In short
New York’s lawsuit against Kalshi, alleging prediction markets are illegal gambling and seeking to force restitution/penalties; Mansour’s response centers on federal regulation, customer protection, and proposed taxation. The episode also covers a U.S. yen intervention, Iran-linked cyberattacks on municipal water systems, possible AstraZeneca–Bristol Myers Squibb merger, and box office chatter.
Guests and backgrounds
Tarek Mansour, co-founder and CEO of Kalshi (prediction market exchange; CNBC has a commercial relationship including customer acquisition and a minority investment). Adam Isles, head of cybersecurity at the Chertoff Group; former/industry cybersecurity expert discussing government reports (FBI/CISA) on water-sector intrusions.
Key claims
Mansour says the lawsuit is driven by special interests (sports books/casinos) rather than customer protection; Kalshi operates under a federal license and charges a 1% transaction fee. He argues New York’s restitution demand is unrealistic and that prediction markets are safer than sportsbooks. Isles says Iran-linked attackers steal “project files” (industrial computer “brain”) and shut down alarm logic; attacks are scaled (e.g., Minnesota ~30 systems, Michigan nine).
Notable examples
NY AG seeks disgorgement/penalties totaling about $36B; water incidents include boil-water alerts and California Water Service (June). Isles cites AI-enabled offensive research (OpenAI report) and an AI-driven attack on a Mexican water system (January).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOKalshi's Legal Challenges
0:28 to 0:55
Discussion on New York's lawsuit against Kalshi and its implications.
“Finally, you can feel the fabric, sit on the sectionals, and even open the refrigerators.”
Kalshi's Legal Challenges
2:29 to 3:11
Discussion on New York's lawsuit against Kalshi and its implications.
“Stand Becky by in 3, 2, 1, fuel, please.”
U.S. Intervention in Currency Markets
3:11 to 4:13
Exploration of the U.S. intervention to support the Japanese yen.
“We're very strong, very, very strong financially.”
Negotiations with Iran
4:13 to 6:39
Update on U.S. negotiations with Iran regarding nuclear threats.
“Because what's really happening, I think, is you say to yourself, if you're Scott Besson, if we don't do this and the yen falls further, they're going to sell treasuries.”
AstraZeneca and Bristol-Myers Merger Talks
6:39 to 7:39
Details about the potential merger between AstraZeneca and Bristol-Myers.
“had been ready to hit Iran with the biggest U.S.”
Summer Box Office Successes
7:39 to 10:03
Discussion on the blockbuster performance of recent movies, including Spider-Man.
“I was trying to figure out all the previous progenitors of both of these companies.”
Kalshi CEO's Response
10:03 to 13:41
Tarek Mansour responds to the lawsuit allegations against Kalshi.
“I wanted a couple, there were a couple times where I really.”
Kalshi CEO's Response
14:09 to 14:32
Tarek Mansour responds to the lawsuit allegations against Kalshi.
“Like when a client cancels their order at the last minute.”
Introduction to the Lawsuit Against Calci
14:57 to 15:40
The hosts introduce the lawsuit against prediction market Calci and its implications.
“And we should mention that Calci and CNBC have a commercial relationship that includes customer acquisitions and a minority investment.”
The Impact of the Lawsuit on Prediction Markets
15:40 to 16:47
Tarek Mansoor discusses how the lawsuit could affect the prediction market industry.
“because this is really a shot across the bow, not just at Calci, ostensibly.”
Show all 22 chapters
Customer Protection vs. Regulation
16:47 to 17:40
The conversation shifts to the conversation around customer protection in gambling.
“It's litigate, and you try to legislate, and then finally when you realize that consumer demand is not going to go away, you finally try to compete and innovate.”
Taxation Proposals for Prediction Markets
17:40 to 19:12
Mansoor discusses proposed taxation on prediction markets and potential revenue.
“How much do you think, if you add up all the profits and losses of New Yorkers so far this year on cash, what do you think that number is?”
Negotiations with New York State
19:12 to 20:39
Mansoor explains the negotiation process with New York state regarding taxes and protections.
“Because, I mean, the prediction market industry is the fastest growing industry outside of AI right now.”
Philosophical Underpinnings of the Lawsuit
20:39 to 21:46
Discussion on the philosophical implications of the state's perspective on gambling.
“The gambling business model is take money from consumers and pay some part of it back to the state.”
Comparing Gambling Models
21:46 to 22:54
The hosts and Mansoor compare different gambling models and their implications.
