Are Prediction Markets Destroying Society? I Asked the Kalshi CEO

20:56If the CEO is very charismatic, if he has the right friends that are buying up the stock, all these different things. So it actually kind of if the right, if the correct value is like 70 % chance of success, that thing might trade at like 80%, 90 % chance of success. It is actually not the correct thing. There may be a premium or a discount or whatever it is. And so what's amazing about these types of markets is that you're now crowdsourcing. You're giving a much larger pool of investors or people the ability to kind of give us an additional data point to that one that we already have. So one way that you would find edge, say I were on CalSheen, I'm like betting on this, is I might then start calling up friends who have AML or other cancers and they're in trials and starting to try to get information from them as a way to understand how the trial is going.

21:44Isn't that a good thing? I mean, if I'm a cancer patient, I definitely don't want to be called by random investors. I mean, I agree that it sounds a bit, but think about it. Because for the next cancer patient that's considering it, wouldn't they like to know what the experience of others have been? Assume there was a bad drug that's in the market right now, right? And obviously, that's a terrible thing. And some people are taking it. Don't you want to know as soon as possible? Don't you want an investigative journalist to start calling up all the people that are basically taking that drug and aggregate a massive file on this thing and then put it out to the public?

22:16Do you want that or not? Well, I mean, the difference in these two examples, an investigative journalist is like putting out the story so people can know the prediction market investor is making a bet so they can make a profit on it. This, and one way, so that's a very cynical way of putting it. I understand. People knowing it, but I'm not saying, I mean, you can dismiss it as cynical, but I'm just saying it's different. That's one way to put it, but let me rephrase that a little bit. Let me rephrase a little bit. We are creating an incentive now for people to go out and do the research. But what about the other situation where the drug is going to work, but there are some side effects or there's something, and then you end up not investing in a really good drug.

22:50I'm a believer that more information is always better. That's my belief. But I think the difference here, and I really like, and by the way, people are going to hear us and they think that we're like arguing, but actually this is just a Lebanese and a Pakistani having a conversation at like totally normal household volumes. So, okay. So, but for me, I'm like the That's actually right Isn't it? So true Typical But for me like the The idea that These It's like What is the incentive For knowing the information And I'm not here to be like Oh my god Journalism It's the best thing And we're just putting it out And there in the world Of transparency But there is a difference Between knowing something I don't think so To inform people And knowing something To make a buck No A lot of decision making Gets made centrally But a lot of information That's relevant to the decision Is distributed And I've said this a million times You need an incentive some degree, some something to give someone some sort of incentive to go and probe all the places where there's relevant information for something and then bring it to light, bring it to transparency.

23:50All the information, but not insider information, which we're going to get to. Not insider information, because that's cheating. And there's like a philosophical reason for that because if you let the insider trading, then nobody trades. But my point is markets do a very good job at doing that because they provide that incentive for people to do that sort of research that doesn't exist otherwise. So how is, so Mark Cuban asked this question, how does a bet get confirmed as a winner or a loss in the pharmaceutical market. Like it's the stages of approval. I mean, so you have a market, you list the market.

24:13Yeah. By the way, I don't think these are bets anymore. You're betting on a stock in the stock market. If you're using bet in that realm, fine. Let's say, okay, there's a drug. Will it make it through like certain stage of approval? Let's call it like, you know, final FDA approval, which is usually I think stage four. You can buy yes shares or no shares and that share will pay out. You know, let's say right now it's saying 20 % chance that it's going to make it. It will go to 100 if the approval comes through and it will go to zero if it doesn't. And that's usually the FDA basically approving or not.

24:41And you have all the same issues there that you're going to have to make sure that the FDA's, you know, regulators, cousin, et cetera, isn't the one making the trade, et cetera. But that's illegal, yeah. So that exists elsewhere. Okay. But that exists in the stock market too. There are so many other markets I wanted to go through. There are markets for Costco hot dogs. There's the market for the Pope that we talked about. There's a whole Reddit thread on how Polymarket has ruined the show Love Island. People are very upset, but we're just going to move on from these. People are very upset, but they seem to be growing incredibly fast and like people are using them a lot.

25:09So, I mean, I don't know. I don't watch Love Island, but people seem to think that there's some kind of, you know, interplay between the prediction market, the Redditors. Do you ever worry about making us like dumber as a society, like leaning into our silliest - How is that remotely possible coming from prediction markets? The people that are succeeding on CalShe are like spreadsheets, math, analysis, reading, reading below the headlines, skeptical, cynical. There's a lot of like play, right? There's a lot of play money of like, I want to play on some random TV show. But that's the type of people that will not over time, like, you know, the people that are doing it on the side and not like, you know, like, I mean, it's like going and trying to win the Olympics.

25:46The people that are like, you know, drinking Coke and eating burgers are probably going to, you know, be outperformed by the people that are like super disciplined and running every day and doing the marathon every week and like whatever. And that's the same thing in a highly competitive environment. The point is the incentive structure. When you say something dumb on social media, you get dopamine hits. When you say something dumb on prediction markets, you lose money. So how could I possibly be making society dumber if I'm punishing society when it's saying dumb things? It's the exact opposite.

