July 10, 2025 • 38 mins
On today’s show Action Network hosts Chad Millman and Simon Hunter are joined by Chris Gerlacher, a reporter with Prediction News who's covered the rise and regulation of prediction markets worldwide for several years.
The influence of these prediction markets as businesses has become an increasingly important narrative in the sports betting space overall. Now legal in all 50 states, Kalshi just raised $185M and is valued at $2 billion. Internationally-focused Polymarket announced a raise the same week to hit unicorn status of $1 billion. Meanwhile, prediction markets stand to benefit the most from the continued legislation which impacts professional bettors, as well as continued bans from operators who don’t want their business. #Volume
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
Welcome to the Favorites of the Podcast part of the
Volume Podcast Network. I am Chad Moment of the Action Network.
We are doing part two of the show that we
started on Tuesday. Let's welcome in my co host, my companion,
Mike Compadre, my BFF professional better signon Hunter et O
Simon Chad.
Speaker 2 (00:27):
I heard the dumbest dad joke when I was an
England I forgot to tell you about it on the
last show. As soon as I heard, I go Chad
would love this dad joke. So my younger cousin there,
young lad, just had his birthday and my uncle goes
up there and goes, Charlie, how old are you now?
And he goes nine. He goes, oh, I didn't know
you spoke German. I was like, damn, Chad's gonna love that.
(00:51):
So everyone out there, you can use that one time.
If you got you know, a kid that's turning nine,
you can use that one time for life.
Speaker 1 (00:58):
Dude, I'm so old. I don't even have of nieces
and nephews turning nine anymore. All I have are irascible
teenagers who like to throw everything I've ever said in
my life back in my face. That's the entirety of
my existence. It's kind of like working with Matt Mitchell
and Gifford on this podcast, Simon, I want to bring
(01:21):
in Chris Girlocker, who's with Prediction News and has been
covering prediction markets for a very long time, and because
we talked a little bit about this in part one
on Tuesday. Because there's been such a confluence of circumstances
that have been impacting the sports betting and the gambling
universe in the last ten days, and to me, the
(01:47):
growth of these prediction markets and the influence and impact
of these prediction markets is one of the biggest things
out there. And I mentioned, you know, I've been working
on this book and I've done a lot of reporting
around these to a lot of the principles and the
players at CALSHI, at Sport Trade, and they're really becoming
increasingly important players in the space. As I mentioned the
(02:10):
other day, CALSHI raised one hundred and eighty five million,
it's now worth two billion dollars. Polymarket raised, it's now
worth a billion dollars. My conspiracy theory that I talked
about a little bit on Tuesday, nobody is benefiting more
from the new tax regulations in the Big Beautiful Bill,
(02:35):
in which professional betters are now only allowed to deduct
ninety percent of their losses, not one hundred percent of
their losses. Nobody benefits more, in my opinion, than prediction
markets because those are regulated and taxed in entirely different ways.
I'm excited to get Chris Gerlocker on the show because
(02:58):
he can help us break all this down. Chris, welcome
to the Favorites.
Speaker 3 (03:03):
Hey, Chad, thanks for having me.
Speaker 2 (03:04):
This is cool.
Speaker 1 (03:06):
Well, I can sense your enthusiasm. So before we get
to that, Simon, Matt Mitchell was rushing us off the
other day.
Speaker 2 (03:14):
Yeah, it gives a y off the curtain.
Speaker 1 (03:16):
He like it was. So it was so annoying because
I felt like you were digging in on a couple things.
And Chris just indulges for a second. Because the Big
Beautiful Bill, in which gamblers are now only allowed to
deduct ninety percent of their losses versus one hundred percent
of their losses, so all of a sudden, if they
(03:37):
could be paying taxes on money they did not win. Simon,
you mentioned you're trying to figure out what to do
because you think it will kill how professional betters live
in this country. It may not kill how they live,
but it may change how transparent they are with their taxes,
(03:58):
or they got to leave the country and decide to
do it from somewhere else. Unpack that a little bit more.
Some of the conversations you've been happening having with either accountants,
with lawyers, with other people in the space. Explain the
impact here, because I don't think people get it. And
by the way, it doesn't just impact professional betters like
DraftKings Fandal, they will send you sort of basically sheets
(04:21):
forms at the end of the year which you are
responsible for documenting what your potentially taxable income was as
a better So this is for everybody.
Speaker 2 (04:32):
Yeah, no, it's just bad for everybody. That's why I
hope you're right that it's it doesn't go through and
that something does change because luckily we get the rest
of this season upcoming, like it doesn't go into effect
I believe until twenty twenty six, which is a big deal.
So whatever I win this year, legally I can still
report my wins and losses. But yeah, Chad, we're talking
(04:56):
about people like me are just constantly looking for an
edge and that doesn't come just with sports budding. That's
just about everything I do in life. It's a microcosm
of everything in life. I'm always looking for an edge.
So I told you my favorite contest that we do
pit contest. We do legal ones. My favorite pit contest
are tax free ones. Those are ones that are off
the books, so you know, people are going to go
(05:19):
back to what they had never even left, which is
mainly offshore books or your local book, which we know
is got a hint of crime underneath the belly of it.
So it's like guys are going to go back to
that they want to stay in the States. I like
being above board. I've liked what we what we have
now with legalization, and you know, it's it's a hard
(05:44):
life having everything be cash, so getting getting things to
now what it is, which is, you know, I pay
text on everything. I like it. And you know, I knew,
not that I knew this was coming, but we'd heard whispers.
And you know, again we can dive in your'rasy part
of this because New Jersey's stuff is insane. It's literally
I feel like a bill written just to go after
(06:06):
someone like me. I am a narcissist in many ways.
But that one just is insane to me, attacking runners.
But it really is at the point, Chad, where I'm
going to be forced possibly to leave the country for
six months out of the year. Right, England is no taxes.
I can win big money and pay no taxes on
the winning, same with my losses. In England, it's very different.
(06:27):
There are taxes towards gambling than it is here in America,
so that off the get go is a big deal
and many professional betters are going to look into that. Now.
Getting in three months to six month visa to England,
that's a whole story inside itself. Chad knows my mom's
from England. I can have dual citizenship. It's no problem,
you know. That's something that happens basically when you're a
(06:49):
wee young lad. So to me, it's it's not gonna
be a hard transition. To a lot of guys guy
was just meeting with in Vegas, I don't think they've
ever even left the country, let alone go to England.
So they're the ones that to me, will go back
to the dark books. And again there's ways around it.
It's just the normal better having to pay having already
(07:12):
try to make a winning betting and then they're having
to pay ten percent on their losses. I just can't
believe it. I can't believe it. I really can't. I
know how stupid a lot of the stuff in our
government is, but this one is. It's up there, and
what we're about to dive into, you know, the poly markets,
something that's going to help counteract this in many ways.
So I'm here. I'm excited to learn more about it
(07:33):
from Chris here because you know, to me and to
me a lot of other people, Chad, it was something
that really blew up when it came to politics, and
it's obviously going to try to take advantage of what's
about to happen right now with these sports books. So yeah,
very unique, interesting time we're living for sure, with the
sports puddy markets.
Speaker 1 (07:51):
Hi, Chris, thanks for letting us sort of finish up
that conversation. But Simon brings up the politics, He brings
up polymarket for anyone listening, who because we haven't talked
a lot about Calshi, we haven't talked a lot about
sports trade, we haven't talked a lot about polymarket on
this show. Give people a primer. You are an expert
in this. You write for Prediction News, You've been covering
(08:14):
this for a long time at a professional level. Give
people a primer on what's happening in this space.
