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The Future of Journalism When Prediction Markets ‘Financialize Everything’ · Journalism 2050

• 0:14
  SPEAKER_01: Hello, welcome to Journalism 2050.
• 0:17
  SPEAKER_01: This is our podcast about the future of journalism where we look a lot into the future and a bit into the past.
• 0:22
  SPEAKER_01: I'm Emily Bell, director of the Tower Center for Digital Journalism here at Columbia Journalism School.
• 0:28
  SPEAKER_01: And I'm joined by my two esteemed co-hosts, Heather.
• 0:32
  SPEAKER_01: Heather Chaplin, hello.
• 0:33
  SPEAKER_03: Hello, I'm Heather Chaplin.
• 0:35
  SPEAKER_03: I'm the founding director of journalism and design at the new school.
• 0:38
  SPEAKER_03: And an expert on witches.
• 0:41
  SPEAKER_03: She is at she is literally so I thought we should I should throw that in.
• 0:46
  SPEAKER_03: Follow the podcast.
• 0:47
  SPEAKER_03: In case it comes up.
• 0:49
  SPEAKER_01: Follow the podcast because Heather will be delivering a seminar on witches in the coming weeks.
• 0:55
  SPEAKER_01: So you'll definitely get that.
• 0:57
  SPEAKER_01: I think there's a I think that we could get to that this week.
• 0:59
  SPEAKER_01: Oh, sorry, and there's not a witch.
• 1:02
  SPEAKER_01: Sam, Sam Earl.
• 1:04
  SPEAKER_00: You don't know that, but anyway.
• 1:06
  SPEAKER_00: My official official title is as a journalist and a PhD student at Columbia Journalism School, researching how tech is shaping the public sphere.
• 1:18
  SPEAKER_00: And it's great to be back on the podcast.
• 1:20
  SPEAKER_03: And as a young person, we felt we needed him on today.
• 1:23
  SPEAKER_01: I know a young person and indeed a male presenting person.
• 1:26
  SPEAKER_00: Representative of my generation and my gender.
• 1:30
  SPEAKER_00: So much responsibility.
• 1:31
  SPEAKER_01: Representing both.
• 1:33
  SPEAKER_01: We felt that your generation and indeed your gender come in for such heavy criticism of the game.
• 1:40
  SPEAKER_00: My generation and my gender.
• 1:42
  SPEAKER_01: To be sound, we needed right of reply at all times.
• 1:46
  SPEAKER_01: Um we're a show about forecasting the future of media.
• 1:49
  SPEAKER_01: We often look at the past to predict the future, but maybe there's a better way.
• 1:53
  SPEAKER_01: Maybe we should open it up to the wisdom of crowds.
• 1:58
  SPEAKER_01: If you had to put money on whether journalism will still be around in 2050, how much would you bet?
• 2:03
  SPEAKER_01: What are your odds?
• 2:04
  SPEAKER_01: Heather.
• 2:06
  SPEAKER_01: I know you're a gambler.
• 2:08
  SPEAKER_03: I'm a gambler by nature, a risk taker.
• 2:12
  SPEAKER_03: Heather risky chaplain, they used to call me.
• 2:22
  SPEAKER_03: So I was thinking that maybe we should hedge our bets.
• 2:25
  SPEAKER_03: I hear that's the thing to do now.
• 2:28
  SPEAKER_03: I was reading about these new companies that said we could open our own prediction market that says that journalism will be dead by 2050.
• 2:37
  SPEAKER_03: And we put all of us put all our life savings into it.
• 2:40
  SPEAKER_03: And that way, even if we lose and journalism dies, we also win big.
• 2:44
  SPEAKER_03: So no matter what happens, we come out ahead.
• 2:47
  SPEAKER_01: That is an absolutely amazing idea.
• 2:49
  SPEAKER_01: I will we'll execute that as soon as we as soon as we've wrapped up.
• 2:53
  SPEAKER_01: And and actually, you know, funny should be talking about that because coincidentally, uh, that's what we're going to be talking about today.
• 3:01
  SPEAKER_01: Oh my god.
• 3:02
  SPEAKER_01: Nobody would have predicted that.
• 3:05
  SPEAKER_01: Um, and joining us to do that is an actual professional who doesn't know what she's talking about.
• 3:09
  SPEAKER_01: Uh, Kate Nibbs from Wide Magazine, who's written about this very subject.
• 3:13
  SPEAKER_01: Kate, welcome.
• 3:14
  SPEAKER_04: Thrilled to be here.
• 3:15
  SPEAKER_00: We won't implicate you in our financial strategy and whether we should be hedging our bets in prediction markets over journalism's future.
• 3:23
  SPEAKER_00: But it does feel like prediction markets is something that everyone needs to understand right now, especially in journalism.
• 3:31
  SPEAKER_00: And we've found your reporting at Wired to be really helpful.
• 3:35
  SPEAKER_00: I wondered if you could just start by telling us how long you've been covering prediction markets for, because it it's a beat that can't have existed until quite recently.
• 3:45
  SPEAKER_00: And at the most basic level, what are they?
• 3:49
  SPEAKER_04: Yeah, absolutely.
• 3:50
  SPEAKER_04: So I've been covering prediction markets intensively since the beginning of the year.
• 3:56
  SPEAKER_04: I was on a maternity leave at the starting at the end of last year, and it was like when I was sleep deprived and up scrolling at two in the morning that I became really obsessed with prediction markets and was sort of came back guns blazing, saying, I really want to cover this.
• 4:14
  SPEAKER_04: This is such a fascinating moment.
• 4:17
  SPEAKER_04: It feels like an extension of the story of cryptocurrency, but also like watching the beginning of crypto, the crypto boom.
• 4:25
  SPEAKER_04: It really feels to me like an extension of this like larger story that's playing out where people are just a lot more open to risk in their lives.
• 4:36
  SPEAKER_04: And my decision to cover intensity definitely coincided with these platforms becoming way more mainstream.
• 4:45
  SPEAKER_04: They've been around for a while, though, I do want to say.
