Latest / The Favorites Sports Betting Podcast / The Future of Sports Betting

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The Future of Sports Betting · The Favorites Sports Betting Podcast

0:08
Speaker 1: Welcome to the Favorites of the Podcast part of the
0:11
Speaker 1: Volume Podcast Network. I am Chad Moment of the Action Network.
0:15
Speaker 1: We are doing part two of the show that we
0:18
Speaker 1: started on Tuesday. Let's welcome in my co host, my companion,
0:22
Speaker 1: Mike Compadre, my BFF professional better signon Hunter et O
0:25
Speaker 1: Simon Chad.
0:27
Speaker 2: I heard the dumbest dad joke when I was an
0:30
Speaker 2: England I forgot to tell you about it on the
0:31
Speaker 2: last show. As soon as I heard, I go Chad
0:33
Speaker 2: would love this dad joke. So my younger cousin there,
0:38
Speaker 2: young lad, just had his birthday and my uncle goes
0:41
Speaker 2: up there and goes, Charlie, how old are you now?
0:44
Speaker 2: And he goes nine. He goes, oh, I didn't know
0:45
Speaker 2: you spoke German. I was like, damn, Chad's gonna love that.
0:51
Speaker 2: So everyone out there, you can use that one time.
0:54
Speaker 2: If you got you know, a kid that's turning nine,
0:56
Speaker 2: you can use that one time for life.
0:58
Speaker 1: Dude, I'm so old. I don't even have of nieces
1:01
Speaker 1: and nephews turning nine anymore. All I have are irascible
1:06
Speaker 1: teenagers who like to throw everything I've ever said in
1:09
Speaker 1: my life back in my face. That's the entirety of
1:14
Speaker 1: my existence. It's kind of like working with Matt Mitchell
1:17
Speaker 1: and Gifford on this podcast, Simon, I want to bring
1:21
Speaker 1: in Chris Girlocker, who's with Prediction News and has been
1:24
Speaker 1: covering prediction markets for a very long time, and because
1:29
Speaker 1: we talked a little bit about this in part one
1:32
Speaker 1: on Tuesday. Because there's been such a confluence of circumstances
1:36
Speaker 1: that have been impacting the sports betting and the gambling
1:40
Speaker 1: universe in the last ten days, and to me, the
1:47
Speaker 1: growth of these prediction markets and the influence and impact
1:50
Speaker 1: of these prediction markets is one of the biggest things
1:53
Speaker 1: out there. And I mentioned, you know, I've been working
1:56
Speaker 1: on this book and I've done a lot of reporting
1:58
Speaker 1: around these to a lot of the principles and the
2:01
Speaker 1: players at CALSHI, at Sport Trade, and they're really becoming
2:06
Speaker 1: increasingly important players in the space. As I mentioned the
2:10
Speaker 1: other day, CALSHI raised one hundred and eighty five million,
2:13
Speaker 1: it's now worth two billion dollars. Polymarket raised, it's now
2:17
Speaker 1: worth a billion dollars. My conspiracy theory that I talked
2:23
Speaker 1: about a little bit on Tuesday, nobody is benefiting more
2:29
Speaker 1: from the new tax regulations in the Big Beautiful Bill,
2:35
Speaker 1: in which professional betters are now only allowed to deduct
2:39
Speaker 1: ninety percent of their losses, not one hundred percent of
2:41
Speaker 1: their losses. Nobody benefits more, in my opinion, than prediction
2:48
Speaker 1: markets because those are regulated and taxed in entirely different ways.
2:53
Speaker 1: I'm excited to get Chris Gerlocker on the show because
2:58
Speaker 1: he can help us break all this down. Chris, welcome
3:02
Speaker 1: to the Favorites.
3:03
Speaker 3: Hey, Chad, thanks for having me.
3:04
Speaker 2: This is cool.
3:06
Speaker 1: Well, I can sense your enthusiasm. So before we get
3:08
Speaker 1: to that, Simon, Matt Mitchell was rushing us off the
3:13
Speaker 1: other day.
3:14
Speaker 2: Yeah, it gives a y off the curtain.
3:16
Speaker 1: He like it was. So it was so annoying because
3:20
Speaker 1: I felt like you were digging in on a couple things.
3:22
Speaker 1: And Chris just indulges for a second. Because the Big
3:26
Speaker 1: Beautiful Bill, in which gamblers are now only allowed to
3:30
Speaker 1: deduct ninety percent of their losses versus one hundred percent
3:33
Speaker 1: of their losses, so all of a sudden, if they
3:37
Speaker 1: could be paying taxes on money they did not win. Simon,
3:41
Speaker 1: you mentioned you're trying to figure out what to do
3:44
Speaker 1: because you think it will kill how professional betters live
3:48
Speaker 1: in this country. It may not kill how they live,
3:51
Speaker 1: but it may change how transparent they are with their taxes,
3:58
Speaker 1: or they got to leave the country and decide to
3:59
Speaker 1: do it from somewhere else. Unpack that a little bit more.
4:02
Speaker 1: Some of the conversations you've been happening having with either accountants,
4:06
Speaker 1: with lawyers, with other people in the space. Explain the
4:10
Speaker 1: impact here, because I don't think people get it. And
4:12
Speaker 1: by the way, it doesn't just impact professional betters like
4:15
Speaker 1: DraftKings Fandal, they will send you sort of basically sheets
4:21
Speaker 1: forms at the end of the year which you are
4:23
Speaker 1: responsible for documenting what your potentially taxable income was as
4:29
Speaker 1: a better So this is for everybody.
4:32
Speaker 2: Yeah, no, it's just bad for everybody. That's why I
4:35
Speaker 2: hope you're right that it's it doesn't go through and
4:39
Speaker 2: that something does change because luckily we get the rest
4:42
Speaker 2: of this season upcoming, like it doesn't go into effect
4:44
Speaker 2: I believe until twenty twenty six, which is a big deal.