Speaker 3 (08:21):
Sure, So you know, for those who don't know prediction
markets are, you know, they're in exchange where you can
buy and sell contracts on whether an event will happen,
and every contract is priced between one cent and ninety
nine cents, and the price ends up being how likely
that event is to happen. And you know, the more
valuable your contract is, the more likely it is to
pay out. Whinning contracts pay out a dollar each and
(08:42):
losing contracts get nothing. So it's this really cool, interesting
way to aggregate a lot of information and kind of
get a snapshot of a forecast if you're in it
for the forecasting, but if you're in it for the
gambling too, it's constantly live. So it's this you know,
really strong and unmatched live bet experience as well that
makes it really good for recreational betting. So if you
(09:04):
look at you know, sports Trade, and you know they've
been offering sports contracts since twenty twenty two, they've just
been doing it under state gambling law. So they've got
their licenses I think in five states now and they're
you know, safely considered a gambling company. Now. When Calshi
first launched, they were not offering sports or elections or
you know, bleeding over into these any of these other subjects.
(09:27):
They were all about you know, economics, finance, some pop culture.
But you know, sports was a red line for a while,
and elections was a hard line. But they'd been trying
since at least twenty twenty one or twenty twenty two
to offer you know, first it was election or betting
on the midterms, and then they finally won their lawsuit
in October September twenty twenty four and were able to
(09:50):
finally launch in October. So, you know, there's just been
a lot of explosive growth and publicity surrounding pretty markets
during the twenty twenty four election, because that's when you
get your first you know, high volume commercial you know,
you know, really big regulated prediction market. I mean, yes,
polymarket is huge, but it's it's in the crypto space.
(10:13):
And it's not that it's not popular. It's not that
it doesn't have a ton of volume. It's just that
if you're a regular guy you know, you can either
go learn Web three and go learn how to play
with crypto and you know, figure out the wallets, or
you can just go to Calshi, throw down a debit
card and start betting.
Speaker 1 (10:28):
Right. Calshi is legal in the United States. Polymarket is not.
Calcio is regulated by the CFTC, the Commodities Futures Trading Commission.
Polymarket is not sports trade, like you mentioned, has decided
to go through the state licensing process. To me, this
is what's so fascinating. Alex Kane, who started sports Trade,
(10:49):
wonderful guy, thoughtful, energetic, enthusiastic, really earnest years ago, was
a visionary and had this idea to start a prediction
exchange essentially a betting exchange based on sports, and he
(11:10):
went the route of getting regulated state by state as
a sports betting operator. Kelshy started by a couple of
people who got to know each other at MIT and
then became options traders as interns and places like Citadel
And then they were like, wait a second, people are
betting on these particular commodities based on who they think
(11:34):
is going to win this election. Can we just offer
markets on the elections and things like will the FED
raise interest rates? And they graduated from MIT, started this
business and they decided to get licensed by the CFTC,
which they are Since January, they have been offering markets
on sports and Chris this is where it's gotten really
(11:58):
interesting because calshi is offering, you know, markets contracts on
the Super Bowl, then they're offering markets on March Madness.
Now the majority of the trading volume on calshi and
I would recommend an addiction to what Chris does with
prediction news. Everyone should read Dustin Gouker. He's got a
(12:21):
great substack called the Vent Horizon about this stuff. He
did an email today that showed the volume traded on
calshi something like eighty percent of it is sports. And
so they're basically operating as an entity offering the ability
(12:43):
for people to predict the sports markets. I'm not going
to use the phrase betting at a national scale. And
they've bypassed the regulatory markets in the States. How is
that even possible?
Speaker 3 (13:01):
Sure, well, this is one of the interesting things that's
really come to life. And you know, cause she's fired
first over elections, but especially over sports. The finance industry
is very comfortable with kind of these parallel regulations, these
parallel regulatory structures. So like, if you want to trade gold,
and this is something a former CYFTC larder told me
a while ago, but if you want to trade gold,
you can trade it as a commodity. That's a transaction
(13:24):
overseen by the CFTC. Or you can trade in a
gold e F T in in exchange trade and fun, well,
that's a transaction overseen by the SEC, different regulatory agency.
It's the same thing. You're training gold either way. And
you know, nobody really, you know, planned out these you know,
two different ways to make an identical trade, but it happened.
(13:45):
And you know, people who like markets are very excited
about having the different options to be able to make
their same trade in a different way. And that contrast
almost completely with the gambling industry, where everything, you know,
for good reason, has to be under one regulatory umbrella.
I mean, no one has ever described you know, sweet
stakes casinos or like gray market slot machines and gas
(14:08):
stations as you know great you know liquidity providers or
you know, great for pricing or anything like that. So
you know, I think that's one of the one of
the reasons that these two industries are really talking past
each other in court. Is just they're they're looking at
this completely differently.
Speaker 1 (14:25):
Right. So, since cal She has offered these markets, they've
gotten cease and desists from i think seven states telling
them to stop. New Jersey, Maryland, a bunch of others.
They keep losing because they have this in promoter of
(14:48):
being a legal entity, a legitimate entity for offering these
markets from the CFTC. And what's interesting is Calsh includes
Donald from Junior as an advisor, and the incoming chairman
of the CFTC is a former board member of CALCI,
who in his hearings to be confirmed said I'm fine
(15:14):
with sports markets being part of commoderities exchanges. So you
know that's not going to change. That's just going to
continue to be the way it is.
Speaker 3 (15:25):
If change happens, it's going to come from the courts.
It's not going to come from Brian Quintin's and the CFTC.
The District court in Maryland right now is one of
the interesting ones to watch because Navana and New Jersey
granted Calci's calamity injunction. They said, you're probably going to
win on the merits. You know, the federal preemption probably
applies here to you know, state gambling rigs. But the
(15:46):
Maryland judge, they he asked for a lot of supplemental briefs.
He said, you know, let's get some of these issues
on the table and really flesh him out. And you know,
one of the big briefs that came in a couple
of weeks ago was from the Indian Gaming Commission, and
you know that that was probably one of the first
times that you know, one of the federal laws that
(16:09):
calshi sports contracts, could you know cross was that was
the first time that argument was really bent to out
really well. So the Indian Gaming Regulatory Act that you
know forms the foundation of Indian gaming, that's a federal law,
that's not a state law. And so while you know,
like I think briefs in New Jersey and Nevada like
listed the wire Act and PASPA and IGRA kind of
(16:30):
alongside each other saying hey, this could be an issue,
the tribal brief was really the first one where you
see the argument spelled out in detail. And so that
by itself is really interesting. And Judge Abilson choosing to
you know, allow the tribes to file their amicust brief
in Maryland is also interesting because Calhi originally didn't want that.
(16:52):
They were calling it, you know, unhelpful and too late,
which makes me think the tribal brief is stronger. So now,
I mean there's a potential turning point there. I mean,
you know, in the game of rock paper scissors, a
federal court beats a federal regulator. So if either the
District Court in Maryland or the Third Circuit in New Jersey,
you know, ruled that these contracts, you know, bleed into gaming,
(17:14):
then you know, we'll probably see a Supreme Court fight
and an escalation. But Maryland really is one of the
big turning points for for sports contracts in general. So
we still don't know how safe a haven cal She
is going to be for sports betters until those two
cases in particular progress a little bit further.
Speaker 1 (17:32):
Simon. By the way, I mentioned before Dustin Gauker's event Horizon,
he had an email today that said it was seventy
percent of all volume at Cawshee was from sports led
by tennis baseball. And by the way, hot Dog contest,
the hot dog eating contest. Simon, You're like in the
(17:55):
middle of this and do you see prediction markets as
a viable alternative if you are a professional vetter who
gets limited at every operator, who's now going to be
taxed at a more disadvantageous rate. Do you look at
(18:18):
these is something that you'd want to dive into.
Speaker 2 (18:22):
Yeah, I've dove into it, but like we talked about,
I've only dove into a pre unique situations like politics
or the pope and things like that. So to me,
this is something else that you know. It's they're welcoming.
That's the biggest difference, right, They don't reject bets here.