• 4:48
  SPEAKER_04: But so in recent years, a few things have changed that have allowed these prediction markets to like totally explode in popularity.
• 4:56
  SPEAKER_04: One thing is, even though there's this huge fight over whether they're gambling or not, and they say that they're not gambling, the like advent of gambling, sports betting being legalized in many states in the US is, I think, really central to the story just because it like normalized the concept of gambling on your phone for so many people.
• 5:15
  SPEAKER_04: And then PolyMarket launched in 2020 and CalShi launched around the same time.
• 5:21
  SPEAKER_04: They took very different paths, though.
• 5:23
  SPEAKER_04: Calci ended up suing regulators to legally be allowed to offer its prediction markets, and so it's a federally regulated financial exchange.
• 5:35
  SPEAKER_04: Polymarket originally was this fully like offshore crypto-based thing, and it was banned in the United States at one point during the Biden administration because they were like, wow, this shouldn't, this is not allowed.
• 5:49
  SPEAKER_04: Um, and like since then they've sort of come back to the US and launched their own federally regulated financial exchange called Polymarket US, but then they're simultaneously still operating the offshore crypto version.
• 6:03
  SPEAKER_04: That that's still probably when you think about Polymarket, that's what you're thinking about.
• 6:07
  SPEAKER_04: That's the version that has like all of the betting on the Iran war.
• 6:11
  SPEAKER_04: It exists in this very weird space where people in the US are technically banned from using it, but anyone with a VPN can basically figure it out.
• 6:20
  SPEAKER_04: So now we're in this moment where they are not only something that exists in the US, but like they're a huge topic of conversation, and news outlets are striking all these deals with them, and they're sort of becoming enmeshed in in the media world.
• 6:39
  SPEAKER_01: Does that also have a bit of a relationship to this idea of the regulatory gray area?
• 6:45
  SPEAKER_01: So is there a way in which by partnering with news organizations you're more like a polling company, less like a less like a gambling outfit?
• 6:53
  SPEAKER_04: There's a possibility that some of the prediction markets might make that argument in their legal cases.
• 6:58
  SPEAKER_04: We're expecting at least one of them to go up to the Supreme Court in the next year.
• 7:03
  SPEAKER_04: But for the most part, the media partnerships are giving them just cultural authority more than like a legal argument to exist.
• 7:14
  SPEAKER_04: KalShi has deals with CNN and CNBC.
• 7:18
  SPEAKER_04: Polymarket has a deal with the Dow Jones, which owns the Wall Street Journal.
• 7:22
  SPEAKER_04: They have their own newsletters.
• 7:24
  SPEAKER_04: Both companies have like extremely active social media accounts and they like tweet as though they are media companies.
• 7:31
  SPEAKER_04: They'll be like breaking, blah, blah, blah, blah, like scoop.
• 7:34
  SPEAKER_04: Um, and a lot of times it's really wrong.
• 7:37
  SPEAKER_04: They're trying to fix that apparently.
• 7:39
  SPEAKER_04: But um, yeah, they're functioning like media companies.
• 7:42
  SPEAKER_04: I I don't know if that's going to be central to like the legal arguments, but again, it we'll see what happens.
• 7:48
  SPEAKER_00: I think as well, I mean, you know, as someone who is more new to polymarkets, but the th the thing that makes them unique, it should be said, is that you can bet on everything.
• 8:01
  SPEAKER_00: I think what what has made it such an effective publicity tool is this idea that almost nothing is off limits.
• 8:10
  SPEAKER_00: In the way the business works, I think it was something like 70 to 80 percent, or even 80 to 90 percent of their trading happens in sports, and yet they're seen as these radically new technology platforms.
• 8:27
  SPEAKER_00: The other thing that struck me is is how the founders of these companies present or sort of market their companies as two different products at once.
• 8:42
  SPEAKER_00: One is just as a a stock exchange for everything, and a lot of the advertising is is targeting people who they want to take risks, they're in a situation where they're maybe broke or they can't pay the rent, and here's a solution to their problems.
• 8:58
  SPEAKER_00: But then the second way they market their products is as what I I think it was Polymarket's founder, Shane Copeland, called a global truth machine.
• 9:09
  SPEAKER_00: And both Calci and Polymarkets say that not only is this a place where you can make millions, this is also a public service that will find out what's happening in the world much more accurately than polling and then journalism.
• 9:28
  SPEAKER_00: It's hard to get a grip in a way on what these companies are doing because they're doing these things simultaneously.
• 9:35
  SPEAKER_00: And so it is just a very, it's a murky, it's a murky space.
• 9:39
  SPEAKER_01: What's um so on the subject of murky space, Kate?
• 9:43
  SPEAKER_01: So so you say I started doing this uh at the beginning of the year.
• 9:46
  SPEAKER_01: Coming back from maternity leave and straight into this, I can't imagine as um somebody who's I've it's a long time since I was on maternity leave, but this dystopian world of of of weirdness.
• 9:58
  SPEAKER_01: This relationship then between news and the platforms, you say, sort of picking up cultural capital.
• 10:04
  SPEAKER_01: What are the inherent risks for publishing companies that are striking deals with these companies and what do they get out of it?
• 10:12
  SPEAKER_01: What are the terms of those deals look like?
• 10:14
  SPEAKER_04: Well, I think a big risk is connected to what Sam is talking about, with how these companies, on one hand, are purporting to offer these new channels of information, but on the other hand, practically are largely being used as gambling platforms by people.
• 10:30
  SPEAKER_04: And so I think there's always a risk when media outlets yoke themselves to vice companies.
• 10:38
  SPEAKER_04: Like, not that it doesn't happen, you know, I even in the golden age of magazines, like half those ads were for cigarettes.
• 10:46
  SPEAKER_04: Um, and I'm not like a prohibitionist of prediction markets, so I'm not trying to get up on a high horse here, but I I definitely think it's something that poses a risk to the integrity of media companies.
• 10:56
  SPEAKER_04: They need to be careful how they interact with vice institutions.
