The Nespresso Tariffs

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2:10Hello, welcome to Slate Money, your guide to the business and finance news of August. We have made it to August, people. Congratulations. I'm Felix Salmon. I'm here with Elizabeth Spires of the New York Times. Hello. And Emily Peck of Axios. Hi. And we are going to talk about the August tariffs. Now that we're in August, we know what the tariffs are. We're going to talk about what all of that means and whether they are going to survive the legal challenge that they are facing. we are also going to talk to Nathan Bomey of Axios about sports betting and whether it is causing a rise in sports cheating and whether if it did that would be a bad thing or not it is a bad thing Emily thinks it's a bad thing I think it's fine we are going to have a third segment on absolutely nothing because it's the summertime so we can have a two segment show this week we are going to have a numbers round and we are going to have a slate plus segment all about handbags so stay tuned it's all coming up on slate money i have kind of lost track of the number of tariff deadlines that have been blown through by the Trump administration.

3:37But the August 1 deadline was kind of sort of real in that Donald Trump was like, you need to do a deal with me by August 1, otherwise I'm just going to impose a tariff on you. And then on August 1, on July 31, he actually did this. And he's like, if you don't have a deal, then here's a list of 60 countries and here are the tariffs they have to pay. Brazil has to pay 50 % because we don't have a deal. Switzerland, for some reason, has to pay 39%, which is going to seriously cut into Emily Peck's Nespresso habit.

4:11Felix Salmon: This is devastating news. And yeah, how is anyone going to be able to afford a Rolex anymore? The arbitrariness of these numbers. Like, how did they land on 39 %? It is related to, in the specific case of Switzerland, it is actually very close to the argument that was made all the way back on April 2nd when the Liberation Day tariffs were first announced, which is basically, never mind what free trade agreements are in place or what tariffs you put on US goods or whatever, we are going to determine the degree of protectionism in your country by looking at one number, which is the trade deficit.

4:50And if you have a large trade deficit, we're going to try and get that trade deficit down by imposing large tariffs. And Switzerland exports a bunch of stuff to the United States, obviously in espresso capsules and Rolexes, but also a lot of pharmaceuticals is the big one. And so in the absence of any kind of a trade deal, they wind up with a large tariff. Countries with a trade surplus, by contrast, wind up at the 10 % tariff base rate. I'm old enough to remember when, you know, Keir Starmer, after much, you know, haggling and back and forth, finally triumphantly announced that he had come to a deal with the United States, between the United States and the UK, doing a 10 % tariff.

5:40And this was like the first great deal to be announced. Turns out he didn't need to do it at all, because the US has a trade surplus with the UK. And so that UK would have wound up at 10 % anyway. So I do think, Elizabeth, that like the broad view of the world, the Trumpist sort of Peter Navarro view of the world, that we should have higher tariffs on countries where we have the biggest trade deficits has remained more or less in place, has not really changed with the big sort of massive two exceptions of Mexico and China, which is still kind of in limbo. Well, also maybe Brazil, because it seems like that's just, you know, politically punitive, because for whatever reason, Trump sympathizes with Jair Bolsonaro and wants to punish the current government.

6:28Absolutely.

6:29Felix Salmon: But Brazil doesn't need us that much. I think we need Brazil more than they need us, right? We're like their sixth market overall or something in terms of exports. And we need their coffee. We need their coffee, man. The coffee situation with these tariffs, it's not good. The coffee comes in from two places. It comes in from Brazil and it comes in from Switzerland in the form of espresso pods. And so now where are we going to get our coffee? What are we doing, America? Emily's going to have to give up caffeine again. No, I can't go through that again. Someone wrote somewhere this wonderful line saying, I think the Trump administration understands that we can't grow coffee in America.

7:07And then someone was probably like, maybe they don't. I don't think they do. But there was also one other thing that we should mention with all of this tariff craziness, which was the taco trade on copper worked out. We talked a few weeks ago about how Trump announced he was going to put a massive, like, 50 % tariff on copper. And suddenly the price of American copper spiked through the roof because, you know, everyone was going to have to pay this huge tariff. And then suddenly, at the end of July, he was like, oh, never mind. If you're just importing copper, then I'm not going to tariff it 50 % after all.

7:43And the price of American copper immediately plunged all the way back to the global price. So it's all unpredictable. It's all chaos. This will come as no surprise to any of you of the Trump administration. But the broad tariff regime is now kind of coming into focus. It's kind of 10 % to 15 %-ish. and that is ludicrously high by any post-war standards, but also it doesn't seem to be high enough to derail the economy or cause the stock market to tank.

8:17Felix Salmon: But meanwhile, we're talking on Friday morning, only a couple of hours after, not even a couple of hours after we got a really bad jobs report that shows job growth this year has been anemic, as they say. There are large revisions showing like a quarter million of the jobs we thought were created this year have vanished. And most of the jobs we're seeing created now are in healthcare and everywhere else is kind of slumping. So yeah, like the tariffs, like coming into Friday, everyone was like, you know what? Tariffs are going up. Trump's reordered the global economy, but the U.S. is doing fine.