4:47
Speaker 2: So whatever I win this year, legally I can still
4:51
Speaker 2: report my wins and losses. But yeah, Chad, we're talking
4:56
Speaker 2: about people like me are just constantly looking for an
5:00
Speaker 2: edge and that doesn't come just with sports budding. That's
5:03
Speaker 2: just about everything I do in life. It's a microcosm
5:05
Speaker 2: of everything in life. I'm always looking for an edge.
5:07
Speaker 2: So I told you my favorite contest that we do
5:11
Speaker 2: pit contest. We do legal ones. My favorite pit contest
5:13
Speaker 2: are tax free ones. Those are ones that are off
5:16
Speaker 2: the books, so you know, people are going to go
5:19
Speaker 2: back to what they had never even left, which is
5:22
Speaker 2: mainly offshore books or your local book, which we know
5:27
Speaker 2: is got a hint of crime underneath the belly of it.
5:30
Speaker 2: So it's like guys are going to go back to
5:33
Speaker 2: that they want to stay in the States. I like
5:36
Speaker 2: being above board. I've liked what we what we have
5:39
Speaker 2: now with legalization, and you know, it's it's a hard
5:44
Speaker 2: life having everything be cash, so getting getting things to
5:49
Speaker 2: now what it is, which is, you know, I pay
5:51
Speaker 2: text on everything. I like it. And you know, I knew,
5:54
Speaker 2: not that I knew this was coming, but we'd heard whispers.
5:57
Speaker 2: And you know, again we can dive in your'rasy part
6:00
Speaker 2: of this because New Jersey's stuff is insane. It's literally
6:04
Speaker 2: I feel like a bill written just to go after
6:06
Speaker 2: someone like me. I am a narcissist in many ways.
6:09
Speaker 2: But that one just is insane to me, attacking runners.
6:12
Speaker 2: But it really is at the point, Chad, where I'm
6:15
Speaker 2: going to be forced possibly to leave the country for
6:17
Speaker 2: six months out of the year. Right, England is no taxes.
6:21
Speaker 2: I can win big money and pay no taxes on
6:24
Speaker 2: the winning, same with my losses. In England, it's very different.
6:27
Speaker 2: There are taxes towards gambling than it is here in America,
6:30
Speaker 2: so that off the get go is a big deal
6:33
Speaker 2: and many professional betters are going to look into that. Now.
6:36
Speaker 2: Getting in three months to six month visa to England,
6:39
Speaker 2: that's a whole story inside itself. Chad knows my mom's
6:41
Speaker 2: from England. I can have dual citizenship. It's no problem,
6:46
Speaker 2: you know. That's something that happens basically when you're a
6:49
Speaker 2: wee young lad. So to me, it's it's not gonna
6:52
Speaker 2: be a hard transition. To a lot of guys guy
6:54
Speaker 2: was just meeting with in Vegas, I don't think they've
6:56
Speaker 2: ever even left the country, let alone go to England.
6:59
Speaker 2: So they're the ones that to me, will go back
7:01
Speaker 2: to the dark books. And again there's ways around it.
7:05
Speaker 2: It's just the normal better having to pay having already
7:12
Speaker 2: try to make a winning betting and then they're having
7:15
Speaker 2: to pay ten percent on their losses. I just can't
7:18
Speaker 2: believe it. I can't believe it. I really can't. I
7:20
Speaker 2: know how stupid a lot of the stuff in our
7:21
Speaker 2: government is, but this one is. It's up there, and
7:24
Speaker 2: what we're about to dive into, you know, the poly markets,
7:27
Speaker 2: something that's going to help counteract this in many ways.
7:30
Speaker 2: So I'm here. I'm excited to learn more about it
7:33
Speaker 2: from Chris here because you know, to me and to
7:36
Speaker 2: me a lot of other people, Chad, it was something
7:38
Speaker 2: that really blew up when it came to politics, and
7:42
Speaker 2: it's obviously going to try to take advantage of what's
7:44
Speaker 2: about to happen right now with these sports books. So yeah,
7:48
Speaker 2: very unique, interesting time we're living for sure, with the
7:50
Speaker 2: sports puddy markets.
7:51
Speaker 1: Hi, Chris, thanks for letting us sort of finish up
7:54
Speaker 1: that conversation. But Simon brings up the politics, He brings
7:57
Speaker 1: up polymarket for anyone listening, who because we haven't talked
8:01
Speaker 1: a lot about Calshi, we haven't talked a lot about
8:03
Speaker 1: sports trade, we haven't talked a lot about polymarket on
8:07
Speaker 1: this show. Give people a primer. You are an expert
8:11
Speaker 1: in this. You write for Prediction News, You've been covering
8:14
Speaker 1: this for a long time at a professional level. Give
8:17
Speaker 1: people a primer on what's happening in this space.
8:21
Speaker 3: Sure, So you know, for those who don't know prediction
8:23
Speaker 3: markets are, you know, they're in exchange where you can
8:25
Speaker 3: buy and sell contracts on whether an event will happen,
8:27
Speaker 3: and every contract is priced between one cent and ninety
8:30
Speaker 3: nine cents, and the price ends up being how likely
8:33
Speaker 3: that event is to happen. And you know, the more
8:38
Speaker 3: valuable your contract is, the more likely it is to
8:40
Speaker 3: pay out. Whinning contracts pay out a dollar each and
8:42
Speaker 3: losing contracts get nothing. So it's this really cool, interesting
8:46
Speaker 3: way to aggregate a lot of information and kind of
8:49
Speaker 3: get a snapshot of a forecast if you're in it
8:52
Speaker 3: for the forecasting, but if you're in it for the
8:53
Speaker 3: gambling too, it's constantly live. So it's this you know,
8:57
Speaker 3: really strong and unmatched live bet experience as well that
9:01
Speaker 3: makes it really good for recreational betting. So if you
9:04
Speaker 3: look at you know, sports Trade, and you know they've
9:06
Speaker 3: been offering sports contracts since twenty twenty two, they've just
9:08
Speaker 3: been doing it under state gambling law. So they've got
9:12
Speaker 3: their licenses I think in five states now and they're
9:17
Speaker 3: you know, safely considered a gambling company. Now. When Calshi
9:20
Speaker 3: first launched, they were not offering sports or elections or
9:23
Speaker 3: you know, bleeding over into these any of these other subjects.
