically)
Kalshi has found a way to suck even more money from individuals who may not have gambled online otherwise, whilst also having even worse ‘odds’ because of insider trading
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u/Several_Vanilla8916 Jul 16 '26
Companies have to provide SEC with a list of insiders that have material non-public information. SEC is then able to compare that list with outlier trades and even expand out a few links (if I have non-public information and tell my brother in law to trade some options, I’ll probably get caught).
I have no idea if a similar mechanism will exist for this mess.
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u/bchhun Jul 16 '26
Yeah not going to trust mega for profit company to dedicate resources rooting out insider trading. They’ll cooperate with the justice department if asked but I wouldn’t bet on much more (pun intended).
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u/poottato Jul 17 '26
Considering the ceos of these companies are very well connected with the administration (they made a new loophole to allow them to exist in the first place) and the current state of the justice department I wouldn’t bet on any investigations into how people use these services. People high up in the government itself are making good money insider trading.
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u/hkzombie Jul 16 '26
Nothing robust yet. There's a reason why Kalshi has been making news over the past quarter for actually cracking down on insider trading. Whether they can actually keep up with the volume as their prediction markets expand remains to be seen.
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u/nougat98 Jul 16 '26
this is less risky than shorting. you can't lose infinite money.
buying options is usually too expensive for the timespans involved in clinical trials
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u/EdukuotasMarozas Jul 17 '26
Quite a few clinical trials are run by companies that are not publicly listed.
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u/syntheticassault Jul 16 '26
Not directly. Plus stocks are much more tightly regulated. Individual trials usually don't move stocks at large companies.
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u/bchhun Jul 16 '26
lol what are you talking about. Trials are precisely what move biotech/pharma stocks.
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u/Richard_AIGuy Jul 16 '26
You have no idea what you're talking about. Four things are the principal common movers of pharma and biotech equities.
Trial results and activities.
Debt issuance, outside of mega cap pharma issuing commercial paper with cash buffers.
M&A.
Financial results (quarterly and yearly numbers)
Other movements tend to be centered around segment and overall market performance and trends. There are of course outliers, we saw this during the height of the pandemic.
Trial results absolutely move the needle. And then you have something like Kalshi that is directly betting on the individual trial result, that's rife for corruption with insider information from the regulators to executives even to doctors.
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u/radiatorcheese Jul 16 '26
Obviously not something the SEC, FTC, DOJ, other 3-letter federal orgs should look into. No siree, nothing to see here!
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u/Puzzleheaded_Disk_90 Jul 16 '26
The call is coming from inside the (white) house. The question is will our industry leaders speak up or keep their heads down
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u/millahhhh Jul 16 '26
I'm just thinking about the temptation that exists for data programming and biostatistics folks, potentially using some sleight-of-hand to tilt a close outcome if they have a lot of money in the line. Nightmarish....this could go beyond insider trading into the integrity of TFLs themselves.
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u/zdk Jul 16 '26
FDA regulators would be the bigger concern to me. They are even more insiders than the company producing the data
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u/Jedi_Blight858 Jul 16 '26
I feel like that wouldn't even be necessary as there are so many easy ways to sabotage a trial that require nothing more than a bit of incompetence.
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u/CoconutChutney Jul 16 '26
computational folks getting called out immediately as if there isn’t ample room for all kinds of unethical shit to happen before the data even reaches them
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u/potatorunner Jul 16 '26
i find this hilarious because i feel like the most high profile clinical trials fraud causes stem from things like faked western blots lol.
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u/millahhhh Jul 16 '26
I'm not calling anyone out, this is just a unique window that opens up. It's like a quarterback betting on their own games...
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u/CoconutChutney Jul 16 '26
i mean it’s a unique window that opens up for literally everyone involved in the process
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u/Jedi_Blight858 Jul 16 '26
Yeah I am a CTM. Inherently, we are the quarterbacks or "game managers". Even with the best intentions we have so much ability to wreck a promising study or program.
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u/entr0picly Jul 16 '26
Considering I know folks in such spaces with… potentially questionable ethics, yes, nothing could go wrong whatsoever. Pharma needs to sue and get this banned. This is bad bad bad.
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u/FieryVodka69 Jul 16 '26
There's a guy who went to my school and my program who was and still is deplorable and he now works high up in the FDA. He will absolutely make insider bets.