• 11:02
  SPEAKER_04: And the appeal is that they do offer interesting channels of information.
• 11:10
  SPEAKER_04: You know, they can be barometers of public sentiment.
• 11:13
  SPEAKER_04: There is uh a lot of research that indicates that they can be at least complementary to traditional political polling.
• 11:21
  SPEAKER_04: Um, they have like dashboards for public companies and and sort of economics markets.
• 11:28
  SPEAKER_04: I I I think that they're genuinely interesting to look at as sources of information.
• 11:34
  SPEAKER_04: If you watch CNBC, like they will run the Cal sheet ticker.
• 11:40
  SPEAKER_04: It's already very much sort of part of that company's presentation of what's happening in in the world of finance.
• 11:49
  SPEAKER_04: And I I think it's a huge much bigger coup.
• 11:52
  SPEAKER_04: I think these are much better deals for the prediction markets.
• 11:54
  SPEAKER_01: Like scary anymore.
• 11:57
  SPEAKER_01: Right.
• 11:57
  SPEAKER_01: Well, because I just come from a class actually of students at Columbia General School, and all they wanted to talk about was the prediction markets and Cauchy and betting.
• 12:07
  SPEAKER_01: And they had a whole kind of host of questions about like, well, like like once you once you do a deal with a betting company, like what's in it for the journalism companies?
• 12:18
  SPEAKER_01: And I think, as you say, it's a much better deal for the prediction markets.
• 12:22
  SPEAKER_01: Are they also a sort of a distribution platform for news?
• 12:25
  SPEAKER_01: Because they do have, as you say, this kind of live tweeting thing.
• 12:28
  SPEAKER_01: Do we have the same issue that we had with other social platforms, which is if your content's not on polymarket, do you even really exist?
• 12:35
  SPEAKER_01: That sort of question, or is that not is that not an issue yet?
• 12:38
  SPEAKER_04: You're kind of I'm like, you're gonna speak this into existence.
• 12:41
  SPEAKER_04: So far, the deals haven't really involved, you know, putting CNBC content on Calci, for instance.
• 12:48
  SPEAKER_04: It's more Calci content being integrated into CNBC's offerings.
• 12:52
  SPEAKER_04: CNBC will actually like commission its markets to get information that it wants.
• 12:58
  SPEAKER_04: I think that both of these companies recognize that they are media companies to some extent and are positioning themselves in that way.
• 13:06
  SPEAKER_04: So I wouldn't be surprised if there were deals like that.
• 13:09
  SPEAKER_04: But yeah, at the moment it's more going the other way.
• 13:12
  SPEAKER_00: I was listening to an interview that Tarek Mansor, one of the co-founders of CalShi, was giving.
• 13:19
  SPEAKER_00: And he was boasting about how many users of prediction markets aren't putting their money into them.
• 13:26
  SPEAKER_00: They're just going on it to browse, as he put it, as someone might look at the newspaper in the morning.
• 13:32
  SPEAKER_00: So it's like, I mean, again, it's all these different things at once because on the one hand, they're saying they want to replace newspapers.
• 13:40
  SPEAKER_00: At the same time, they're striking up deals with newspapers where they're giving them, you know, cash-strapped newsrooms money.
• 13:48
  SPEAKER_00: And then the other way that they rely on journalism, um, which again I I hadn't been fully aware of, is that they need journalists to settle the bets.
• 13:58
  SPEAKER_00: So to determine what happened or not, it is often up to what a journalist has said, and that is also given journal like exposed journalists to a new type of scrutiny.
• 14:11
  SPEAKER_00: Like there was a story in the Washington Post about a journalist who suddenly he'd reported on a missile falling on Israel.
• 14:21
  SPEAKER_00: Suddenly, out of nowhere, he started getting all these death threats saying you need to change that story.
• 14:27
  SPEAKER_00: It wasn't a missile, it was shrapnel, it da-da-da-da-da.
• 14:30
  SPEAKER_00: And he he at first didn't know what was happening, but then he realized there had been a market on whether a missile was going to fall there on that day or not.
• 14:41
  SPEAKER_00: And so suddenly his reporting was responsible for whether people were making millions or losing millions, and they were just saying, just change the word for missile to this, to that.
• 14:52
  SPEAKER_00: And so again, it's like they need journalism in all these ways, they want to replace it, and and the journalist becomes the sort of referee over whether something happens or not.
• 15:07
  SPEAKER_04: Yeah, so right now, a lot of the markets, when they come up for the terms to resolve them, they will often say, you know, there should be a consensus among XYZ credible news sources, and they absolutely are relying on the mainstream media.
• 15:22
  SPEAKER_04: I've never heard them say they want to like destroy the media and like but they definitely want to be part of the ecosystem.
• 15:30
  SPEAKER_03: Can I ask a serious question about that?
• 15:34
  SPEAKER_03: This is something that's confused me since we were been talking about this and knew you were coming on.
• 15:41
  SPEAKER_03: And maybe I'm just revealing my ignorance here, but I understand how it's an interesting, as you said, barometer of public sentiment.
• 15:50
  SPEAKER_03: You can see, huh, a lot of people are betting for X?
• 15:54
  SPEAKER_03: That implies a lot of people believe X.
• 15:56
  SPEAKER_03: That's interesting.
• 15:57
  SPEAKER_03: But that's not the same as X has happened or is going to happen.
• 16:02
  SPEAKER_03: So, how is it anything other than just like an opinion poll?
• 16:07
  SPEAKER_03: Like, how is it the truth or news?
• 16:11
  SPEAKER_03: It's just what people think.
• 16:13
  SPEAKER_03: I agree.
• 16:14
  SPEAKER_03: Okay, okay.
• 16:16
  SPEAKER_03: Okay.
• 16:16
  SPEAKER_00: Well, it's where the sort of the wisdom of crowds elevates.
• 16:20
  SPEAKER_03: But it's not the wisdom, it's just what people think.
• 16:22
  SPEAKER_03: Well, this is it's not actually giving you any knowledge of what's likely to happen, let alone what's happened.