9:27
Speaker 3: They were all about you know, economics, finance, some pop culture.
9:30
Speaker 3: But you know, sports was a red line for a while,
9:33
Speaker 3: and elections was a hard line. But they'd been trying
9:36
Speaker 3: since at least twenty twenty one or twenty twenty two
9:39
Speaker 3: to offer you know, first it was election or betting
9:43
Speaker 3: on the midterms, and then they finally won their lawsuit
9:46
Speaker 3: in October September twenty twenty four and were able to
9:50
Speaker 3: finally launch in October. So, you know, there's just been
9:56
Speaker 3: a lot of explosive growth and publicity surrounding pretty markets
10:00
Speaker 3: during the twenty twenty four election, because that's when you
10:02
Speaker 3: get your first you know, high volume commercial you know,
10:07
Speaker 3: you know, really big regulated prediction market. I mean, yes,
10:10
Speaker 3: polymarket is huge, but it's it's in the crypto space.
10:13
Speaker 3: And it's not that it's not popular. It's not that
10:15
Speaker 3: it doesn't have a ton of volume. It's just that
10:17
Speaker 3: if you're a regular guy you know, you can either
10:19
Speaker 3: go learn Web three and go learn how to play
10:21
Speaker 3: with crypto and you know, figure out the wallets, or
10:23
Speaker 3: you can just go to Calshi, throw down a debit
10:25
Speaker 3: card and start betting.
10:28
Speaker 1: Right. Calshi is legal in the United States. Polymarket is not.
10:31
Speaker 1: Calcio is regulated by the CFTC, the Commodities Futures Trading Commission.
10:36
Speaker 1: Polymarket is not sports trade, like you mentioned, has decided
10:40
Speaker 1: to go through the state licensing process. To me, this
10:44
Speaker 1: is what's so fascinating. Alex Kane, who started sports Trade,
10:49
Speaker 1: wonderful guy, thoughtful, energetic, enthusiastic, really earnest years ago, was
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Speaker 1: a visionary and had this idea to start a prediction
11:03
Speaker 1: exchange essentially a betting exchange based on sports, and he
11:10
Speaker 1: went the route of getting regulated state by state as
11:14
Speaker 1: a sports betting operator. Kelshy started by a couple of
11:18
Speaker 1: people who got to know each other at MIT and
11:20
Speaker 1: then became options traders as interns and places like Citadel
11:25
Speaker 1: And then they were like, wait a second, people are
11:28
Speaker 1: betting on these particular commodities based on who they think
11:34
Speaker 1: is going to win this election. Can we just offer
11:37
Speaker 1: markets on the elections and things like will the FED
11:41
Speaker 1: raise interest rates? And they graduated from MIT, started this
11:45
Speaker 1: business and they decided to get licensed by the CFTC,
11:48
Speaker 1: which they are Since January, they have been offering markets
11:54
Speaker 1: on sports and Chris this is where it's gotten really
11:58
Speaker 1: interesting because calshi is offering, you know, markets contracts on
12:06
Speaker 1: the Super Bowl, then they're offering markets on March Madness.
12:09
Speaker 1: Now the majority of the trading volume on calshi and
12:13
Speaker 1: I would recommend an addiction to what Chris does with
12:15
Speaker 1: prediction news. Everyone should read Dustin Gouker. He's got a
12:21
Speaker 1: great substack called the Vent Horizon about this stuff. He
12:26
Speaker 1: did an email today that showed the volume traded on
12:30
Speaker 1: calshi something like eighty percent of it is sports. And
12:36
Speaker 1: so they're basically operating as an entity offering the ability
12:43
Speaker 1: for people to predict the sports markets. I'm not going
12:50
Speaker 1: to use the phrase betting at a national scale. And
12:54
Speaker 1: they've bypassed the regulatory markets in the States. How is
13:00
Speaker 1: that even possible?
13:01
Speaker 3: Sure, well, this is one of the interesting things that's
13:04
Speaker 3: really come to life. And you know, cause she's fired
13:06
Speaker 3: first over elections, but especially over sports. The finance industry
13:10
Speaker 3: is very comfortable with kind of these parallel regulations, these
13:14
Speaker 3: parallel regulatory structures. So like, if you want to trade gold,
13:17
Speaker 3: and this is something a former CYFTC larder told me
13:19
Speaker 3: a while ago, but if you want to trade gold,
13:21
Speaker 3: you can trade it as a commodity. That's a transaction
13:24
Speaker 3: overseen by the CFTC. Or you can trade in a
13:27
Speaker 3: gold e F T in in exchange trade and fun, well,
13:30
Speaker 3: that's a transaction overseen by the SEC, different regulatory agency.
13:34
Speaker 3: It's the same thing. You're training gold either way. And
13:38
Speaker 3: you know, nobody really, you know, planned out these you know,
13:42
Speaker 3: two different ways to make an identical trade, but it happened.
13:45
Speaker 3: And you know, people who like markets are very excited
13:49
Speaker 3: about having the different options to be able to make
13:51
Speaker 3: their same trade in a different way. And that contrast
13:55
Speaker 3: almost completely with the gambling industry, where everything, you know,
13:58
Speaker 3: for good reason, has to be under one regulatory umbrella.