26:14If anything, it's making society more research, more calibrated. What do you think is the best criticism someone's had of the overall business market of prediction markets? What's the one that really made you stop and think? A lot of it, I think a lot about it. I mean, there's a lot of dumb stuff flying around. But like the, look, I think that like there's one that's interesting about how do you define what's inside of information? And that's like an interesting line. And we can talk a little bit about how it's defined the stock market, how it's defined us. I think there are questions around customer protections that we have to be very conscious of.

26:43And I actually think if you really dug into Calci and the incentive structure in our system, because we're a neutral marketplace, we don't make money when people lose. You make a percentage on the trade. I make as much money if they win or lose. You still make money. No, no. We don't make more money if someone wins or loses. That's critical. I make 1 % whether someone wins or loses. Whereas a casino drives the revenue from losses. Right. But if a loser shows up every day to keep on making investments, the prediction mark. The same way that a winner shows up every day. Yeah, you'll keep making money off them.

27:06It doesn't matter. I get it. So I just want to draw that distinction. But that's for the same New York Stock Exchange. If a loser or winner chose, they're going to make the same amount of money. But that neutrality, I am neutral. When someone loses a lot and they're doing something that may harm them, like irresponsible behaviors, I'm not on the other side of that. I'm not making more money if they start doing this type of behavior. I'm not because I still take 1 % of whether they win or lose. Whereas like if you're a sports book, you kind of like these customers. You want them to come back because that's how they generate revenue.

27:31My incentive enables me to be more thoughtful and more conscious about limiting those types of behavior. Yeah. Because it's a small minority that gets harmed. I acknowledge your point that it's not the same as like a casino on the other side of a slot machine where like everybody puts in money and the house wins. But I do think it's not a non-zero incentive to increase the volume of trading that happens. Oh, we're fully incentivized to increase volume for sure. Okay, so let's move on to insider trading. So there's been some recent stories and you could say they drive clickbait, but Trump's teleprompter guy was placing bats on Calci allegedly earns over$100 ,000.

28:04This is one that's out in the open Brian Armstrong, CEO of Coinbase That's not insider trading This is not insider trading This is a troll This is a different thing A troll that he does He's on a call He's on an earnings call for Coinbase And he enlisted the names And he sees there's a prediction market For what words he's going to say on the earnings call And he says like, you know Before we end the call I just want to say blockchain Stock staking, Web3, etc. To make sure that the money So he's moving a market That's right Manipulating a market And then just this week George Santos settled with the CFTC Your regulator for$35 ,000 following the finding that he'd been betting on his own attendance at the State of the Union in February while tweeting the opposite of his intended actions.

28:41He definitely did something terrible, yes. Yes. And honestly, I can't believe George Santos is still around. It's like he's on Cameo, he's on Calci. I don't know where this guy isn't. But how do you, like, you have caught, in these cases, the teleprompter guy. Exactly. You have caught them. In other cases, like congressional representatives and their staffers, you have banned them, barred them from participating. when I look at this I say I see two things I say okay Tarek he's catching some people you've got your own compliance etc that you have to do as a nuance yeah people are going to get bored yeah yeah but you're catching some people which is great but I'm like who isn't he catching who isn't he catching fast enough it seems like a game of whack-a-mole no and the question is like why not plug all the holes not at all not at all see I started so nicely then you go not at all keep going I mean like I mean he's Pakistani yeah yeah keep going but no because like here's okay a few things first of all the fact that we caught the teleprompter and the and george santos is like a it's validation of our system right like it's it's validation of the fact that you know whoever it is no matter who it is we're going to catch and enforce our rules uniformly and fairly how do we know who you don't catch well is it perfect probably not but like here's the way that i would rephrase that question do you think that people inside are trading the stock market for sure are they catching all of them no so first what we need to do is like, we need to first set the standard.

30:00But the point is like, the standard cannot be, are you catching everybody? The standard should be, are you basically detecting and deterring? Are you getting faster at catching people? Yes. And we've always been pretty good. I think now we have more cases because we have so much trading activity. But this is the thing about prediction markets is honestly a blessing and a curse. It's a curse. It's very transparent. All my trading activity is public for everyone to see. Every time someone puts a trade, you can see it. You can go to cashier.com, even if you're not a user and see it see your username and what you're betting like see the trades immediately and i can see the trades but i can't see your username doesn't really matter because usually it looks weird it always looks weird it's like always looks like you know something is 10 and all of a sudden now someone is buying in bulk so i mean couldn't someone game it by buying slower it wouldn't be worth it like this is the night like fraudsters usually they don't do it for a hundred dollars they quick it out and they have a getaway financial crime like you're gonna commit a financial crime for 50 bucks like you're not gonna do that right like i mean maybe you would Maybe I would, but yeah.

30:56But the point is, it's so transparent, which is a curse. How much would you commit a financial crime for? I would not commit a financial crime for any amount of money because I think, you know, I would not. I spent 40 years getting regulated up front. I'm a paranoid. I'm a risk-averse guy. I'm sure. But the point is, it's so transparent that everyone sees it, which means that everyone will talk about it. But that's a good thing because the blessing is everyone sees it. But everyone sees the stock market too. The market goes up and down. Can you go anywhere right now to see all the trades that are happening?

