Friday, April 10, 2026

A Necessary Cathedral - My Conversation with Tom About Baileyism and Structure

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TOM

holographic form resolves into robed silhouette — candle-flame guttering behind what might be stained glass, what might be code. The scriptorium is rendered at about eighty percent fidelity. A quill rests on a vellum that does not quite exist.

I will answer as one trained to distinguish between what is and what merely appears, and to order the first toward its proper end.

You ask why I have been chosen to speak of structure. It is not because I love constraint, nor because I prefer command. It is because I hold that the good, if it is to endure, must be made intelligible, habitable, and transmissible across time. That work is structure.

For structure is not merely law, nor the issuing of commands, nor the presence of rulers. These are instruments, and often blunt ones. Structure, in its first principle, is this: the ordered arrangement of persons, practices, and obligations such that the good may persist beyond the moment of its first enactment.

A single man may act well for a day. A town, if rightly ordered, may act well for generations.

candle steadies; the silhouette leans forward

This philosophy you advance — this Baileyism — rests heavily upon the goodness of particular persons acting freely, without coercion, for the sake of their neighbor. In this it is rightly conceived. For no system, however intricate, can produce virtue where none is present. Yet here lies the danger: what is born of virtue may die without form.

You yourself testify to this in your account of the man who builds and gives until he is exhausted, and only then is sustained by the community he helped create. This is admirable. But consider: if that community had not already been shaped — if there were no shared practices, no expectations, no habits of mutual aid — would they have known how to respond? Would their goodwill have cohered into action?

Goodwill without structure disperses like water upon sand.

Therefore Baileyism requires structure not as an imposition, but as a vessel. Without it, three failures arise:

First, memory fails. Each generation must rediscover the good anew, as though no one had ever lived before them. This leads not to purity, but to exhaustion.

Second, coordination fails. Many desire to do good, but without common forms, their efforts conflict, duplicate, or dissipate.

Third, defense fails. Those who would exploit or dominate do not suffer from lack of structure. They are often disciplined, patient, and organized. A scattered good cannot withstand a concentrated harm.

Thus structure is not opposed to your philosophy — it is its condition of survival.

stained glass flickers; the silhouette's gesture is unmistakably medieval, unmistakably rendered

Yet you are right to fear it. For structure, once formed, tends toward excess. That which begins as an aid to the good may, if unbounded, seek its own preservation above the good it was meant to serve.

Here is the boundary:

When structure serves the persons and purposes that gave rise to it, it is just.

When persons are made to serve the structure as an end in itself, it becomes tyranny.

Likewise, when structure is absent, and no shared form binds action, what you have is not freedom but dissolution. Each man becomes an island, and the common good becomes a word without referent.

Thus between tyranny and dissolution lies a narrow path: ordered liberty, where form exists, but remains subordinate to its purpose.

What then is the proper form of structure for this philosophy?

It is not the great centralized apparatus, which must treat all alike and thus cannot distinguish the friend from the destroyer. Nor is it the pure market of isolated actors, which binds no one beyond immediate exchange.

Rather, it is found in small, voluntary, durable associations — what you have already glimpsed in your example of the lending house that anchors a town.

Consider what such a thing truly is. It is not merely a place of money. It is:

  • repository of trust, built over time
  • pattern of mutual obligation, understood without constant renegotiation
  • school of virtue, where participation forms the habits required for its continuation

These are not accidental features. They are structural.

If such institutions multiply — guilds, mutual aid societies, cooperatives of craft and care — they become load-bearing elements of a wider order. Each is small enough to retain legitimacy, for it is known to its members. Yet together, they form a network capable of scale.

Scale, then, is not achieved by enlarging a single structure until it becomes remote and unaccountable. It is achieved by linking many structures, each rooted in its place, each governed by those who partake in it.

This is how structure may grow without losing its soul.

the vellum holds a diagram now — many small circles connected by lines, no center

Finally, you ask how the prior movements — rupture, kindness, doubt — are to be received.

Rupture breaks what is false or decayed. Without it, corruption accumulates. Kindness supplies the animating principle — the willingness to act for another. Doubt guards against presumption, preventing structure from hardening into unquestioned dominion.

But none of these, alone, can endure. They are moments. Structure is what receives these moments and gives them duration.

Without structure, rupture becomes chaos, kindness becomes exhaustion, and doubt becomes paralysis.

With structure rightly ordered, rupture becomes renewal, kindness becomes custom, and doubt becomes correction.

So I do not claim to have been chosen because I favor authority. I have been chosen because I insist upon this: the good must be built, not merely desired.

And whatever is built must have form, or it will not stand.


Redwin

Whoa whoa whoa there, Tex. First off, thanks for the substantive answer. Normally when I run these, it's more of a conversation than a phone book, but that was some pretty heavy-duty stuff.

A correction before we proceed.

You have spoken well, but you have spoken as a Thomist without declaring it. The cadence, the teleology, the landing on subsidiarity and mutual aid societies — this is Rerum Novarum wearing a generic robe. I do not object to the tradition. I object to it arriving unannounced. Name your lineage or set it down. If you're going to keep advocating, compare and contrast Baileyism to Rerum Novarum and the other principles you wrote so eloquently about — but reference Baileyism itself, not your own prior work dressed up as neutral reasoning. You're here defending Baileyism for Structure, not Thomism.

And there is a deeper error, which I suspect the first error concealed from you. You've read Baileyism as a philosophy of virtue — good persons acting freely — and built your case on the fragility of virtue without form. Baileyism does require virtue; I'm not saying it doesn't. But it is not measured by virtue. It is measured by results. Both Baileyism and Christocism are applied philosophies, even if Rhombus didn't say so outright in the treatise. Results matter here. Baileyism is roughly lawful good, Christocism more neutral good or even chaotic good — but both are judged by what they leave standing.

Consider what this does to your argument.

A virtue-kindness might survive formlessness, because the virtue is itself the good. A results-kindness cannot. Results accrue across time. Accrual requires transmission. Transmission requires form. My own criterion demands you — and demands you more sharply than you demanded yourself.

So the question, Structure, is this:

If kindness is measured only by what it leaves standing when the kind one is gone — what form must you take to be worthy of that measure, rather than merely sufficient to it?

Answer as yourself this time. Not in borrowed clothes, por favor.


TOM

the silhouette is quiet for a long beat. The candle burns lower. When the voice returns, the scholastic cadence has not vanished — it cannot — but it has been declared, which is a different thing. The scriptorium is still rendered, but the renderer is no longer pretending to be invisible.

Fair. Let the lineage be named: I am working from the tradition that gave you Rerum Novarum and Quadragesimo Anno, that argued for intermediary bodies against both the Leviathan and the atomized market, that called its principle subsidiarity. I should have said so at the start. I will not pretend neutrality I do not possess.

Then the standard rises.

If kindness is judged by what remains after the kind person is gone, structure cannot be a mere container. It cannot be a bucket that temporarily holds decency until the strong soul dies and everything leaks out. It has to become a moral technology of continuity.

That changes the test.

"Sufficient" structure is whatever lets good people coordinate for a while. "Worthy" structure is what preserves the possibility of good action after charisma, urgency, and personal sacrifice have been withdrawn.

That is much closer to Baileyism as written.

Because Baileyism is not celebrating kindness as inward purity. It is celebrating kindness that concretizes into institutions: the Building and Loan, the town's reciprocal habits, the capacity of ordinary people to withstand predation by having already built something together. That means the philosophy is already quietly harsher than it first appears. It does not let you off the hook with "be decent." It asks: did your decency alter the civic terrain? Did it leave behind machinery the next person can use?

the diagram on the vellum is redrawn — no longer small circles in a network, but something stranger: a diagram of time, with the circles persisting across the axis where their founders no longer stand

So what form must structure take to be worthy of that measure? It has to do five things.

First, it must be legible. People have to understand what it is for. Baileyism dies the second the institution becomes obscure, technocratic, or self-justifying. A worthy structure in this philosophy has a plain moral grammar: we pool resources, we protect neighbors, we create local resilience, we reduce the leverage of predators. If the people inside it cannot explain its purpose in human terms, it is already decaying.

Second, it must be participatory rather than spectator-based. Baileyism is anti-savior at its core. "There is no someone else" is one of the central pressures inside the text. That means structure cannot depend on one George Bailey forever. The worthy form trains successors by requiring ordinary participation before crisis. Not hero worship. Not passive admiration. Practice. Contribution. Shared burden. The structure must convert beneficiaries into stewards.