They will take your money because they want people to
be in it. This is early days, Chad. Like the
(18:42):
parallel between this and when fantasy football was letting us
do those private tournaments for cash, and that sped us
up on this whole crazy world wind of what this
became of sports better being legalized in this country. This
feels like another kind of moment we're living in here
where I'd love to have your view on this, Chris.
Is is this going to be here in five years?
(19:03):
Is this going to be here in ten years? Or
is this just a flash in the pan. Are we
just living in this quick moment where they're kind of
figure out these little loopholes, but like you just said,
eventually a court will come on come down on them
with a hammer, and then they're just gonna be gone.
Like they just popped up for a year or two.
Now they're gone. Like, what's your view on this going forward?
Speaker 3 (19:19):
I think election contracts have some I think they can last.
I think they have the ability to last. Sports is
going to be a little bit more up in the
air until these court cases are finally settled. If you
take a step back and look at the problem that
you know, Calshi solves for the finance industry. You know,
I mean chat you were talking about it earlier. But
you know, if you're an institutional trader and you want
(19:40):
to know, you know what, how like the Trump presidency
in twenty sixteen is going to affect you compared to
you know, a Clinton presidency, how's that gonna affect your portfolio?
You know, you have to guess how like the S
and P five hundred is going to react, And you
know you can just flat out get it wrong. A
lot of people, you know, short at the S and P.
Five hundred and twenty sixteen and they ended up losing
(20:02):
money because the SMP went up when Trump was elected.
So you know, now you can just hedge directly on
that event, and that possibility is open to ordinary people too,
although how many people are actually using it to hedge
at the retail level is an open question. It's always
going to be a minority of traders. But you know,
this is the regulatory trade off, and you can this
(20:24):
is like Hamilton Jefferson old you know how much speculation,
you know, do you allow for the benefits of hedging
for the small group of people. And it was really
obvious when you know, we were talking like early nineteen
hundreds and trying to protect farmers who were starving and
getting engaged by the railroads. You know, they needed some
price stability and they needed some assurance of some steady
and reliable income at a price that they could predict.
(20:46):
But you know, now you can do it on any event,
and you know we're gonna have to redecide how those
how we're going to balance those interests.
Speaker 1 (20:56):
Chris handicapped this in another way, lack of a better term.
You know, you see a calshi, you see a poly market,
you see a sport trade. Do you feel like these
can become something that have widespread appeal, because right now
it feels like the volume comes largely from market makers
(21:19):
who are interested in playing in this space, experimenting in
this space. Can they find as you just mentioned, sort
of retail success.
Speaker 3 (21:31):
Calshan's portrait, I think they can. The dream about sports is,
you know, they're very numerous and high volume, and you know,
ordinary people. If you go to like SBC, you know,
every couple of years there's a new panel on you know,
being the second screen during the game, and that you know,
second screen engagement, Well, a prediction market is your second
(21:52):
screen for anything you're mad about, and you know, is
there a story that pops up on social media that
you know kind of hit you where you live or
you can go beat on that on Calshi. Poly Market's
going to be harder, you're telling if you're talking about
retail success at polymarket, you're looking at widespread crypto adoption
and there's a strong crypto community and it's not that. Again,
it's not that polymarket isn't successful and that they have
(22:13):
no future. That's not true at all. It's just it's
gonna be hard to attract, you know, ordinary people. You're
like You're not gonna get that eighty year old guy
in Alabama betting on Trump to win the election on Polymarket,
that you will on Calci. So I think they're gonna
have to Polymarket is gonna have to overcome that. Polymarket
also has issues with their market resolution process. They's had
(22:33):
another scandal this week and the market on whether it's
Lensky war a suit to the Native.
Speaker 1 (22:37):
Tell people about that, because that's you know, you're in
this space neck deep. I'm in the space waste deep.
And that that controversy, to me was the epitome of
what are some of the issues with all of these things? Sure?
Speaker 3 (22:53):
So, I mean the big question if you're a prediction
market is, you know, once an event has happened, how
do you decide that it happened? Because money on the
line in some case hundreds of millions of dollars or
hundreds of yeah, hundreds of millions. So you know you
need a good process to you know, decide when an
event is curred and how you know you're going to
tell people that it actually happened. Cal She does. What
(23:16):
cal She does is they you know, list their resolution
terms under their market and they will link to the
you know, kind of third party authority that they're going
to use, whose data they are going to use to
settle that market. So if you're betting, you know, or
you're trading, you know exactly who is going to you know,
make the call that you know, we you know, have
an effective tariff rate of six percent whatever the market
(23:37):
is what poly market will do. Uh, they have that
same description, but it's a lot of reliance on one
just a consensus of credible reporting, which isn't bad most
of the time, but it also leaves this gray area.
That's issue number one and issue number two. Polymarket uses
a blockchain service. It's a product called the Optimistic Oracle,
(23:59):
the Oracle, and this is a like a cryptocurrency. You
can log in on coinbase and you can buy you know,
the UMA currency, and you use that to cast a
vote in poly markets markets and say, hey, I think
the event has happened. I think the market should resolve
this way or that way. And since it's based on
(24:23):
how much UM a token you hold, how much of
this currency you hold, it's you know, kind of this
Gilded Age oligopoly now where a couple of very very
large traders can just take over the market. So you know,
their market based solutions they're so proud of is you know,
it's not a free market. It's a market where like
two I think two traders hold just over half of
(24:46):
all the UMA tokens. So there's it's not a good
way to resolve markets. Now, the consequence of that, getting
back to Zelenski suit, after Zelenski's Oval office confrontation with
Trump advance earlier.
Speaker 2 (25:02):
It was earlier this year.
Speaker 3 (25:05):
Covering politics is hard because there's just this time dilation.
Speaker 1 (25:09):
February.
Speaker 3 (25:10):
I still can't believe that was just February.
Speaker 2 (25:14):
Anyway.
Speaker 3 (25:15):
After that, you know, one of the jabs at Zelenski
was like, you don't even wear a suit and he's
in you know, military fatigues because he's you know, mid war,
and but he stepped down in the NATO summit with
with a suit that was designed by a you know,
designer who wanted to incorporate some military dress and things
like that, but it was identifiably a suit. So the
(25:35):
market on whether so the polymarket market on whether Zelenski
would wear a suit should have settled to yes instead
of it resolved to know after several rounds of voting
and dispute, and it's because of these big um a whales,
these giant wealthy currency holders were able to just you know,
cast all the necessary votes to resolve the market in
a way that would get them more of their uma
(25:57):
tokens and more of their money. So that is that's
an ongoing issue that poly market has. They did it,
you know, late last year with like will Israel invade
Lebanon in September? Will they invade Syria by the end
of the year. Just a couple of these you know,
fuzzy terms like what is an invasion really and you know,
you know, kind of which time zone are we looking at?
(26:19):
And some of these issues. These really big whales can
take advantage of any fuzziness you know that the finest
lawyers in the world, you know, kind of do in court.
They use that same precision of language to try to
you know, try and resolve things their way. So Polymarket
has a structural problem that they really need to solve
(26:40):
because this goes back at least as far as back
as you know, late last fall, and certainly goes back further.
Speaker 1 (26:46):
Well, it's worth a billion dollars. Now they can try
to figure it out, which is kind of insane, right,
and that sort of speaks to a little bit late nineties,
and then with sort of the dot com blindness, and
then speaks to social media euphoria and the investments that
(27:09):
took place in places like Facebook, places like Twitter, the
growth of something like Instagram to get bought for a
billion when it barely had any users or it was
still you know, in a huge growth state. That's a
lot of what this feels like to me, between the
Calshi's and the polymarkets, especially with the way they've been
(27:30):
able to raise and also like there's a day trading,
sports betting, crypto manna sphere, ethos, sort of a bro
economy that exists now that is helping to propel some
of these things. I'm wondering if you're seeing some of
that and you're reporting as well.