• 16:30
  SPEAKER_03: Or is am I missing something?
• 16:32
  SPEAKER_03: It's just what people believe will happen.
• 16:35
  SPEAKER_00: And those are I mean, like like Kate, I think I I also agree, but from what I've understood of what I've understood, and and Kate, I don't know if you've also had to look into this, but it's like a key part of their economic rationale is this idea, which is a very old one in economics, which is that by aggregating the decisions of as many people as possible, you know.
• 17:05
  SPEAKER_03: But it's not decisions, it's well, it's it's beliefs, it's it's thoughts, it's actions.
• 17:11
  SPEAKER_03: This is truly an honest question.
• 17:13
  SPEAKER_03: Like, I'm willing to believe I'm missing something.
• 17:16
  SPEAKER_04: So, like obviously, right now they don't have investigative journalists on staff.
• 17:22
  SPEAKER_04: Some of them have been trying to hire journalists, which is interesting.
• 17:25
  SPEAKER_04: Yeah.
• 17:25
  SPEAKER_04: But when they're saying that the markets are a source of news, sometimes it's like, okay.
• 17:34
  SPEAKER_04: A lot of it is connected to this very, very controversial part of these markets, which is the the fact that they are vectors for inside trading in many cases.
• 17:43
  SPEAKER_04: So sometimes they can be truth machines because, for example, a market about whether George Santos is going to appear at the State of the Union, he actually manipulated it to be wrong.
• 17:56
  SPEAKER_04: But like had had enough inside traders who knew he wouldn't be there put their money down, then you could have looked at the market and seen, oh, he's not there's a 95% chance he's not gonna be there before it happened.
• 18:09
  SPEAKER_04: That would be the source.
• 18:19
  SPEAKER_04: Yeah, but the thing is that these these uh these markets are so new and so in many cases susceptible to various forms of market manipulation.
• 18:32
  SPEAKER_04: Like, for example, there were markets into who would perform at the Super Bowl, like who whose special guests would be.
• 18:40
  SPEAKER_04: And in traditional commodities trading, it's illegal to insider trade.
• 18:45
  SPEAKER_04: And because these are federally regulated markets, at least Calci is, like, it's it's illegal, it's against the Commodities Exchange Act.
• 18:53
  SPEAKER_04: But insider trading requires having like non-public material information about a company and like violating uh contracts that you have with them and or an agreement you have with them.
• 19:06
  SPEAKER_04: So like a dancer, it could be clear, fairly clear-cut insider trading if if they bet on a special guest, but like it's less clear.
• 19:15
  SPEAKER_04: What if they have a cousin and the cousin told five friends?
• 19:19
  SPEAKER_04: So there is this idea that these markets could be accurate because of this sort of like amorphous insider trading.
• 19:28
  SPEAKER_03: Insider trading would be saying that's good, that this actually helps us, right?
• 19:33
  SPEAKER_01: So if you're better if you're betting on who is going to be voted out next on traitors, there's already a production crew that knows who that is.
• 19:40
  SPEAKER_01: There's already and is that public information?
• 19:42
  SPEAKER_01: Is it insider information?
• 19:43
  SPEAKER_01: Is it kind of that as you say, Kate, there's that sort of but I mean talk a little bit as well about the financialization of kind of everything, which is like, is there any transaction now which that takes place on the internet, which cannot be financialized once you let these markets loose?
• 20:04
  SPEAKER_04: It's really wild.
• 20:05
  SPEAKER_04: And like as you're saying, like there's all these markets on traders, there's all these reality shows, there's a huge push specifically to get women to trade on prediction markets that are about like their favorite reality shows.
• 20:16
  SPEAKER_04: There's mention markets, which are um quite controversial, and they might end up getting banned, like even if everything else is permitted, which is you're butting on, for example, what Caroline Lovitt would say in a press conference, and those were very clearly like very easy to manipulate if people wanted to.
• 20:36
  SPEAKER_04: There was an instance where a tech CEO knew that there were a bunch of mention markets about what he would say in an earnings call, and at the end of the call, he just rattled off a bunch of the keywords to nod at the traders.
• 20:49
  SPEAKER_04: I actually, as like a joke, I vibe coded this website called futures.baby that is still in existence.
• 20:56
  SPEAKER_04: And it was a satirical website about making a prediction market for your child's life.
• 21:03
  SPEAKER_04: And a lot of people thought it was real.
• 21:06
  SPEAKER_01: Wow.
• 21:07
  SPEAKER_01: This isn't did anyone, did anyone put any money on your own?
• 21:11
  SPEAKER_01: No, no, I it was just like a it was a joke, to be clear.
• 21:15
  SPEAKER_04: I did not.
• 21:16
  SPEAKER_00: Yeah, but that's that's the scary thing.
• 21:19
  SPEAKER_00: Is people believe like I listened to a freak economics podcast with Tarek Mansor, co-founder of CalShi, and they also interviewed someone called Robin Hansen, and he was talking about his idea to literally create prediction markets for everything because he says it's the greatest way of achieving certainty about anything that exists, better than any expert, better than yourself.
• 21:47
  SPEAKER_00: And he literally he was describing his utopian vision, and it was one of the most terrifying things I've heard.
• 21:54
  SPEAKER_00: He was saying you could set up prediction markets for whether your son should go to this or that university.
• 22:00
  SPEAKER_00: If he's about to date this woman, let's set up a prediction market whether we think that's a good idea.
• 22:05
  SPEAKER_00: We're gonna get his parents to invest, we're gonna get his exes to invest, and it'll all be true because they have money on the line and through the aggregation.
• 22:17
  SPEAKER_00: And he was putting this out, and he he was you could you could hear how excited he was about this possibility.
• 22:23
  SPEAKER_00: And I was like, oh my god.
• 22:27
  SPEAKER_04: He's got some real interesting ideas.
• 22:29
  SPEAKER_04: He also bel he invented the concept of feudarchy, which is ruling a nation state via prediction markets.
• 22:36
  SPEAKER_04: I highly recommend looking into it.
• 22:40
  SPEAKER_04: Talk more about that.