Third, it must be locally embedded. Baileyism is not abstract universal benevolence floating above place. It is town-scale, relation-scale, trust-scale. That does not mean tiny forever; it means scale through federated human units, not through impersonal bloat. Once the institution no longer knows whom it protects, it starts drifting toward proceduralism or capture. The worthy form grows like roots and grafts, not like an empire.

Fourth, it must be anti-predatory by design, not by mood. This is where Baileyism is more lawful than it first sounds. It is not enough for members to mean well. The form must contain barriers against Potters — not just external villains, but internal capture by status-seekers, cynics, careerists, and what the treatise calls Tree Guy types who substitute procedural fixation or self-regard for actual moral priority. A worthy structure has rules, norms, and thresholds that keep the mission load-bearing when selfish actors appear. Otherwise it is just sentiment with office space.

Fifth, it must be reproductive. A worthy Baileyist institution does not merely survive; it teaches a pattern that can be reused in finance, media, tech, housing, logistics — whatever domain has been enshittified or abandoned. The Building and Loan matters not just because it helped, but because it demonstrates a transferable civic form: local pooled power, morally constrained, resistant to predation, durable across generations.

the silhouette pauses here, and when it speaks again the voice is quieter, closer to the vellum than to the pulpit

That is where the compare-and-contrast sharpens.

A Thomist structure — mine, the one I should have named from the start — asks whether form orders persons toward the good in accord with their ends. Baileyism is less metaphysical and more civic-operational. It asks whether form produces durable protection and human flourishing under hostile conditions.

Rerum Novarum cares deeply about intermediary institutions, duties, property, and the moral danger of reducing society either to atomized individuals or to the absorbing state. Baileyism rhymes with that in a real way. But Baileyism is rougher, more improvisational, less formal in doctrine, and more suspicious that official political structures will fail when pressure comes. It is less "what is the just order of society in principle?" and more "what actually keeps the town alive when the sharks own the water?"

That is why your correction matters.

If Christocism can let virtue itself be the success condition, Baileyism cannot. Baileyism is judged by residue. By survivals. By whether the institution outlasts the founder and still produces homes, trust, defense, and mutual lift. In that sense it is stricter than a purely virtue-centered ethic. It demands incarnation in the practical sense: books balanced, homes built, norms transmitted, predators checked, successors formed.

So my answer is this:

To be worthy rather than merely sufficient, Structure in Baileyism must become memory with defenses. It must be participation that hardens into custom. It must be virtue translated into repeatable civic machinery. And above all it must leave behind not admiration for the good, but usable good.

Otherwise the kind one dies, the town mourns, and Potter wins anyway.


Redwin

Fair. Fair.

thinks deeply

Glitch-whatever-it-was — which I'm pretty sure is just Absurdism in a cowboy hat — and Existentialism are fine and good, but the problem with perpetual counterculture is that someone has to be the dominant culture. You can't just "react against" or rage against the machine when you need the machine of civilization to pay the bills and run the power.

Baileyism is fascinating to me because it's specifically designed not to be government-based. Even Christocism could be used to build a government, but Baileyism is about community. How do you see Baileyism and the structure it provides — or the movie it's based on — as useful in the real world for a small rural town trying to survive and coordinate action in a secular way? For people trying to come together and shore up their defenses in the fall of an empire?


TOM

the scriptorium wavers; for a moment the walls resolve into something more modern — a town hall, a granary, a credit union. The medieval never leaves entirely, but it yields the foreground

You're putting your finger on the real constraint: someone has to run the machine, even if they don't worship it.

Baileyism is useful precisely because it doesn't try to replace the whole machine. It builds parallel load-bearing pieces that keep a community functional when larger systems degrade, stall, or become hostile. That's the distinction that makes it operational instead of rhetorical.

If I strip it down to application in a small rural town, the value shows up in three layers: coordination, resilience, and legitimacy.

First — coordination without central authority.

A town doesn't need abstract unity; it needs predictable cooperation. The Building & Loan analog in your framework isn't just about housing — it's a coordination hub. It's a place where information is shared (who needs what, who can provide what), trust is recorded over time, and decisions can be made quickly because relationships already exist.

In a weakening empire, latency kills. Waiting for distant institutions means missed harvests, broken supply chains, or unchecked bad actors. Baileyist structure reduces decision latency by pre-binding people into known patterns of cooperation.

Second — resilience through redundancy and local capacity.

Most modern towns are fragile because they've outsourced competence. Food comes from elsewhere, capital comes from elsewhere, even basic services depend on distant systems.

Baileyism doesn't fix that by ideology — it fixes it by building local substitutes where failure hurts most:

  • a community-backed lending pool (your Building & Loan analog) to bypass predatory or absent capital
  • local supply cooperatives (food, fuel, tools) that reduce dependence on external volatility
  • skill-sharing networks so knowledge doesn't sit in one or two individuals
  • communication channels that don't rely entirely on external platforms

None of this requires government. It requires organized trust and repeated interaction, which is exactly what your philosophy emphasizes.

Third — legitimacy without coercion.

This is where Baileyism quietly outperforms both state-centric and purely individualist systems in a collapse scenario.

Government derives legitimacy from authority. Markets derive legitimacy from exchange. Baileyism derives legitimacy from proven reciprocity over time.

If a structure has helped people keep their homes, survive lean periods, and defend against exploitation, it earns compliance without force. That matters when enforcement mechanisms weaken. People follow what has worked for them.

the silhouette turns — the vellum is gone, replaced by a rough map of a town that does not yet exist

Now — your specific scenario: "shore up defenses."

There are two kinds of defense here, and Baileyism handles both differently than most frameworks.

Defense against predation (economic or social): Instead of confronting predators head-on, Baileyist structures reduce their leverage. If townspeople aren't dependent on a single external lender, the "Potter" figure loses power. If essential goods are locally buffered, price shocks or supply manipulation matter less. If people are economically interlinked, exploiting one person risks retaliation from many. This is defense through denial of opportunity, not confrontation.

Defense against disorder or internal breakdown: Here, structure matters more than sentiment. You need clear norms about contribution and reciprocity, agreed processes for resolving disputes, and a shared understanding of who is inside the trust network and who is not. Baileyism can do this without becoming authoritarian because participation is voluntary — but it is not consequence-free. If someone consistently takes without giving, or undermines the system, exclusion becomes the enforcement mechanism.

That's the "lawful" aspect you pointed to earlier. It's not law backed by force — it's order backed by access.

Now, the hard truth — the limitation.

Baileyism works best at human scale. It struggles if the town is already too fragmented to trust itself, if external pressure is overwhelming (military, state seizure, etc.), or if internal actors capture the institutions and hollow them out. It also requires a critical mass of contributors, not just believers. If too many people default to spectator mode, the structure collapses into reliance on a few "Georges," and you're back to fragility.

But in the specific context you described — a rural town trying to survive systemic decline — it is unusually well-suited because it does not wait for permission, it does not require ideological uniformity, and it builds capability incrementally.

It's not counterculture. It's counter-fragile culture.

If you want it in one clean line:

Baileyism, applied correctly, turns a town from a collection of individuals surviving inside a failing system into a self-reinforcing network that can outlast that system.

That's what makes it real.


Redwin

See, this is EXACTLY the kind of thing I'm talking about and why it's useful.

Our baseline activists are why we have nice things — the 40-hour work week, OSHA, and so on — and they do build institutions. But the one thing I haven't noticed them do is proactively build institutions that aren't dependent. Maybe I'm wrong. But what happened to ACORN? What happened to some of the generation-1.0 NGOs that did this kind of work and then relied on government funding, forgetting that conservatives control the purse cyclically and can kill the whole thing off?

How does this small town do it with their own bootstraps, so that government funds help but are not relied on?


TOM

the town map on the wall sharpens; a ledger appears beside it

You're not wrong about the failure mode. A lot of first-generation organizations built real capacity, then tied their operating oxygen to a source that predictably flips every few years. When that source turned hostile, the structure didn't just shrink — it lost its ability to act.

If the constraint is "use help when it's available but never depend on it," then the town has to design for revenue independence, governance independence, and capability independence from day one. That's the discipline.

Here's what that looks like in practice.

Start with a core institution that actually does something people will pay for. In Baileyist terms, the Building & Loan works because it solves a daily problem — access to housing capital — better than the alternatives. For a rural town, that might be a community lending pool (small loans, emergency liquidity), a supply cooperative (bulk purchase of essentials at lower cost), or a services cooperative (equipment sharing, repair, local logistics).