8:55Felix Salmon: The U.S. economy is, it's fine. We're going to absorb it. It's all good. And I was like, you know what? That makes sense. Like I was buying into it. Everyone was kind of, and then this jobs report drops and everyone's like, oh, oh no. Like, okay, prices are going to go up a little bit, but also no one has, is finding jobs anymore. Employers aren't hiring anymore. It doesn't seem good. It seems like we've been on this like weird rollercoaster where we're like, it's going to be terrible. No, it's fine. And now we're back at maybe terrible again. Another factor is just that some of the effects of tariffs are going to take a while to play out.

9:30They're not instantaneous. Well, the tariffs aren't in place yet, right? Like these things officially go into effect on August the 7th.

9:37Felix Salmon: Well, the 10 % baseline has been in effect since April, I believe. Yeah. And 30 % China has been in effect. And now this new stuff, the Nespresso thing, I just, that's all I'm calling it. Nespresso tariffs. And the de minimis thing, like end of August, suddenly the de minimis exception goes away, which means if you order something worth less than$800 from somewhere not in America, there's going to be a whole crazy set of paperwork and bureaucracy. You might have to pay$100 in taxes on the$10 item if they don't have a way of declaring it. And the USPS is going to have to deal with this and it's all going to be a shit show.

10:15But yeah, it's going to be a big mess.

10:18Felix Salmon: Yeah. I think with the de minimis, so that's the, you just explained it, that's like the Sheehan exception or something where they were mailing like individual sweaters to people to get around tariffs and things, they'll just figure out a better way to ship their stuff over here, right? Yeah, they've already done that. I'm not super worried about Xi 'an. I'm much more worried about just the general chaos of sending packages into the United States from anywhere. It's going to be a shit show. Yeah, because then there's also a new regime around what's called trans shipments. So that's when China makes a thing, but it sends it to like Vietnam or the Philippines or Mexico to subvert the terrorists.

10:55Felix Salmon: But now the Trump administration's like, if you do that, we're going to charge you even more. We're going to charge you 40%. But the customs and border people don't know how to figure that out. No one knows how to do that. No one knows how to do it. But here's my question, Emily. Like, as you say, we did have a bad jobs report in July. And there is a kind of, you know, the business cycle does seem like it's turning. We've been talking for some months now about how hiring is very weak. People are finding it hard to find jobs. And total employment is still relatively high. People aren't getting laid off very much.

11:32But if you are looking for a job, it's hard to find one. GDP growth still looks like it's okay. But inflation looks like it's stubbornly not coming down to where it wants to be. All of this kind of big macro stuff, which we can talk about. But it does seem to me that it's only peripherally related to tariffs. The tariffs are just one part of a very, very large and very complex economy, which, by the way, you know, what is it like less than 10 percent of U.S. GDP has anything to do with imports, right? Like we're mostly a services economy. Like it's you can't really sort of say, oh, the economy is bad.

12:13Therefore, the tariffs caused it.

12:15Felix Salmon: Yeah, it's not tariffs. A lot of the analysts that we were looking at this morning with jobs were talking about immigration. There has been a big slowdown in net immigration. And, you know, employers can't hire people the way they could last year or the year before. They're just, they aren't there. So that's kind of the big thing that's also obviously a Trump policy. That's a weird irony, right? The GOP intuition or the MAGA intuition is that if you basically reduce immigration, if immigration goes down to very close to zero, then Americans who are looking for a job are no longer competing against immigrants and they should therefore find it easier to get a job.

12:53But that doesn't seem to be how it's working out. The kind of jobs that immigrants take are not the jobs that the MAGA people think they want.

13:01Felix Salmon: The native-born employment rate was low. People who wanted jobs and could work were working. And exactly as Elizabeth said, these are two labor markets, two different kinds of jobs. Like these employers weren't lying when they were like, native-born Americans don't want to work in the meatpacking plant. That was true. And now, you know, what is it? F-A-F-O? Like we're finding out. You're allowed to swear on this show. Well, I didn't want to. And so in conclusion, and it's not just illegal immigration, it's they took away legal status from all these people from Venezuela and other countries who had temporary protective status.

13:42Felix Salmon: I mean, I spoke to employers at I think it was a retirement community or nursing home in Florida who had to they had to fire people. They had to fire people because the Trump administration took their status away. And that's happening in workplaces around the country. There was a meatpacking company in Omaha where they lost 50 % of their employees, and they had gone to Great Lakes to try to verify that all of those employees were documented. Well, the fact is there's actually, it's actually kind of impossible. That's kind of the problem here is there are no Great Lakes you can go to to try and verify that employees are documented.

14:20All you can do is you can sign up for one of these verification services and say, like, you know, put in your social security number and we will run you through the verification service. And it will either come through with like a green checkmark or a red X. And if it's a green checkmark, you can work here. And if it's a red X, you can't. And those verification services are not super reliable. There's not much you can do beyond that. And so what happened was there was like raids and stuff. a bunch of people who'd been who'd passed the verification tests turned out to be unauthorized or undocumented and the ceos and hrf people are saying well so what else can we do and the answer from ice is basically nothing like you can't do anything else so there's like one thing you can do but beyond that there's not much else you can do and so there's just this massive cloud of uncertainty that is overhanging basically every employer in the country who employs a lot of foreigners, you know, like immigrants like me.

15:21Honestly, I am legal, but like, it's hard for me to prove that it's hard. It's hard for an employer to be sure of that.