• 22:41
  SPEAKER_01: Yeah, talk more about that.
• 22:43
  SPEAKER_04: He is is truly a fascinating figure and he has been very influential like in the prediction market and forecasting space.
• 22:49
  SPEAKER_04: But yes, so feudarchy is this idea that the wisdom of the crowds is real and that we might be better served by instead of having a president, we all just rule collectively via gambling.
• 23:05
  SPEAKER_03: Okay, okay.
• 23:06
  SPEAKER_03: So wait, I I'm sorry to keep going back to this point, but it's I feel like I must be missing something because it's people's predictions.
• 23:18
  SPEAKER_03: It's not wisdom.
• 23:19
  SPEAKER_03: Like I don't, I don't what am I missing honestly in the conflating those two?
• 23:24
  SPEAKER_03: Like, okay, great.
• 23:26
  SPEAKER_03: I might think this is gonna happen.
• 23:28
  SPEAKER_03: My thinking it does not materially affect reality.
• 23:32
  SPEAKER_03: So why is it wisdom?
• 23:33
  SPEAKER_03: Why is it have anything to do with what actually happens?
• 23:37
  SPEAKER_03: So there's unless there's insider trading, but don't answer.
• 23:41
  SPEAKER_04: I'm gonna like butcher the specifics of this.
• 23:44
  SPEAKER_04: So anyone listening, you could just Google it to get like the exact figures.
• 23:47
  SPEAKER_04: But one of the examples often cited by the wisdom of the crowd proponents is it at a county fair, there's a hog and there's a contest to determine who can most accurately guess the size of the hog.
• 24:02
  SPEAKER_04: And they found that the most accurate predictor of the size of the hog was the a prediction market.
• 24:09
  SPEAKER_03: Like the I would take everybody's and then you generalize out of it.
• 24:14
  SPEAKER_00: And and so why it's interesting, and when this idea really actually took off because another one of the economists who's sort of famous within this fear is Hayek writing during the Second World War, during the sort of rise of social democracy, and it was basically a way of crediting.
• 24:33
  SPEAKER_03: You know, he's Milton Fox.
• 24:35
  SPEAKER_03: He was funded Kant brothers to sorry, but he's Road to Serfdom.
• 24:41
  SPEAKER_00: Our listeners can go back to early episodes to find out about this.
• 24:45
  SPEAKER_00: About about Heather's enthusiasm for Frederick Commick.
• 24:48
  SPEAKER_00: The Mount Pellan society.
• 24:49
  SPEAKER_03: This is important stuff.
• 24:51
  SPEAKER_00: And it's a way of it's a way of it's a way of discrediting expertise and state bureaucrats.
• 24:57
  SPEAKER_00: And so the the implication of the wisdom of crowds is we don't need any regulators, we don't need any economic intervention, it needs to be all bottom-up, no one knows better than the the sort of decentralized mass of people just going about their lives.
• 25:18
  SPEAKER_00: Exactly.
• 25:19
  SPEAKER_00: And and yeah, through that we will achieve a much higher grade of truth than if we have an expert who inevitably has warped incentives or they've but got clouded judgment because they've been in their world for too long.
• 25:34
  SPEAKER_01: So, Kate, on that um subject, we have an administration at the moment, doesn't feel like that they're particularly enthusiastic about regulating polymarkets.
• 25:45
  SPEAKER_01: How how would you?
• 25:47
  SPEAKER_01: I'm trying to find a um delicate way of putting this.
• 25:50
  SPEAKER_01: Um, can you tell us a bit about the connections between the current administration and prediction markets and how maybe the political philosophy and the regulatory desire of the administration knits with the development of these markets in the United States?
• 26:05
  SPEAKER_04: Yeah, absolutely.
• 26:06
  SPEAKER_04: So, like Heather was hitting the nail on the head about this being a philosophy that dovetails with populism.
• 26:13
  SPEAKER_04: It's not a coincidence that these are exploding in the age of second Trump administration, mega two.
• 26:20
  SPEAKER_04: You cannot talk about these markets without noting that Donald Trump Jr.
• 26:26
  SPEAKER_04: is a major investor, major, major investor in polymarket.
• 26:32
  SPEAKER_04: The fund that he is a partner in, 1789 Capital, is currently helping lead a fundraising round for polymarket.
• 26:39
  SPEAKER_04: He's also been an advisor for the company.
• 26:42
  SPEAKER_04: He's also been an advisor for Calci.
• 26:46
  SPEAKER_04: Trump media was going to launch its own prediction market.
• 26:50
  SPEAKER_04: It's then sort of walked it back, and now it's this weird partnership with crypto.com, but it it was planning something called Truth Predict.
• 26:59
  SPEAKER_04: Um, so Donald Trump's family is very invested in these markets flourishing and not being regulated.
• 27:07
  SPEAKER_04: Um the Commodity Futures Trading Commission, which is the federal regulator that oversees commodities trading and that includes prediction markets, the chairman is this man named Michael Sellig, who comes from the crypto world, and there's usually supposed to be multiple chairpersons.
• 27:24
  SPEAKER_04: He is the only one.
• 27:26
  SPEAKER_04: The CFTC has come under a lot of criticism, including from people who have left the agency for treating this space way too gently.
• 27:38
  SPEAKER_04: There's a lot of fears that it just isn't enforcing laws, it isn't bringing investigations quickly enough.
• 27:47
  SPEAKER_04: There's at least one ongoing probe into Polymarket like that has started doing some of the work, I will say.
• 27:55
  SPEAKER_04: I just FOIA'd the agency and found out that there were three investigations that had hadn't been reported.
• 28:02
  SPEAKER_04: Like they're doing some stuff, but there's a lot of, I think, very reasonable and valid criticism that this this leading federal agency is taking sort of a Trumpian-friendly approach to the prediction space.
• 28:17
  SPEAKER_01: From a journalistic point of view as well, I mean, you're do you're doing incredible work on this beat, and there are sort of a few other reporters who are looking at it, but I also kind of wonder if it's strangely undercovered in terms of the mainstream that again, as you say, sort of actually polymarket is just being socialized by so many news networks at the moment without really like I other are we gonna see CNBC doing major investigations into polymarket?