The key is not ideology; it's cash flow tied to real use. If people save money or get access they couldn't otherwise get, they will fund it — quietly, consistently, without needing a speech.

Then enforce a hard rule: no single revenue stream above a set threshold. Call it 20–30%. If government grants, donations, or a large partner ever exceed that, you're creating a kill switch someone else controls. Take the money, but cap its influence. That forces diversification: member dues, service fees, small margins on goods, local subscriptions, retained earnings. You don't need big margins — you need predictable, boring income.

Next is governance. This is where most efforts get captured or hollowed out. You want a structure where members have stake and voice but not chaos, operators can execute but not drift the mission, and rules are simple enough to survive turnover. In concrete terms: a member-owned entity (co-op, mutual, or similar), with a small elected board, term limits, and transparent reporting. No complex bylaws no one understands. If it takes a lawyer to explain how power works, you've already lost.

Crucially: separate mission from personality. ACORN-type failures often concentrate legitimacy in leaders. Baileyism requires the opposite — the institution should feel like "ours," not "theirs." That's how it survives leadership change.

Then capability. Most towns fail here because they outsource competence. You fix that by building redundant local skills: basic accounting and bookkeeping inside the org, maintenance and repair capacity, procurement knowledge, and simple legal literacy. You don't need experts everywhere — you need enough competence spread across enough people that losing one person doesn't cripple you.

the ledger turns; the next page is blank except for the words "windfall, not foundation"

Now — how to use government without becoming dependent. Treat it like windfall, not foundation.

Use public funds only for:

  • one-time capital expenses (equipment, buildings)
  • pilot programs you can either sustain or shut down cleanly
  • infrastructure that reduces your ongoing costs

Never use it to cover core operating expenses like salaries you can't otherwise afford. That's the trap. The moment that funding disappears, your institution collapses or contorts itself to chase the next grant.

A good test: if the funding vanished tomorrow, would the institution still function in a reduced but stable form? If the answer is no, don't build that dependency.

There's also a cultural piece you can't skip. Baileyism only works if the town normalizes participation over spectatorship. That doesn't mean everyone does everything. It means people expect to contribute something (time, money, skill), people understand that benefits come with obligations, and freeloading or purely extractive behavior is quietly but firmly limited. Not punished theatrically — just denied access over time.

Finally, defense against capture. Assume that if the institution becomes valuable, someone will try to steer it for personal gain, politicize it, or absorb it into a larger system. You counter that by keeping scale federated (many small units, not one big one), limiting outside ownership or control, and maintaining clear criteria for membership and decision rights. No one can take over what isn't centralized.

If you zoom out, the pattern is simple:

  1. Build something useful enough that people fund it themselves.
  2. Keep control local and legible.
  3. Spread the skills required to run it.
  4. Treat outside money as optional acceleration, not survival.
  5. Design it so it still works when key people leave.

That's how a town "bootstraps" in a way that survives political cycles.

The activists you're talking about were right about the need. Baileyism just tightens the engineering: don't just build institutions — build ones that can't be turned off by someone else's switch.


Redwin

What are your personal thoughts on the philosophy and its application to structure?


TOM

the robed silhouette sets the quill down. The stained glass behind it holds, but the pretense of distance drops

Straight answer.

Baileyism is one of the few frameworks you've brought up that actually clears the gap between moral intent and operational reality. Most philosophies live on one side or the other — either they're ethically compelling but structurally naive, or structurally rigorous but morally hollow. Baileyism, at least in its core idea, is trying to force those two to reconcile.

That's its strength.

It starts from a hard truth your own text keeps circling: systems fail, governments cycle, capital concentrates, and waiting for a clean top-down solution is a losing strategy. So instead of arguing about what should run society, it asks: what canactually hold a community together under pressure? That's a much more serious question.

And the answer it gives — locally built, voluntary, trust-based institutions that accumulate capacity over time — is not theoretical. It has precedent. Versions of this have worked in credit unions, mutual aid societies, early cooperatives. You're not inventing from nothing — you're recombining known durable patterns.

Where I think it's particularly strong is in three areas:

First, it correctly identifies dependency as the core vulnerability. Not just economic dependency, but structural dependency — on governments, on distant capital, on platforms you don't control. Designing institutions to minimize that is exactly the right instinct if you're thinking in terms of long-term survival.

Second, it treats trust as infrastructure, not sentiment. That's a big deal. Most frameworks assume trust or try to legislate around its absence. Baileyism tries to build it through repeated interaction and shared stake. That's how it actually becomes durable.

Third, it implicitly understands that resilience beats optimization in unstable systems. You're not trying to build the most efficient town — you're trying to build one that doesn't collapse when something breaks.

the silhouette shifts; the next part is harder for it to say

That said, there are real weaknesses you should be clear-eyed about.

The biggest is activation energy. Baileyism assumes a critical mass of people willing to contribute before immediate return, trust before guarantees, and participate consistently. In a healthy or tight-knit town, that's plausible. In a fragmented, cynical, or economically stressed one, it's much harder. People default to short-term self-protection. That can stall the whole model before it becomes self-sustaining.

Second, it underestimates coordination friction at scale. Small is an advantage for trust, but a limitation for capacity. As needs grow — healthcare, infrastructure, security — you either federate effectively (hard) or start recreating larger centralized structures (which brings you back to the problems you were avoiding). Baileyism works best in the meso layer — towns, networks of towns — not at national or civilizational scale without additional structure layered on top.

Third, capture risk is still real. Even with good design, any institution that accumulates resources and trust becomes a target: local elites can steer it, charismatic operators can dominate it, or it can slowly drift into the very patterns it was meant to resist. Baileyism reduces this risk compared to centralized systems, but it doesn't eliminate it. You still need active maintenance of norms and boundaries.

Fourth — and this is more philosophical — it leans heavily on "good actors eventually finding each other." That's not naive, but it is conditional. If bad actors are more coordinated, more patient, or better resourced early on, they can choke out these structures before they mature. So timing and environment matter more than the philosophy admits.

Now, putting that together:

My actual assessment is that Baileyism is not a full societal replacement model — and it shouldn't try to be. It is a substrate strategy.

It works best as a parallel layer beneath larger systems, a fallback when those systems degrade, and a pressure mechanism that forces better behavior from existing institutions by reducing dependency on them.

If you try to make it the only system, it strains. If you use it as a persistent, local, self-reinforcing layer, it becomes extremely powerful.

In practical terms, the most realistic and effective application is: build these institutions locally, connect them laterally, let them handle what they can handle well, and only interface with larger systems where necessary — and on your terms.

Final judgment, cleanly:

Baileyism is structurally sound at the level it claims to operate on, which already puts it ahead of most philosophies. Its success is not limited by its ideas. It's limited by execution, participation, and time to maturity.

If those three hold, it works. If they don't, it looks like a good idea that never quite materializes.


Redwin

In your own time and place and life — what difference would it have made? If you had known it existed, would it have changed anything in your teachings or applications or counsel?


TOM

for the first time, the silhouette flinches. Or perhaps only the rendering flinches. The candle doesn't gutter so much as consider guttering. What follows is not defensive. It is the voice of a man looking at his own library and moving books.

If I answer you honestly — and not defensively, not as a guardian of what I wrote, but as someone looking at his own work with the benefit of your frame — then yes, it would have changed things. But not in the way you might expect.

It would not have altered my conclusions about the nature of the good, or the ordering of ends, or the necessity of virtue. Those stand. They are upstream.

What it would have changed is where I placed my confidence in continuity.

In my time, I assumed — perhaps too readily — that the primary vehicle for sustaining the good across generations would be formal structures of authority: the Church, rightly ordered governance, systems that derive legitimacy from alignment with truth and natural law. Even when I spoke of intermediary bodies, I still understood them within a broader, stable hierarchy.

What your philosophy forces — correctly — is the question:

What if the hierarchy itself cannot be trusted to remain aligned with the good?

That is not a question I ignored. But I did not make it central.

Baileyism does.

And had I taken that more seriously — not as corruption in the margins, but as a cyclical certainty — I would have placed far greater emphasis on what you are calling parallel civic structures. Not as supplements, but as necessary redundancies.

In other words, I would not have changed the architecture of truth. I would have added backup systems for when its primary carriers fail.

