The Original Prediction Market Was Betting on the Pope

0:00Your best restaurant location gets 5 star reviews. How do you make every location like your best location? Your best paper mill has been operating at peak productivity. How do you make every mill like your best mill? Your best data center has optimized every drop of water. How do you make every data center like your best data center? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location. How many vendors does it take to meet all your organization's food needs? Just one. EasyCater, the workplace food platform that lets teams order from a huge variety of restaurants, over 100 ,000 nationwide, all through a single vendor.

0:45In addition to all that variety, EasyCater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast, free shipping to in-depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals.

1:23It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to AmazonBusiness.com for support. Bloomberg Audio Studios, podcasts, radio, news.

1:49Hello and welcome to another episode of the Odd Lots podcast. I'm Traci Alloway. And I'm Joe Weisenthal. Joe, prediction markets. Yeah, I love them. I know you do. I find them mostly entertaining versus insightful. And I like looking up things that people are betting on. So I saw today people are betting on the temperature in New York. There's one pool for Will Doge and Elon Musk claim there's missing gold at Fort Knox before May. There's political stuff, obviously, like who will be the next German chancellor. But we haven't actually done that many prediction markets episodes. We did one with Nate Silver late last year, but we should talk about them more.

2:29No, I totally agree. And I'll say two things in their defense. One is, to the point, like, it's interesting to see what people are betting on. It's sort of an interesting news filter in and of itself, because I'll look at, say, Polymarket, and it's like, I didn't even know people were talking about this. Whatever it is, is someone going to have a baby? Is so-and-so, you know, going to be with so-and-so on Love is Blind or whatever? which I don't watch. But it gives you a read on like, okay, this is interesting right now. And I do really think there is something to be gleaned that's in the price in several of these.

3:07And it's not that they're right or wrong. I've never thought about the usefulness of prediction markets from a right or wrongness standpoint, but more like if you have an opinion on something, how does it differ from conventional wisdom right now? Is there a big gap between your sense of something happening and the market sense of something. And so sort of taking the temperature of the betting public. And it is a narrow slice. Not everyone bets, but generally speaking, there isn't gold lying on the ground, right? Like generally speaking, there aren't tons of obvious opportunities to make money from these markets.

3:45So I will just say one of the big debates is whether or not this has social value. If you add financial incentives into betting, the betting mix, do you actually get better predictions? As you say, there tends to be a certain type of person who is betting on something like Polymarket and Calci. So maybe it's a good thing for getting a read on a particular slice of the population, but I definitely have questions. Anyway, all of it kind of got me thinking. We've probably had some form of early prediction market way, way back before we had things like Polymarket and Calci. And I guess getting philosophical, all markets are essentially prediction markets.

4:26People think a company will do well or bad, but there must be some early examples of people betting on very specific social things. And it turns out there is one. There's a really good example, and it is the papal prediction market. This is crazy to me. I had no idea this existed. Yeah. So in Renaissance Rome, betting on who would be the next pope was a thing. And in fact, a very interesting market was built around it. So we should talk about that. And I'm glad to say we have the perfect guest to talk papal prediction markets. We're going to be speaking with Ryan Isico. He is the author of the No Dumb Ideas sub stack.

5:04So Ryan, welcome to the show. I'm thrilled to be here. Why did you decide to become an expert in Renaissance papal betting markets? It's a good question. It goes back to, I was writing a sub stack about prediction markets in general. I typically write about economic or social ideas through the lens of a business pitch. And I wrote one about the idea of paying lobbyists through prediction market contracts. And that got me onto Polymarket regularly to check what the latest bets were. And I saw when the Pope was in the hospital, and I'm glad to say he's doing better, that one of the top markets - We're recording this March 11th.