“just because you and I are now betting against each other and that there's no house, if you will, shouldn't change the dynamic because effectively at base what the user is doing conceptually is not that different.”
State vs. Federal Regulation
22:54 to 24:47
The dialogue continues on the balance of state and federal regulations in prediction markets.
“What is the sort of limiting principle that you are looking at.”
Future of Prediction Markets and Taxes
24:47 to 25:59
Mansoor shares his views on the future of prediction markets and proposed taxation models.
“And when it comes to this, I mean, going back to the point on taxes, you know, I mean, this is a state that has been having massive taxation questions over the last few years, really last few months especially.”
Consumer Demand and Market Growth
25:59 to 28:00
The conversation shifts back to consumer demand and the growth of prediction markets.
“So you get taxed on your realized gains.”
Regulatory Challenges for Prediction Markets
28:00 to 34:57
Explore the ongoing legal battles and regulatory landscape for prediction markets in the U.S.
“But this is the type of thing that makes me think, like, maybe we should have been lobbying more.”
Cybersecurity Threats to Water Supply
36:23 to 42:05
Discuss the implications of cyber attacks on municipal water systems in the U.S.
“You're watching Squawk Box right here on CNBC.”
Water Security and AI Threats
42:05 to 43:49
Discussion on AI-driven attacks on water systems and consumer safety.
“attack on a Mexican water system in January of this year.”
Technology and Preparedness
43:49 to 44:04
Exploration of how technology impacts security and preparedness for threats.
“But the thing we need to be concerned about is that the technology that enables the bad guys is getting better and more advanced.”
Transcript
Automatic transcript. May contain errors.0:00Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos, and more. All curated just for traders. Plus, guided learning paths with content designed to fit your unique interests. And no sifting to find exactly what you need, so you can spend your time learning to trade brilliantly. Learn more at schwab.com slash trading. Hey, Chicagoland, the Wayfair store is in your neighborhood at Edens Plaza and Wilmette. Finally, you can feel the fabric, sit on the sectionals, and even open the refrigerators.
0:36Plus, our in-store designers will help you bring it all together with free one-on-one design support for any project on any budget. Yep, we said free. Oh, and did we mention the cafe? So what are you waiting for? Come see all that's in store. Visit the Wayfair store today at Edens Plaza and Wilmette. Way fair, every style, every home. Bring in show music, please. This is Squawk Pod, and I'm CNBC producer Cameron Costa. On today's episode, New York has sued Kalshi, alleging that the platform is quintessentially gambling, and it's seeking to avoid the financial consequences of doing so. Kalshi CEO Tarek Mansour responds.
1:19They like those talking points. They like to be able to say that prediction markets are not paying taxes. But I'm here, I'm telling you, I'm right here on Squawk. It's like, there's a reasonable taxation that you want to impose on prediction markets. Let's have a conversation. What's at stake for the prediction market? The AG's office is saying that's about$36 billion. I mean, this is a fun headline. I mean, we're not too worried about having to pay$36 billion. Then, Iran could be behind cyber attacks on water systems in seven states. Head of cybersecurity at the Chertoff Group, Adam Isles. It's a combination of an easier target and a motivated adversary.
1:55The newest tools in an age-old strategy. The technology that enables the bad guys is getting better and more advanced, and we've got some catch-up work to do on the good guy side. Plus, the rest of today's news, an intervention in the Japanese yen, a possible blockbuster pharma deal, and speaking of blockbusters, a surprising summer box office. You know what killed me? What killed you? The dog. Don't tell everybody the story. The Odyssey earning millions, but we swear, no spoilers. It's only been out there for 4 ,000 years. It's Monday, August 3rd, 2026, and Squawk Pod begins right now. Stand Becky by in 3, 2, 1, fuel, please.
2:40Good morning, everybody. Welcome to Squawk Box right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. And here we go on this Monday morning. The U.S. announced that it has now intervened to prop up the Japanese yen alongside Japan's finance ministry. Speaking with reporters on Air Force One yesterday, President Trump confirming that the U.S. took that action on Friday. It was the government's first foreign currency intervention in years. We have a good relationship with Japan. We're very strong, very, very strong financially.