• 28:41
  SPEAKER_01: I I kind of don't see it myself.
• 28:43
  SPEAKER_01: I don't know.
• 28:43
  SPEAKER_03: And is that part of their strategy for wanting to partner with news organizations?
• 28:48
  SPEAKER_03: I mean, if I worked there, that would be part of my strategy for sure.
• 28:51
  SPEAKER_04: It seems like um yeah, I there there's you know, Bloomberg's been really ahead on coverage.
• 28:59
  SPEAKER_04: The certain times reporters are great.
• 29:01
  SPEAKER_04: Bobby Ellen at NPR, who's now going to Bloomberg, is is a great prediction markets reporter.
• 29:06
  SPEAKER_04: There are people paying attention.
• 29:09
  SPEAKER_04: It's like one of the interesting things for me.
• 29:12
  SPEAKER_04: I I actually think I assumed that Wired's readership would be like more familiar with prediction markets.
• 29:18
  SPEAKER_04: I still, because I'm like so enmeshed in the space, I've been like a little surprised by how many people either just don't know what they are, aren't paying attention, or just see them as like kind of just another fan duel.
• 29:30
  SPEAKER_04: And what's happening is so much crazier than that.
• 29:35
  SPEAKER_04: Um, like I I really think that they're kind of gunning to cannibalize traditional financial marketplaces, which is nuts.
• 29:44
  SPEAKER_04: And then in like Polymarket's case, a huge chunk of its business is still this offshore crypto thing that that they don't have know your customer requirements.
• 29:55
  SPEAKER_04: People are doing this anonymously.
• 29:57
  SPEAKER_04: It's really and it's run from New York somehow.
• 30:00
  SPEAKER_03: Can I ask another question about the hog?
• 30:03
  SPEAKER_03: I go back to this this hog and how much he weighs because I'm like, okay, that's a fair point.
• 30:08
  SPEAKER_03: Like I now I see what people mean.
• 30:11
  SPEAKER_03: Um one, is it is that right?
• 30:15
  SPEAKER_03: Is there evidence that people will tend to get closer weight to the hog?
• 30:21
  SPEAKER_03: That if you take the average of everybody's guess, you do get something more accurate than any one guess alone.
• 30:27
  SPEAKER_03: Does that happen across these markets?
• 30:30
  SPEAKER_04: Well, the hog thing was like a specific example.
• 30:33
  SPEAKER_04: There is a historical hog.
• 30:35
  SPEAKER_04: Um I think there it's kind of an open question right now.
• 30:39
  SPEAKER_00: But the 2024 election was their sort of clinching piece of evidence where they say, like, look, we guessed the weight of the hog and the hog was Trump's victory.
• 30:50
  SPEAKER_03: This is my big idea.
• 30:51
  SPEAKER_03: Why don't we harness people to make their predictions but remove the gambling aspect?
• 30:59
  SPEAKER_00: How are we gonna make money?
• 31:01
  SPEAKER_01: I was gonna say, I do you not live, and I was about to say, do you not live in the United States?
• 31:06
  SPEAKER_01: And the answer is no, you don't.
• 31:07
  SPEAKER_01: You live in North Yorkshire, where that might seem like an opinion.
• 31:10
  SPEAKER_03: But so I'm serious.
• 31:11
  SPEAKER_03: So it sounds like it is an interesting, it's a it's a fascinating.
• 31:16
  SPEAKER_03: I can imagine the guy who discovered, hey, that the the hog was the the best way, the best guess came from averaging everybody.
• 31:24
  SPEAKER_03: What an amazing insight.
• 31:26
  SPEAKER_03: And how interesting that the best thing we can do with it is turn it into a casino.
• 31:30
  SPEAKER_00: But actually, there's no, but there is there is actually a serious answer to this, and this again gets at the heart of these companies.
• 31:38
  SPEAKER_00: They say that the only way of getting the true indication of what someone thinks about the weight of the hog is if they put their money in.
• 31:48
  SPEAKER_00: And so it's it's also really interesting how these the prediction markets exist in relation to social media.
• 31:55
  SPEAKER_00: Because you get a lot like and I'm when I'm watching interviews now with Tarek Mansor, Shane Copeland, they do feel like the new sort of Mark Zuckerberg.
• 32:08
  SPEAKER_00: But the prediction markets people say social media is full of warped incentives about why people share this or that opinion.
• 32:14
  SPEAKER_00: It encourages sensationalist takes, it's created this really polarized public sphere.
• 32:22
  SPEAKER_00: But by making people put money onto their opinions, we get their true view, and then that allows this wisdom of crowds idea to actually be effective.
• 32:34
  SPEAKER_00: And so they would say that the fact that there's money involved is completely essential to their role as like global truth machines.
• 32:42
  SPEAKER_00: And it's it I I feel frustrated even having to explain their logic because it's so self-serving, but it's like it is this perfect web of justification.
• 32:52
  SPEAKER_03: Well, they would say that I was missing the point that that what keeps people honest is is the is the money.
• 32:58
  SPEAKER_00: And and that I I mean, Kate, I don't know how you feel, but one of the things that I find most frustrating about it is this idea that by putting money on the line you remove other incentives.
• 33:10
  SPEAKER_00: Whereas before I'd come across that logic from prediction markets, I'd always seen having money at stake as a key thing that makes you have other incentives or like potentially conflicted incentives.
• 33:24
  SPEAKER_00: But this idea that the money purifies your incentives is is is pretty that was new to me.
• 33:33
  SPEAKER_04: I always think about that case where someone took a hairdryer to a sensor, like a weather sensor near the Parisian airport because they wanted to manipulate a market on the temperatures in polymarket.
• 33:48
  SPEAKER_04: I understand where they're coming from a little bit in terms of like how how do you incentivize people to participate.
• 33:53
  SPEAKER_04: There are some that don't use real money, like those do exist.