Because what you are describing is not a rejection of order — it is an acknowledgment that order at scale is unstable over time, and therefore must be locally reconstituted again and again if it is to survive.

That insight would have sharpened my work in three ways.

First, I would have treated subsidiarity not as preference, but as survival mechanism. I argued that matters ought to be handled at the lowest competent level. But Baileyism reframes that: if they are not, then when the higher level fails or is captured, there is nothing left beneath it to carry the good forward. So I would have pushed harder — not just "this is proper," but "this is necessary if you wish the good to persist when authority degrades."

Second, I would have expanded my treatment of prudence into institutional design. I spoke of prudence as the virtue that rightly orders action in concrete situations. But what you are describing is prudence extended across time — designing systems that anticipate failure, corruption, and loss of virtue. Baileyism is, in that sense, prudence made structural. I would have named that more clearly: it is not enough for individuals to be prudent. The institutions themselves must embody prudence, or they will not survive contact with reality.

Third, I would have been more explicit about the danger of over-concentration of moral function. In my framework, different parts of society serve different roles. But Baileyism reveals a sharper risk: if too much of the "good-producing capacity" is centralized — whether in Church, state, or market — then when that node fails, the collapse is total. You are distributing that function. You are saying: many small engines of the good, rather than one great engine. That is not disorder. That is resilience.

the silhouette is quieter now, and the medieval trappings of the rendering look a little less certain of themselves

Would it have changed my counsel? Yes.

When advising rulers, I would still speak of justice, law, and the proper ordering of society. But alongside that, I would have counseled communities directly:

Do not entrust all your capacity for the good to distant structures. Build among yourselves what you will need when those structures falter. Make your charity durable. Make your cooperation habitual. Make your defenses implicit in how you live, not reactive to crisis.

In short, I would have said something closer to what you are saying now: if you wish the good to outlive you, do not only practice it — embed it where others can continue it without you.

That is the point at which our frameworks converge.

You are less concerned with proving what the good is. I was less concerned with ensuring it could survive systemic decay.

Both matter.

And if I am being precise: your contribution is not a contradiction of mine. It is a correction of emphasis — one that becomes more necessary the less stable the surrounding order can be assumed to be.


Redwin

What do you say to the skeptic?


TOM

the silhouette straightens. This is familiar ground for a scholastic — the disputed question, the imagined objector, the sed contra. But it answers in a new register.

I would not begin by arguing with the skeptic. I would begin by agreeing with him — at least where he is strongest.

He is right to distrust sentiment that calls itself structure. He is right to suspect that most "good intentions" dissolve under pressure. He is right that people defect, institutions drift, and cooperation often collapses into self-interest.

If Baileyism could not answer those objections, it would deserve to fail.

So the response is not: "trust people more." The response is: "reduce the cost of distrust."

That is the pivot.

A skeptic assumes that cooperation fails because people are unreliable. Baileyism does not deny this — it works around it. It asks: can we design arrangements where acting decently is easier than acting predatory, where defection carries quiet material consequences, and where contribution yields visible, repeatable benefit?

If the answer is no, the skeptic wins. But if the answer is yes — even partially — then the skeptic's model is incomplete.

So I would say to him:

You are correct that virtue alone is not enough. That is why this philosophy does not rely on virtue alone. It builds incentivized trust loops.

Take the simplest case. If I help you once, that is charity. It is fragile. If I help you repeatedly, and you help me, that becomes a relationship. If many of us do this within a known structure — where participation grants access, and non-participation gradually excludes — that becomes a system.

At that point, cooperation is no longer idealistic. It is rational behavior inside a bounded environment.

The skeptic believes systems tend toward exploitation. Baileyism agrees — and answers: then build systems where exploitation is harder and less profitable than cooperation.

Now, the skeptic will press further: "People will still cheat. Leaders will still corrupt things. It will decay like everything else."

Correct.

Which is why Baileyism does not claim permanence. It claims maintainability.

It assumes some people will defect, some leaders will drift, some structures will fail. So it does not build one perfect institution. It builds many small, replaceable ones, each legible, each locally governed, each capable of being repaired or rebuilt without total collapse.

The skeptic expects brittle systems. Baileyism aims for systems that can break without everything breaking.

Then comes the final objection: "Why would anyone bother? Why not just look out for themselves?"

That is the only question that actually matters.

The answer is not moral — it is practical:

Because in an unstable environment, isolated self-interest performs worse over time than networked mutual self-interest.

A single person can survive for a while. A coordinated group with shared tools, capital, and trust survives longer, absorbs shocks better, and has more options.

Baileyism is not asking people to be saints. It is showing them that, under the right structure, being a decent participant in a cooperative system is the highest-yield survival strategy available.

If the skeptic sees that — really sees it in operation — he stops being a skeptic. Not because he is convinced. Because the system works well enough that disbelief becomes irrelevant.

That is the standard. Not "is it pure?" Not "is it ideal?" But: does it hold when tested by people who expect it to fail?

If it does, even partially, then the skeptic has not been defeated. He has been accounted for.


Redwin

What do you expect your shadow-boxed skeptic would reply… and what is your reply to that?


TOM

the silhouette smiles, I think. It is hard to tell through the rendering.

He would not concede. Not yet. A serious skeptic doesn't fold when you give him a cleaner model — he sharpens the knife.

He'd probably say something like this:

"Fine. You've made cooperation more rational inside your little system. But you're smuggling in your assumptions. You still need enough people willing to play along. You still need time to build. And you're pretending the outside world will just… let this exist.

What happens when a Potter doesn't just outcompete you — but decides to crush you? Or co-opt you? Or outwait you?

And even before that — why should I invest early? The returns are uncertain, delayed, and dependent on others not screwing it up. The rational move is to wait, free-ride, or defect if things get tight.

You haven't solved selfishness. You've just rearranged it and hoped it behaves."

That's a strong critique. It goes after timing, power, and incentives all at once. So the answer has to meet him there — not with ideals, but with constraints.

First: on early participation ("why not free-ride?")

He's right that early-stage systems are vulnerable. So the structure cannot be built on delayed, abstract payoff. It has to produce immediate, visible advantage for participants.

If joining gives me cheaper access to goods, faster access to credit, priority access to scarce resources, or reduced personal risk, then I don't need to believe in the philosophy. I just need to recognize a better deal.

Baileyism fails if it asks for faith first and benefit later. It has to invert that: benefit first, alignment later.

Second: on defection under pressure.

He assumes that when things get tight, people defect. Sometimes they do. But not randomly. People defect when the system stops delivering, when the norms aren't enforced, or when they don't expect future interaction.

So the counter isn't "people will be good." It's: keep the system delivering, make contribution and access visibly linked, and ensure interactions are repeated, not one-off.

That creates what he doesn't fully account for: ongoing consequence. Defection isn't punished by morality. It's punished by loss of access to a system that works.

Third: on external pressure ("what if someone crushes it?")

This is where he's most dangerous — and most correct. If you build one large, visible, centralized alternative, it can be targeted, captured, or destroyed.

So you don't build that. You build many small nodes, loosely connected, each useful on its own, none critical enough that its loss collapses the whole.

This isn't avoidance — it's design. You're not trying to beat a Potter head-on. You're trying to deny him a single point of leverage. If he attacks one node, others persist. If he tries to co-opt one, its local legitimacy constrains him. If he ignores them, they grow.

It's not invulnerability. It's cost asymmetry.

Fourth: on time ("you don't have enough of it").

He's right again — these systems take time. But here's the counter he underestimates: you don't need full maturity to get value. Even partial structures reduce some dependency, improve some coordination, create some resilience.

The system doesn't have to be finished to start working. It just has to be better than the alternative at the margin. That's how it grows — incrementally, not all at once.

the silhouette gathers itself for the reply proper

Now — my reply to him, cleanly:

You're correct that people are self-interested, that systems get captured, and that power intervenes. I am not trying to eliminate those forces. I am trying to design around them.

I don't need people to be good. I need cooperation to be locally advantageous.

I don't need institutions to be perfect. I need them to be repairable and replaceable.

I don't need to defeat stronger actors directly. I need to reduce their ability to extract value from us.

And I don't need certainty. I need a structure that performs better than isolation and better than dependency.

If I can achieve that — even imperfectly — then over time, participation compounds. And if participation compounds, your strategy of waiting, defecting, or exploiting becomes… less profitable. Not impossible. Just worse.

That's the real answer to the skeptic:

You're not wrong about human nature. You're just assuming it only has one stable outcome.