Speaker 3 (27:52):
I mean, yeah, you're You're always seeing the influencers get
really excited about you know, prediction markets being the news
and you know, my mind, you know, the news is
the news. You know, you once she once a market
resolves in real time, it's it's really cool. I was
writing a story that included I think it led with
the big beautiful bill vote. How individual centers were gonna vote,
And while I was writing it, the vote was happening.
(28:13):
And I knew the vote was happening because you know,
Murkowski's odds, you know, spiked up to like ninety six percent,
and Collins was dropping like a rock. And you know,
I wasn't watching. I didn't have c Span in my
corner because that wasn't what the story was about, and
I didn't have it up. I thought I had like
at least one or two more hours, to be honest,
But no, that was that was kind of wild to watch.
(28:34):
And prediction markets give you a great state of the race,
and I think they're still benefiting from you know, how
much earlier they called the race in twenty twenty four,
and how much more of a lead they showed Trump
having than polls did. But the forecasting piece of prediction
markets is a lot more nuanced than the hedging piece.
(28:57):
And there's a Columbia economist who to Columbia University economists
who you know, studied Polymarket five thirty eight and the
economist polls side by side for thirteen competitive house races,
and Polymarket, you know, was never in first. Sometimes it
was the least effective pulling mechanisms. So for these really
smaller races, I think you can see polls do. My
(29:20):
prediction is polsill do pretty well in the midterms compared
to prediction markets, and then prediction markets will have another
moment of glory in the presidential one where history is
not as good a guide for forecasting, for forecasting the
presidential election, because you can get these you know, I mean,
Donald Trump's the French candidate in twenty fifteen. He was
you know, I don't think a polster would have necessarily
(29:42):
predicted that Donald Trump would you know, do really well
in electoral politics before he came on the scene in
twenty fifteen. But you test these new ideas in these
new characters the national level, and sometimes things take off,
and prediction markets are really good at bringing that new
information together, where polsters are relying on past history. So
I yeah, So I think there's gonna be a lot
(30:04):
more nuance that comes alive, you know, in the in
the forecasting space in particular, and I don't know that
that will dampen the enthusiasm for prediction markets. But you know,
I think they also benefit from you know, kind of
the self sufficiency of financial trading too. You know, the
idea that you can trade yourself and know the future
(30:24):
better than everybody else and you know, be the self
sufficient man. In particular, I mean I grew up in Texas.
I know what I know what those noises sound like.
But it's also I mean, those same things, those same
beliefs are you know, cognitive behavioral therapy for financial trading addicts.
There's a professor in California who's on the front edge
of trying to you know, prepare uh, you know, gambling
(30:46):
counselors as well to you know, properly treat people who
are using financial platforms as you know, gambling platforms and
you know, hiding behind well, I'm investing, I'm not gambling,
even though you know they're functionally gambling, even if their
activity that they're choosing is regulated under this different umbrella.
Speaker 1 (31:04):
Simon. By the way, we've hit like the nirvana for
me where we are talking about the geekiest, most technical
stuff and then throwing in cognitive behavioral science. I don't
I feel like I should just end the podcast now
(31:26):
because it'll never be better for me, But I do
remember for you, Simon, election night, I'm just settling down.
My wife had insisted on inviting the neighborhood over for
a freaking party for election night. Everyone finally leaves. I'm
sitting on my couch. I'm about to watch John King
(31:47):
give me the results from Kalamazoo County and you're texting
me and you're saying it's over, and I'm like, what
are you talking about. I'm just sitting down to watch
the results, and you're like, check out the prediction markets.
Speaker 2 (32:01):
Yeah. Again, it's a different world where I don't know
much about betting politics, but luckily I have people in
my life that do it professionally. And these guys texted
me at eight thirty. I took an incredible amount of positions,
bet a lot of money. I think I texted you
right before about nine o'clock and told you it was
(32:21):
over and that the market was about to move an
insane amount in the next thirty minutes. And you saw
Alive where it's like our money comes in, the public
follows that money because they don't know, they don't have
the inside news. Like these guys don't end Again, I
don't know how they do it, Chad, But like you said,
the predictive model of the markets is my favorite part.
(32:42):
Of election night that these guys know three four hours
before the general public and all these news media outlets.
It's one of the more interesting parts of the world
we live in in It's always fun picking those guys'
brains that do it and how some of them can
predict it a year or two out based on markets,
money trends, and general public feel and you know, it's
(33:05):
always interesting. It's just a different world. Where we talked
about Action. One of our biggest nights of a company was,
I believe in twenty twenty right with the election night
they crashed our site because we're traffic night. Ever, yeah,
we were kept updating the market right and where it
was that and people weren't going to Fox or CNN.
They were coming to Action to get the truth, and
(33:26):
the truth was telling them, now, this is what the
numbers are saying, this is who's going to win this election.
So yeah, I love it. And again, this to me
is why I hope these markets do last, because it's
just another tool to use in another way to make money.
Speaker 1 (33:39):
You're a great follow on Twitter at growlacracy, and this
is really interesting stuff and really important stuff that I
think is going to impact anyone who has an interest
in this show, because it will become more accessible and
available to people as compliments potentially to what people are
doing regularly with places like DraftKings fandor a fanatics. Last question,
(34:01):
you were just at I believe the Manifest conference about
a month ago or so. Explain to people what that
is and then tell people the most interesting thing that was,
the most mind blowing thing or the most oh my god,
if this really happens, it's crazy thing from the conference.
Speaker 3 (34:21):
Oh man, how to explain Manifest because any Silver's new book,
he spent some time just describing it. So Manifest is
basically it's half conference and half festival. So it's this
gathering of you know, really trying to attract big name stars.
So like you know Nate Silver, Jesse Richardson at Political
Kiwi on X. He's a great political trader, you know,
(34:45):
David Shore, great progressive democratic polster. Richard Henania a very
good conservative punditum. He's not a polster, but he's he's
actually pretty a commentary. He's a he leaves, he's a
libertarian who had to come to Jesus moment about Trump
earlier this year. So he was interesting to watch, and
he also did a really good job, in hindsight of
predicting Donald Trump's rise. So and when you get people
(35:06):
like that who are giving talks, and then you have
all these you know, really uh kind of quirky technical folks,
the the the the sexploration people, uh, the sex influencers
like Ala are also there. There, there's you know, it's
all about body positivity and kind of intellectualizing of sexuality
(35:28):
as well. So a lot of different uh intellectual spears
all come together at Manifest at this campus just off
of off Berkeley, and it's a it's a really cool
space and you know, definitely worth It was definitely worth
going to for sure. But the most mind blowing thing
for me about that trip was the idea of the
(35:51):
looming rise of AI traders and l l M traders.
So you know, l ms can already like chat epte
and research a trade for you and wholesome sources and perplexity.
AI can you know, give you some trading advice and
do some research for you. We're getting very close to
arguably within the next four years, according to at least
once today. I was shown there of AI traders who
(36:15):
match the actually of so called super forecasters, people who
are just very very accurate traders beyond what experts and
even what wise crowds can can achieve. So the rise
of AI traders is going to have some hard questions,
and I think the free to play and crypto platforms
are gonna have to deal with it first. You know,
(36:35):
right now, every user should be a human trader on
a regulated free money or real money site like Calshie. Right.
You can't have counterfeit people on there, even if you're
using AI to assist. But you know, there's at least
one star of there called few Tour, another prediction market site,
and you know they're already preparing their ux to have
(36:57):
you know, fully autonomous AI traders with their own counts.
So the IAI wave is not just you know, it's
not just coming in for the white collar drops. Jobs
are looking at traders too, and pretty soon Betters.
Speaker 1 (37:11):
Yeah, Chris Girlocker, fucking awesome, man. That was great. Follow
Chris on Twitter at Girlocker, see check him out at
prediction News. This is a fascinating space that people need
to pay paying attention to. So thanks thanks for jumping on, brother,
I appreciate it. The favorites will return with our next
(37:31):
episode of the show Tuesday. Action Network YouTube page. Download
us from Spotify, Apple Pods, wherever you get your pods,
Rate review, subscribe, leave us five stars, say whatever you want.