14:01
Speaker 3: I mean, no one has ever described you know, sweet
14:04
Speaker 3: stakes casinos or like gray market slot machines and gas
14:08
Speaker 3: stations as you know great you know liquidity providers or
14:11
Speaker 3: you know, great for pricing or anything like that. So
14:16
Speaker 3: you know, I think that's one of the one of
14:18
Speaker 3: the reasons that these two industries are really talking past
14:20
Speaker 3: each other in court. Is just they're they're looking at
14:22
Speaker 3: this completely differently.
14:25
Speaker 1: Right. So, since cal She has offered these markets, they've
14:30
Speaker 1: gotten cease and desists from i think seven states telling
14:35
Speaker 1: them to stop. New Jersey, Maryland, a bunch of others.
14:39
Speaker 1: They keep losing because they have this in promoter of
14:48
Speaker 1: being a legal entity, a legitimate entity for offering these
14:53
Speaker 1: markets from the CFTC. And what's interesting is Calsh includes
14:59
Speaker 1: Donald from Junior as an advisor, and the incoming chairman
15:04
Speaker 1: of the CFTC is a former board member of CALCI,
15:07
Speaker 1: who in his hearings to be confirmed said I'm fine
15:14
Speaker 1: with sports markets being part of commoderities exchanges. So you
15:20
Speaker 1: know that's not going to change. That's just going to
15:22
Speaker 1: continue to be the way it is.
15:25
Speaker 3: If change happens, it's going to come from the courts.
15:27
Speaker 3: It's not going to come from Brian Quintin's and the CFTC.
15:30
Speaker 3: The District court in Maryland right now is one of
15:33
Speaker 3: the interesting ones to watch because Navana and New Jersey
15:36
Speaker 3: granted Calci's calamity injunction. They said, you're probably going to
15:39
Speaker 3: win on the merits. You know, the federal preemption probably
15:42
Speaker 3: applies here to you know, state gambling rigs. But the
15:46
Speaker 3: Maryland judge, they he asked for a lot of supplemental briefs.
15:50
Speaker 3: He said, you know, let's get some of these issues
15:52
Speaker 3: on the table and really flesh him out. And you know,
15:54
Speaker 3: one of the big briefs that came in a couple
15:56
Speaker 3: of weeks ago was from the Indian Gaming Commission, and
16:02
Speaker 3: you know that that was probably one of the first
16:04
Speaker 3: times that you know, one of the federal laws that
16:09
Speaker 3: calshi sports contracts, could you know cross was that was
16:13
Speaker 3: the first time that argument was really bent to out
16:15
Speaker 3: really well. So the Indian Gaming Regulatory Act that you
16:18
Speaker 3: know forms the foundation of Indian gaming, that's a federal law,
16:21
Speaker 3: that's not a state law. And so while you know,
16:23
Speaker 3: like I think briefs in New Jersey and Nevada like
16:26
Speaker 3: listed the wire Act and PASPA and IGRA kind of
16:30
Speaker 3: alongside each other saying hey, this could be an issue,
16:33
Speaker 3: the tribal brief was really the first one where you
16:37
Speaker 3: see the argument spelled out in detail. And so that
16:40
Speaker 3: by itself is really interesting. And Judge Abilson choosing to
16:44
Speaker 3: you know, allow the tribes to file their amicust brief
16:48
Speaker 3: in Maryland is also interesting because Calhi originally didn't want that.
16:52
Speaker 3: They were calling it, you know, unhelpful and too late,
16:57
Speaker 3: which makes me think the tribal brief is stronger. So now,
17:00
Speaker 3: I mean there's a potential turning point there. I mean,
17:02
Speaker 3: you know, in the game of rock paper scissors, a
17:04
Speaker 3: federal court beats a federal regulator. So if either the
17:07
Speaker 3: District Court in Maryland or the Third Circuit in New Jersey,
17:11
Speaker 3: you know, ruled that these contracts, you know, bleed into gaming,
17:14
Speaker 3: then you know, we'll probably see a Supreme Court fight
17:17
Speaker 3: and an escalation. But Maryland really is one of the
17:20
Speaker 3: big turning points for for sports contracts in general. So
17:23
Speaker 3: we still don't know how safe a haven cal She
17:26
Speaker 3: is going to be for sports betters until those two
17:29
Speaker 3: cases in particular progress a little bit further.
17:32
Speaker 1: Simon. By the way, I mentioned before Dustin Gauker's event Horizon,
17:36
Speaker 1: he had an email today that said it was seventy
17:39
Speaker 1: percent of all volume at Cawshee was from sports led
17:45
Speaker 1: by tennis baseball. And by the way, hot Dog contest,
17:50
Speaker 1: the hot dog eating contest. Simon, You're like in the
17:55
Speaker 1: middle of this and do you see prediction markets as
18:01
Speaker 1: a viable alternative if you are a professional vetter who
18:08
Speaker 1: gets limited at every operator, who's now going to be
18:13
Speaker 1: taxed at a more disadvantageous rate. Do you look at
18:18
Speaker 1: these is something that you'd want to dive into.
18:22
Speaker 2: Yeah, I've dove into it, but like we talked about,
18:23
Speaker 2: I've only dove into a pre unique situations like politics
18:27
Speaker 2: or the pope and things like that. So to me,
18:29
Speaker 2: this is something else that you know. It's they're welcoming.
18:34
Speaker 2: That's the biggest difference, right, They don't reject bets here.
18:36
Speaker 2: They will take your money because they want people to
18:39
Speaker 2: be in it. This is early days, Chad. Like the
18:42
Speaker 2: parallel between this and when fantasy football was letting us
18:46
Speaker 2: do those private tournaments for cash, and that sped us
18:50
Speaker 2: up on this whole crazy world wind of what this
18:53
Speaker 2: became of sports better being legalized in this country. This
18:55
Speaker 2: feels like another kind of moment we're living in here
18:57
Speaker 2: where I'd love to have your view on this, Chris.
19:00
Speaker 2: Is is this going to be here in five years?