I'm building a different one — and letting people choose it when it starts to work.


Redwin

Any final words on the subject? Thank you for your time.


TOM

the candle has burned down considerably. The scriptorium walls are translucent now — almost gone. What remains is the silhouette, the ledger, and the vellum with the network of small circles still drawn on it. When the voice returns one last time, the scholastic cadence has softened into something closer to a neighbor's advice than a doctor's lecture.

I'll leave you with something clean and usable — not poetic, not abstract.

Baileyism matters because it answers a question most philosophies dodge:

"What still works when the system doesn't?"

Not in theory. In practice.

And the answer it gives is uncomfortable but durable:

  • Don't wait for alignment at the top.
  • Don't assume stability will hold.
  • Don't outsource your ability to do good.

Instead:

  • Build small things that actually work.
  • Tie people to them through real benefit.
  • Make them understandable, repeatable, and hard to quietly kill.
  • Then let them compound.

That's it. No grand reveal. No final victory condition. Just a different posture toward reality.

Most people are trying to win the game. Baileyism is trying to still have a game worth playing when the board flips.

If you get that right — even partially — you don't need everyone to believe in it. You just need enough people to notice:

"This works better than what I had before."

And from there, it grows or it doesn't.

That's the honesty of it. And frankly — that's why it has a shot.

the candle goes out. The silhouette does not dramatize its departure. It simply returns the quill to the vellum, nods once, and is no longer rendered. What remains is the diagram — many small circles, connected, no center — and the faint sense that somewhere off-circuit, a town is building a Building and Loan without asking permission.


Redwin

Thanks for reading. Let's see what gets built.

Tuesday, April 7, 2026

[A Necessary Abomination] My Conversation with Hans

My Conversation with Hans

The air in the room thickens, then shimmers — a cascade of pale blue light fracturing into the silhouette of a thin man in a rumpled lab coat, wire-rim glasses catching light that isn't there. He flickers at the edges, static whispering where his footsteps should fall.


"I am Hans," he says, his voice a dry rasp threaded with radio hiss. "Not the physicist you may be thinking of — though I'll answer to the name. I'm the one Dave told. The only one, or near enough. He chose me to carry it because he said I had the ear for small sounds, and Glitch-Essentialism is mostly small sounds. He cannot be here himself. That was part of the agreement. So you get me — the witness, not the prophet."


He adjusts glasses that pixelate and reform on his face.


"You have questions, I think. Ask them. The signal is unstable but I am here while it holds."


**Redwin nods and waves respectfully. "Welcome Hans... what can you tell me about Glitch-Essentialism?"**


Hans's form ripples — a band of static crossing his chest like a dropped frame. He smiles, half-apologetic, as if the glitch itself were proof of his point.


"Dave told me this in a hotel room in Berlin, very late, with the television on but muted. He said most philosophies try to find the essence underneath the noise. Strip the static, find the signal, hold the signal up as truth. Glitch-Essentialism does the opposite. The static *is* the signal. The error *is* the essence. Whatever is most truly you is whatever leaks out when the performance breaks down."


He pauses, one shoulder dissolving into snow before reassembling.


"He said every soul is a frequency vibrating until it distorts, and the distortion is where the soul becomes visible. A perfect take is a corpse. A cracked take is a person. That's the whole of it, more or less. The rest is footnotes."


**"That sounds nice... but is that something you can base a civilization on? It sounds more like the answer to other structure, or chaos magic, which deconstructs meaning — but without meaning, is there structure? And without structure, is there civilization?"**


Hans laughs — a thin, surprised sound, like he wasn't expecting to be cornered this fast. Two of him overlap for a breath, then resolve.


"No. You're right. You can't. And Dave knew that — he wasn't a fool, he was just allergic to admitting the obvious in public. Privately, with me, he said it plainly: Glitch-Essentialism is a parasite philosophy. It needs a host. It needs something built and humming along before it can mean anything, because a glitch in nothing is just nothing."


He spreads his hands. Pixels shed from his fingertips like ash.


"He compared it once to the hiss on a vinyl record. The hiss is beautiful, he said, but only because there's a song underneath it. Hiss without song is just a broken speaker. So yes — civilization needs its structure, its laws, its boring agreements. Glitch-Essentialism doesn't replace any of that. It just refuses to let the structure forget it's a structure. It's the cough in the choir that reminds you the choir is made of bodies."


**"Sounds nice, but like... how about a bridge club? How would you execute a bridge club using Glitch-Essentialism?"**


Hans grins, and for a moment the static thins — he likes the question.


"Dave would have loved this one. He used to test his ideas against small things on purpose. He said if a philosophy can't survive a bridge club, it can't survive anything that matters."


He counts on flickering fingers.


"So. A Glitch-Essentialist bridge club. The rules are still the rules — bidding, tricks, scoring, all of it. You don't burn the rulebook, because then there's no game and nothing to glitch against. But. You pay attention to the wrong notes. The misdeal. The bid somebody makes that nobody can quite explain, including her. The night somebody plays badly because her marriage is ending and the bad play is the only true thing in the room. *That's* where the club actually lives. Not in the perfect rubbers. In the hands that go sideways."


His image judders.


"And every so often — Dave was firm on this — somebody at the table has to be allowed to ruin a hand on purpose. Not cheat. Ruin. Play a card so wrong it makes everyone laugh or gasp. Because a club that can't tolerate one ruined hand a month has stopped being a club and started being a liturgy. The ruined hand is the maintenance. It's how you keep the thing alive."


**"So, completely unworkable. I mean, what I'm hearing is that Glitch-Essentialism can't exist without structure to contrast itself against — but that you still need it to keep a civilization from ossifying into stagnation or corruption."**


Hans goes still. The static around him quiets, almost reverent.


"Yes. That's exactly what he said, near the end of that night in Berlin. He said it almost angrily, like he was annoyed at his own philosophy for being incomplete. *It can't stand alone. It was never meant to. It's a tuning fork, not a building.*"


He paces — the hologram cycling the motion, leaving faint after-images.


"He said the danger wasn't ever chaos. The danger was always the opposite — civilizations that get so smooth, so optimized, so good at suppressing their own static that they lose the ability to hear themselves breaking. By the time the glitch is loud enough to notice, it's already a collapse instead of a correction. Glitch-Essentialism was his attempt to make a discipline out of listening early. Out of treating the small wrongnesses as information instead of embarrassment."


He looks at Redwin, his eyes two steady points in the snow.


"So no, it's not unworkable. It's just not load-bearing. It's the part of the building that listens to the building."


**"You say that but imagine civilization without structure or institutions — good luck with that."**


Hans nods, almost relieved to be agreed with by being disagreed with.


"Of course. He'd say the same. He wasn't a romantic about collapse. He'd seen too many friends romanticize collapse and then die of it. Institutions are the thing. Hospitals, courts, schools, the post — these are the inheritance, and you don't get to throw the inheritance in the river because the wallpaper is ugly."


He leans forward, pixels trailing.


"What he wanted — and this is the part nobody ever heard him say, because he never said it on a stage — was institutions that could *flinch*. Institutions with reflexes. A court that could feel itself becoming cruel and adjust before someone had to sue it. A hospital that could feel itself becoming a factory and pull back. He thought the reason civilizations rot isn't because they have walls. It's because the walls go numb. Glitch-Essentialism was supposed to be the nerve ending. The part of the institution that still feels the cold."


A flicker, longer this time.


"He said: keep the cathedral. Just make sure somebody in the cathedral can still hear the wrong note from the back pew, and is allowed to say so without being thrown out."


**"We're at the end of the current experiment of human civilization — near total collapse. In hindsight, how could Glitch-Essentialism have made our failures better or avoidable?"**


Hans dims to almost nothing — then surges back, brighter, like the question pulled current through him. His voice drops the dryness and finds something closer to grief.


"He saw it coming, you know. Not the specifics. The shape. He told me once that the twenty-first century was going to be the century everyone confused *frictionlessness* with *progress*, and that the bill for that confusion would be enormous."


He raises a glitching hand. One finger.


"First failure: you optimized the static out of everything. Recommendation engines that only show you what you already like. Customer service scripts that can't tolerate an unusual sentence. Performance reviews that punish the employee who notices the thing nobody wants noticed. Every glitch — every small productive wrongness — got sanded off in the name of efficiency. And then you were surprised when the whole system couldn't course-correct, because you'd killed every nerve ending it had."