15:28Felix Salmon: Combine that, the immigration crackdown and the slowdown in the job market, plus firing from the biggest employer in the country has a hiring freeze, the federal government, and has laid off countless of workers that are only just beginning to show up in the jobs report. I think it's like negative 18 ,000 for the year so far, but there's like hundreds of thousands of people who are still receiving severance or they're on some weird buyout package from the White House that aren't showing up on the rolls yet. So that's probably going to get worse. And then on the flip side, the tariffs, I guess, are more of a question mark because like Elizabeth said, we don't know fully what their effect is or what they even are yet.

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19:46That's code slate money at im8health.com slash slate money. Code slate money at im8health.com slash slate money. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. We should also mention, I'm very interested in how you guys are going to handicap this. The Federal Circuit Court of Appeals this week heard the big tariff case on bank. All 11 judges. I believe that eight of them are Democratic appointees. and of the other three Republican appointees, none of them are Trump appointees. And if you listened to the argument, to the oral arguments, the judges were almost unanimously highly skeptical that there is like some kind of a state of emergency that would allow Trump to unilaterally impose these tariffs and so on and so forth.

20:49And the general vibe seemed to be very much in line with the original ruling from the International Trade Court in New York, which basically said these tariffs are obviously illegal. So my expectation at this point in the wake of that hearing is that the Federal Circuit will uphold the International Trade Court ruling, finding the tariffs to be illegal. so my question for you guys is what happens then will will the tariffs suddenly go away which is what the international trade court did but then that abolition of the tariffs got stayed by the federal circuit pending this appeal or the federal circuit then say well we've heard the appeal we agree with the international trade court so all of the tariffs are now illegal and you can't impose them.

21:43Or in the event that inevitably the government will appeal this to the Supreme Court, will the federal circuit go, well, ultimately this has to be decided by SCOTUS and therefore the tariffs stay until SCOTUS gets around to it. And then who knows when that's going to happen and what they're going to decide.

22:00Felix Salmon: That one. Yeah. Let's say it does go to SCOTUS and because SCOTUS is heavily conservative, they decide to, or actually let's say that they rule in favor of the idea that the tariffs are illegal, then ostensibly Congress is responsible for instituting tariffs or not doing it. Then it sort of boils down to whether or not congressional Republicans are willing to fight Trump on it. And so far, they have not fought him on really anything. I think this is a very interesting question, which is like, if the tariffs are found to be illegal, then we go back to call it the rule of law where if you want to impose tariffs, you need to draft and pass a law in the legislature.

22:47And as we know, you know, as we know from all the flights over like TPP and NAFTA and USMCA and all the rest of it, these deals are very, very drawn out. The tariffs, quote unquote, deals that Trump is doing are very sketchy. They're not, the I's are not dotted, the T's not classed, whereas anything that passes in Congress is very, very detailed, it would take a minimum years just to draft this legislation, let alone to pass it. There's a huge range of opinion about tariffs and trade in Congress. So my feeling is that even with the deep support of both houses, Trump would be very, very hard pressed to actually pass tariff legislation along these lines before the midterms.

23:41I don't see it happening.

23:42Felix Salmon: But I think more realistically, the other scenario is the federal circuit rules that the tariffs are illegal, but then there's an emergency appeal to the Supreme Court. They say, stay that. We're not like, keep the status quo, keep the tariffs in place until we can, you know, whatever, make our case before the Supreme Court. The Supreme Court on the shadow docket does that because that's what they've done for the Trump administration all year. They're going to do it again. Like, I'd be shocked if they didn't. And then they let him have his way. They figure out some new thing, whatever. This is what they do now.

24:16Felix Salmon: I don't know. Not to sound cynical, but I mean, that's what they've been doing with all Trump's grab for executive, extra executive power this year. They keep doing it again and again, with the one exception was like a sentence about the Federal Reserve being independent for reasons that they sort of came up with on the fly, that we can't fire Jerome Powell, but the Trump administration can literally fire anyone else that was supposed to be independent, except for Jerome Powell. They just like made that up. I don't think they would do the same for tariffs. So the federal circuit is kind of irrelevant.

24:48We should have just like skipped them, gone straight to SCOTUS. But yeah, that one I have to say is the last, I think the last great hope of the, you know, global neoliberal elite. They're like, maybe we can have some semblance of rule of law, but maybe not.

25:06Felix Salmon: Everything was so like, the global neoliberal world order, so complicated. Like you're saying, like, it takes years for Congress to come up with a treaty. And like, I was thinking about all the regulations I've been covering over the years, you know, where like some agency makes this painstaking process to come up with some minor rule, blah, blah, blah. And then it goes to court and it's in the courts and it takes forever to do anything. I don't know, like get rid of non-competes, stuff like that, that I always get all excited about. What this White House has proven is like, none of that was necessary.

25:41Felix Salmon: It was all too much. It was all a lot of red tape and too many words. Like, oh my god this is this is the point to which emily goes full doge it's too complicated we need to cut the red tape well i think i think the smarties made everything a little too complicated and it wasn't their fault because i think the people that opposed all these regulations and all these rules made things unnecessarily complicated because it's easier than to confuse people into not supporting things that are good for them and blah blah blah gum up the works make things take longer but it went too far so so emily like i'm i'm reading friend of the pod ray madoff has a book out about like tax avoidance yes and this is i think the key insight here is that the best case scenario if you're trying to put together a tax regime is a kind of spy versus spy situation where a bunch of highly paid lawyers come up with attempts to circumvent taxes and then a bunch of legislators find those loopholes and close them and then rinse and repeat.