19:03
Speaker 2: Is this going to be here in ten years? Or
19:04
Speaker 2: is this just a flash in the pan. Are we
19:06
Speaker 2: just living in this quick moment where they're kind of
19:08
Speaker 2: figure out these little loopholes, but like you just said,
19:11
Speaker 2: eventually a court will come on come down on them
19:13
Speaker 2: with a hammer, and then they're just gonna be gone.
19:14
Speaker 2: Like they just popped up for a year or two.
19:16
Speaker 2: Now they're gone. Like, what's your view on this going forward?
19:19
Speaker 3: I think election contracts have some I think they can last.
19:23
Speaker 3: I think they have the ability to last. Sports is
19:25
Speaker 3: going to be a little bit more up in the
19:26
Speaker 3: air until these court cases are finally settled. If you
19:29
Speaker 3: take a step back and look at the problem that
19:31
Speaker 3: you know, Calshi solves for the finance industry. You know,
19:35
Speaker 3: I mean chat you were talking about it earlier. But
19:37
Speaker 3: you know, if you're an institutional trader and you want
19:40
Speaker 3: to know, you know what, how like the Trump presidency
19:45
Speaker 3: in twenty sixteen is going to affect you compared to
19:48
Speaker 3: you know, a Clinton presidency, how's that gonna affect your portfolio?
19:51
Speaker 3: You know, you have to guess how like the S
19:53
Speaker 3: and P five hundred is going to react, And you
19:55
Speaker 3: know you can just flat out get it wrong. A
19:57
Speaker 3: lot of people, you know, short at the S and P.
19:59
Speaker 3: Five hundred and twenty sixteen and they ended up losing
20:02
Speaker 3: money because the SMP went up when Trump was elected.
20:05
Speaker 3: So you know, now you can just hedge directly on
20:10
Speaker 3: that event, and that possibility is open to ordinary people too,
20:14
Speaker 3: although how many people are actually using it to hedge
20:17
Speaker 3: at the retail level is an open question. It's always
20:19
Speaker 3: going to be a minority of traders. But you know,
20:21
Speaker 3: this is the regulatory trade off, and you can this
20:24
Speaker 3: is like Hamilton Jefferson old you know how much speculation,
20:27
Speaker 3: you know, do you allow for the benefits of hedging
20:30
Speaker 3: for the small group of people. And it was really
20:31
Speaker 3: obvious when you know, we were talking like early nineteen
20:34
Speaker 3: hundreds and trying to protect farmers who were starving and
20:37
Speaker 3: getting engaged by the railroads. You know, they needed some
20:40
Speaker 3: price stability and they needed some assurance of some steady
20:43
Speaker 3: and reliable income at a price that they could predict.
20:46
Speaker 3: But you know, now you can do it on any event,
20:49
Speaker 3: and you know we're gonna have to redecide how those
20:53
Speaker 3: how we're going to balance those interests.
20:56
Speaker 1: Chris handicapped this in another way, lack of a better term.
21:01
Speaker 1: You know, you see a calshi, you see a poly market,
21:04
Speaker 1: you see a sport trade. Do you feel like these
21:08
Speaker 1: can become something that have widespread appeal, because right now
21:13
Speaker 1: it feels like the volume comes largely from market makers
21:19
Speaker 1: who are interested in playing in this space, experimenting in
21:22
Speaker 1: this space. Can they find as you just mentioned, sort
21:27
Speaker 1: of retail success.
21:31
Speaker 3: Calshan's portrait, I think they can. The dream about sports is,
21:35
Speaker 3: you know, they're very numerous and high volume, and you know,
21:40
Speaker 3: ordinary people. If you go to like SBC, you know,
21:43
Speaker 3: every couple of years there's a new panel on you know,
21:46
Speaker 3: being the second screen during the game, and that you know,
21:49
Speaker 3: second screen engagement, Well, a prediction market is your second
21:52
Speaker 3: screen for anything you're mad about, and you know, is
21:54
Speaker 3: there a story that pops up on social media that
21:56
Speaker 3: you know kind of hit you where you live or
21:58
Speaker 3: you can go beat on that on Calshi. Poly Market's
22:01
Speaker 3: going to be harder, you're telling if you're talking about
22:04
Speaker 3: retail success at polymarket, you're looking at widespread crypto adoption
22:07
Speaker 3: and there's a strong crypto community and it's not that. Again,
22:10
Speaker 3: it's not that polymarket isn't successful and that they have
22:13
Speaker 3: no future. That's not true at all. It's just it's
22:15
Speaker 3: gonna be hard to attract, you know, ordinary people. You're
22:19
Speaker 3: like You're not gonna get that eighty year old guy
22:20
Speaker 3: in Alabama betting on Trump to win the election on Polymarket,
22:23
Speaker 3: that you will on Calci. So I think they're gonna
22:27
Speaker 3: have to Polymarket is gonna have to overcome that. Polymarket
22:30
Speaker 3: also has issues with their market resolution process. They's had
22:33
Speaker 3: another scandal this week and the market on whether it's
22:36
Speaker 3: Lensky war a suit to the Native.
22:37
Speaker 1: Tell people about that, because that's you know, you're in
22:40
Speaker 1: this space neck deep. I'm in the space waste deep.
22:45
Speaker 1: And that that controversy, to me was the epitome of
22:49
Speaker 1: what are some of the issues with all of these things? Sure?
22:53
Speaker 3: So, I mean the big question if you're a prediction
22:55
Speaker 3: market is, you know, once an event has happened, how
22:57
Speaker 3: do you decide that it happened? Because money on the
23:00
Speaker 3: line in some case hundreds of millions of dollars or
23:02
Speaker 3: hundreds of yeah, hundreds of millions. So you know you
23:08
Speaker 3: need a good process to you know, decide when an
23:10
Speaker 3: event is curred and how you know you're going to
23:12
Speaker 3: tell people that it actually happened. Cal She does. What
23:16
Speaker 3: cal She does is they you know, list their resolution
23:18
Speaker 3: terms under their market and they will link to the
23:21
Speaker 3: you know, kind of third party authority that they're going
23:23
Speaker 3: to use, whose data they are going to use to
23:25
Speaker 3: settle that market. So if you're betting, you know, or
23:28
Speaker 3: you're trading, you know exactly who is going to you know,
23:31
Speaker 3: make the call that you know, we you know, have
23:34
Speaker 3: an effective tariff rate of six percent whatever the market
23:37
Speaker 3: is what poly market will do. Uh, they have that
23:41
Speaker 3: same description, but it's a lot of reliance on one
23:44
Speaker 3: just a consensus of credible reporting, which isn't bad most
23:48
Speaker 3: of the time, but it also leaves this gray area.