Feedback is a gift Until next time. Love you. Action
(37:53):
Network reminds you please gamble responsibly if you or someone
you care about has a gambling problem. Was available twenty
four to seven at one eight hundred gambler
Welcome to the Favorites of the Podcast part of the
Volume Podcast Network. I am Chad Moment of the Action Network.
We are doing part two of the show that we
started on Tuesday. Let's welcome in my co host, my companion,
Mike Compadre, my BFF professional better signon Hunter et O
Simon Chad.
Speaker 2 (00:27):
I heard the dumbest dad joke when I was an
England I forgot to tell you about it on the
last show. As soon as I heard, I go Chad
would love this dad joke. So my younger cousin there,
young lad, just had his birthday and my uncle goes
up there and goes, Charlie, how old are you now?
And he goes nine. He goes, oh, I didn't know
you spoke German. I was like, damn, Chad's gonna love that.
(00:51):
So everyone out there, you can use that one time.
If you got you know, a kid that's turning nine,
you can use that one time for life.
Speaker 1 (00:58):
Dude, I'm so old. I don't even have of nieces
and nephews turning nine anymore. All I have are irascible
teenagers who like to throw everything I've ever said in
my life back in my face. That's the entirety of
my existence. It's kind of like working with Matt Mitchell
and Gifford on this podcast, Simon, I want to bring
(01:21):
in Chris Girlocker, who's with Prediction News and has been
covering prediction markets for a very long time, and because
we talked a little bit about this in part one
on Tuesday. Because there's been such a confluence of circumstances
that have been impacting the sports betting and the gambling
universe in the last ten days, and to me, the
(01:47):
growth of these prediction markets and the influence and impact
of these prediction markets is one of the biggest things
out there. And I mentioned, you know, I've been working
on this book and I've done a lot of reporting
around these to a lot of the principles and the
players at CALSHI, at Sport Trade, and they're really becoming
increasingly important players in the space. As I mentioned the
(02:10):
other day, CALSHI raised one hundred and eighty five million,
it's now worth two billion dollars. Polymarket raised, it's now
worth a billion dollars. My conspiracy theory that I talked
about a little bit on Tuesday, nobody is benefiting more
from the new tax regulations in the Big Beautiful Bill,
(02:35):
in which professional betters are now only allowed to deduct
ninety percent of their losses, not one hundred percent of
their losses. Nobody benefits more, in my opinion, than prediction
markets because those are regulated and taxed in entirely different ways.
I'm excited to get Chris Gerlocker on the show because
(02:58):
he can help us break all this down. Chris, welcome
to the Favorites.
Speaker 3 (03:03):
Hey, Chad, thanks for having me.
Speaker 2 (03:04):
This is cool.
Speaker 1 (03:06):
Well, I can sense your enthusiasm. So before we get
to that, Simon, Matt Mitchell was rushing us off the
other day.
Speaker 2 (03:14):
Yeah, it gives a y off the curtain.
Speaker 1 (03:16):
He like it was. So it was so annoying because
I felt like you were digging in on a couple things.
And Chris just indulges for a second. Because the Big
Beautiful Bill, in which gamblers are now only allowed to
deduct ninety percent of their losses versus one hundred percent
of their losses, so all of a sudden, if they
(03:37):
could be paying taxes on money they did not win. Simon,
you mentioned you're trying to figure out what to do
because you think it will kill how professional betters live
in this country. It may not kill how they live,
but it may change how transparent they are with their taxes,
(03:58):
or they got to leave the country and decide to
do it from somewhere else. Unpack that a little bit more.
Some of the conversations you've been happening having with either accountants,
with lawyers, with other people in the space. Explain the
impact here, because I don't think people get it. And
by the way, it doesn't just impact professional betters like
DraftKings Fandal, they will send you sort of basically sheets
(04:21):
forms at the end of the year which you are
responsible for documenting what your potentially taxable income was as
a better So this is for everybody.
Speaker 2 (04:32):
Yeah, no, it's just bad for everybody. That's why I
hope you're right that it's it doesn't go through and
that something does change because luckily we get the rest
of this season upcoming, like it doesn't go into effect
I believe until twenty twenty six, which is a big deal.
So whatever I win this year, legally I can still
report my wins and losses. But yeah, Chad, we're talking
(04:56):
about people like me are just constantly looking for an
edge and that doesn't come just with sports budding. That's
just about everything I do in life. It's a microcosm
of everything in life. I'm always looking for an edge.
So I told you my favorite contest that we do
pit contest. We do legal ones. My favorite pit contest
are tax free ones. Those are ones that are off
the books, so you know, people are going to go
(05:19):
back to what they had never even left, which is
mainly offshore books or your local book, which we know
is got a hint of crime underneath the belly of it.
So it's like guys are going to go back to
that they want to stay in the States. I like
being above board. I've liked what we what we have
now with legalization, and you know, it's it's a hard
(05:44):
life having everything be cash, so getting getting things to
now what it is, which is, you know, I pay
text on everything. I like it. And you know, I knew,
not that I knew this was coming, but we'd heard whispers.
And you know, again we can dive in your'rasy part
of this because New Jersey's stuff is insane. It's literally
I feel like a bill written just to go after
(06:06):
someone like me. I am a narcissist in many ways.
But that one just is insane to me, attacking runners.
But it really is at the point, Chad, where I'm
going to be forced possibly to leave the country for
six months out of the year. Right, England is no taxes.
I can win big money and pay no taxes on
the winning, same with my losses. In England, it's very different.
(06:27):
There are taxes towards gambling than it is here in America,
so that off the get go is a big deal
and many professional betters are going to look into that. Now.
Getting in three months to six month visa to England,
that's a whole story inside itself. Chad knows my mom's
from England. I can have dual citizenship. It's no problem,
you know. That's something that happens basically when you're a
(06:49):
wee young lad. So to me, it's it's not gonna
be a hard transition. To a lot of guys guy
was just meeting with in Vegas, I don't think they've
ever even left the country, let alone go to England.
So they're the ones that to me, will go back
to the dark books. And again there's ways around it.
It's just the normal better having to pay having already
(07:12):
try to make a winning betting and then they're having
to pay ten percent on their losses. I just can't
believe it. I can't believe it. I really can't. I
know how stupid a lot of the stuff in our
government is, but this one is. It's up there, and
what we're about to dive into, you know, the poly markets,
something that's going to help counteract this in many ways.
So I'm here. I'm excited to learn more about it
(07:33):
from Chris here because you know, to me and to
me a lot of other people, Chad, it was something
that really blew up when it came to politics, and
it's obviously going to try to take advantage of what's
about to happen right now with these sports books. So yeah,
very unique, interesting time we're living for sure, with the
sports puddy markets.
Speaker 1 (07:51):
Hi, Chris, thanks for letting us sort of finish up
that conversation. But Simon brings up the politics, He brings
up polymarket for anyone listening, who because we haven't talked
a lot about Calshi, we haven't talked a lot about
sports trade, we haven't talked a lot about polymarket on
this show. Give people a primer. You are an expert
in this. You write for Prediction News, You've been covering
(08:14):
this for a long time at a professional level. Give
people a primer on what's happening in this space.
Speaker 3 (08:21):
Sure, So you know, for those who don't know prediction
markets are, you know, they're in exchange where you can
buy and sell contracts on whether an event will happen,
and every contract is priced between one cent and ninety
nine cents, and the price ends up being how likely
that event is to happen. And you know, the more
valuable your contract is, the more likely it is to
pay out. Whinning contracts pay out a dollar each and
(08:42):
losing contracts get nothing. So it's this really cool, interesting
way to aggregate a lot of information and kind of
get a snapshot of a forecast if you're in it
for the forecasting, but if you're in it for the
gambling too, it's constantly live. So it's this you know,
really strong and unmatched live bet experience as well that
makes it really good for recreational betting. So if you
(09:04):
look at you know, sports Trade, and you know they've
been offering sports contracts since twenty twenty two, they've just
been doing it under state gambling law. So they've got
their licenses I think in five states now and they're
you know, safely considered a gambling company. Now. When Calshi
first launched, they were not offering sports or elections or
you know, bleeding over into these any of these other subjects.