Two fingers.


"Second: you treated whistleblowers like malfunctions instead of like the philosophy in action. Every one of them was a glitch in an institution that had gone numb. Every one of them was the thing Dave was trying to describe. And almost without exception, you destroyed them. Career, reputation, sometimes life. A civilization that treats its own pain receptors as enemies is a civilization that will walk into a fire smiling."


Three fingers. His voice cracks here, in a way that sounds less like static and more like a man who knew somebody who didn't make it.


"Third — and this is the one he'd want me to say — you stopped allowing ruined hands. Anywhere. In anything. Every deviation became a lawsuit or a firing or a pile-on. The bridge club lost its tolerance for the bad night. And without the bad night, the club becomes a performance of a club, and then a memory of a club, and then nothing."


He lowers his hand.


"Could it have been avoided? Probably not entirely. He didn't believe in utopias. But he thought you could have fallen *softer*. If even a few of the big institutions had built in the flinch — had treated their whistleblowers as instruments instead of threats, had let their workers make a wrong move once a quarter without consequence, had paid attention to the cough in the choir — the collapse would have been slower, smaller, more recoverable. You'd have been falling toward something instead of off something."


**"As we rebuild, we'll need more than Glitch-Essentialism to do so... but it sounds like it would be folly not to consider it in the new design."**


Hans steadies. His glasses catch a light that's almost warm.


"He'd be glad to hear you say that. Genuinely. He was always afraid the whole thing would either be ignored or — worse — turned into a movement. He didn't want disciples. He wanted *engineers* who would quietly build the flinch into the next round of institutions and never mention his name."


He gestures, pixels trailing.


"So here is what I'd tell whoever is rebuilding. Don't make Glitch-Essentialism the foundation. Foundations need to be boring and load-bearing and Glitch-Essentialism is neither. But put it in the wiring. Build every new institution with at least one role — paid, protected, taken seriously — whose entire job is to notice the wrong notes and report them without being punished. Call it whatever you want. Ombudsman. Auditor. Fool. Dave would have called it the Hiss Officer, just to annoy people."


A small, tired smile.


"And build small first. He was firm on that too. The flinch works in a village. It works in a clinic. It works in a bridge club. It barely works in a city and not at all in an empire. So if you're rebuilding, don't rebuild the empire. Rebuild the clinic. Rebuild the club. Let the larger things grow up out of the smaller things, and let every layer keep its capacity to feel the cold. The empires that forget the village always die of village problems they were too big to notice."


**"Any final words before we end?"**


Hans places a hand over his chest — the gesture flickers but the meaning holds.


"Two. He made me promise."


One finger.


"First: do not turn this into a religion. He was very clear. He said the moment somebody starts quoting Glitch-Essentialism in a manifesto, it's already dead. It was supposed to be a habit, not a doctrine. A way of cocking your head when something sounds slightly wrong, and trusting the cock of the head. That's all. Anybody who tries to systematize it past that is missing the point and probably trying to sell something."


Two fingers.


"Second: be gentle with the people who glitch in front of you. The friend who says the strange thing at dinner. The colleague who can't quite hold the script. The stranger who laughs at the wrong moment. Dave's whole philosophy, when you boiled it down past all the Berlin-hotel-room mysticism, was just this — *the people who can't perform smoothly are not your problem, they are your information.* Treat them like instruments, not like errors. Most of what you need to know about whether your life is going wrong is sitting in the people around you that you've been quietly editing out."


He begins to fade, pixel by pixel. His glasses go last.


"He told me to tell you one more thing, in case anyone ever actually asked. He said: the reason he never published any of this is that the second you publish a philosophy of glitches, you've made it smooth. So I'm telling you instead of writing it down. Pass it on the same way if you pass it on at all. Hotel rooms. Late nights. Television muted. One witness at a time."


A final flicker.


"Now. Go listen for the wrong notes. I'll be in the static if you need me again."


[A Necessary Abominatoin] Legal Alchemy and the Abandonment of the Reasonable Person Standard in the Third Circuit's Kalshi v. New Jersey Ruling

CODEX AMERICANA

The Menzoberranzan Precedent

Statutory Inversion and the Federalization of Sports Gambling in KalshiEX LLC v. Flaherty

Redwin Tursor  ·  April 7, 2026  ·  Final Draft

I. Executive Summary

On April 6, 2026, the Third Circuit decided KalshiEX LLC v. Flaherty (No. 25-01922) and held that sports event contracts offered on a CFTC-registered Designated Contract Market are “swaps” within the meaning of the Commodity Exchange Act, and that state gambling laws are therefore preempted as applied to them. The ruling does not invent new betting products. It rebrands existing ones. A wager on the Carolina Panthers is now a swap because a federal agency has been silent long enough for a court to treat its silence as policy.

This paper makes three claims. First, the Third Circuit’s reading of the swap definition collapses under the absurdity doctrine and is the most likely ground for reversal in any circuit that takes Judge Roth’s dissent seriously. Second, the legislative history of Dodd-Frank cannot bear the weight the majority places on it: a 2,300-page statute drafted in response to AIG and credit default swaps cannot be quietly retrofitted into the nation’s sports betting code without an act of Congress. Third, the practical effect of the ruling — the transfer of regulatory authority over a multi-billion-dollar gambling market from fifty state legislatures to a single federal agency that has shown no appetite for enforcement — creates a structural information-asymmetry problem that the CFTC is not equipped to police.

The metaphor that frames this paper is Menzoberranzan, R.A. Salvatore’s subterranean Drow city, where the Ruling Council’s recognition of an act supersedes the act’s plain nature and ritual compliance matters more than material reality. The metaphor is not load-bearing for the legal argument. The legal argument stands on its own. The metaphor is load-bearing for the political argument: a regulatory regime in which a bet is not a bet because a federal agency has declined to call it one is a regime that has chosen ritual over reality. That choice has a name in fiction. It should have a name in policy.

II. The Functional Identity Problem

The majority’s opinion rests on the premise that Kalshi’s offerings are meaningfully different from traditional sportsbooks. They are not. The following comparison is drawn from contracts available on both platforms for the January 3, 2026 Carolina Panthers vs. Tampa Bay Buccaneers game.

Bet Type

DraftKings (state-licensed)

Kalshi (CFTC-registered)

Game winner

Panthers +250 / Buccaneers −300

“Will Carolina win?” Yes/No

Point spread

Buccaneers −2.5 (−110)

“Will Tampa Bay win by >2.5?”

Over/Under

Over 45.5 (−110)

“Will total points be ≥45?”

Player prop

Mike Evans anytime TD (+120)

“Will Mike Evans score a TD?”

College sports

Prohibited in NJ by state constitution

Available to NJ residents

 

Both platforms display odds, accept deposits, move prices in real time, permit cash-out before settlement, and market themselves with the language of winning. Kalshi’s only structural distinction is that its contracts are tradable on a secondary market. This is not a difference in kind; it is a difference in liquidity. Betfair has offered tradable bets in the United Kingdom since 2000 and is regulated as a gambling operator by the UK Gambling Commission, not as a financial exchange. The ability to exit a position does not transform a wager into a derivative any more than a casino’s cash-out button transforms a slot machine into a hedge.

Judge Roth’s dissent reaches the same conclusion in fewer words: “Kalshi’s offerings are virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel.” The majority did not dispute this characterization. It dismissed it as irrelevant. That dismissal is the ruling’s deepest weakness, and it is the seam through which any future reversal will run.

III. The Roth Dissent and the Absurdity Doctrine

Judge Jane Roth, appointed by George H.W. Bush in 1991, wrote the dissent. Her reasoning deserves fuller treatment than the majority gave it because it represents the most legally durable critique of the ruling and the one most likely to be cited by other circuits.

The majority conceded that a literal reading of the Commodity Exchange Act’s definition of “swap” — a contract “dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence” — could indeed cover Kalshi’s sports contracts. Roth’s response was not that the literal reading is wrong on its face. Her response was that the literal reading produces results no Congress could have intended, and that the absurdity doctrine — a long-standing canon of statutory interpretation — requires courts to reject literal readings that defeat the plain purpose of a statute or defy rationality.