5:39one of the top markets on Polymarket was New Pope in 2025. And that just seems so shocking to me. It's such an outrageous thing to bet on. And when I went into the comments, which were a mix of compassionate and tasteless, I saw this idea that you could be excommunicated for gambling on this market. And while that's actually no longer true, that led me down this rabbit hole of trying to understand what were the dynamics around this? Why was this put into place? What I started looking to the academic literature and I saw there wasn't a lot of public-facing writing that went any deeper than this market existed and you could be excommunicated for it.

6:15And so I figured, if not me, then who else? So I started writing about it. All right, keep going. So what years are we talking about? At what point did the Catholic Church have a ban on betting on the next pope? Yeah, so the ban was put into place in 1591. It was called Colgitnos. That's my attempt at Latin. and this papal bull which is sort of a decree that has the rule of law in the Catholic Church banned all forms of betting on cardinals, duration of a pope's length duration of a conclave and who the next pope would be and in the bull it had a punishment of automatic excommunication what's the bull?

6:54bull, yes, so bull, b-u-l-l the animal it's like the animal and so it's a papal decree that essentially has the rule of law and papal bulls made up a lot of historical Catholic law until 1918, which is when there was a massive reform of the entire canon law, all the law of the Catholic Church, and the bull was not renewed as part of that reform of the law. So let's back up a bit and talk about early 1500s. What was this market exactly, and who were the participants? Who was making the bets? That's a great question. So there were three broad types of groups that were making bets on these markets.

7:34The first was what you might call gentlemen's bets. So aristocrats, cardinals would make side bets with each other. There's records of cardinals betting things like gloves, jewelry, over the outcome of the conclave. And the conclave, just to take a step back, is the process that happens where a new pope is elected. I saw the movie. It was good. Oh, I still haven't seen it. The movie is a pretty accurate representation of the process. And so group one was just sort of, you can imagine it being kind of equivalent today to making a bet with your friends over a sports game. The second group was the biggest one.

8:05And this was a group of brokers called Sensali who would take bets from all social classes, from regular workers all the way up to aristocrats and also cardinals sometimes and their attendants. And these brokers were often people like cloth merchants, spice traders. They're often tied to the Florentine financial industry. and they took bets on everything, not just papal elections. They took bets on the outcome of sport matches. One of the most popular games in Renaissance Rome was essentially, you could kind of translate it as boy or girl. They would find a pregnant woman and they would take bets on whether she didn't give birth to a boy or a girl.

8:41Wow. And this was an incredibly popular game. It was so popular that it actually was banned in the late 1500s. Amazing. And they took bets on everything from will new cardinals be nominated who will the new cardinals be? How long will the Pope reign for? How long will the conclave run for? Who will the new Pope be? And alongside these market makers was a whole information ecosystem. You had handwritten newsletters. There was a lot of gossip going around, a lot of rumors spreading. And we can talk about that in a minute, maybe. It's fascinating, the rumors that went around. And the last group was actually sort of an early form of risk hedging.

9:19So you had financial institutions, banks, that would, in the same ledger, give updates on shipping insurance that an investor had underwritten and the results of their papal bets. And so these same institutions would actually offer both. There wasn't a clear distinction between gambling and financial investments in some of these environments. And you sort of think of this as an early form of political risk hedging. Because in the 1500s, the Pope ran a major country, the Papal States. It was going to think of it as covering a large part of central Italy. And when a new pope came in, it often meant it was a new family that had political influence.

9:56It often meant that projects or taxation policy would change. You might go to war. And so there was really big policy changes that would happen as popes switched. And it makes sense that some investors might want to hedge against that. Yeah, real money. Real money. There's so much meat here that's interesting. I mean, first of all, you know, Tracy said in the beginning, talk about some of the social utility. There's certainly the disutility when you mentioned Cardinals betting, right? This is what we worry about with modern prediction markets, that there are actors who might try to influence the outcome of a specific event that's being bet on to make their bet pay off.