(09:27):
They were all about you know, economics, finance, some pop culture.
But you know, sports was a red line for a while,
and elections was a hard line. But they'd been trying
since at least twenty twenty one or twenty twenty two
to offer you know, first it was election or betting
on the midterms, and then they finally won their lawsuit
in October September twenty twenty four and were able to
(09:50):
finally launch in October. So, you know, there's just been
a lot of explosive growth and publicity surrounding pretty markets
during the twenty twenty four election, because that's when you
get your first you know, high volume commercial you know,
you know, really big regulated prediction market. I mean, yes,
polymarket is huge, but it's it's in the crypto space.
(10:13):
And it's not that it's not popular. It's not that
it doesn't have a ton of volume. It's just that
if you're a regular guy you know, you can either
go learn Web three and go learn how to play
with crypto and you know, figure out the wallets, or
you can just go to Calshi, throw down a debit
card and start betting.
Speaker 1 (10:28):
Right. Calshi is legal in the United States. Polymarket is not.
Calcio is regulated by the CFTC, the Commodities Futures Trading Commission.
Polymarket is not sports trade, like you mentioned, has decided
to go through the state licensing process. To me, this
is what's so fascinating. Alex Kane, who started sports Trade,
(10:49):
wonderful guy, thoughtful, energetic, enthusiastic, really earnest years ago, was
a visionary and had this idea to start a prediction
exchange essentially a betting exchange based on sports, and he
(11:10):
went the route of getting regulated state by state as
a sports betting operator. Kelshy started by a couple of
people who got to know each other at MIT and
then became options traders as interns and places like Citadel
And then they were like, wait a second, people are
betting on these particular commodities based on who they think
(11:34):
is going to win this election. Can we just offer
markets on the elections and things like will the FED
raise interest rates? And they graduated from MIT, started this
business and they decided to get licensed by the CFTC,
which they are Since January, they have been offering markets
on sports and Chris this is where it's gotten really
(11:58):
interesting because calshi is offering, you know, markets contracts on
the Super Bowl, then they're offering markets on March Madness.
Now the majority of the trading volume on calshi and
I would recommend an addiction to what Chris does with
prediction news. Everyone should read Dustin Gouker. He's got a
(12:21):
great substack called the Vent Horizon about this stuff. He
did an email today that showed the volume traded on
calshi something like eighty percent of it is sports. And
so they're basically operating as an entity offering the ability
(12:43):
for people to predict the sports markets. I'm not going
to use the phrase betting at a national scale. And
they've bypassed the regulatory markets in the States. How is
that even possible?
Speaker 3 (13:01):
Sure, well, this is one of the interesting things that's
really come to life. And you know, cause she's fired
first over elections, but especially over sports. The finance industry
is very comfortable with kind of these parallel regulations, these
parallel regulatory structures. So like, if you want to trade gold,
and this is something a former CYFTC larder told me
a while ago, but if you want to trade gold,
you can trade it as a commodity. That's a transaction
(13:24):
overseen by the CFTC. Or you can trade in a
gold e F T in in exchange trade and fun, well,
that's a transaction overseen by the SEC, different regulatory agency.
It's the same thing. You're training gold either way. And
you know, nobody really, you know, planned out these you know,
two different ways to make an identical trade, but it happened.
(13:45):
And you know, people who like markets are very excited
about having the different options to be able to make
their same trade in a different way. And that contrast
almost completely with the gambling industry, where everything, you know,
for good reason, has to be under one regulatory umbrella.
I mean, no one has ever described you know, sweet
stakes casinos or like gray market slot machines and gas
(14:08):
stations as you know great you know liquidity providers or
you know, great for pricing or anything like that. So
you know, I think that's one of the one of
the reasons that these two industries are really talking past
each other in court. Is just they're they're looking at
this completely differently.
Speaker 1 (14:25):
Right. So, since cal She has offered these markets, they've
gotten cease and desists from i think seven states telling
them to stop. New Jersey, Maryland, a bunch of others.
They keep losing because they have this in promoter of
(14:48):
being a legal entity, a legitimate entity for offering these
markets from the CFTC. And what's interesting is Calsh includes
Donald from Junior as an advisor, and the incoming chairman
of the CFTC is a former board member of CALCI,
who in his hearings to be confirmed said I'm fine
(15:14):
with sports markets being part of commoderities exchanges. So you
know that's not going to change. That's just going to
continue to be the way it is.
Speaker 3 (15:25):
If change happens, it's going to come from the courts.
It's not going to come from Brian Quintin's and the CFTC.
The District court in Maryland right now is one of
the interesting ones to watch because Navana and New Jersey
granted Calci's calamity injunction. They said, you're probably going to
win on the merits. You know, the federal preemption probably
applies here to you know, state gambling rigs. But the
(15:46):
Maryland judge, they he asked for a lot of supplemental briefs.
He said, you know, let's get some of these issues
on the table and really flesh him out. And you know,
one of the big briefs that came in a couple
of weeks ago was from the Indian Gaming Commission, and
you know that that was probably one of the first
times that you know, one of the federal laws that
(16:09):
calshi sports contracts, could you know cross was that was
the first time that argument was really bent to out
really well. So the Indian Gaming Regulatory Act that you
know forms the foundation of Indian gaming, that's a federal law,
that's not a state law. And so while you know,
like I think briefs in New Jersey and Nevada like
listed the wire Act and PASPA and IGRA kind of
(16:30):
alongside each other saying hey, this could be an issue,
the tribal brief was really the first one where you
see the argument spelled out in detail. And so that
by itself is really interesting. And Judge Abilson choosing to
you know, allow the tribes to file their amicust brief
in Maryland is also interesting because Calhi originally didn't want that.
(16:52):
They were calling it, you know, unhelpful and too late,
which makes me think the tribal brief is stronger. So now,
I mean there's a potential turning point there. I mean,
you know, in the game of rock paper scissors, a
federal court beats a federal regulator. So if either the
District Court in Maryland or the Third Circuit in New Jersey,
you know, ruled that these contracts, you know, bleed into gaming,
(17:14):
then you know, we'll probably see a Supreme Court fight
and an escalation. But Maryland really is one of the
big turning points for for sports contracts in general. So
we still don't know how safe a haven cal She
is going to be for sports betters until those two
cases in particular progress a little bit further.
Speaker 1 (17:32):
Simon. By the way, I mentioned before Dustin Gauker's event Horizon,
he had an email today that said it was seventy
percent of all volume at Cawshee was from sports led
by tennis baseball. And by the way, hot Dog contest,
the hot dog eating contest. Simon, You're like in the
(17:55):
middle of this and do you see prediction markets as
a viable alternative if you are a professional vetter who
gets limited at every operator, who's now going to be
taxed at a more disadvantageous rate. Do you look at
(18:18):
these is something that you'd want to dive into.
Speaker 2 (18:22):
Yeah, I've dove into it, but like we talked about,
I've only dove into a pre unique situations like politics
or the pope and things like that. So to me,
this is something else that you know. It's they're welcoming.
That's the biggest difference, right, They don't reject bets here.
They will take your money because they want people to
be in it. This is early days, Chad. Like the
(18:42):
parallel between this and when fantasy football was letting us
do those private tournaments for cash, and that sped us
up on this whole crazy world wind of what this
became of sports better being legalized in this country. This
feels like another kind of moment we're living in here
where I'd love to have your view on this, Chris.
Is is this going to be here in five years?