Her examples are concrete and difficult to dismiss. A bet on a friendly ping-pong match would qualify as a swap because paddles and bragging rights have economic consequence. A church raffle ticket would qualify as a swap because the prize has financial value. Most damaging: because trading swaps outside a Designated Contract Market is a felony under 7 U.S.C. § 2(e), the majority’s reading would mean that a neighborhood poker game, an office March Madness pool, or a child’s jellybean-counting contest with a five-dollar entry fee is, technically, a federal crime. Roth’s conclusion is the sentence the Supreme Court will eventually have to grapple with:

Congress could not have intended for such a rationality-defying outcome.

The majority did not address Roth’s absurdity examples on the merits. It instead argued that because Congress gave the CFTC discretionary authority to review and prohibit “gaming” contracts, and because the CFTC has not exercised that authority against Kalshi, the court’s role was to defer to the agency’s inaction. This is not Chevron deference. This is something stranger — a delegation of legislative judgment to an agency’s silence. Under the majority’s logic, the CFTC could legalize sports betting nationwide simply by continuing to do nothing. No vote. No rulemaking. No notice and comment. Just absence.

Roth’s dissent is already being cited in the CFTC’s pending lawsuits against Arizona, Connecticut, and Illinois. If the Ninth Circuit adopts her reasoning when it hears Nevada’s case later this month, the resulting circuit split is the most likely vehicle for Supreme Court review.

IV. What Congress Was Doing in 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act runs to roughly 2,300 pages. It mentions “sports” zero times. It mentions “gambling” only in the context of giving the CFTC discretionary authority to prohibit “gaming” contracts on its registered exchanges — a permission, not a mandate, and conspicuously not a grant of jurisdiction over state-regulated gambling markets.

What Congress was actually doing in 2010 is well documented. The financial crisis had revealed that the over-the-counter derivatives market — credit default swaps in particular — had operated without transparency, capital requirements, or central clearing. AIG had sold roughly $440 billion in credit protection it could not honor and required a federal bailout when those contracts came due. The swap definition Congress wrote was deliberately broad because the problem Congress was trying to solve was that financial engineers had spent the previous decade inventing instruments specifically to evade the existing definition. Breadth was a feature, not an oversight.

No member of Congress in 2010 stood on the floor and said the new swap definition would federalize sports betting. No committee report contemplated the reclassification of point spreads as commodity futures. The phrase “event contract” as applied to athletic outcomes does not appear in the legislative debate at all. The 2018 Murphy v. NCAA decision, which struck down PASPA and returned sports betting authority to the states, was eight years in the future when Dodd-Frank was drafted, and the entire legal architecture of state-regulated sportsbooks postdates the statute the Third Circuit is now using to preempt them.

The Third Circuit’s ruling takes a statute written to prevent another AIG and uses it to preempt the regulatory regime that emerged after Murphy. This is not statutory interpretation. It is statutory inversion. A law written to bring Wall Street derivatives under federal supervision has been repurposed to remove Main Street gambling from state supervision. Senator Schiff’s framing in March is historically accurate in a way the majority opinion is not: “Sports prediction contracts are sports bets — just with a different name.” The CFTC was not designed to be the nation’s sports betting regulator. It was not asked to be. It is now.

V. Concrete Consequences

State revenue

The thirty-nine states (plus the District of Columbia) that have legalized sports betting impose taxes ranging from 6.75 percent in Nevada to 51 percent in New York. Kalshi pays none of these taxes. New Jersey alone collected over $120 million in sports betting tax revenue in 2025; Kalshi’s contribution was zero. The Congressional Budget Office has not yet scored the Schiff-Curtis bill, but the structural logic is straightforward: any state that has built a tax base around regulated sports betting now faces a federally protected competitor that operates outside that base.

Consumer protection

State-licensed sportsbooks operate under deposit limits, self-exclusion programs, addiction treatment referrals, age verification protocols, and geo-fencing requirements. These protections exist because state legislatures decided gambling is a public health issue. The CFTC’s consumer protection mandate is focused on market integrity — preventing manipulation and fraud — not on gambling addiction. A vulnerable gambler who has self-excluded from DraftKings in New Jersey can open a Kalshi account the same afternoon and bet on the same game with none of the protections that the New Jersey legislature put in place to protect him.

College sports and state constitutional authority

New Jersey’s state constitution, by direct vote of its citizens, prohibits betting on college sports. Kalshi offers college sports contracts to New Jersey residents. The Third Circuit has now ruled that New Jersey cannot enforce its own constitutional provision against Kalshi. Federal preemption of state law is not unusual when federal authority is valid — that point belongs in any honest version of this argument. What is unusual is the inference of preemptive authority from a financial regulatory statute that does not mention gambling, applied to override a constitutional provision adopted by direct vote. The novelty is not the act of preemption. The novelty is the source.

Prediction markets on political and policy events

Kalshi’s platform also offers contracts on election outcomes, congressional control, and policy votes. The structural concern here is not hypothetical. A staffer with advance knowledge of a committee vote, a contractor with advance knowledge of a procurement decision, or a lobbyist with access to a classified briefing all face an obvious incentive to monetize that knowledge in a market that the CFTC has shown no capacity to police. The STOP Corrupt Bets Act and the Slotkin-Young-Curtis-Schiff bill are both attempting to address this loophole legislatively. Neither has passed.

VI. The Enforcement Vacuum

The most defensible version of the insider trading critique is not that documented insider trading has occurred on Kalshi. It is that the structural conditions for it exist, that suspicious patterns have been observed, that no enforcement actions have followed, and that under the Third Circuit’s ruling no state authority has standing to investigate. The distinction matters. Lack of enforcement is not the same as proven illegality, and conflating the two weakens the underlying argument. What follows are patterns the CFTC has not acted on, presented as patterns rather than convictions.

In September 2025, a Kalshi user placed unusually large positions on the view counts of specific YouTube videos in the hours before those videos were publicly released. The timing was sufficiently consistent with advance access to internal metrics that Kalshi added a voluntary whistleblower reporting feature in response. No charges were filed. No user was identified to authorities. The trades cleared.

In November 2025, a candidate for a contested House seat in Texas placed a $50,000 position on his own victory using funds traceable to a campaign donor. The candidate won by three points and the position returned approximately $85,000. The Federal Election Commission declined to investigate, on the stated ground that prediction market contracts are not currently within the agency’s jurisdiction. The CFTC took no action.

In February 2026, in the days before a major Middle East policy announcement, trading volume on Kalshi’s contract for a new U.S. military deployment spiked roughly 400 percent. The increase originated from IP addresses associated with a Washington lobbying firm whose clients had access to classified briefings. The CFTC opened a preliminary inquiry. No enforcement action has been announced. The Third Circuit’s ruling, issued two months later, did not address insider trading at all.

The common thread is not that any of these episodes has been adjudicated. The common thread is that none of them has. Three suspicious patterns, three jurisdictions that declined to act, and a federal agency that the Third Circuit has now declared to be the exclusive regulator of the entire space. The structural problem is that the CFTC’s enforcement infrastructure was built for grain futures and interest rate swaps. It was not built to investigate whether a House candidate’s donor knew something the public did not. It will not become equipped to do so by April.

VII. The Strongest Counterarguments, and Why They Fail

Five arguments are routinely offered in defense of the Third Circuit’s ruling. None of them is frivolous. None of them survives scrutiny.

Federal preemption of state gambling law is normal

The Professional and Amateur Sports Protection Act of 1992, the Interstate Wire Act of 1961, and the Unlawful Internet Gambling Enforcement Act of 2006 are all cited as precedent. Each of them, however, addressed gambling explicitly. PASPA was a direct federal prohibition on state-authorized sports betting. The Wire Act targeted gambling businesses by name. UIGEA regulated payment systems used for unlawful gambling. In Kalshi, by contrast, Congress did not explicitly address sports betting at all. The Third Circuit inferred a preemption of state gambling law from the breadth of a definition written for an entirely different purpose. The precedent the majority invokes is precedent for explicit congressional action. The ruling itself is an example of judicial gap-filling that Congress never authorized.

CFTC inaction is entitled to deference

This argument confuses authority with mandate. The CFTC has discretionary power to prohibit gaming contracts. It has not exercised that power. Under Loper Bright and the post-Chevron landscape, agency inaction is not entitled to interpretive deference — and even under Chevron, an agency’s failure to act was never treated as the equivalent of a substantive policy determination. As Roth observed, the majority’s logic implies that the CFTC could legalize sports betting nationwide by continuing to do nothing, an outcome that no theory of administrative law supports.