31:25I mean, sure. I could go sit in like the ticker at the NASDAQ. I have a thing that you can put in a spreadsheet. Yeah, Bloomberg Terminal and see the thing. No, that's just the hedge funds can see that. But you cannot as an individual without paying Bloomberg to do this. I mean, I can't. Well, how am I going to afford that? I have to pay$100 ,000 to get early access to Trump's Truth Social. But how about you go to Cash.com? Then I got to get$200 ,000. But you can go to Cash.com and see how to do it. This isn't an ad. This isn't an ad. But yes. Okay. So I get your point that like you, but you guys are, you're getting faster.

31:52I didn't finish the point about George Sons when he did it or all these cases, our users and our systems immediately flag it. They immediately say, hey, something is weird there. And so we catch it immediately. Literally 30 % of our team is investigation and compliance. How big is your team now? We're like 200. But my point is like, and then you have to punish it very hard. Like that's the tech and the tech. That's the case for all the financial markets. And when you do that, it's like you cannot catch all the crimes on the street. But when you catch a crime, you punish them really hard. So who are you worried that you're not catching right now?

32:18I don't think that much because it's very clear in the data. Like cousins of, like third degree? Cousins of are also easy because, not easy, it's harder. Like if a person obviously directly does it, it's very easy. But if they use a cousin, it still looks suspicious in the data. So we might catch them and like we can enforce against them. Maybe the biggest worry is like very small. Like if someone does like$10. The petty financial theft. Very petty. I think that over time as you punish people and you educate and our systems are getting, I mean, I think quite good at flagging. That's why you hear about all these cases.

32:48I think it's a very solvable problem. You have to be very serious about solving it. Unfortunately, not everybody in the industry, especially the offshore guys, are, you know, really are very serious about that. I want to change gears a little bit right now. Donald Trump Jr. is also an advisor to CalShe. I just want to know what's the best advice that Don Jr. has given you. A little cliffhanger. We'll be right back. Guys, today's sponsor, Dumb Question, is from me. I'm going to take the next minute to tell you a little bit about Smart Girl Dumb Questions and to ask you for your help in continuing to make independent, fact-based, and curious journalism.

33:19No, I'm not going to ask you for money. Here's what I need. I would love you to tell 10 of your friends about the show or 100. I don't know. Blast that reunion group that you muted and definitely tell your mom and tell your mom to tell her friends too.

33:35Donald Trump Jr. is also an advisor to Calci. I just want to know what's the best advice that Don Jr. has given you. That's a good question. I think it's been a lot about like essentially going direct and talking to people directly, frankly. I mean, that was the whole thing about when we came out in 24 around the election. There was this overall sense of Twitter and prediction markets or this crowdsourced form of information. And there was a little rejection of mainstream media that's kind of honestly continued till now. And I think it was this idea that if you're not going to be granted a fair shot.

34:08Or a friendly shot. I mean, say what you want there. Like a mic in traditional news outlets. You're going to have to basically build your own. So he gave you like Lulu Maservi Chang advice of like go direct to people. Yeah, Lulu. I mean, that's like the same. That's the same. And I mean, honestly, for a while I was like, no, I think. But now I'm realizing actually you have to just, you have to at least. I mean, this is to me a form of going direct. So yeah, yeah. I mean, I imagine you're just, I mean, I think we're having a very direct conversation here in a way that I can ask you the questions.

34:34You brought it out of me because, you know, I think it's the cultural thing. The cultural thing. We're both from the region. That's how I debate with my mom and my brother. Yeah, because it gets heated and like, you know, people get pumped. You know how it is. It's like, you know, I'm a Lebanese householder. Everyone yells, then you go get ice cream. It's fine. Unless it's raining, in which case you hope the guy's just making money on Kelsey. Here's the thing. So, okay, the equity, is it worth, is the equity worth the price tag of that advice, which has been pretty general advice that's out there.

34:59You gave Don Jr. $300 ,000 in equity in January of 2025. So this is a week before daddy's inauguration. I don't know, by the way, if that number is true. I don't know if that number is true. I know it was reported and there was a big press spectacle about it. You don't know your cap table? I literally have thousands of people on my cap table. You don't know the president's son is on your cap table? Quite literally. And it was not, we did not. Do you want to text someone and find out? I don't want to talk about the comp of any of my advisors and not Don. But I think, okay, I understand this is a topic that people love to talk about.

35:27Yeah, people are curious. I know, they're very curious. So I just wanted to give them an example. What's been reported? I just want to say that what's been reported, and you can say you're not sure. What's been reported is that$300 ,000 were given in equity in January 2025, so a week before daddy's inauguration. that's worth about$3 million right now because you went from a two to 20 billion. I don't think that's the right, but yeah. That's very interesting. Also because Don Jr. is on the advisory board of Polymarket. Do you generally like to have advisors that are on the advisory board of your competitor?