26:49And if you simplify things, then all you do is you basically wind up making tax avoidance rampant because a simple system is one where it's simple to avoid taxes. And so you can cut in like a libertarian way. You can cut legislation, you can cut regulation in a sort of libertarian way. But if you want to do something like, you know, really enforce the estate tax so that the estate tax raises real money, that's almost impossible to do without lots of very detailed legislation.

27:24Felix Salmon: Maybe. I haven't read the book yet. I just started it and then I got distracted by my summer novels. But I will just say the payroll tax, Felix, Elizabeth, the payroll tax, could it be any simpler? Is there ever a dispute? The money, your employer just takes the money every two weeks. They take my money away. Ray's whole point is that the rich long ago discovered that they never need to declare any income. There's lots of ways that the rich have for not earning any income. And then you need to start taxing like investment income, wealth, that kind of stuff. You don't pay payroll tax on your dividend income.

28:00But death, I mean, you have to register the death, right?

28:04Felix Salmon: You can't sneak that one by the federal government. So losing on the death tax over the years, as the rich have chipped away at it, that's a big loss because you could really, taxing the death seems like it could be easy. That's even easier than payroll. It's not easy because that's a wealth tax and wealth tax is illegal. Well, maybe it's like in order to be considered dead, You have to like declare your money. Like there's got to be a way to make it, you know. There's got to be a simple way. There's got to be a simple way. God damn it. Now bring it back to tariffs. Well, they are simple. My favorite irony of this whole tariff thing is that Ford, which is the big automaker that is more U.S.

28:47based than any other, like 80 % of its U.S. old cars are made in the United States, is now saying that it faces a higher effective tariff rate than imported cars. If you're importing a car from South Korea, it's getting a 15 % tariff rate. But the F-150 is made of aluminum. There's a 50 % tariff on aluminum. And so Ford winds up paying more tariffs than Kia does. That is bananas. Trump is economically illiterate. More proof every day, I think.

29:17Felix Salmon: Just stop with this Nespresso tax. That's all I want to say. If there's one thing I can communicate to the listeners.

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31:45Felix Salmon: Can I hire more people? Should we get a bigger office space? Don't lose sleep over the small stuff. Keep focusing on the big things. AT &T Business built to work. Get AT &T Business at business.att.com. But let's move on to sports ball, which is one of my favorite subjects and something I know a lot about as Slate Money listeners know. I'm an expert on this. I am not an expert on this. I know nothing about sports, but I know a man who does. Nathan Bomey, welcome. I am so glad to be here. This is going to be a lot of fun. Nathan, introduce yourself. Who are you? Well, these days I'm a business reporter at Axios and author of Axios Closer, which is the daily newsletter on all things business, everything that's happening in the business world, tech world.

32:32We fit it into our newsletter and author of a few books and former reporter at USA today and the Detroit Free Press and whatever else you want to know. Fan of the Green Bay Packers. And basically someone who believes that sports is somehow intrinsically important rather than being just a sort of arm of the entertainment industry. And it's like, what's the word? There's some deep platonic need for the result of a sports ball match to be true and not thrown by one of the players for the sake of winning a betting bet. Yeah, I think I'm old fashioned enough to believe that the integrity of the game still matters, you know.

33:18Integrity, that's it. That's the thing. And I, you see, I feel like this isn't true. I feel like professional wrestling has proved to us that you can have a very successful sport without any integrity. And it's fine. And it's really all just entertainment. Well, I had a Sunday school teacher once who said that professional wrestling is the only honest sport left. You see, there you go. Hard agree. Me and Nathan, Sunday school teacher here, are the only enlightened beings. But Nathan, why are we talking about this? Well, there's a new scandal here in sports betting because these pitchers for the Cleveland Guardians, Emmanuel Classe being the latest, he's a pretty good pitcher.

34:02He's being accused – well, he's not technically being accused of anything, but he's caught up in a potential scandal. He's on leave, paid leave from the Cleveland Guardians as they do an investigation into gambling. And all these social media sleuths have basically zeroed in on the fact that he may have been essentially intentionally pitching balls at the beginning of the innings in which he would pitch, which could be because professional gamblers or amateur gamblers can bet on that and can make money off of it. And if he was actually coordinating with them or in some way conspiring, that would be pretty much a one-way ticket to getting banned from baseball.

34:45Felix Salmon: And he's not the only one in trouble or under a cloud, as they say right now, right? He's just the latest. I feel like I've read this headline about various sports players going back many decades in many countries, that sports is just naturally something that people want to bet on. and especially when you get these like little minor bets within the game of will the first pitch be a ball or how many yellow cards will this person get or something like that then those can be rigged and then people you know every so often get caught for trying to make money on the side and yeah I feel like like your Sunday school teacher I can't get too excited about this but I am interested, quite aside from the professional consequences, which do seem to be dire if this is proved, like two questions.