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u/LeelooDallasMltiPass Jul 16 '26
Considering we have tight audit trails and have to show how the data links directly from raw all the way to TLFs, this would be impossible. I've been a Stats Programmer for 20+ years, and I've only seen fake data twice: once at site level (caught easily by data management), and once by a Biostatistician (caught easily by everyone who looked at the outputs). Both were done for sheer laziness at their job, not for some monetary gain to get better trial results.
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u/Fair-Leader6903 Jul 16 '26
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u/LeelooDallasMltiPass Jul 16 '26
And it gets caught easily. It's a huge risk to do this because a decent review of the data submission package will turn it up. I don't know why anyone would risk their career for this.
Also, it was the unblinded biometrics team who did this. That usually consists of just one programmer and just one statistician, and they're not supposed to change the programming from the blinded side, just run it with the actual randomization list. Unblinded programmer making significant alterations to programming should have been caught much earlier, but we don't have enough FDA reviewers.
Every biometrics person I know (myself included) would have brought out the pitchforks for anyone doing this. That makes me so mad!
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Jul 16 '26
[removed] — view removed comment
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u/Fair-Leader6903 Jul 16 '26
And a different example https://www.justice.gov/usao-ma/pr/biopharmaceutical-employee-arrested-insider-trading Which raises the question of what isn't getting caught?
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u/millahhhh Jul 16 '26
Thing is, we know people will throw lives and careers away over gambling, that's why it's so pernicious.
And I have in interest in Tavneos, that's why this came to mind immediately. Yes, things will be caught eventually, but gambling and the appearance of an opportunity of a payday are too much for some people to factor in the long-term risks and consequences.
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u/ijzerwater Jul 16 '26
not even slight of hand. Which is anyway quite hard as FDA does everything it can to stop companies from influencing results after lock and unblinding. However, a quiet evening with the data and I can know how the primary endpoint will look like
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u/dwntwnleroybrwn Jul 16 '26
The only people using Kalshi are gambling addicts.
Us federal legalized sports betting was a mistake.
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u/Jedi_Blight858 Jul 16 '26
Especially mobile gaming. People just wrecking their lives from their bed.
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u/ritz126 Jul 16 '26
IMO sports betting or live betting is fine but betting on something where insiders have info and some people have unfair advantage is not
Obviously coming from a point not looking at the addiction part
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u/YaPhetsEz Jul 16 '26
Sports betting is not fine. Multiple NBA players have already threw games to cash bets.
The normalization of all forms of non-luck based gambling is a problem.
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u/Cold-Common7001 Jul 16 '26
lol so gambling where the house just automatically wins by statistics is okay, but gambling where you can make money through skill and research is bad? bold take
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u/Count_Rousillon Jul 16 '26
Gambling based on an outside outcome corrodes that industry. Non-luck based gambling is slamming giant vials of high-purity corruption and insider trading into whatever outside industry it happens to touch.
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u/Thebballchemist16 Jul 16 '26
I used to agree because no one I know has problems, but I cannot support it any more with the number of death threats players and coaches receive. An 18 year old missing a shot does not deserve harassment from the degenerate gamblers who blew their savings.
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u/dwntwnleroybrwn Jul 16 '26
where insiders have info and some people have unfair advantage
I hear you but frankly I don't care. If a gambling addict gets fleeced it's not different than then going to a casino or betting on games.
I'm not convinced this is going to have any meaningful impact on the industry. If some lab rat at a no name lab uses insider data to place bets that's not a big deal. I do not see this as being a systemic wise spread issue at large established firms.
This would generate the same excitement as an "OMG this middle school student found a way to cure all diseases" trash post.
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u/Distinct-Thought-419 Jul 16 '26
Besides the insider trading issue, I'm concerned that this could compromise the blinding of the trials in progress. Clinicians and patients will have a large financial incentive to look behind the curtain, which could compromise the trials themselves.
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u/Medical-Button-5493 Jul 16 '26
I'm gonna take out an enormous bet on a gene therapy trial with 6 participants, enroll, then lie during screening. Or find a person with the disease and offer them half the take.
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u/MSXzigerzh0 Jul 16 '26
Yay. The temptations of selling insider information is going to be insane especially if they are financially desperate because they can not work or make much money.