3:14They are, you know, they have a weakening yen, and they wanted a little bit of help. And we're always there for Japan. Japan's been very good to us. Treasury Secretary Scott Besson also confirming the intervention, saying the U.S. won't hesitate to act again in coordination with Japanese financial authorities. The size of the intervention wasn't clear. Reuters' photo of Besson's notepad, which is really, I call it the photo of the day or photo of the week, had physically on a notepad on Friday's cabinet meeting saying to do, buy Japanese yen, five to ten billion dollars. There's some speculation that number may be higher.
3:51The other question, of course, is whether we're going to have to do this again. It's hard to imagine, given actually some of the trials and tribulations of Japan's economy, that we might not have to do this again. And then the cost of your lows. And then the question that I'm always thinking about in terms of the calculus, When we bail out our foreign partners, how do U.S. taxpayers think about that? Is it a cheap bailout effectively of ourselves? Because what's really happening, I think, is you say to yourself, if you're Scott Besson, if we don't do this and the yen falls further, they're going to sell treasuries.
4:27That, in turn, is going to increase the price of interest rates. That's why I was saying when we're talking about the 10-year, that's the important part of the story. And you might say if that goes up on a much more material basis, that's actually a much more expensive cost to the American public. The one thing I will say is I feel good about having Scott Besson being the one who's making these. Well, he knows how to kill currency. So, I mean, well, he understands how markets work. He was a Soros guy and they broke the broke. No, I said the same thing. And the other thing about the notepad. He's he leaves notes on his notepad.
4:59We all have to do. There it is. Some of us have no. But he is on the record a couple of weeks ago or months ago, said you wrote this on your notepad. Why did you do that? And he said so that all the reporters behind me would see it. And then they would ask me questions about it. That's interesting. I don't know if you did it this time. Yeah, it's I would do it on my hand. I think Sarah Palin did that at one point. Remember she had somebody. I can't remember who had it, but they had notes. I do that. I look back. I think of Treasury secretaries in the past. And we've had some pretty great ones.
5:32Paul said some of others who have come through and have been there at an important time when markets were reacting crazy. We've had some bad ones, too. Right. And there are some Treasury secretaries I would not feel comfortable if they were intervening in the markets like this. Besant is a special case, I think. Paul O 'Neill. I don't know what he was doing there. Alcoa. And remember? White. Remember Jon Snow. That's who I was thinking of. I have a$2 bill in my wallet. And I'm saving it because it's been a while since Jon Snow signed it. So that's that's how it reminds me of. Meanwhile, President Trump says U.S.
6:06negotiations with Iran will resume today. The president made those comments on Air Force One yesterday. It's unclear where the negotiations will be or who will be involved. And this follows a Saturday night social media post by the president. He said in this case, and it's happened, I think, in some of the previous instances, but other Middle Eastern powers had asked the U.S. to hold off on attacking Iran. and that key players had agreed to, in his words, the perimeters of a deal that would open the Strait of Hormuz and end Iran's nuclear threat. Trump said the U.S. had been ready to hit Iran with the biggest U.S.
6:42attack since World War II. And it's not going to happen, at least at this point. And I think talks begin this afternoon. Yes. British drug company AstraZeneca. It's in talks with U.S.-based Bristol-Myers Squibb about a possible merger that would create a roughly$400 billion pharmaceutical giant. That is according to the Financial Times. A report says that the companies have spoken in recent months and a deal would probably involve both cash and stock. It would also rank as the biggest pharma deals, one of the biggest pharma deals of all time. Both those companies are key players in the cancer drug market.
7:20An AstraZeneca spokesman declined to comment when contacted by CNBC. But obviously, this is a pretty big deal. If you're looking at Bristol-Myers this morning, that stock is indicated up by about 6%. It's a New Jersey-based company. AstraZeneca shares off by better than 5%. Market cap of BMI is 133. I was trying to figure out all the previous progenitors of both of these companies. Bristol Myers, obviously, bought ER Squibb or whatever it was called. But then Bristol Myers acquired Celgene. You remember Celgene? And what blew my mind was what they paid for Celgene. What? I checked it to see if it was a combined market cap,$74 billion, $50 a share, cash plus stock.
8:08And I think it really was$74. Wouldn't that be, that's huge, Is it$74 billion? Back in the day. Well, what was... I've got to go look and see how much cash it was. It was$50 a share of cash and then stock. But what was... Even AOL, we thought, was the biggest. Wasn't that$100? Wasn't that only$100? I think that was the high 80s, high 90s. The biggest deal still is Vodafone buying Manusman,$183 billion. $183. The year 2000. AOL,$165 to$182 billion at the announcement. Oh, really? Yeah. And let's talk about, at least temporarily, the movies. Yeah. Sort of fun and entertaining. That was an unbelievable number that I just read.