10:35And so that is one reason we might be concerned. I'm just fascinated by the sheer proliferation because this is the characterization of society right now, whether it's pure betting on sports, something that's a little – then crypto, and then you get a little closer to the spectrum of like real trading or something, options, and then stocks. We have this incredible spectrum of opportunities to bet or trade. Gambling culture is what I would call it. Yeah, we live in a clear gambling culture. Talk to us more just about that gambling culture that proliferated. Why was it so big? What was going on?

11:15Yeah, I mean, gambling goes back historically in Rome all the way back to the Roman Empire. There's lots of stories and lots of media about gambling on gladiator games or on the outcome of wars. And in Rome, there were two big drivers of it. One was just this historical culture of gambling. The second was that it was a center of politics and intrigue. And so a lot of our information on the odds throughout the conclaves in the 1500s comes from ambassadors from Venice, from France, from Genoa. And because there was all this interest among all these other foreign powers, there was a lot of information that leaked out of the conclave.

11:50And so when there's a lot of information and there's a market where you can try to make money off that information, you can sort of see how the incentives align to drive a lot of interest in the market. And you can also see how the incentives align to try to do market manipulation. So one of the more interesting stories was in 1555, I believe it was, Cardinal Carafa, who was one of the favorites to win, about 70 % odds to win. A rumor went out after he missed mass that morning that he had died. And his odds dropped down to 30%. People clearly didn't fully believe that he had died, but there was enough to see some change in the odds.

12:22And it turned out he was very much alive. He was elected pope. And you have to imagine that there were some unscrupulous brokers and rumor spreaders who made a lot of money off of the shifting odds there. That reminds me, how did bookies actually make odds? Because I will admit, I don't really understand how bookies make odds nowadays on like sports games and things like that. But for something like who the new pope will be, that seems even more complicated, especially when we're talking about the 1500s, where presumably information flow is not as fast or as heavy as it is now. Yeah, it's an interesting point.

12:58So I think there were two big drivers from what I've been able to uncover. The first one is that there was a lot of insider information, not just cardinals, but also their attendance, people involved with bringing in food or wine. They would bring back information on what had happened. and so bookies had some level of information on what was happening in the conclave these are also really politically there's contentious elections and there were factions and so if you know all the players and you know the dynamics with foreign powers you have some indication of of which alliances of factions might come together to elect a pope and who the kind of logical compromise candidates would be there was an idea i'm gonna butcher it at the italian uh Papa Belli, I think, of this person who was sort of seen as a potential future pope.

13:44And so the people who were candidates who were likely to be chosen were already sort of identified in the public sphere. And then the last dynamic that would drive odds was money flow. So if you set odds and you started getting a ton of bets on those odds you set, that would create pressure to lower those odds and to basically protect yourself from offering too good of odds on a candidate who might win. And so there was a direct flow of that where people would adjust their odds based off of the flow of wagers. There's also sort of a proto-secondary market. We have some records of people saying they sold their ticket after the odds changed, sort of like a prediction market, right?

14:21You buy it at 10 cents, you sell it at 50 cents. People would sell their tickets that were at 100 to 1 odds when they went up to 10 to 1 and lock in their gains. And so that also, I haven't been able to uncover exactly how prevalent that was, but that also could have been a driver of setting prices for these different candidates.

14:53Your best bottling plant employs 3 ,300 people. How do you get 3 ,300 people working at peak efficiency? Your best store has reduced waste, water, and energy usage. How do you make every store like your best store? Your best property has every guest raving. How do you make every property like your best property? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location. How many vendors does it take to meet all your organization's food needs. Just one. EasyCater, the workplace food platform that lets teams order from a huge variety of restaurants, over 100 ,000 nationwide, all through a single vendor.

15:39In addition to all that variety, EasyCater also gives you full visibility of your organization's food spend with invoicing, centralized reporting, and seamless integration with expense management systems, all on one platform. EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Okay, Canva can take your presentations to another level. It's super easy to use, but do you really know everything Canva can do? Let me walk you through some of the highlights. Take Canva Video. Whether you're a content pro or just starting, you can make standout videos right away. There are thousands of templates, a super simple editor, and AI-powered tools that let you generate cinematic-quality videos with sound from just one prompt.