35:57We have like probably a million firms, whether it's comms or public affairs or whatever that work with us and we work with a number of our competitors. So sorry, you have other advisors that you share that are on the advisory board of poly market or fan duel? I made a broad statement. And yes, I mean, yes, yes. Whether it's Coinbase or Robinhood. But you're also partnered with them, right? Yeah, but I think it's a meaningful competitor. People are concerned about this. You understand why people are concerned about this. You come from Lebanon. I come from Pakistan. We understand why people are concerned about this.

36:25I get all of this stuff. I'm just saying, and like we've, you know, it's all about the principles that you uphold and the thing that you basically have approached with. You know, this notion that we just like sort of, you know, got regulated last year and all of a sudden got what we wanted is incorrect. I think the question is, we are in a moment where there is a lot of concern about a president who has made$2 billion in his reported earnings in the first year of being in office. That represents a more than threefold increase from his first year at office in 2017. And, you know, there's ballroom donations and there's this, and there's a lot of questions.

36:56And look, you and I come from countries where there is like a WASTA way of doing business, et cetera. And I'm curious, is this WASTA? Is this WASTA? It's not. It's your advisory relationship. I can tell you. And explain what WASTA is, maybe. You can explain what WASTA is. WASTA is like a, you know, it's a fast track of relationship in Arabic. Yeah, I think the answer is an unequivocal no. And I'll tell you, like, there was never any way she performed. I said this a million times. Absolutely any regulatory involvement, it was made clear by our side. It was made clear by the other side from day one.

37:26I understand, like, people kind of like to bring that up. And we've gotten bashed over it over and over, I don't know, in the last two years or so. So, you know, this comes in a kind of broader sort of dynamic of like, you know, if you, we came out in 24 and we're like, you know, small company that just realized like over time, you want people that help you navigate the court of public opinions, people that will help you navigate all these different sort of like, like the policymakers, DC, all these different things. And that's why all these bigger companies, if you look at them, if you look at their boards, you look at, you know, they have like people on both sides of the aisle that have connectivity to both sides of the aisle.

37:57I mean, Dick Kostlo, by the way, asked me this question. Do you know Dick Kostlo, former CEO of Twitter? Oh, yeah, yeah. Investor. And so Dick said, you know, you have an administration that's friendly to you right now from a regulatory perspective. I don't know about us. He always say, what happens if the future administration looks more like New York State right now, which has just leveled a lawsuit against you guys, which we'll get into? Dick said, you know, how do you set up a company that is able to ride? Do the right thing. It's very simple. Like, do the right thing. And like, you have to have a relationship with both sides, which we do.

38:24And we have good relationship on both sides. And we have some critics on both sides. And like, you know, not everybody agrees. like this idea that's like people love to make things partisan. I don't think prediction markets are. I think just doing the right thing and people loving the product and seeing it as a safer, as safe and responsible and all these different things. And I think our customers do. Our customers really do. I was surprised that because like you had taken this long road and I've been like kind of tracking Kelsey's journey a little bit that you had been taking this long road to regulation that you weren't like going at the Travis Kalanick Wild West approach that you did do this advisory relationship with Donald Trump Jr.

38:54I don't think that has to do anything with it. That has absolutely nothing to do with it. But the blowback and the optics, even if you're saying the real ticks are fine, the optics of it are certainly not great. Yeah, I think I can see that, but it's also, there's like a part of it where it's like, you cannot control, like you're going to be swapped in into political narratives left and right, but it's narratives. Like people love to, you know, kind of lump us in with crypto. They love to lump us in with polymorphic. Well, that's where the majority of Donald Trump's$2 billion, you know, wealth gain came from.

39:20I don't know about any of that. More than a billion came from crypto. Yeah, but do you feel like there's different terms of doing business in this administration than the last one as it relates to things like advisory? I think the regulators on the front line, a lot of the people that we engage with with our regulator on the CFTC, some of them are the same, some of them are not. But the level of like diligence, the types of things like, you know, when you're actually working on your risk model, when you're actually working on your customer protection, the cases that you refer, all of that is the same.

39:44Do you think I should get Don Jr. to be an advisor to Smart Girl Dumb Questions? That's a question for you. I don't know. It would make for a fun pod, honestly. I mean, Hunter Biden's like having a moment. Should you have him as an advisor to Kelsey? He's funny. He's pretty funny. He's very funny. Okay. Maybe we should, honestly. It could be like a funny... What is your last text message with John Jr.? I literally don't know. I mean, we haven't spoken in a while, and I'm not going to... You don't want to open it up? It's a crazy question to ask. Okay. It is a crazy question to ask. It might be like, congrats on his wedding.

40:08It's a dumb question to ask. That's what the show says. We'll take a quick break and be right back. This episode is brought to you by Didi's Discounts. Back to School Season is officially here, and Didi's has everything on your list. I'm talking bold styles, cool kicks, backpacks, and even dorm room essentials. All the prices that won't hurt your wallet. So don't sleep on Dee Dee's. Whether you've got a second grader or a sophomore, Dee Dee's has your whole family covered. Find a Dee Dee's discount store near you and go check it out today. Hello? Look what TJ Maxx dragged in. The Devil Wears Prada 2 is now streaming on Disney Plus and Hulu.