(19:03):
Is this going to be here in ten years? Or
is this just a flash in the pan. Are we
just living in this quick moment where they're kind of
figure out these little loopholes, but like you just said,
eventually a court will come on come down on them
with a hammer, and then they're just gonna be gone.
Like they just popped up for a year or two.
Now they're gone. Like, what's your view on this going forward?
Speaker 3 (19:19):
I think election contracts have some I think they can last.
I think they have the ability to last. Sports is
going to be a little bit more up in the
air until these court cases are finally settled. If you
take a step back and look at the problem that
you know, Calshi solves for the finance industry. You know,
I mean chat you were talking about it earlier. But
you know, if you're an institutional trader and you want
(19:40):
to know, you know what, how like the Trump presidency
in twenty sixteen is going to affect you compared to
you know, a Clinton presidency, how's that gonna affect your portfolio?
You know, you have to guess how like the S
and P five hundred is going to react, And you
know you can just flat out get it wrong. A
lot of people, you know, short at the S and P.
Five hundred and twenty sixteen and they ended up losing
(20:02):
money because the SMP went up when Trump was elected.
So you know, now you can just hedge directly on
that event, and that possibility is open to ordinary people too,
although how many people are actually using it to hedge
at the retail level is an open question. It's always
going to be a minority of traders. But you know,
this is the regulatory trade off, and you can this
(20:24):
is like Hamilton Jefferson old you know how much speculation,
you know, do you allow for the benefits of hedging
for the small group of people. And it was really
obvious when you know, we were talking like early nineteen
hundreds and trying to protect farmers who were starving and
getting engaged by the railroads. You know, they needed some
price stability and they needed some assurance of some steady
and reliable income at a price that they could predict.
(20:46):
But you know, now you can do it on any event,
and you know we're gonna have to redecide how those
how we're going to balance those interests.
Speaker 1 (20:56):
Chris handicapped this in another way, lack of a better term.
You know, you see a calshi, you see a poly market,
you see a sport trade. Do you feel like these
can become something that have widespread appeal, because right now
it feels like the volume comes largely from market makers
(21:19):
who are interested in playing in this space, experimenting in
this space. Can they find as you just mentioned, sort
of retail success.
Speaker 3 (21:31):
Calshan's portrait, I think they can. The dream about sports is,
you know, they're very numerous and high volume, and you know,
ordinary people. If you go to like SBC, you know,
every couple of years there's a new panel on you know,
being the second screen during the game, and that you know,
second screen engagement, Well, a prediction market is your second
(21:52):
screen for anything you're mad about, and you know, is
there a story that pops up on social media that
you know kind of hit you where you live or
you can go beat on that on Calshi. Poly Market's
going to be harder, you're telling if you're talking about
retail success at polymarket, you're looking at widespread crypto adoption
and there's a strong crypto community and it's not that. Again,
it's not that polymarket isn't successful and that they have
(22:13):
no future. That's not true at all. It's just it's
gonna be hard to attract, you know, ordinary people. You're
like You're not gonna get that eighty year old guy
in Alabama betting on Trump to win the election on Polymarket,
that you will on Calci. So I think they're gonna
have to Polymarket is gonna have to overcome that. Polymarket
also has issues with their market resolution process. They's had
(22:33):
another scandal this week and the market on whether it's
Lensky war a suit to the Native.
Speaker 1 (22:37):
Tell people about that, because that's you know, you're in
this space neck deep. I'm in the space waste deep.
And that that controversy, to me was the epitome of
what are some of the issues with all of these things? Sure?
Speaker 3 (22:53):
So, I mean the big question if you're a prediction
market is, you know, once an event has happened, how
do you decide that it happened? Because money on the
line in some case hundreds of millions of dollars or
hundreds of yeah, hundreds of millions. So you know you
need a good process to you know, decide when an
event is curred and how you know you're going to
tell people that it actually happened. Cal She does. What
(23:16):
cal She does is they you know, list their resolution
terms under their market and they will link to the
you know, kind of third party authority that they're going
to use, whose data they are going to use to
settle that market. So if you're betting, you know, or
you're trading, you know exactly who is going to you know,
make the call that you know, we you know, have
an effective tariff rate of six percent whatever the market
(23:37):
is what poly market will do. Uh, they have that
same description, but it's a lot of reliance on one
just a consensus of credible reporting, which isn't bad most
of the time, but it also leaves this gray area.
That's issue number one and issue number two. Polymarket uses
a blockchain service. It's a product called the Optimistic Oracle,
(23:59):
the Oracle, and this is a like a cryptocurrency. You
can log in on coinbase and you can buy you know,
the UMA currency, and you use that to cast a
vote in poly markets markets and say, hey, I think
the event has happened. I think the market should resolve
this way or that way. And since it's based on
(24:23):
how much UM a token you hold, how much of
this currency you hold, it's you know, kind of this
Gilded Age oligopoly now where a couple of very very
large traders can just take over the market. So you know,
their market based solutions they're so proud of is you know,
it's not a free market. It's a market where like
two I think two traders hold just over half of
(24:46):
all the UMA tokens. So there's it's not a good
way to resolve markets. Now, the consequence of that, getting
back to Zelenski suit, after Zelenski's Oval office confrontation with
Trump advance earlier.
Speaker 2 (25:02):
It was earlier this year.
Speaker 3 (25:05):
Covering politics is hard because there's just this time dilation.
Speaker 1 (25:09):
February.
Speaker 3 (25:10):
I still can't believe that was just February.
Speaker 2 (25:14):
Anyway.
Speaker 3 (25:15):
After that, you know, one of the jabs at Zelenski
was like, you don't even wear a suit and he's
in you know, military fatigues because he's you know, mid war,
and but he stepped down in the NATO summit with
with a suit that was designed by a you know,
designer who wanted to incorporate some military dress and things
like that, but it was identifiably a suit. So the
(25:35):
market on whether so the polymarket market on whether Zelenski
would wear a suit should have settled to yes instead
of it resolved to know after several rounds of voting
and dispute, and it's because of these big um a whales,
these giant wealthy currency holders were able to just you know,
cast all the necessary votes to resolve the market in
a way that would get them more of their uma
(25:57):
tokens and more of their money. So that is that's
an ongoing issue that poly market has. They did it,
you know, late last year with like will Israel invade
Lebanon in September? Will they invade Syria by the end
of the year. Just a couple of these you know,
fuzzy terms like what is an invasion really and you know,
you know, kind of which time zone are we looking at?
(26:19):
And some of these issues. These really big whales can
take advantage of any fuzziness you know that the finest
lawyers in the world, you know, kind of do in court.
They use that same precision of language to try to
you know, try and resolve things their way. So Polymarket
has a structural problem that they really need to solve
(26:40):
because this goes back at least as far as back
as you know, late last fall, and certainly goes back further.
Speaker 1 (26:46):
Well, it's worth a billion dollars. Now they can try
to figure it out, which is kind of insane, right,
and that sort of speaks to a little bit late nineties,
and then with sort of the dot com blindness, and
then speaks to social media euphoria and the investments that
(27:09):
took place in places like Facebook, places like Twitter, the
growth of something like Instagram to get bought for a
billion when it barely had any users or it was
still you know, in a huge growth state. That's a
lot of what this feels like to me, between the
Calshi's and the polymarkets, especially with the way they've been
(27:30):
able to raise and also like there's a day trading,
sports betting, crypto manna sphere, ethos, sort of a bro
economy that exists now that is helping to propel some
of these things. I'm wondering if you're seeing some of
that and you're reporting as well.
Speaker 3 (27:52):
I mean, yeah, you're You're always seeing the influencers get
really excited about you know, prediction markets being the news
and you know, my mind, you know, the news is
the news. You know, you once she once a market
resolves in real time, it's it's really cool. I was
writing a story that included I think it led with
the big beautiful bill vote. How individual centers were gonna vote,
And while I was writing it, the vote was happening.