35:36One, is this illegal or is this just like unethical? And number two, what's the standard of proof that the league would need in order to ban this person? It's a good question on the legality. I do believe that there could be legality concerns here because there's a fraud element where you could be sort of conspiring to defraud. I guess in this case, it would be other gamblers. I'm not sure. But yeah, the fallout from this is significant, I think, because if people begin to believe that the games aren't actually being determined by skill, by whichever team is better, then does that affect ratings?

36:17Does that affect ticket sales? What is that beginning to affect? And does that affect how the sportsbooks do business? Do they start to not offer some of these sorts of micro bets that, like you said, can be easily manipulated?

36:28Felix Salmon: How is the way gambling has grown and changed over the past year impacting these scandals? Are there more opportunities for micro bets now that the Supreme Court has made it legal to do this gambling? Also, we have the Cal Sheep, which we should talk about where people can also bet. it's gotten so much bigger. Was this sort of inevitable? Has there been an increase in the number of players caught up in stuff like this? Well, there's more and more of these live micro bets being offered. So in this particular example, will the pitcher pitch a ball or a strike on their first pitch of the inning, on their second pitch of the inning, that sort of thing.

37:05Then in golf, for example, you can bet on, will the golfer hit the green on the 16th hole? And that sort of bet is a very binary bet that can be fairly easy to manipulate. Think about it, if you're a golfer, just hit the ball a little bit off to the left, and all of a sudden, whoever bets on the ball not being on the green just won. I think what shocks people here, though, is the idea that a professional athlete might conspire with a gambler on these types of bets because by their very nature, they are micro. They are a small amount of money. The sportsbooks will not allow you to bet a lot of money on these things.

37:42I'd be personally surprised if anybody could bet more than$1 ,000 or$2 ,000 on any individual play like this. And that's obviously not going to move the needle for any particular athlete in professional sports. So why are they doing this? These guys are making millions, right? Yeah, exactly. I mean, they're talking millions, tens of millions in some cases. But talk to an expert who said, hey, these players are as susceptible to getting deep into sports gambling debt as anybody else. And so once you start to get deep, you start to get desperate. We know from star baseball player in Los Angeles who did a lot of sports gambling.

38:21Shohei Ohtani. Shohei Ohtani, there you go, that these players can rack up lots of sports bets. There's no suggestion that Shohei Ohtani ever bet on himself or on any game that he was involved in. But, you know, this chap has tens of millions, possibly hundreds of millions of dollars worth of various contracts and endorsements and whatnot. So even if he wound up with massive debts from bad sports bets, how would throwing a ball in the second pitch of an inning and allowing someone to make a couple thousand dollars on a bet help him or anyone? Well, what could happen theoretically is that a sports bettor or say someone involved in organized crime or what have you could essentially coordinate with the athlete and say, if you don't throw a strike in the first pitch of this inning, then I will wipe out your debts or whatever.

39:19because they can maybe work with a group of a syndicate, essentially, a sort of an underground syndicate of bettors throughout the country to place bets on that particular play. And that's how they can make more money than if just one individual person can't really bet that much. A syndicate could bet a lot. The problem is that the sportsbooks, they'll catch that. Emily is looking skeptical. I'm skeptical as well. I feel like...

39:42Felix Salmon: It sounds elaborate, yeah. Yeah, I feel like, you know, as you said, the liquidity in these contracts is just not great enough for real money to be to be made in them plus like back in the day of you know organized crime and and underground sports books and stuff which is kind of this very unexpected answer to emily's question which is like over the past year the legal above ground gambling has become massively more liquid much bigger. We now have CalShe, which is like a commodities exchange doing a lot of legal above ground sports gambling as well. And there's almost no incentive anymore. I would say there is no incentive anymore for bettors to go to some like mob boss to place their trades when they can just go to CalShe, right?

40:30There are still incentives. The primary incentive would be tax avoidance for starters. So if you believe you're going to make a lot of money, then you might want to do it off the books because then those guys are not going to report that to the IRS. So that would be one particular reason. And then the other reason would be maybe the juice or the essentially the rake, the percent that the house holds on the bet might be a little bit less on an offshore book than on the regulated books, which have to pay for handling that sort of regulatory regime. So there are some reasons to go offshore, but there are also a lot of reasons not to impart the trustworthy factor.

41:06Will you even be able to get your money back if you bet through an offshore book, there's more risks there. Just to like, make this clear, when you're talking about offshore, you're saying like, betting pools that are outside the US. And then yeah, because because within the US, I guess we have a distinction between three different types. That's like the legal bets within the US, the illegal bets within the US, and then the commodities bets on Calci. And then outside the US, I guess there's the legality is weird. But there is this thing called Polymarket, which is a little bit like Couchy, but offshore and abroad.

41:41And they say they're going to now move onshore, but that hasn't happened yet. Yeah, here I'm referring to essentially like the equivalent of a DraftKings that exists in a different country, provides its business in the US, but is not doing so under a regulated structure, essentially illegally. And some of the state gaming regulators have tried to push those offshore books out. But, it's not that hard to make that service available in the U.S. And a lot of people will still use those services. That's essentially how most people were doing mobile sports betting before the Supreme Court allowed states to legalize sports gambling in 2018.