• 33:57
  SPEAKER_04: Manifold is one.
• 33:59
  SPEAKER_04: There's one called safe bets.
• 34:01
  SPEAKER_04: Um and I just think they don't get enough participants to be super accurate, like the volume people unfortunately want to speculate and wager and trade and gamble.
• 34:15
  SPEAKER_04: So that's like one of the key things to get enough people or institu.
• 34:21
  SPEAKER_04: I also want to say institutions, these are often discussed as like vectors for retail trading, like for regular people to lose money.
• 34:30
  SPEAKER_04: There's a lot of major institutional players that are already on these platforms, especially Calci.
• 34:36
  SPEAKER_04: When you are making a wager about who's gonna win traders on CalShi, and you inevitably lose, the person winning is probably a like quant trader.
• 34:49
  SPEAKER_01: So that's so that's so that's in so that is interesting.
• 34:52
  SPEAKER_01: And I think again, something that people don't understand about uh polymarkets, which is in the casino the house always wins.
• 34:59
  SPEAKER_01: And the way that they position themselves is well, we don't take that money as the house.
• 35:05
  SPEAKER_01: So how do how do they actually make money if they're not?
• 35:08
  SPEAKER_04: So it's peer-to-peer, so yeah, there's people taking either side of the of the butt.
• 35:14
  SPEAKER_04: But again, one of those people might be me, and then another person might be a Jane Street guy who is using an algorithm.
• 35:23
  SPEAKER_04: So that's like the one of the main arguments they make about how they're not sports betting because there's no book.
• 35:29
  SPEAKER_04: They make money off of transaction fees.
• 35:31
  SPEAKER_04: So they also are like, well, it doesn't matter to us what the outcome is because that's that's irrelevant to how we make money.
• 35:37
  SPEAKER_04: We just take a cut of the transaction fees.
• 35:40
  SPEAKER_04: That's like mainly true, but then there's also like I don't want to get too wonky, but one of the ways that they have to operate in order to like provide enough liquidity is there's market makers.
• 35:53
  SPEAKER_04: So there will be like institutions offering large sums of money to make sure that these markets can function so you don't have to like wait for an actual single person to take the trade.
• 36:06
  SPEAKER_04: And in some cases, like Calci has a market making arm, so it's like all a little more complex than just sheer peer-to-peer.
• 36:16
  SPEAKER_01: And I guess that raises another question, which is we come back to sort of how it's converging with media and what does it mean for journalism?
• 36:22
  SPEAKER_01: Um online gambling is really quite new for the United States, you know.
• 36:28
  SPEAKER_01: I I I come from a country where um people bet on anything and have done that for many years, which is why it has to be very tightly regulated.
• 36:36
  SPEAKER_01: Uh, isn't there just like a huge ethical issue with urging your readers or engaging your readers through this idea of a market or placing bets?
• 36:48
  SPEAKER_01: It just seems to me that there's no ethical way to implement this on your pages.
• 36:53
  SPEAKER_04: I think that there's currently a pretty big reckoning starting to happen, specifically in sports media, because of how enmeshed it is with sports gambling.
• 37:04
  SPEAKER_04: A lot of big sports outlets will take advertising sponsorship money from gambling companies.
• 37:12
  SPEAKER_04: They'll have like gambling themed content.
• 37:15
  SPEAKER_04: Uh and again, that's not like even you know, back in the days of print only before TVs existed, there were newspapers that like ran gambling odds, etc.
• 37:27
  SPEAKER_04: It's not new new, but like the level to which ESPN and The Ringer, which is my former workplace, um have gambling is something that's like very central to their programming, often major sponsors, major advertising partners, is something that a lot of journalists have a problem with and are increasingly speaking up about.
• 37:53
  SPEAKER_04: And I've noticed that even though the prediction markets have been really successful at making deals with some pretty big media outlets and names, there's still a lot of pushback from individual journalists.
• 38:09
  SPEAKER_04: Like I started reporting a piece that I should probably finish reporting and publish um about Substack.
• 38:21
  SPEAKER_04: You know, a lot of pushback.
• 38:23
  SPEAKER_04: They were reaching out to some of their big names, and some of them struck deals, but a lot of them were sending like really salty emails back saying, hell no.
• 38:33
  SPEAKER_04: And I just saw the host of Breaking Points screenshot a sponsorship offer from one of the companies and say I would never do this.
• 38:45
  SPEAKER_04: Like there is it kind of reminds me of the increasing resistance to AI.
• 38:51
  SPEAKER_04: Like there is this movement to resist totally enmeshing gambling and trading with journalism, which is I think we can we can all agree that that's a good thing.
• 39:06
  SPEAKER_01: Um, we we're we're kind of running up against time, which is a shame because I could I would really like to go back to it.
• 39:12
  SPEAKER_03: I have so many more questions.
• 39:14
  SPEAKER_01: I was gonna say we might have to get you back to talk about the civil war, which is actually Heather's favorite thing.
• 39:19
  SPEAKER_01: Um, and witches.
• 39:21
  SPEAKER_01: Um, but if you so if you're making a prediction about prediction markets and where we're going, give us your unfinancialized uh sort of what's the direction of travel here?
• 39:35
  SPEAKER_04: Well, I don't think that they're going anywhere anytime soon.
• 39:40
  SPEAKER_04: I think that there's gonna be a Supreme Court case about this, and I don't even know how to begin predicting the outcome, honestly.
• 39:47
  SPEAKER_04: But if sports contracts end up getting reclassified as gambling, it's going to severely curtail these companies' growth.
• 39:58
  SPEAKER_03: But I I do think they're probably bringing the case that's leading to the Supreme Court.
• 40:04
  SPEAKER_03: Like what's the challenge?
• 40:06
  SPEAKER_04: There's a ton of them.
• 40:07
  SPEAKER_04: Um, it's usually state regulators.
• 40:09
  SPEAKER_03: So they're saying this is this is unregulated.
• 40:11
  SPEAKER_03: This is gambling.
• 40:13
  SPEAKER_04: Yeah.
