Bettin’ on votes

23 years ago today nearly 3,000 lives were lost in the September 11 attacks on New York, DC, and in Pennsylvania. The day that changed the world forever is also one of service and remembrance, when Americans are called to volunteer and unite.

Stocks rose again yesterday ahead of today’s August consumer-inflation report, which should inform the Fed’s interest-rate decision next week (it’s widely expected to cut). Related: JPMorgan Chase stock dropped 5% after America’s largest bank curbed its expectations for interest income.

Post-debate bets… are now table stakes. A federal judge sided with a New York prediction market that had been fighting regulators over election-related bets in the US. Kalshi, which is regulated by the Commodity Futures Trading Commission, got the green light to list bets on congressional elections. Prediction markets like Kalshi let users wager on real-world events, from the size of Fed rate cuts to whether Justin Bieber will release a new song this year.

A crowded table… The prediction markets industry is booming, with PredictIt and crypto-based Polymarket overseeing hundreds of millions of dollars in bets. Polymarket, which bars folks in the US from using its service, saw half a billion dollars in trading last month alone. As of yesterday, Polymarket had $850M+ wagered on who’ll win the US presidential election. Before last night’s debate, people could buy events contracts on everything from whether Donald Trump would say “bitcoin” to whether VP Kamala Harris and Trump would shake hands (bettors gave a 27% chance).

It’s tricky pulling chips from the pot… especially a big one. Polymarket saw $1.1B in bets since June, and 88% of those were on US elections. Kalshi’s court win could set a legal precedent for election betting in America. Still, regulators and lawmakers have argued that election betting could hurt the integrity of the democratic process.

Out of the vault… The Fed’s reversing course on plans to hike banks’ reserve requirements by 20%. Now it plans to raise the amount of cash banks need to have on hand by just 9%. FYI: banks are required to hold a certain amount of cash in vaults to handle a rush of customer withdrawals. Most US banks with less than $250B in assets (aka all except the biggest) won’t be required to hike their reserves if the rule’s adopted.

Take it to the bank… The Fed’s concession is considered a big win for Wall Street, which has been fighting against the hike since it was proposed last summer after the collapse of Silicon Valley Bank, Signature Bank, and First Republic. Bank execs led by JPMorgan Chase CEO Jamie Dimon have rallied against the higher-reserve requirement and earlier this year threatened to sue the Fed. Wall Street lobbyists ran TV and billboard ads, warning consumers that it would hurt their ability to get loans like mortgages.

It’s hard to strike a safe balance… On the one hand, requiring banks to hold too much in reserves could depress lending, which could hamper economic activity and spur a recession. On the other hand, banks need to be prepared to weather a crisis. Whether the Fed’s proposed hike will help the US prevent a financial crisis is up for debate, but experts say the country isn’t prepared to handle another shock.

Uncharted: Which European country, where tourist #s have boomed, is this? Hint: it recently announced plans to impose a ~$22 tax on summer cruise ship visitors in hotspots. (Answer here). 

 (Answer here.)

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Authors of this Snacks own bitcoin and shares of: Apple

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