42:18That's essentially how it was done in the U.S. And I think a lot of cases, the lawmakers sort of looked the other way. How standardized are the penalties for doing this? In baseball, it's usually a lifetime ban. There was one guy who was banned for life for betting on games he didn't even play in. So is it automatically just a career ender if they get caught? Yeah, I think it's definitely going to be a career ender if you are caught manipulating the outcome in some way. That's 100 % going to get you banned for life. If you look at what happened in the NBA last year, this player named John Tay Porter, very minor player, not someone that most people would have heard of, he got caught up in this, has since pleaded guilty to wire fraud in connection with the scandal in which he was providing information to bettors on his own personal physical condition, for example.

43:06So he told them, listen, I'm not feeling that good. You know, bet the under on three pointers made. So essentially bet that I'm not going to make a three pointer. And so he enters the game and then he exits the game within a few minutes, never even takes a three pointer. And of course they win the bet. And, you know, this all has come out since then because it was very quick how the sports books could say, why are so many people betting on John Tate Porter three pointers? Like, this is so weird. Nobody even knows who this guy is. Yeah, he got banned from the NBA. So, but that's a minor athlete.

43:36This baseball player this week, Emmanuel Klasse, he's a much more significant athlete. And I think that's really caught people's attention. So just on that subject, because I'm not sure we answered the question, what's the standard of proof here? Like, how sure does the league need to be before it bans someone? I think they got to be really sure. I think that is part of the challenge. And that's why at this point, he's only on paid leaves. He's not even been officially suspended at this point as this investigation rolls out. But, you know, if you look at there, some people have already analyzed the data that really raised some red flags.

44:10For example, looking at the percentage of his pitches this year that were considered to be way out of the strike zone, meaning really bad pitches, is much higher this year on the first pitch of the inning than it was last year. like way higher. Statistically, almost seems impossible to have been that much higher. And so that's the kind of data that I think is going to be pretty damning. Circumstantial, perhaps, but I think it won't be that difficult for them to figure out if he was coordinating, all it would take is a few text messages.

44:40Felix Salmon: So can we go back to Felix's first, you know, whatever Felix was doing at first and talk about it? Like, do we need sports, professional sports to be fair and not rigged in order to enjoy them. I say absolutely yes. Look what happened with steroid scandal in baseball in the early aughts. It really had a big impact. I think people kind of became really disillusioned with the sport for a while. And I think it's different from professional wrestling in that people really need to root for athletes and feel like they're trying their best and this is real, right? Yeah, I think so. I think there's a purity quality to sports that people still cling to, this idea that it's still a meritocratic environment in which the best team is going to win, the best players are going to win.

45:30And it's still one of these areas that I think has escaped sort of partisan life and all of this. And I think, you know, if it gets sullied, I guess, by this sort of thing, I think people will be pretty upset about it. I ultimately think that people have this parasocial investment, I think, in athletes. And then if an athlete sort of betrays them by purposely playing poorly, then I think it causes them to question the entire basis of their fanhood. So Nathan, just because I know you can do this, can you just channel your Sunday school teacher for a minute here and give us the opposite argument?

46:09Well, yeah. The opposite argument is that these guys are all just performers, that it's just entertainment in the end. And hey, there are people who say, I have no problem with the baseball players having taken steroids. Let them do it. Let them cheat. Let's just see who's the best of all the cheaters. I think, you know, a lot of those guys aren't in the Hall of Fame yet, but they're starting to be chatter that maybe they will end up in the Hall of Fame eventually because we maybe just decide, hey, if they were all cheating, then it was the best of the cheaters. Oh, that's the Peter Thiel argument.

46:39Infamy is a form of fame. Well, Lance Armstrong, you know, I mean, people have said, yeah, Lance Armstrong cheated at the Tour de France, but they were all cheating, you know, essentially is the assertion. And there's some evidence to back that up. Lance Armstrong cheated in the Tour de France, and he remains, by some margin, the only cyclist that most Americans can name. And he's very rich and successful, and he doesn't seem to have done any lasting harm to the cycling profession.

47:08Felix Salmon: Those people cheated to win. These people are cheating to make money and doing worse. That's even worse. Do you think the way people think about this is changing? Because there's been chatter about admitting Pete Rose back into the Hall of Fame. Yeah, I think it is. People have pointed out, for example, with the Cleveland Guardians this week, the team is literally sponsored by Bet365. This is a sports book. So it's kind of hard to be a purist and be sort of the do-gooder and say, hey, you should stop sports betting. We're actually making money from sports betting at the same time. But of course, they would say that, you know, the whole point of this is that the regulated sports books, they argue they are going to catch this sort of thing.

47:52And if it's not regulated, then people won't catch it. That's their argument. I think there is something to be said for that, but I'm not sure how far that goes. Let me ask you whether CalShea, which is not regulated by any kind of gambling regulator, has similar controls in place. The emergence of Calci and also Polymarket, because Polymarket offers sports betting or sports prediction markets, I should say. Some would argue that it's betting. The emergence of those players here on this field is going to shake things up. I think that they say that they have some controls, but I think that they're probably not quite as vigorous yet as the traditional sportsbooks.