40:50We are digital. We are downloadable. We are streamable. The fashion event of the year is certified fresh. Pull yourself together. We have work to do. Critics say it's smart and witty and the perfect sequel. That's all. Get runway ready for The Devil Wears Prada 2 on Disney Plus and Hulu. Rated PG-13. So let's move on to your regulatory status. So CalShift is the first federally regulated prediction market. It's regulated by the CFTC, which is the Commodities Futures Trading Commission. Yeah. And this allows you to bypass state regulation, right? It's not bypassing anything. It's the same way that the New York Stock Exchange bypassed state regulation.

41:31The way that the law is structured is that financial exchanges operate under federal law. And insurance is operated on state-regulated insurance. And gambling markets are operating in states, et cetera. By the way, you can buy insurance on financial markets, but that's considered a financial swap. like the fancy term. But like that's a financial market. States are not happy about it. Like 44 or 45 AGs wrote this letter to the CFTC. Casinos are not happy about it. You're saying that the AGs are acting on behalf of the casinos. That's your accusation? Well, there was a letter from one of the gaming commissioners in Maryland that was literally apparently there was some reporting that it was written by the American Gaming Association.

42:05I mean, lobbying is so dark and twisted in this country. I don't know. So like this notion that I don't think that every single AG There's notion that there's some like ethical battle on prediction markets. There are 44 or 45 state AGs who wrote a letter to the CFTC effectively saying that the federal government should back off so that states can regulate or ban the platforms themselves. Could you actually name the five states that like you, by the way? I cannot name the 44. I cannot name it. Florida, New Hampshire, Missouri, Texas, Georgia. I was, like, very curious. But you're also being— There's all cliques that are being generated, you know.

42:33No, I don't think so. So there's so much suing here right now. States are suing you. You're suing states. The CFTC is suing states to protect their turf and regulation. That's right. et cetera. But last week, New York filed a$36 billion lawsuit to completely halt Calci's operations over what they say is unlicensed gambling. You say? To what? What do you say back to the AG? I mean, like, we see this as like kind of like a nice headline, you know, and I think that... A nice headline. I mean, it is. I think that the law, you know, there's like a number of courts, especially a peer score that agree with our legal analysis.

43:03And I think that, you know, but even if you put the legal stuff aside, I think that, what is the intended outcome? right like what is it like forcing our america so so it's interesting because our customers we have over a million new yorker new yorkers that are active on the platform and what is the intended policy outcome out of all of this right there's two things that he usually does there's customer protection and then taxes that's what people usually talk about taxes are where you have a proposal we always tell people like if there's a reasonable tax you want to tax prediction markets i'm fine with that like i think it can go to a number of great causes and that's great and i think that's one place where new york could actually raise additional taxes for a state to fund a bunch of other places, you know, a bunch of the things that need funding right now.

43:41You want to pay gambling level taxes of like 51 %? I think there's many taxes and it's different. The model is different. I'm not taking money from customers the way that the house is. It's just a very different business model. But we can pay taxes that are commensurate with like a financial exchange structure. And that would raise a lot of money given the growth of the industry. But the intended policy outcome is what? Like when you ask the average consumer, it's like, all of this is doing is telling them you don't have a choice but to go offshore or to go to a sports book. That's a very bad outcome for these consumers.

44:04I understand it's a path you've kind of gone towards is federal regulation. But why is it better that you be regulated, not from your own efficiency, but why should it be regulated at a federal level versus state level? Like why would it – I know it would be cumbersome to your business, but why would it be bad for consumers? Yes, that's the exact same reason why the NASDAQ and New York Stock Exchange are regulated at the federal level. Because the marketplace needs global liquidity. It needs consistent rules that everyone has fair access and fair, like equal access and equal obligation. And it's very different from me setting up shop and say, hey, I'm going to receive trades from you and I'm trading against you.

44:40I need you in New York who's trading against someone in California or someone in Texas. Imagine the New York Stock Exchange has to be, you can only buy stock from a New Yorker. Then you know what would happen? It would get way less liquid and the prices would be way worse. It would not work. You need scale. You need global scale for a marketplace. Do you look at any state regulations and think, oh, those are good. We should put those in to protect our consumers? Yeah, I think this is an interesting question. So that, for example, when you asked me about the fair criticism, like if there are genuine concerns, like I'm always open ears about like, are there things in our system that you think are not there that we should be doing?

45:10Right. And that I could do legally, obviously. But like, but and it's so interesting because like, you know, when people talk about customer protection and state regulations, you know how many there's 40 states where like sports betting, traditional sports betting is legal. You know how many of them ban explicit marketing to minors? I've heard you say that it's one or two, but I had to go fact check it and it's not accurate that it's one or two. I mean, I can send you the chart right after this. On social media, you basically will not get slapped with a fine if you basically market directly to consumers on social media.