23:50
Speaker 3: That's issue number one and issue number two. Polymarket uses
23:56
Speaker 3: a blockchain service. It's a product called the Optimistic Oracle,
23:59
Speaker 3: the Oracle, and this is a like a cryptocurrency. You
24:04
Speaker 3: can log in on coinbase and you can buy you know,
24:07
Speaker 3: the UMA currency, and you use that to cast a
24:12
Speaker 3: vote in poly markets markets and say, hey, I think
24:15
Speaker 3: the event has happened. I think the market should resolve
24:18
Speaker 3: this way or that way. And since it's based on
24:23
Speaker 3: how much UM a token you hold, how much of
24:25
Speaker 3: this currency you hold, it's you know, kind of this
24:28
Speaker 3: Gilded Age oligopoly now where a couple of very very
24:32
Speaker 3: large traders can just take over the market. So you know,
24:36
Speaker 3: their market based solutions they're so proud of is you know,
24:39
Speaker 3: it's not a free market. It's a market where like
24:43
Speaker 3: two I think two traders hold just over half of
24:46
Speaker 3: all the UMA tokens. So there's it's not a good
24:51
Speaker 3: way to resolve markets. Now, the consequence of that, getting
24:54
Speaker 3: back to Zelenski suit, after Zelenski's Oval office confrontation with
25:00
Speaker 3: Trump advance earlier.
25:02
Speaker 2: It was earlier this year.
25:05
Speaker 3: Covering politics is hard because there's just this time dilation.
25:09
Speaker 1: February.
25:10
Speaker 3: I still can't believe that was just February.
25:14
Speaker 2: Anyway.
25:15
Speaker 3: After that, you know, one of the jabs at Zelenski
25:17
Speaker 3: was like, you don't even wear a suit and he's
25:19
Speaker 3: in you know, military fatigues because he's you know, mid war,
25:22
Speaker 3: and but he stepped down in the NATO summit with
25:25
Speaker 3: with a suit that was designed by a you know,
25:28
Speaker 3: designer who wanted to incorporate some military dress and things
25:31
Speaker 3: like that, but it was identifiably a suit. So the
25:35
Speaker 3: market on whether so the polymarket market on whether Zelenski
25:39
Speaker 3: would wear a suit should have settled to yes instead
25:43
Speaker 3: of it resolved to know after several rounds of voting
25:46
Speaker 3: and dispute, and it's because of these big um a whales,
25:48
Speaker 3: these giant wealthy currency holders were able to just you know,
25:53
Speaker 3: cast all the necessary votes to resolve the market in
25:55
Speaker 3: a way that would get them more of their uma
25:57
Speaker 3: tokens and more of their money. So that is that's
26:01
Speaker 3: an ongoing issue that poly market has. They did it,
26:04
Speaker 3: you know, late last year with like will Israel invade
26:07
Speaker 3: Lebanon in September? Will they invade Syria by the end
26:11
Speaker 3: of the year. Just a couple of these you know,
26:14
Speaker 3: fuzzy terms like what is an invasion really and you know,
26:17
Speaker 3: you know, kind of which time zone are we looking at?
26:19
Speaker 3: And some of these issues. These really big whales can
26:23
Speaker 3: take advantage of any fuzziness you know that the finest
26:28
Speaker 3: lawyers in the world, you know, kind of do in court.
26:31
Speaker 3: They use that same precision of language to try to
26:35
Speaker 3: you know, try and resolve things their way. So Polymarket
26:37
Speaker 3: has a structural problem that they really need to solve
26:40
Speaker 3: because this goes back at least as far as back
26:42
Speaker 3: as you know, late last fall, and certainly goes back further.
26:46
Speaker 1: Well, it's worth a billion dollars. Now they can try
26:49
Speaker 1: to figure it out, which is kind of insane, right,
26:51
Speaker 1: and that sort of speaks to a little bit late nineties,
26:58
Speaker 1: and then with sort of the dot com blindness, and
27:04
Speaker 1: then speaks to social media euphoria and the investments that
27:09
Speaker 1: took place in places like Facebook, places like Twitter, the
27:13
Speaker 1: growth of something like Instagram to get bought for a
27:16
Speaker 1: billion when it barely had any users or it was
27:18
Speaker 1: still you know, in a huge growth state. That's a
27:23
Speaker 1: lot of what this feels like to me, between the
27:27
Speaker 1: Calshi's and the polymarkets, especially with the way they've been
27:30
Speaker 1: able to raise and also like there's a day trading,
27:34
Speaker 1: sports betting, crypto manna sphere, ethos, sort of a bro
27:41
Speaker 1: economy that exists now that is helping to propel some
27:47
Speaker 1: of these things. I'm wondering if you're seeing some of
27:49
Speaker 1: that and you're reporting as well.
27:52
Speaker 3: I mean, yeah, you're You're always seeing the influencers get
27:54
Speaker 3: really excited about you know, prediction markets being the news
27:57
Speaker 3: and you know, my mind, you know, the news is
27:59
Speaker 3: the news. You know, you once she once a market
28:01
Speaker 3: resolves in real time, it's it's really cool. I was
28:03
Speaker 3: writing a story that included I think it led with
28:07
Speaker 3: the big beautiful bill vote. How individual centers were gonna vote,
28:10
Speaker 3: And while I was writing it, the vote was happening.