16:23It seriously couldn't be easier. Then there's Canva Docs. Create, collaborate, and share visual documents that actually make an impact. Reports, plans, whatever you need. And with MagicWrite, Canva's built-in AI, you can brainstorm, draft, and even create copy in your own voice. And Canva Sheets? It's like spreadsheets, if they were fun. Which is maybe an over-promise because... spreadsheets, but they're more visual and insightful, plus easy to generate. So whether it's a doc, a sheet, or a show-stopping video, Canva lets you bring your big ideas to life as fast as you can think of them. Put imagination to work at canva.com.

17:00One of the things that you mentioned is that there were real stakes involved for some of the participants by who the next pope was going to be because major policies could change because, you know, there was geopolitical consequence of this. And so therefore there is, you know what they would say, real money at stake. And then you can obviously have people ride along that who have nothing really at stake, but they just want to bet, which is characteristic of all markets today, including the popular prediction markets. Some of the prediction markets, like is so-and-so going to get pregnant? There probably isn't the real money.

17:32You probably don't really see much activity there, but you know, a lot of things, certainly areas like presidential elections or midterm elections, it's some of both. But the other thing I'm really interested in is, you know, Tracy and I work in financial media, which is subsidized by people who want to sell access to investment products. And these days it's more ETFs, but et cetera. This idea that like betting has always been a subsidy, betting or investing or gambling has always been a part of what subsidizes the existence of news media. Yeah, 100 percent. I mean, it's interesting because there's a mix of the idea and then the proliferation of it.

18:13So the idea of these newsletters was really common. There's, again, this is a longstanding Roman culture. If you ever look up Roman graffiti, you'll see there's a long history of spreading rumors and spreading ideas in Rome. But you're right that the demand for these newsletters was shot through the roof because it was a financial incentive. And it wasn't just the newsletters that spread information. There was also taverns. People would spread rumors and share information in taverns. So there's a statue called the Pekino, which has been for hundreds of years, this place where people would leave anonymous notes to spread information.

18:45And so those notes often had information on what was happening inside of the conclave. And the other piece that was interesting was that the diplomats, the foreign diplomats who were in Rome, would report back to their kings, monarchs, whoever, leaders on what was happening inside the conclave. And so that definitely created a lot of demand for getting that initial firsthand information, which presumably was passed off informally. And one other piece that set odds in your question earlier, another piece that set odds was if a certain person who's considered in the know would make bets. So you had certain people like if a Venetian ambassador made a major bet, that would be a strong signal that that person had some insider information and that this person was likely to win.

19:27So, Joe, I don't know if you've ever looked at the comment section on something like Polymarket. Yeah, definitely have. I don't know how to describe it. A bit of a mess, maybe. But one thing that does happen there is everyone talks their own book, right? Everyone is trying to sway the odds and get their prediction right. Did we see that in Rome as well? Yeah, you did see a little bit of that. So you definitely saw people hype up their candidates and even some people try to force the hand. So just take a step back. The way a papal election works is up to 120 cardinals go into a locked room. They swear not to share any information, which I think is better enforced today than it was back then.

20:07And they vote up to four times a day. And every time they vote, if there's no if no one has a two thirds majority, they they burn the ballots. There's black smoke. Oh, yeah, yeah. The famous black smoke. And they try again up to three more times that day. And some of these conclaves went on for months. They were conclaves where they had odds on how long the conclave would go for. And there was a 10 % actually implied odds of never in one of the conclaves, that they would never pick a pope. And so there's also a piece where these rumors could try to force the hand of these cardinals. So in 1590, Cardinal Pagliotti was considered one of the favorites to become the next pope.