45:38There's all these issues, but the point is - So how many do you think it is? It's like basically one or two. So this is what I found. 38 plus states, New York, New Jersey, Ohio, Massachusetts, Colorado, Virginia. They prohibit advertising aimed at minors, including digital and social marketing. There's a table of NCPG that puts out every year. We can see that table. So my thing is, but I think this is very important because like what actually this is a, this is one thing that how you went out and you went ahead in kind of regulatory world and said, okay, I'm going to make this market. I'm going to do this.

46:03I think one thing I've seen is like, there are founders who come out and they say things that are, that are expedient to their cause and they put out information and they're going direct and they become like the bullet points for people's, you know, understanding of a market. And it's so important for you to like be faithful to the truth. I don't, like, it's just, there are not 37 states in which, you know, legally, you can legally target gambling to minors on social media. It's just not true. No, that's incorrect. Well, fact check it after the fact. You'll stay post the credits. Okay, we did that fact check.

46:3739 states and D.C. allow legal sports betting. And 30 plus D.C. allow online or mobile betting apps. The majority of these limit marketing to adults only and require operators to avoid marketing that appeals to minors. Two states, Connecticut and Massachusetts, go a bit further. They have a separate provision age-gating social media marketing. So Tarek's point on that narrower claim holds, but he started the conversation elsewhere, asking me if I knew, quote, how many states ban explicit marketing to minors. Not social media, he said, marketing writ large. And that may have been a misspeak. It happens a lot on podcasts, but it risks this misleading talking point instead of a much more nuanced truth.

47:16It implies that you could go legally market to minors in 37 or 38 states. You can't do that, guys, so do not go do that. Tarek's broader point, which is about kind of uniform federal regulations, is important. And that's where we went to next. One of the things I advocate for is uniform federal regulations. And when you talk to policymakers about establishing a ceiling, a baseline for regulation that everybody has to abide by. and the industry that comes very hard against that is the traditional casinos and sports books. They hate it. Yeah, they don't like you. And they hate the idea of federal regulation because they're being able to get away with doing things that they should not.

47:50Are you hoping your business moves away from sports betting so that you aren't just lumped in? I don't decide what consumers want to trade. That's not my - And you don't trade yourself. I'm a free markets person. I believe I can't because I run the exchange. But there are markets that I'm more excited about than others for sure. the point is like this is so interesting is a lot of it is the same consumer like customers like and I think the underlying what the topic is is less important yeah than the mechanism okay what's the future of your business I heard your co-founder Luana talk about going into institutional markets yeah going international you're not going to launch a polymarket type offshore no we're launching like regulatory first always okay but what about like competition because Meta is reportedly exploring a prediction a prediction market they should all do it Robinhood makes 200 100 to 200 times more per dollar invested in a prediction market than on a stock market trade which I thought was crazy I don't know I actually don't know the numbers yeah I mean it's a percentage take 100 seems a little aggressive but they probably make more yeah but they also make a lot more on options trading than stocks in a world where there are 10 or 15 of these things how is Calci set up to succeed like what's your moat marketplace we have the most liquid active, vibrant marketplace.

49:06And the largest community of super forecasters, the predictor, the predictors are participating on CalSheet. And that's, it's a little bit like why Airbnb has been so big for so long. That contributes to having a better product. There is a conversation right now about like young men in America. They're so behind, et cetera, et cetera. We've done an episode on this. Is there a war on men? We look at the actual data to understand it. I take your point that you said earlier on, which is like, wow, isn't it paternalistic to say we're so worried about the people that are on the platform versus just letting people be on the platform.

49:33No, I think you should establish right customer guardrails. I don't think it's like, hey, do this or don't do that. That's very different from, look, there are risks associated with any type of, any of these types of activities and here are the risks, here are the tools for you to manage your risk and here's for you to be, you know, be responsible. Don't do irresponsible things and you want to, there's always a minority that may use things irresponsibly, whether it's, you know, alcohol, whether it's options. I'm not like a person that's saying like, hey, hands off. I'm a pro-regulation person.

50:00Again, like I go back to saying, I believe in regulation there needs to always be a dampening function to any mechanism other way the mechanism will go crazy and my view is basically you let people kind of make their own decisions and have individual responsibility but you add a fence you have to have a fence and you have to tell them you have to have the warning signs like hey you may get hurt if you overdo it and there are levels where you start overdoing it where you're like you gotta slow down dude like you gotta stop and our product does that really well today but I wanna be clear this is not me saying like I'm a believer in individual responsibility but I'm also a believer in regulation but it just needs to be a delicate balance do you like this kind of conversation like to have like a direct conversation about these things I feel like a lot of them like tiptoeing asking you what the thing I like one I like so I'll tell you the two types of conversation there's a certain type of conversation where like people just like want to state very vague and terrible sounding things that are like unaddressable like the questions I asked you at the top of it at the beginning right like it's like what do I say about that oh how do you feel about destroying society well I don't I obviously you don't agree that I'm destroying society.

51:00But this is the type of thing like comments on Twitter, right? Like, you know. So you said there's two types of conversations. The second one is like, where you're like, there is a genuine interest in digging in. Like what is actually happening behind this sort of thing. And that is interesting because like, sometimes I go back and think about like, okay, like I tinker a little bit, like I whiteboard after this. I'm like, well, here's some things that like, maybe would have missed. And I think with the reality with something that's this big, and I think about it, whether it's AI, whether it's prediction markets, self-driving cars, Uber, Airbnb at the time.