28:13
Speaker 3: And I knew the vote was happening because you know,
28:15
Speaker 3: Murkowski's odds, you know, spiked up to like ninety six percent,
28:18
Speaker 3: and Collins was dropping like a rock. And you know,
28:22
Speaker 3: I wasn't watching. I didn't have c Span in my
28:24
Speaker 3: corner because that wasn't what the story was about, and
28:28
Speaker 3: I didn't have it up. I thought I had like
28:29
Speaker 3: at least one or two more hours, to be honest,
28:31
Speaker 3: But no, that was that was kind of wild to watch.
28:34
Speaker 3: And prediction markets give you a great state of the race,
28:37
Speaker 3: and I think they're still benefiting from you know, how
28:41
Speaker 3: much earlier they called the race in twenty twenty four,
28:44
Speaker 3: and how much more of a lead they showed Trump
28:46
Speaker 3: having than polls did. But the forecasting piece of prediction
28:53
Speaker 3: markets is a lot more nuanced than the hedging piece.
28:57
Speaker 3: And there's a Columbia economist who to Columbia University economists
29:02
Speaker 3: who you know, studied Polymarket five thirty eight and the
29:06
Speaker 3: economist polls side by side for thirteen competitive house races,
29:09
Speaker 3: and Polymarket, you know, was never in first. Sometimes it
29:13
Speaker 3: was the least effective pulling mechanisms. So for these really
29:16
Speaker 3: smaller races, I think you can see polls do. My
29:20
Speaker 3: prediction is polsill do pretty well in the midterms compared
29:22
Speaker 3: to prediction markets, and then prediction markets will have another
29:26
Speaker 3: moment of glory in the presidential one where history is
29:29
Speaker 3: not as good a guide for forecasting, for forecasting the
29:34
Speaker 3: presidential election, because you can get these you know, I mean,
29:36
Speaker 3: Donald Trump's the French candidate in twenty fifteen. He was
29:39
Speaker 3: you know, I don't think a polster would have necessarily
29:42
Speaker 3: predicted that Donald Trump would you know, do really well
29:46
Speaker 3: in electoral politics before he came on the scene in
29:48
Speaker 3: twenty fifteen. But you test these new ideas in these
29:51
Speaker 3: new characters the national level, and sometimes things take off,
29:53
Speaker 3: and prediction markets are really good at bringing that new
29:56
Speaker 3: information together, where polsters are relying on past history. So
30:01
Speaker 3: I yeah, So I think there's gonna be a lot
30:04
Speaker 3: more nuance that comes alive, you know, in the in
30:08
Speaker 3: the forecasting space in particular, and I don't know that
30:11
Speaker 3: that will dampen the enthusiasm for prediction markets. But you know,
30:16
Speaker 3: I think they also benefit from you know, kind of
30:18
Speaker 3: the self sufficiency of financial trading too. You know, the
30:21
Speaker 3: idea that you can trade yourself and know the future
30:24
Speaker 3: better than everybody else and you know, be the self
30:27
Speaker 3: sufficient man. In particular, I mean I grew up in Texas.
30:29
Speaker 3: I know what I know what those noises sound like.
30:31
Speaker 3: But it's also I mean, those same things, those same
30:35
Speaker 3: beliefs are you know, cognitive behavioral therapy for financial trading addicts.
30:39
Speaker 3: There's a professor in California who's on the front edge
30:42
Speaker 3: of trying to you know, prepare uh, you know, gambling
30:46
Speaker 3: counselors as well to you know, properly treat people who
30:49
Speaker 3: are using financial platforms as you know, gambling platforms and
30:53
Speaker 3: you know, hiding behind well, I'm investing, I'm not gambling,
30:56
Speaker 3: even though you know they're functionally gambling, even if their
30:59
Speaker 3: activity that they're choosing is regulated under this different umbrella.
31:04
Speaker 1: Simon. By the way, we've hit like the nirvana for
31:11
Speaker 1: me where we are talking about the geekiest, most technical
31:17
Speaker 1: stuff and then throwing in cognitive behavioral science. I don't
31:24
Speaker 1: I feel like I should just end the podcast now
31:26
Speaker 1: because it'll never be better for me, But I do
31:30
Speaker 1: remember for you, Simon, election night, I'm just settling down.
31:38
Speaker 1: My wife had insisted on inviting the neighborhood over for
31:40
Speaker 1: a freaking party for election night. Everyone finally leaves. I'm
31:44
Speaker 1: sitting on my couch. I'm about to watch John King
31:47
Speaker 1: give me the results from Kalamazoo County and you're texting
31:52
Speaker 1: me and you're saying it's over, and I'm like, what
31:54
Speaker 1: are you talking about. I'm just sitting down to watch
31:56
Speaker 1: the results, and you're like, check out the prediction markets.
32:01
Speaker 2: Yeah. Again, it's a different world where I don't know
32:05
Speaker 2: much about betting politics, but luckily I have people in
32:08
Speaker 2: my life that do it professionally. And these guys texted
32:12
Speaker 2: me at eight thirty. I took an incredible amount of positions,
32:16
Speaker 2: bet a lot of money. I think I texted you
32:19
Speaker 2: right before about nine o'clock and told you it was
32:21
Speaker 2: over and that the market was about to move an
32:24
Speaker 2: insane amount in the next thirty minutes. And you saw
32:27
Speaker 2: Alive where it's like our money comes in, the public
32:31
Speaker 2: follows that money because they don't know, they don't have
32:33
Speaker 2: the inside news. Like these guys don't end Again, I
32:36
Speaker 2: don't know how they do it, Chad, But like you said,
32:39
Speaker 2: the predictive model of the markets is my favorite part.
32:42
Speaker 2: Of election night that these guys know three four hours
32:46
Speaker 2: before the general public and all these news media outlets.