20:46And he has about 70 % chance. And someone put out a rumor that he had actually already been elected. And the rumor spread so rapidly that the city started to put up his coat of arms. It started to set up as if he had won. They sent guards to protect his house because typically after Pope was elected, people would go and raid their house. It's an interesting cultural norm. And it turned out he hadn't won. He hadn't gotten two thirds. And so there's an implication that that was done in part to try to pressure the last few cardinals to make that bet and acclaim him. Did it work? Did not work. Instead, we got Pope Gregory XIII, who started the crackdown in earnest on some of the papal gambling that was happening.

21:22Did the premature victory turn people against him? Would he have probably won had it not been for, or do we not know? It's a good question. I don't know for sure. But you can imagine for sure. So this brings me to a very important idea, which is, did all this betting actually have an impact on the church in the sense of, you know, I imagine the Catholic Church isn't a big fan of betting and you have this huge betting culture that's pegged to the internal political dynamics of the church. Did it change people's perception of the Catholic Church? It's a really good question. In terms of the perception of the Catholic Church, I'm not as sure, but the Catholic Church certainly felt threatened by it.

22:08And so the Catholic Church, starting even before the hammer really came down, had tried to ban these types of bets from happening. And so they'd issued bans, they'd sent police raids out, but they were never rigorously enforced because there was enough intermixing between the bettors and people in the Vatican that there wasn't a lot of impetus for aggressive enforcement. But as you get to the late 1580s and into the early 1590s, you started to see popes do really, really aggressive crackdowns. And the level of aggression implies that there was a real threat to the church. And so they would raid broker shops and arrest everybody and torture them to find out who had placed bets.

22:47they set up a system of 30 approved brokers that were allowed to take bets on some things, not on the election of cardinals, not on the boy or girl bets for pregnant women. And if you made bets outside of those 30 groups, the punishment was 500 scudi, which I did a little bit of calculation. I think it's about$7 ,500, which a year's wage for a rural worker would be about 50 scudi, so 10 times the wage of an average worker. and you can even be sentenced to serve on the galleys except being conscripted into the military for being caught on this. But the real crackdown came with Cogitnos, which is the papal bull banning it.

23:25And I actually brought a copy with me from the Yale Beineke Rare Book Library. Yeah, what is this amazing old document? Yeah, so when this was issued, this papal bull was translated into Italian, posted around the city, posted on tavern, city gates, given to all of the bishops and priests around Europe. particularly in Italy. And if you read the translation, you can actually see that a lot of the, it kind of implies what some of the issues might've been. And if I can read a little bit from it. Individuals driven by greed or fear of loss improperly seek to influence, obstruct, or delay these sacred elections or promotions through illicit means, either directly or indirectly.

24:01Others maliciously defame or slander candidates, undermining the dignity and reputation of those involved. Such actions distract and cool the sincere prayers and devotions of Christians. And then instead, many individuals pursue temporal profit or personal gain rather than selecting candidates based solely on merit, employing numerous fraudulent schemes, lies, deceit and manipulations. There's also pieces here where they say people are trying to forbid an arts like divination or invoking demonic assistance driven by desperation and greed to figure out who is going to win. And so the bowl is really strict.

24:35It says they permanently forbid all forms of wagering, betting, or speculation regarding papal elections, the promotion of cardinals. It nullifies any existing bets or wages that have already happened. They declare all future agreements null, void, and invalid. They say that any funds or valuables involved in those should be given to charitable institutions with no allowances. And anyone who does this is automatically excommunicated from the church. which was a big deal it was a big deal so it wasn't just about obviously today it's still a massive deal to be excommunicated but from a religious perspective back then excommunication could mean ostracization you could be kicked out of your community they could seize your property occasionally you could even be killed for being excommunicated and so your protections and especially in the in the in the papal states mostly went away if you're excommunicated and then one other piece that's really fascinating is that any clergy or figures who violate the decree are immediately stripped of their office and are incapable of being reassigned.