8:51And it's the lead store top of the, what is that, the 10 point? 927 million? Sony and Marvel's new Spider-Man film with a heroic weekend at the box office. Spider-Man Brand New Day earned an estimated$355 million, just shy of the all-time domestic opening weekend record set by Avengers. obviously that's domestic, seven years ago. Internationally, the movie brought in more than$570 million, putting its opening weekend total at, total at what I said,$927 million. Intelligence says that more than 24 million people went to see the film this weekend in the U.S. and Canada, and that's without the benefit of an IMAX release.
9:33Those screens have been reserved for Christopher Nolan's The Odyssey. Which I just saw, but without the IMAX screen. I saw it the day it came out. Have you seen it in the IMAX screen? No. No, I don't have that kind of money. You can't get those tickets for 70 millimeter. Lately, three hour movies are sometimes I'm like, wow, this is long. It's like a show. It's squat box. It was okay, though. Yeah, that's right. Yeah. It's exactly like that for viewers. Kill me. No, but in this case, it was good. I thought it was a great movie. I wanted a couple, there were a couple times where I really. And I had a nice chair.
10:13You did, I liked those that go back, although they are, the ones that go way back are a problem for me. Because I miss a lot of the movie. But I wanted him, John Leguizamo, who I don't like some of the stuff he said, but he was good. I thought he was great. They actually made him blonde. I know, you know what killed me? What killed you? The dog. Yeah. How they treated the dog. I almost, that's the one time I almost started crying when he was reunited with the dog. I wanted more, I wanted him to. Don't, don't. I wanted to. Tell everybody the story. Well, I just wanted him to. Hopefully they read it in high school.
10:49Right. Okay, let me ask you this. Did they really go off at the end to the West? I don't know. I like to believe that. I don't think so. I like to believe that, though. It was a good Hollywood ending. It was, but I don't. For the story, which. I think he had a lot of arrows sticking in him. Yeah. You know. But I wish he had not exposed himself. I wish he had I wish he had let Anne Hathaway know earlier that he was so just drug it out. Yeah, except for that. That was the movie. Do it where you had to have the. Well, never mind. Don't give it away. I'm not giving in. It's only been out there for four thousand years.
11:28But this part of the story. The ending's only been there for three thousand years. The Chris Nolan treatment has only been out there for four weeks. I know, but it was accurate. All right, just back to the top box office. Avengers Endgame, you said, was the highest take of all time,$357 million. No, you're right. Spider-Man, brand new day,$355 million. You know what the third is? Too big to fail? Nope. Good guess. Good guess. Spider-Man, no way home. So it was the last Spider-Man and Sidall meant in 2021. There's apparently a couple of previous Spider-Mans that are important to see before you see this one.
12:07Has your son seen all of them? Yes. Because my son will not see this one until he sees the... He's right. I think there's two or three previous ones. There are. There are two, and if you want to include Civil War, there's three, I guess. Meanwhile, you know, Tom Holland is like... In both of these great movies. Ka-ching, everything. Yeah. The Odyssey, and then... With his wife, too. Right. Yes. Yeah. That's right. Zendaya's in both of them too. Yeah. Really cool. Oh, she's in Spider-Man too? She's in Spider-Man as well? That's where they got to know each other from the series where they were working together.
12:44She's in the current Spider-Man. I haven't seen the current one. I assume she's in the current one. Well, then you don't know. I don't know. Well, she's his love interest in the last one, so. Unless he broke up with her, then she'd be back. Was it Tom Holland was in the last one too? Yeah. Yeah. Yeah. All right. Cheese will be next. Coming up on Squawk Pod, after months of negotiation talks broke down, New York State sued prediction market CalShea. CEO Tarek Mansour responds to the lawsuit and the allegation that the company is essentially illegal gambling and is aiming to avoid paying the appropriate taxes.
13:20You have an industry, the prediction market industry, that is disruptive, that is going fast, consumers are adopting it, And it's threatening a legacy in common industry that is unhappy about that. And that has played out over and over. It's played out with taxis and Uber. It's played out with hotels and Airbnb. That big conversation right after this break. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos, and more. All curated just for traders.