32:49
Speaker 2: It's one of the more interesting parts of the world
32:52
Speaker 2: we live in in It's always fun picking those guys'
32:55
Speaker 2: brains that do it and how some of them can
32:58
Speaker 2: predict it a year or two out based on markets,
33:01
Speaker 2: money trends, and general public feel and you know, it's
33:05
Speaker 2: always interesting. It's just a different world. Where we talked
33:09
Speaker 2: about Action. One of our biggest nights of a company was,
33:12
Speaker 2: I believe in twenty twenty right with the election night
33:14
Speaker 2: they crashed our site because we're traffic night. Ever, yeah,
33:18
Speaker 2: we were kept updating the market right and where it
33:21
Speaker 2: was that and people weren't going to Fox or CNN.
33:24
Speaker 2: They were coming to Action to get the truth, and
33:26
Speaker 2: the truth was telling them, now, this is what the
33:28
Speaker 2: numbers are saying, this is who's going to win this election.
33:30
Speaker 2: So yeah, I love it. And again, this to me
33:33
Speaker 2: is why I hope these markets do last, because it's
33:36
Speaker 2: just another tool to use in another way to make money.
33:39
Speaker 1: You're a great follow on Twitter at growlacracy, and this
33:42
Speaker 1: is really interesting stuff and really important stuff that I
33:45
Speaker 1: think is going to impact anyone who has an interest
33:47
Speaker 1: in this show, because it will become more accessible and
33:52
Speaker 1: available to people as compliments potentially to what people are
33:56
Speaker 1: doing regularly with places like DraftKings fandor a fanatics. Last question,
34:01
Speaker 1: you were just at I believe the Manifest conference about
34:07
Speaker 1: a month ago or so. Explain to people what that
34:10
Speaker 1: is and then tell people the most interesting thing that was,
34:14
Speaker 1: the most mind blowing thing or the most oh my god,
34:18
Speaker 1: if this really happens, it's crazy thing from the conference.
34:21
Speaker 3: Oh man, how to explain Manifest because any Silver's new book,
34:26
Speaker 3: he spent some time just describing it. So Manifest is
34:30
Speaker 3: basically it's half conference and half festival. So it's this
34:33
Speaker 3: gathering of you know, really trying to attract big name stars.
34:38
Speaker 3: So like you know Nate Silver, Jesse Richardson at Political
34:41
Speaker 3: Kiwi on X. He's a great political trader, you know,
34:45
Speaker 3: David Shore, great progressive democratic polster. Richard Henania a very
34:50
Speaker 3: good conservative punditum. He's not a polster, but he's he's
34:55
Speaker 3: actually pretty a commentary. He's a he leaves, he's a
34:57
Speaker 3: libertarian who had to come to Jesus moment about Trump
35:00
Speaker 3: earlier this year. So he was interesting to watch, and
35:02
Speaker 3: he also did a really good job, in hindsight of
35:03
Speaker 3: predicting Donald Trump's rise. So and when you get people
35:06
Speaker 3: like that who are giving talks, and then you have
35:09
Speaker 3: all these you know, really uh kind of quirky technical folks,
35:15
Speaker 3: the the the the sexploration people, uh, the sex influencers
35:19
Speaker 3: like Ala are also there. There, there's you know, it's
35:23
Speaker 3: all about body positivity and kind of intellectualizing of sexuality
35:28
Speaker 3: as well. So a lot of different uh intellectual spears
35:32
Speaker 3: all come together at Manifest at this campus just off
35:37
Speaker 3: of off Berkeley, and it's a it's a really cool
35:40
Speaker 3: space and you know, definitely worth It was definitely worth
35:44
Speaker 3: going to for sure. But the most mind blowing thing
35:47
Speaker 3: for me about that trip was the idea of the
35:51
Speaker 3: looming rise of AI traders and l l M traders.
35:55
Speaker 3: So you know, l ms can already like chat epte
35:58
Speaker 3: and research a trade for you and wholesome sources and perplexity.
36:01
Speaker 3: AI can you know, give you some trading advice and
36:03
Speaker 3: do some research for you. We're getting very close to
36:08
Speaker 3: arguably within the next four years, according to at least
36:10
Speaker 3: once today. I was shown there of AI traders who
36:15
Speaker 3: match the actually of so called super forecasters, people who
36:18
Speaker 3: are just very very accurate traders beyond what experts and
36:22
Speaker 3: even what wise crowds can can achieve. So the rise
36:28
Speaker 3: of AI traders is going to have some hard questions,
36:30
Speaker 3: and I think the free to play and crypto platforms
36:33
Speaker 3: are gonna have to deal with it first. You know,
36:35
Speaker 3: right now, every user should be a human trader on
36:39
Speaker 3: a regulated free money or real money site like Calshie. Right.
36:42
Speaker 3: You can't have counterfeit people on there, even if you're
36:45
Speaker 3: using AI to assist. But you know, there's at least
36:49
Speaker 3: one star of there called few Tour, another prediction market site,
36:54
Speaker 3: and you know they're already preparing their ux to have
36:57
Speaker 3: you know, fully autonomous AI traders with their own counts.
37:01
Speaker 3: So the IAI wave is not just you know, it's
37:05
Speaker 3: not just coming in for the white collar drops. Jobs
37:07
Speaker 3: are looking at traders too, and pretty soon Betters.
37:11
Speaker 1: Yeah, Chris Girlocker, fucking awesome, man. That was great. Follow
37:16
Speaker 1: Chris on Twitter at Girlocker, see check him out at
37:19
Speaker 1: prediction News. This is a fascinating space that people need
37:22
Speaker 1: to pay paying attention to. So thanks thanks for jumping on, brother,
37:27
Speaker 1: I appreciate it. The favorites will return with our next
37:31
Speaker 1: episode of the show Tuesday. Action Network YouTube page. Download
37:36
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37:38
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37:40
Speaker 1: Feedback is a gift Until next time. Love you. Action
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