Tea Leaves #6: KALSHI & CAMELS

Originally published July 22, 2026

CME has had a busy summer. Just last month, it sued the CFTC. And according to this weekend’s FT, its market cap has fallen nearly 20% in a matter of weeks.

Why? Talking heads would say “Kalshi.”

More specifically, the CFTC’s approval of Kalshi’s bitcoin “perps,” or “perpetual futures” – a product with which CME takes issue.

A product I won’t pretend to understand.

What I do understand: Financial history. And the story of Kuwait’s Souk al-Manakh, a shadow equity exchange established in 1978, feels pertinent.

As Ben Craig of the Cleveland Fed writes, the Souk was born of investor demand to trade stocks unavailable on the traditional exchange (the Boursa). Their needs unmet, these traders struck out for a new home.

Literally. They moved to a converted parking garage, a location that derived its name from the market that preceded it.

The Souk al-Manakh. Translated, “the market at the resting place of camels.”

To insulate the Boursa from the Souk, regulators drew what they believed were clear lane lines. Critically, they banned bank financing of Souk trades – an attempt to mitigate the risk of broader disruption if things went awry.

But as we know, systemic risk is stubborn.

Without traditional funding sources, Souk traders became reliant on a system of post-dated checks as a credit and liquidity substitute. That system grew to billions before confidence broke and the exchange collapsed.

The fallout extended to Kuwaiti banks, whose customers became overextended in the Souk and were subsequently unable to repay other obligations. The risks thought relegated to the shadows of a parking garage brought down the house.

“In the end,” as Craig notes, “only one bank in Kuwait’s robust commercial banking system was solvent.”

To be fair, Kalshi isn’t a camel trading post. It’s regulated by the CFTC, an entity whose inner workings aren’t known to me.

But if underpinning all of this is a regulatory belief that the broader market can be inoculated by isolation, the Souk says think again.