(28:13):
And I knew the vote was happening because you know,
Murkowski's odds, you know, spiked up to like ninety six percent,
and Collins was dropping like a rock. And you know,
I wasn't watching. I didn't have c Span in my
corner because that wasn't what the story was about, and
I didn't have it up. I thought I had like
at least one or two more hours, to be honest,
But no, that was that was kind of wild to watch.
(28:34):
And prediction markets give you a great state of the race,
and I think they're still benefiting from you know, how
much earlier they called the race in twenty twenty four,
and how much more of a lead they showed Trump
having than polls did. But the forecasting piece of prediction
markets is a lot more nuanced than the hedging piece.
(28:57):
And there's a Columbia economist who to Columbia University economists
who you know, studied Polymarket five thirty eight and the
economist polls side by side for thirteen competitive house races,
and Polymarket, you know, was never in first. Sometimes it
was the least effective pulling mechanisms. So for these really
smaller races, I think you can see polls do. My
(29:20):
prediction is polsill do pretty well in the midterms compared
to prediction markets, and then prediction markets will have another
moment of glory in the presidential one where history is
not as good a guide for forecasting, for forecasting the
presidential election, because you can get these you know, I mean,
Donald Trump's the French candidate in twenty fifteen. He was
you know, I don't think a polster would have necessarily
(29:42):
predicted that Donald Trump would you know, do really well
in electoral politics before he came on the scene in
twenty fifteen. But you test these new ideas in these
new characters the national level, and sometimes things take off,
and prediction markets are really good at bringing that new
information together, where polsters are relying on past history. So
I yeah, So I think there's gonna be a lot
(30:04):
more nuance that comes alive, you know, in the in
the forecasting space in particular, and I don't know that
that will dampen the enthusiasm for prediction markets. But you know,
I think they also benefit from you know, kind of
the self sufficiency of financial trading too. You know, the
idea that you can trade yourself and know the future
(30:24):
better than everybody else and you know, be the self
sufficient man. In particular, I mean I grew up in Texas.
I know what I know what those noises sound like.
But it's also I mean, those same things, those same
beliefs are you know, cognitive behavioral therapy for financial trading addicts.
There's a professor in California who's on the front edge
of trying to you know, prepare uh, you know, gambling
(30:46):
counselors as well to you know, properly treat people who
are using financial platforms as you know, gambling platforms and
you know, hiding behind well, I'm investing, I'm not gambling,
even though you know they're functionally gambling, even if their
activity that they're choosing is regulated under this different umbrella.
Speaker 1 (31:04):
Simon. By the way, we've hit like the nirvana for
me where we are talking about the geekiest, most technical
stuff and then throwing in cognitive behavioral science. I don't
I feel like I should just end the podcast now
(31:26):
because it'll never be better for me, But I do
remember for you, Simon, election night, I'm just settling down.
My wife had insisted on inviting the neighborhood over for
a freaking party for election night. Everyone finally leaves. I'm
sitting on my couch. I'm about to watch John King
(31:47):
give me the results from Kalamazoo County and you're texting
me and you're saying it's over, and I'm like, what
are you talking about. I'm just sitting down to watch
the results, and you're like, check out the prediction markets.
Speaker 2 (32:01):
Yeah. Again, it's a different world where I don't know
much about betting politics, but luckily I have people in
my life that do it professionally. And these guys texted
me at eight thirty. I took an incredible amount of positions,
bet a lot of money. I think I texted you
right before about nine o'clock and told you it was
(32:21):
over and that the market was about to move an
insane amount in the next thirty minutes. And you saw
Alive where it's like our money comes in, the public
follows that money because they don't know, they don't have
the inside news. Like these guys don't end Again, I
don't know how they do it, Chad, But like you said,
the predictive model of the markets is my favorite part.
(32:42):
Of election night that these guys know three four hours
before the general public and all these news media outlets.
It's one of the more interesting parts of the world
we live in in It's always fun picking those guys'
brains that do it and how some of them can
predict it a year or two out based on markets,
money trends, and general public feel and you know, it's
(33:05):
always interesting. It's just a different world. Where we talked
about Action. One of our biggest nights of a company was,
I believe in twenty twenty right with the election night
they crashed our site because we're traffic night. Ever, yeah,
we were kept updating the market right and where it
was that and people weren't going to Fox or CNN.
They were coming to Action to get the truth, and
(33:26):
the truth was telling them, now, this is what the
numbers are saying, this is who's going to win this election.
So yeah, I love it. And again, this to me
is why I hope these markets do last, because it's
just another tool to use in another way to make money.
Speaker 1 (33:39):
You're a great follow on Twitter at growlacracy, and this
is really interesting stuff and really important stuff that I
think is going to impact anyone who has an interest
in this show, because it will become more accessible and
available to people as compliments potentially to what people are
doing regularly with places like DraftKings fandor a fanatics. Last question,
(34:01):
you were just at I believe the Manifest conference about
a month ago or so. Explain to people what that
is and then tell people the most interesting thing that was,
the most mind blowing thing or the most oh my god,
if this really happens, it's crazy thing from the conference.
Speaker 3 (34:21):
Oh man, how to explain Manifest because any Silver's new book,
he spent some time just describing it. So Manifest is
basically it's half conference and half festival. So it's this
gathering of you know, really trying to attract big name stars.
So like you know Nate Silver, Jesse Richardson at Political
Kiwi on X. He's a great political trader, you know,
(34:45):
David Shore, great progressive democratic polster. Richard Henania a very
good conservative punditum. He's not a polster, but he's he's
actually pretty a commentary. He's a he leaves, he's a
libertarian who had to come to Jesus moment about Trump
earlier this year. So he was interesting to watch, and
he also did a really good job, in hindsight of
predicting Donald Trump's rise. So and when you get people
(35:06):
like that who are giving talks, and then you have
all these you know, really uh kind of quirky technical folks,
the the the the sexploration people, uh, the sex influencers
like Ala are also there. There, there's you know, it's
all about body positivity and kind of intellectualizing of sexuality
(35:28):
as well. So a lot of different uh intellectual spears
all come together at Manifest at this campus just off
of off Berkeley, and it's a it's a really cool
space and you know, definitely worth It was definitely worth
going to for sure. But the most mind blowing thing
for me about that trip was the idea of the
(35:51):
looming rise of AI traders and l l M traders.
So you know, l ms can already like chat epte
and research a trade for you and wholesome sources and perplexity.
AI can you know, give you some trading advice and
do some research for you. We're getting very close to
arguably within the next four years, according to at least
once today. I was shown there of AI traders who
(36:15):
match the actually of so called super forecasters, people who
are just very very accurate traders beyond what experts and
even what wise crowds can can achieve. So the rise
of AI traders is going to have some hard questions,
and I think the free to play and crypto platforms
are gonna have to deal with it first. You know,
(36:35):
right now, every user should be a human trader on
a regulated free money or real money site like Calshie. Right.
You can't have counterfeit people on there, even if you're
using AI to assist. But you know, there's at least
one star of there called few Tour, another prediction market site,
and you know they're already preparing their ux to have
(36:57):
you know, fully autonomous AI traders with their own counts.
So the IAI wave is not just you know, it's
not just coming in for the white collar drops. Jobs
are looking at traders too, and pretty soon Betters.
Speaker 1 (37:11):
Yeah, Chris Girlocker, fucking awesome, man. That was great. Follow
Chris on Twitter at Girlocker, see check him out at
prediction News. This is a fascinating space that people need
to pay paying attention to. So thanks thanks for jumping on, brother,
I appreciate it. The favorites will return with our next
(37:31):
episode of the show Tuesday. Action Network YouTube page. Download
us from Spotify, Apple Pods, wherever you get your pods,
Rate review, subscribe, leave us five stars, say whatever you want.
Feedback is a gift Until next time. Love you. Action
(37:53):
Network reminds you please gamble responsibly if you or someone
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