According to CNBC, Western Grazers, a California goat herding business, used prediction market platform Kalshi to hedge against higher payroll costs after a state wage exemption expired on June 30. Owner Tim Arrowsmith said he pays at least $70,000 a year per herder when flight tickets and visa costs are included, and that labor costs could rise to as much as $240,000 per herder under a 2016 California assembly bill that requires goat herders to be paid for being on call 24 hours a day. The company has about 4,000 goats and eight herders, each paid $60,000 a year.

Castle, a New York-based startup founded by four Stanford graduates and backed by Ribbit Capital, identified the situation through its AI tool and contacted Arrowsmith about structuring a hedge. Castle co-founder and CEO Lucas Cavalieri said the company worked to provide coverage, while Arrowsmith said the arrangement was new to him. Castle declined to say how much it profited from arranging the hedge.

Susquehanna senior trader Eric Passmore helped establish the pricing and contract terms on Kalshi. The contract carries a $500,000 payout, with Arrowsmith paying a 10% premium, or $50,000, and pays out if California does not authorize an alternative wage or provide qualifying relief from goat herder wage and overtime obligations before Oct. 1, 2026.