51:30This big and so novel. When it gets so big and a lot of consumers are adopting it, you kind of want a healthy societal discourse. Yeah, you want to market test. Exactly, a little bit. Like you want to hear the criticisms. Like imagine... But you want to respect them is what you're saying. You want to hear criticisms that you respect. But like vice versa, like exactly. No, no, but they need to be real. And you want to also have people... They need to be rooted in someone that sits me down and says like, hey, have you thought about this? Because that's a real concern. And oftentimes I actually take it and I agree with it.

51:53My concern for you on the pharmaceutical markets is I do think they are thin markets that could be easily swung by single investors. And I think it's worth looking at. Then people won't trust them. You should judge our markets based on their accuracy long-term. People have been making that claim about politics forever. They keep saying that political prediction markets are very manipulable. But you play out last few years and you look at our accuracy, like the calibration chart, which is like whether the prediction markets predict and what ended up happening. And that line is near perfect. That is not possible.

52:21But accuracy doesn't imply that no one moved the market. The point is like, it is not possible to be this perfect if these things are being manipulated left and right, right? The more important thing is like, we also don't live in a vacuum. You have to compare it to alternatives. Like are polls being manipulated left and right these days, right? Is the media being manipulated left and right? I always thought polls are a really bad indicator because like the person who picks up the phone has 30 minutes to talk to you about like how they're not having sex is the person who's not having sex, which is why all the polls say no one's having sex.

52:43It's always the same. I mean, but I always tell people, look at the prediction markets next to all the other alternatives. You don't have, like, I don't want people to look at this as the, and honestly, I don't know of anyone that looks at this as the only source of truth. no one does but they look at it because it's increasingly more accurate than they trust it but look at it look at the polls look at what people are saying on Twitter look at news look at everything else and then make your own dependent assessment right like don't just read the New York Times and decide what your view of the world is because it's probably not going to be there why are you going to come for the New York Times no but I'm saying New York Times and don't look at Calci and say what your view of the world is you know look at both I mean I think by the way I was looking through your you're on Lebanese time coming here so I was looking through the Calci IG And I was like, oh, there's a lot.

53:25Like I could, I see your content vehicle growing. I know you guys have done a partnership with CNBC. We didn't get into that. I have more questions for CNBC, not than you. But, you know, I'll take those to those guys. But there is a content. I think the news should use prediction markets increasing. I'm sure you do think that. But there's a real content that's coming out. Do you agree that the prediction market data, the data so far shows that prediction markets are pretty accurate at predicting the future? I haven't looked across everything. I don't know, for example, whether. I will yeah I mean I don't know how much time I have Tarek you're going to pay me you should do it are you going to give me that Donald Trump Jr.

53:58advisory budget no I won't but you're curious about friction markets I am curious I will actually run it down so can you do that can you go and compare it like the Fed put out a paper the Federal Reserve put out a paper two months ago saying that we're the best forecast on the economy they have if the friction markets are very accurate shouldn't people at least use it you know what I think that the scary thing about it and this also is the pharmaceutical thing is like what is the prediction market accurate about in the short to medium term, that is a cost in the long term. You're going to be more specific.

54:23It's a counterfactual. It's hard to know. It's a philosophical question about what - I think we should think about it. And if there's real genuine concerns, I'd love to hear them, right? Like, and I think, but fear is not a way to make decisions. It's like, you know, saying no to self-driving cars because we're afraid of them. And I think we would both agree. I hope you would agree that if we had self-driving cars running around New York, we would probably have less fatalities. Yeah, New York is a particularly hard market to look at it. But in general, the fatality rate is lower. So I agree with you on that.

54:54I also think that we as a society, especially in the United States, also in Lebanon, also in Pakistan, we have an eat-what-you-kill kind of culture where we are not good. And I think even less so here because we don't have the same collectivism of our cultures. We're not good at absorbing the societal shocks of that. So displacing a tremendous amount of workers and what happens to them and how to adjust for that and having that be something that society can help people through doesn't happen in America. And so it happens at the benevolence of people like you who lent billions of dollars and who become Dan Gilbert and give to the city of Detroit and all that.

55:29But I agree with you. And that's why there's a bucket of criticisms I always say. What you just said, and I think you would agree with me, it's not like let's ban self-driving car. It's actually let's sit down. This is probably a good thing for society, but there is all the negatives that are sitting here. Yeah, and we need to absorb those. How do we deal with it? Yeah. Like, let's sit, I'll sit down. But the problem is the conversation has gotten so polarized in this country that it's like either you're pro or against. Yeah, but fuck that conversation. That conversation is uninteresting. And I wish less people are like either pro or against AI, pro or against crypto, pro or against prediction markets.

55:59And more people are like, see it for all what these things are. They're like a lot of benefits and there are downsides. And you have to figure out how to maximize the benefits while minimizing the downsides. Yeah. Right? And there are real solutions to that, right? The problem is those solutions don't get you the likes on Twitter. They don't, but that's okay. They get me audience for this show, which is show is like people who are curious and want to understand the long form and hear the nuance. What are you going to do as a leader? I know you're 30, but like, are you going to commit to the giving pledge?