48:31But I would imagine that as this grows, they may have to or certainly will invest in that. But, you know, Calci and Polymarket, they're significant. I would take the other side of that. The reason why sportsbooks invest a lot of money in detecting this kind of activity is that this kind of activity costs them money. If the whole bunch of bettors all bet that some guy on the Cleveland Guardians is going to throw a ball, and then he does throw a ball, and they all win, then the sportsbook loses. And the sportsbook, being a good capitalist enterprise doesn't want to lose any money. That isn't the case with Koushi.

49:10That isn't the case with Polymarket because they're just marketplaces. The ball versus strike market is entered into between one person who's saying he's going to draw a ball and another person who says that he isn't. And the person who loses is the person who says that he isn't, not the marketplace, not Koushi itself. And so they have much less of a financial incentive. In fact, they have no financial incentive to detect this kind of thing because the more betting there is the more money they make and if this goes on they just make money they don't lose money i think it's a fair point i think that peer-to-peer quality of the prediction markets is different you're right than the sports books and so no i think that's an excellent point i hate to say it you know

49:50Felix Salmon: feeling felix points it's tough it's annoying when that happens especially when it's something about when he doesn't understand how important it is that these things be pure and honest and clean This, I have to say, is very, very colored. My whole attitude to this is very colored by the one American football game I've ever been to in my life. Who was playing? Who was playing? It was the Dallas Cowboys against Chicago, I think. I can't remember. That is a true American experience. It was a very American experience. And I was in the owner's box. I had this great seat and I watched the whole game and it was so choreographed.

50:28It was as choreographed as a Rockettes show. There was the music. There was the big sign saying, like, make noise or whatever it is. There was a back and forth and there were the timeouts. It was, you can go see like a Taylor Swift show. You can go see in the same stadium and you have the same like highs and lows and, you know, beats and drops. And it really struck me that this is pure entertainment. And it's extremely popular entertainment. And a lot of people get really caught up in it. And the Dallas Cowboys are worth, you know, billions of dollars precisely because they are a media company who's selling like an IP media product that is incredibly popular.

51:07And I feel like we should just be honest about this. You know, they are a franchise just like, you know, the Marvel comic universe. And no one complains that the Marvel comic universe is fake.

51:19Felix Salmon: This is insane. This is, I think, among your worst takes I've ever heard. Just because the Dallas Cowboys are good entertainment and they have, as we all know, fans of the show, the Dallas Cowboy cheerleaders, the DCC, and it's all choreographed and there's, you know, a framework for a game does not mean that the game itself is not something that we aren't going to know the outcome of, that it's not a real competition. Beneath all the pageantry is a real competition. And I think everyone's bought into that pretty hard. Yeah. Also, people want to root for something. You know, that's why people have developed these parasocial relationships with the players and the teams at large.

51:58And, you know, they get very into it. I mean. But, Elizabeth, isn't wrestling proof that people can root for things that aren't true and honest?

52:05Felix Salmon: But that's children. No, that's adults. There's a massive adult. Wrestling's biggest fans, their big demographic is teen boys. Am I not right, Nathan? Nathan? Well, I have to say that I stopped watching professional wrestling at about age 12. But I know that there are folks as adults who do love it. I think it is different. And I think sports is the one place that Americans, at least, are not cynical about. We know they're cynical about politics now, right? And business too. And everything's insider trading, says Matt Levine. But it is. I think everything has become ironized. One of my favorite words of the past two or three years is neo-kayfabe.

52:44Yeah. Which you can apply not only to sports, but even to like meme stocks. Everything is kind of fake.

52:51Felix Salmon: It's neo-kayfabe. Am I the only one who doesn't know? Well, kayfabe is this concept in professional wrestling that we all pretend this is real. And we're not going to acknowledge that it's fake. And professional wrestlers did that for a long time. They tried to maintain this idea that what was happening in the ring was not choreographed. And eventually they finally gave that up and stopped. But if we all collectively agree that we're going to kind of pretend it's real, then it still works. And that's why professional wrestling still genders as much conversation and cheering and fans as it always has.

53:25Well, also, professional wrestling, their entire storylines, they are choreographed almost like an episodic television series. And I think you don't really have that in other sports. Of course you do. No, not the way you do in professional wrestling. It's not as scripted, but people absolutely become invested in the storylines. You get the heroes and the villains.

53:45Felix Salmon: But it's a framework leading to finals and semifinals. The framework is there, but within each game, no one knows what's going to happen. And we can't ruin that with betting. The only difference is between scripted and unscripted entertainment. But look at the Netflix F1 show, right? It's not scripted, but it's basically a TV show which people love to tune into and find out what happens in the next episode. A lot of this is built on the concept of heroism. And I think professional wrestling, of course, you have the heroes and the villains. And in sports, you have people who are at least perceived as heroes.

54:20Probably the most famous sports gambling scandal of all time, going back to 1919, the Chicago White Sox became known as the Chicago Black Sox because those players were accused of fixing the 1919 World Series. And this hero named Shoeless Joe Jackson, who is, of course, portrayed in the film Field of Dreams, This is a good example of someone who got caught up in a sports gambling scandal and may or may not have actually fixed the game because people have pointed out he actually performed very well in the 1919 World Series and yet got banned from baseball for having allegedly fixed the game. And this is someone who was a hero to many people and is portrayed as a hero in Field of Dreams.