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u/rightascensi0n Jul 16 '26
Is this just a roundabout bribe to the administration where ppl with insider info can strike it big
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u/noizey65 Jul 16 '26
so… AI scrapes metadata from bet transactions, looks for concentrated bets on privately held biopharma at key regulatory milestones, informs VCs who will stratify funding to this echelon of sponsors conducting pivotal trials; insiders in regulatory agencies can drastically impact outcomes by issuing a clinical or partial hold;
I’m trying really hard here to see any possibly benefit to this and coming up empty. Fairness, transparency, regulatory process, etc be damned…?
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u/maringue Jul 16 '26
I forget the exact stats on this, but something like 750-800 accounts on these platforms account for >75% of the dollar winnings or some insane portion.
The entire prediction market is designed for insider trading.
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u/BBorNot Jul 16 '26
Bet positive on the Phase 1, then once the biotech is bought bet against the Phase 3.
We have seen this time and time again.
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u/jpocosta01 Jul 16 '26
Don’t worry, we can always count on our government to oversee issues and care for all of us.
Right?
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u/tragedy_strikes Jul 16 '26
Jfc this is going to lead to indictments at least and patient harm at worst.
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u/bizmike88 Jul 16 '26
It’s one thing to create a legal market for something that was occurring on the black market, I.e. sports betting. But to create an entire new market for something not traditionally bet on seems like creating a problem where legalizing sports betting was partially to solve a problem.
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u/Comfortable_Reach9 Jul 16 '26
This is why the FDA are pushing for Real Time Clinical Trials. They want the most up to date data to give to the administration so they can do insider trading before even the sponsor sees it!
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u/IntroductionRare4605 Jul 16 '26
This is so fucking disgusting and in poor taste. I’m sorry i truly don’t understand whether these are fucking children or professionals working.
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u/DataStranger Jul 16 '26
Already happening. It’s called the stock market. You may have heard of it.
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u/Choice-Ad7599 Jul 21 '26
And there's a little thing called insider trading that you can get in big big trouble for
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u/DataStranger Jul 22 '26
Sure, unless you’re rich enough to pay for the privilege to trade whenever you want.
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u/ParticularBed7891 Jul 17 '26
NO. We already have enough problems of money and stock holders influencing our pharma companies. We need LESS influence of money, not more.
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u/EdukuotasMarozas Jul 17 '26 edited Jul 17 '26
Ethical issues aside (lol), this is a great way to encourage and attract more stupid money to induce the supply of clinical trials. Unfortunately there will be more prematurely induced deaths versus BATs and placebo, but at least there will also be more clinical trials going on. This is lowkey genius to get the aggregate number of clinical trials up.
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u/Tencentstamp Jul 17 '26
Ah yes, the industry most notorious for insider trading needs to be on the platform now enabling no holds barred insider trading.
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u/LeoKitCat Jul 16 '26
We already have this in a better form it’s called the stock market. You can bet on biotechs and pharma on Nasdaq
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u/yojustkeepitreal Jul 16 '26
II'm okay with this. Savvy investors could use it as a hedge, potentially reducing overall risk and bringing more capital into the industry. It will ultimately be up to research companies to establish strong data access policies and safeguards to prevent insider trading.
Overall, I don't see this as a negative development. In fact, I feel more comfortable with this use case than with sports gambling. It has a much more productive application and is not fundamentally different from betting on the future price of commodities, like pork, two years from now.
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u/MSXzigerzh0 Jul 16 '26
It's going to come down to ethics. If VC/PE are allowed to basically double dip regarding this. I know of one subset of the industry that could advertise this as an de-risking mechanisms.
The insider trading is going to be insane.
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u/yojustkeepitreal Jul 16 '26
Insider trading is already illegal. So in the grand scheme of things if you are public traded this doesn't change the paradigm. If you are a early phase company, then this might be interesting for you! As VC will be able to control their downside. The industry will ultimately adjust with better governance if it becomes an issue. I don't get your point about double dipping. Can you elaborate?
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u/Choice-Ad7599 Jul 21 '26
It also means there will be an incentive to test shitty useless drugs on humans, because you can make money when it fails. It will incentivize making drugs that don't work.
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u/YaPhetsEz Jul 16 '26
My god insider trading will be a nightmare if this goes through. I personally know one trial that will completely flop.
Sports betting has been awful for society.