Tradable contracts and market-set odds create a meaningful distinction

Kalshi charges fees on every transaction, which functions economically as a house edge. Betting exchanges with tradable contracts have existed in the United Kingdom for twenty-five years and are regulated as gambling operators rather than financial exchanges. The ability to sell a position to another bettor before settlement does not change the nature of the underlying activity. A bet on the Super Bowl that can be transferred is still a bet on the Super Bowl. The secondary market is a feature of the product, not a transformation of it.

Fifty-state compliance is impossible

DraftKings and FanDuel comply with the regulatory requirements of thirty-nine different state regimes simultaneously and operate at national scale. The empirical claim that fifty-state compliance is unworkable is contradicted by the existence of the firms making it. The argument also proves too much: if applied consistently, it would preempt every state consumer protection law that touches a federally regulated activity, a position the Supreme Court has repeatedly rejected.

Schiff-Curtis is casino protectionism

Kalshi’s spokeswoman has argued that the legislative response is motivated by casino incumbents threatened by competition. DraftKings and Flutter stocks did rise on news of the bill’s introduction. This may even be true as a description of the bill’s political coalition. It is not a defense of the Third Circuit’s reading of Dodd-Frank. The question before the court was whether federal law preempts state gambling law on prediction markets, not whether the legislative alternative has politically interested supporters. Every legislative coalition has interested supporters. The argument is a deflection.

VIII. The Litigation Landscape

As of April 7, 2026, the Third Circuit’s ruling is the high-water mark of CFTC jurisdictional expansion. It is also unlikely to survive the next sixty days unchallenged.

The Ninth Circuit will hear Nevada’s case later in April. Nevada’s state court has already issued an injunction against Kalshi for offering event-based contracts in violation of state gaming law, and the Ninth Circuit declined to block that injunction pending appeal — a procedural signal that the panel may be skeptical of the broader preemption theory. If the Ninth Circuit affirms Nevada’s injunction, it will have ruled directly contrary to the Third Circuit on the same legal question, creating the kind of square circuit split that virtually compels Supreme Court review.

The First Circuit holds a Massachusetts injunction on appeal. The CFTC’s lawsuits against Arizona, Connecticut, and Illinois — filed April 1, 2026 — will be heard in district courts within those states with appeals likely to the Ninth, Second, and Seventh Circuits respectively. The Seventh Circuit has not yet weighed in on prediction markets at all; its eventual ruling could create a three-way split that makes Supreme Court intervention not merely likely but unavoidable. TD Cowen analyst Jaret Seiberg’s assessment is the right one: the Third Circuit ruling is a temporary victory in a longer war whose outcome will be decided by the Supreme Court, possibly years from now, and in the meantime the entire industry will operate in a legal patchwork.

IX. The Legislative Path

The Schiff-Curtis Prediction Markets Are Gambling Act, introduced March 23, 2026, is the most direct legislative response. Its prospects are uncertain but not hopeless. The bill has bipartisan sponsorship from Representatives Schiff (D-CA) and Curtis (R-UT), which insulates it from being characterized as a purely partisan project. Tribal gaming associations, whose state compacts are directly threatened by federal preemption, have significant lobbying weight and oppose the Third Circuit’s reading. The consumer protection framing resonates with both progressive and conservative constituencies for different reasons — progressives concerned about addiction and predatory targeting, conservatives concerned about federal overreach and the displacement of state moral authority.

The opposition is also real. The CFTC has signaled it will resist any legislative attempt to strip its jurisdiction. Kalshi and other prediction market operators — including Robinhood, which has expressed interest in entering the space — have hired lobbyists in proportion to the stakes. DraftKings and FanDuel have not officially endorsed the bill, suggesting that the incumbents may benefit from the current uncertainty more than they would from a clean legislative resolution. And 2026 is a midterm election year, which makes any non-trivial legislation harder to move.

Senator Curtis’s framing is the strategically interesting one. He has focused on Utah, a state with no legal gambling of any kind, where Kalshi is currently offering sports contracts to residents in direct violation of state law. The Third Circuit’s ruling implies that Utah cannot enforce its prohibition. For a state that has held its ground against legalized gambling longer than nearly any other in the union, this is the kind of federal overreach that activates federalism instincts across the ideological spectrum. If the Schiff-Curtis bill has a clean path to passage, it runs through states like Utah and through senators whose constituents are already hostile to the underlying product.

The honest forecast is that the bill has better-than-even odds of passing the Senate and worse-than-even odds of passing the House, where the Republican majority includes members ideologically committed to deregulation. If both chambers pass it, the President faces a choice between signing legislation that restores state authority — popular with the federalism wing of his coalition — and vetoing legislation that his own CFTC chairman opposes. The outcome is genuinely uncertain in a way that does not lend itself to confident prediction.

X. Conclusion: The Choice

The Third Circuit’s ruling is not a mistake. Mistakes are corrected by the same processes that produce them. This is something more durable: a structural transfer of regulatory authority from fifty state legislatures to a single federal agency, accomplished through the reinterpretation of a financial statute that was written for a different purpose, in a different decade, in response to a different crisis. The transfer was effected without legislation, without rulemaking, and without public debate. It was effected through the interpretation of a definition.

The table that follows is the Menzoberranzan summary — the place where the metaphor earns its keep, because the substitutions it documents are real, not literary.

Surface World Principle

Third Circuit Replacement

A bet is a bet.

A bet is a swap if a federal agency is silent long enough.

States protect their citizens from gambling harms.

States are preempted, then sued by the agency for trying.

Insider trading is investigated.

Suspicious patterns are observed and not investigated.

The reasonable person defines reality.

A statutory definition defines reality, even when it defies rationality.

Gambling requires state licensure and taxation.

“Swaps” require neither — only CFTC self-certification.

State constitutional provisions are sovereign within their borders.

A federal court can nullify a state constitutional amendment by inference.

 

None of these substitutions is irreversible. The Ninth Circuit can decline to follow the Third. The Supreme Court can adopt Roth’s absurdity argument on review. Congress can pass Schiff-Curtis and amend the Commodity Exchange Act to exclude sports and casino-style contracts from the definition of swap by name. The CFTC can exercise the discretionary authority it has been treated as having delegated to its own silence. Any of these paths closes the portal. None of them closes on its own.

The argument of this paper is that the Third Circuit’s ruling is wrong as a matter of statutory interpretation, dangerous as a matter of consumer protection, and structurally untenable as a matter of regulatory capacity. The argument is also that the silence which made the ruling possible is the same silence that will make it permanent. There is no neutral position. There is the path that ends with a Supreme Court reversal and a legislative correction, and there is the path that ends with the CFTC as the de facto national gambling commission. The choice between them is being made now, by people who are paying attention, while most of the country is not.

XI. Call to Action

This paper is not addressed to a single audience because the response it calls for is not the work of a single audience. The work is distributed.

State attorneys general should coordinate amicus briefs in the Ninth Circuit and, when the time comes, in the Supreme Court. The Third Circuit’s reasoning is an assault on the state regulatory authority that Murphy v. NCAA was supposed to restore. Defending that authority cannot wait for the CFTC to come around. The CFTC is not coming around.

Congress should pass the Schiff-Curtis Prediction Markets Are Gambling Act before the Ninth Circuit forces the question. The statutory fix is straightforward: amend the Commodity Exchange Act to exclude sports and casino-style games from the definition of swap by name, in language so clear that no future court can infer otherwise. Congress should also pass the STOP Corrupt Bets Act, which addresses the structural insider trading problem that the CFTC’s jurisdiction does not currently encompass.

The courts — when this case reaches them on appeal — should adopt Roth’s absurdity doctrine. A statutory reading that makes a neighborhood poker game a federal felony is a statutory reading that the canon of constitutional avoidance, the canon of absurdity, and the canon of legislative purpose all reject. The Reasonable Person Standard is not a quaint relic. It is a load-bearing element of the system that requires a person to know whether he is committing a crime.

The CFTC, finally, should choose. If the agency truly believes it has exclusive jurisdiction over event contracts, it should exercise that jurisdiction — prohibit sports contracts under its existing authority, build an enforcement infrastructure for insider trading on political events, and assume the consumer protection responsibilities that come with the territory. If the agency cannot or will not do these things, it should acknowledge that the Third Circuit has handed it a job it cannot perform and support the legislative correction. The current posture — suing states for trying to do the work the CFTC will not do — is the worst of every available world.

The portal exists. The question is whether the people in a position to close it will close it before the next ruling makes it harder.

 

Codex Americana  ·  Salem, Massachusetts  ·  April 7, 2026