55:00And when that reputation gets sullied, I think that people's relationship with those players, although removed in a lot of ways, becomes forever severed. I think it just becomes more complex you know you can't have heroes without villains let's have some villains in this narrative in this little media ecosystem that is the sports ball no harm no foul right that's the sports term I think we're going to see more and more villains I don't think this is going to stop because there's just so much incentive on all sides and I think players will continue to believe that they can get away with it and in some ways they'll be accurate I think for example, you may be able to easily identify whether a pitcher is intentionally pitching balls.

55:43What about a hitter intentionally swinging and missing? That's going to be hard. You know, how do you prove that I didn't swing and miss accidentally? I mean, it's just, this stuff is not always easy to identify. And that's part of the reason why I think it'll continue. Nathan Bomey, thanks for coming on. Lots of fun, friend of the pod, long time listener. So glad to be on.

56:15Emily, what's your number?

56:17Felix Salmon: My number is 500. As in, in New York State, a cannabis dispensary is prohibited from opening within 500 feet of a school. And so all these cannabis dispensaries were licensed and opened in the past three years since the legalization happened. But now, this week, New York City was like, we done messed up. We measured 500 feet wrong. Instead of front door of dispensary to front door of school, it should have been front door of dispensary to property line of school. And now there are like around 100 dispensaries that may not be operating legally anymore. It's just... It's such a dumb rule. This is not going to prevent teenagers from smoking pot.

57:00No? It does nothing except... I did a little bit of a deep dive a couple of years ago about opening up a wine store. And wine stores operate under exactly the same regime, which is you can't be within 500 feet of a school. Which obviously, because if you're a wine store within 500 feet of a school, then the grade schoolers will just come pouring into your school and buying first growth Bordeaux's. And that would just be terrible. so new york state is amazing at these kind of weird things and of course there are a million unlicensed cannabis stores that just flout the rules and the law anyway and yeah no the whole

57:42Felix Salmon: thing is dumb as sand it's sad because it was like there's a great not reply all the reply all guy has a new podcast it's very good i can't remember the name and he went search engine yes search engine he went really deep on the new york state's like rollout of the cannabis legalization they were so painstaking. They wanted to only give licenses to people who had gone to prison or jail or had gotten caught up in the criminal justice system over cannabis or other folks that were sort of on the outskirts. But they were taking so long and being so painstaking that all these illegal shops opened up and overwhelmed everyone and became impossible to do it legally.

58:20Felix Salmon: It's just been, you said I could curse, a shit show. And this just feels like the latest episode in the show. Elizabeth, what's your number? My number is 345 and that's dollars. And for$345, you can buy cowboy boots from Chili's, the fast, or it's not really fast food. It's kind of like a mid-market chain. Fast casual. Yeah. I feel like I'm explaining this to Felix because he may not know what Chili's are. But anyway, they're doing a collaboration with Tecova's, which makes cowboy boots. And so you can buy a pair of cowboy boots that's made out of the similar vinyl that the booths at Chili's are made out of.

59:00So they're red and they have a chili pepper in the stitching. And I don't know who would buy this, but that's a lot of money.

59:07Felix Salmon: I feel like our cowboy boots, $345 and not even leather. Nice ones are. Especially ones made out of vinyl, but nice ones are not made out of vinyl or correct me if I'm wrong. It's like$300 vinyl cowboy boots a thing. If you get all sweaty in them. Yeah. I assume some of the boot has to be leather because you can't wear vinyl as a boot. That's not a good idea. Don't wear that on the range, cowboys. My number is, I'm just going to pick a number as of 10 36 AM on Friday, 127.29, which is the number of dollars that you would need to spend right now as we record this were you in the market for buying a share of figma stock and figma stock went public on thursday and the ipo price was 33 so obviously that was a shit show that was massively mispriced and billions of dollars were left on the table figma now has a market cap of over 60 billion dollars which looks very attractive compared to the$20 billion that it was going to get bought for by Adobe.

1:00:16And I'm very happy about this. I have to say that Adobe failed to buy Figma. Mostly, I think, weirdly, thanks to UK regulators. The UK regulators said this was going to be an antitrust violation and they couldn't get a way around that. And so rather than Adobe buying Figma and killing it because Figma is like the cooler, cheaper web-based version of Photoshop, now Figma gets to be a standalone company worth $60 billion. So good for them.

1:00:41Felix Salmon: It's such an antitrust win. I feel like I was like waiting for that tape to come across the transom, but no one wrote it because antitrust now is kind of DOA in the United States. It's not where it was, but at least they got this win. So well done, Figma folks. And if you are one of the investors who sold into the IPO at$33 a share, I hope you kept some stock back because otherwise you would be getting major FOMO right now. What are we going to talk about next time, Emily? I'm just wondering what the hell is going on with IPOs in the stock market. This is the second one where the open prices shot up.

1:01:16I think some of it is they were pricing Figma like it was a Photoshop alternative, and it's actually a lot more than that. And they've also made huge investments into AI. It's an AI stock. There you go. We will talk about the IPO market because we haven't talked about the IPO market in ages. But in the meantime, we have to thank Nathan Bomey of Axios for coming on. as well as Jessamyn Molly and Shana Roth and the whole Slate team who puts this show together. So keep those emails coming on slatemoneyatslate.com, and we will see you next week with more Slate Money.

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