56:24Are you thinking about philanthropy? Like, how are you thinking about yourself? I mean, I always say this, like, I think, you know, one of the things like - Because how much you're worth, like$2 billion right now, supposedly? I mean, that's like - Paper money. Those numbers. But like the tax, like I always think about, you know, for example, like another one that's could always be opposed to taxes, but I really care about how it's used. Like I care a lot about math and I care a lot about financial literacy and honestly education in general. I really do because like, I think the math is what got me to where I am.

56:51I love math. Like when I was in Lebanon and all the craziness was happening, like math was my refuge and it got me to MIT. It then got me to build a company. And one of the things that like, I think concerns me a little bit is like, I feel like people, especially in the kind of age of AI, like I just feel like people are like not as driven anymore. Like, especially in, like my mom always wanted me to come back to the US because it was like, this is the place where you can like make it. If you work hard. And you're here, right? Like you can do anything, right? Like, you know, you start. And I think our generation, we felt that when we were graduating from college.

57:21But now you talk to people out of college and you're like, there's certain jadedness that you should get when you're like 50 or 60 years old. You don't get when you're in college. Yeah, they feel like the world is stacked against them. They're jaded a bit. I don't know what all the solutions is, but I think that's an area where I want to do work in. Mamdani has galvanized these people with a particular mission. Do you like the mayor of New York? Are you into him? I think he's cool. Yeah. I think every time he gets on camera, you want to watch him. Some things I disagree. Some things I agree, I would say.

57:49I think some of the issues are real. The issues of wealth and equality are very real. The thing that I go back to, people feeling jaded and they don't have a shot, that's a very bad thing for society long term. Yeah. Okay, I end every episode of Smart Girl Dumb Questions asking my guests a question they don't know the answer to. But what's a dumb question you have that you haven't known the answer to or haven't asked to your chat daddy? I've always wondered, I never really read that much into it. It's like, why do we need to sleep so much? And how have we not figured out how to reduce the amount of sleep we need?

58:15Because if you think about it, if you live like 100 years, you sleep like 35 years of those. Yeah. That's a lot. That's like a lot of sleep. But I just always felt like maybe there should be more like looked into like, just, I mean, generally sleep research, like I feel sleeping well and is it efficient, et cetera. Do you, how much do you sleep? I don't sleep well. You don't wear an aura. You're not like a tech bro. You're not wearing all this stuff. I'm Lebanese. Lebanese people don't sleep well. I know. They're always fidgety and stuff. Anxious. So yeah. Growing up in a war-torn country will do it for you.

58:44Okay, I like that question. So why can't we be more efficient with sleep? It's because our neurology requires the rest. Yeah, but what exactly happens when you sleep? What is the thing that you really need? And what is rest? What is the physical? And is there other ways to compensate for it? I mean, I don't know. If we have a good answer, are you going to start doing more of it? like we'll see okay alright thank you so much Tarek for showing up I really appreciate this this was fun yeah it's great thanks a lot

59:13wow I feel like I just like left a Middle Eastern dinner party I so appreciated Tarek making the time it was an interesting conversation and I think we hear so much in our culture right now this anti-elitist argument for why things are good and it's kind of like a rallying cry to this anti-elite world ironically being made by a guy who went to MIT talking to a girl who went to another small school outside of Boston. I also think there's a difference between what a prediction market can tell you when it comes to something like Brexit or, you know, a big popular decision and the kind of expertise of the wisdom of the crowd in that world versus the expertise of the wisdom of the crowd when it comes to pharmaceuticals or something else where, like, the insider edge becomes a lot and that is going to be a huge question of how he can police and what he is not policing and what we are not finding as it relates to insider trading on these markets.

1:00:01One thing, you know, it seems to me is like these markets are here, they're growing in a big way. They've, you know, had major federal court victories under the Biden administration. The Biden administration pushed back a lot on those. And the Trump administration has been much more lenient to Dick Costello's question of, you know, you have an administration who's favorable to you right now. You have a son of a president who's a divisor to you right now. I'm curious how that will hold up. I'm also curious about the wisdom of the discerning individual. So I want to know what you think of this episode.

1:00:30Are you interested in these prediction markets? Do you think that they're gambling or not? Where do you think these state cases are going to go? And did you learn something in this conversation that changed your mind? You can email me at naeemaraza101 at gmail.com. You can leave a comment. Please leave us a review. Share this episode with your friends. And that's it for this episode of Smart Girl Dumb Questions. Today's show was produced with Sanjana Nigam and Andrea Lopez-Cruzado. It was edited by Davy Chin and mixed by Cam Schenken, engineered by the great Jamie Van Corff and shot in Wonder Studios in Manhattan and the ending is shot in WTF Studios in Midtown Manhattan.

1:01:04Thank you for having me, guys. I'm your host, Naeem Arraza, and I'll see you next week for an all-new Smart Girl Dumb Questions.

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