• 40:13
  SPEAKER_03: Um and then is there any um logical argument that it isn't gambling?
• 40:19
  SPEAKER_03: I'm serious.
• 40:20
  SPEAKER_03: This is like my other question.
• 40:22
  SPEAKER_03: I'm actually really completely serious.
• 40:24
  SPEAKER_04: Um the the federal government's view is that these because of the way that these markets are structured, that they're peer-to-peer and you're buying this binary yes or no features contract, that they are futures, like they're swaps, they are financial derivatives.
• 40:41
  SPEAKER_04: The states are like, yeah, but Yeah.
• 40:44
  SPEAKER_03: I mean, I have I should confess that you you might not even know this about Mamley.
• 40:49
  SPEAKER_03: Did you know that I'm uh I was barred from entering the New York Stock Exchange ever again?
• 40:56
  SPEAKER_01: I did not know that, but I'm uh totally unsurprised.
• 41:00
  SPEAKER_01: Was it to do what's it to do with witchcraft?
• 41:05
  SPEAKER_00: There's no truth here.
• 41:06
  SPEAKER_00: There's no truth here, you don't know anything.
• 41:08
  SPEAKER_03: That was such an honest question.
• 41:10
  SPEAKER_03: And I just revealed my ignorance about this interesting mathematical thing.
• 41:14
  SPEAKER_03: That wasn't happening.
• 41:16
  SPEAKER_03: Had you attempted to burn it to the ground?
• 41:20
  SPEAKER_03: No, no, I detailed wrote when I used to be a columnist for Salon to age myself, when Salon was a brand new, respectable enterprise.
• 41:31
  SPEAKER_03: I wrote a column that was called The Reluctant Capitalist.
• 41:35
  SPEAKER_03: And I went to the stock exchange, and then I wrote a story about it, and I referred to it as like this great gambling den.
• 41:44
  SPEAKER_03: And I wasn't trying to be controversial, and they called me and told me that I would never be allowed back in because I had said that it was gambling, and I still don't understand how it's not gambling.
• 42:01
  SPEAKER_03: It is right, and it's the same with this.
• 42:04
  SPEAKER_03: Like, let's not even say whether it's good or bad for now.
• 42:07
  SPEAKER_03: Like, put the morality aside.
• 42:09
  SPEAKER_03: When one person bets that something's gonna happen and puts money down, isn't that the definition of gambling?
• 42:18
  SPEAKER_04: No, I mean your point of view is very valid and one I I mostly agree with.
• 42:23
  SPEAKER_04: I don't see a huge distinction, especially like morally, ethically, with um gambling on the outcome of a game and doing meme stock trading and crypto arbitrage.
• 42:42
  SPEAKER_04: Like the stock market, there's there is also a reasonable argument that's like, well, the stock market like confers value to people and isn't extractive and exploitative wholly like something like traditional sports books or whatever, but I don't know.
• 43:00
  SPEAKER_04: For me, it's it's all variations of of speculation.
• 43:04
  SPEAKER_03: Right, there's it's called speculation.
• 43:06
  SPEAKER_00: I think you're right, but I think I think they have gone through an incredibly elaborate effort to try and muddy the waters, and they have tried to put space between them and the idea that it's bets, but to any average person on the outside, it's a bet.
• 43:25
  SPEAKER_00: Like you could if you're 19, it would be possible for you to put money on the Knicks winning the NBA next season on a prediction market, but you couldn't do that in a lot of betting stores because the the legal age for betting is 21.
• 43:44
  SPEAKER_00: Is that right, Kate?
• 43:46
  SPEAKER_04: Yes, so most of the major prediction markets are 18.
• 43:49
  SPEAKER_04: The other argument that they often make is that they provide a hedging mechanism.
• 43:53
  SPEAKER_04: So that's like uh, you know, if you were concerned about your house getting damaged in a hail storm, you could place a bet about the temperature for 2027 in a way that would like correspond with the likelihood of a hail storm, um, where that gets kind of especially baroque is with the sports stuff.
• 44:20
  SPEAKER_04: It's like, how do you hedge like what is the hedging?
• 44:22
  SPEAKER_04: And then they'll they'll discuss, you know, there's there's a bar owner whose bar does better when you know the socks are in the playoffs, so they hedge that the socks will lose the playoffs.
• 44:34
  SPEAKER_04: And um, they those are arguments that these prediction markets are actively trying to make.
• 44:39
  SPEAKER_04: Like they make them in a lot of the court filings.
• 44:43
  SPEAKER_04: They offer lots of cases about how different businesses are using them to hedge.
• 44:48
  SPEAKER_04: But whether or not that's going to ultimately be a successful legal argument remains to be seen.
• 44:54
  SPEAKER_01: That's a good place to stop.
• 44:56
  SPEAKER_01: Um, not least because we don't want Heather to implode what is uh rage.
• 45:03
  SPEAKER_03: I'm not even angry.
• 45:04
  SPEAKER_03: I'm I'm asking completely reasonable questions because I don't know anything about this topic.
• 45:10
  SPEAKER_01: So I'm like, am I missing I'm trying to see like I I feel I feel I think you're right in thinking, as Kate says, it's it's bonkers.
• 45:17
  SPEAKER_01: And I want to say Kate, thank you very much for your work on this.
• 45:20
  SPEAKER_01: I just think you know, you're gonna be busy.
• 45:23
  SPEAKER_01: That's what I would be putting my predictions on.
• 45:27
  SPEAKER_01: No, no sleep for for Kate nibs.
• 45:30
  SPEAKER_01: Um, but thanks very much indeed for joining us.
• 45:32
  SPEAKER_01: That was absolutely thank you so much.
• 45:34
  SPEAKER_03: Really fascinating stuff.
• 45:35
  SPEAKER_03: Thanks for doing the work.
• 45:38
  SPEAKER_02: I'm not a crumb yellow.
• 45:39
  SPEAKER_02: I the singularity disappeared.
• 45:42
  SPEAKER_02: And uh company has produced such a medium as the internet as you survey our language models.