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14:56Welcome back to Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross-Sorkin. Here's Andrew. On Friday, New York State sued prediction market Calci, the lawsuit alleging the platform is quintessentially gambling, allowing, quote, a better to stake or risk money upon the outcome of a contest or chance or a future contingent event not under the better's control or influence upon an agreement or understanding that he will receive something of value in the event of a certain outcome. Joining us right now is Tarek Mansoor. He is the co-founder and CEO of Calci. And we should mention that Calci and CNBC have a commercial relationship that includes customer acquisitions and a minority investment.
15:37Good morning. Let's talk about this, because this is really a shot across the bow, not just at Calci, ostensibly. I mean, they didn't bring the suit against others, but this could change the whole prediction market story if you believe it changes the story. And this is really a state's rights issue versus a federal law issue. I don't really think this is like about a state or federal or any of these questions. I mean, that same lawsuit, you know, and it's not about sports going after all prediction markets and their entirety, the entire business model. You could copy paste that lawsuit and file it against NASDAQ, the building that we're in.
16:12I mean, you know, they could shut down this building for the same exact reasons that you just read, the same same thing that you outlined. I mean, I think the more interesting thing that's at play here is that you have an industry, the prediction market industry, that is disruptive, that is growing fast. Consumers are adopting it. And it's threatening a legacy and common industry that is unhappy about that. And that has played out over and over. It's played out with taxis and Uber. It's played out with hotels and Airbnb. And, you know, those are usually pretty well galvanized industries with large lobbies that are effective at getting actions against the new thing that's coming around.
16:46And the playbook is very simple. It's litigate, and you try to legislate, and then finally when you realize that consumer demand is not going to go away, you finally try to compete and innovate. And that's the cycle that we're going through right now. Now, the key thing here and what's very important is that we have a federal regulator. This notion that this is the Wild West or we're skirting some laws or regulations, we have federal regulators. We're adopting or abiding by all the rules that were basically being put in front of us, and we're operating under those rules. We took years to get that license, and, you know, we stand firmly by that license.
17:19And on the policy side, I mean, there's a bit of a question of, like, what exactly is the sort of intended outcome? You know, we have over a million customers. You're saying the intended outcome from the state of New York? The lawsuit. What is, I mean, what is the intended outcome out of this whole thing, right? It looks like they plan to shut you down is what they... Well, you're going to have a lot of pissed off New Yorkers if you get shut down in New York, right? And you have a million... I mean, here's a question, Becky. How much do you think, if you add up all the profits and losses of New Yorkers so far this year on cash, what do you think that number is?
17:48Over a billion? Over three billion? Well, they made$200 million. Plus$200 million. Chris Christie and the gaming guys come in here and all these customers are losing on cash, et cetera. They have made over$200 million because New Yorkers are smart and they're doing a good job. You know where that's not possible? On the sports books. That is impossible on DraftKings or in a casino. It's impossible in the gambling business. Meaning that the house always wins. It is impossible. The house always wins. They ban the winners. It's impossible for that number to exist. Actually, that number is negative$200 million for the sportsbooks in that same period.
18:20So when we talk about customer protection, like, what exactly are we protecting customers from? Let me ask you a different question. Because effectively what's happened here is right. You are right in the sort of an Uber sense that, when I say Uber, meaning the car service, that technology evolves. Sometimes the companies try to move faster than the regulators, try to get to a place where the customer loves everybody so much that then the regulators have to basically capitulate and decide, well, we're just doing this because the customer actually likes this and we think politically it's painful otherwise.
18:49If you were the governor of New York, recognizing what's going on right now from a policy perspective for the state of New York, either to maximize tax revenue, to minimize losses for citizens in the state, to take advantage of this moment in some way, what would you do? I would pick New York over special interests. I mean, that's what I would do. I mean, so the two concerns I brought up is customer protection and taxes. we've gone to the government and said look if there are genuine gaps in customer protection that cash is not doing let's have a conversation we'll implement them you know we look at the things that are required from the state of sports books and what we're doing and we see that as what we're doing is being superior if you ask consumers on the ground which one do you feel safer which one do you trust more it they would tell you unequivocally cash now the tax piece is the other really interesting piece we put our proposal in front of the governor that would you know do some sort of taxation you've been negotiating with the government and with new york state and And then there'd be some sort of taxation on the prediction market industry that would raise close to$10 billion over the next five years from the prediction market industry.
19:49Why? Because, I mean, the prediction market industry is the fastest growing industry outside of AI right now. We're probably the fastest growing company in New York. But what was the tax rate? I read that it was like 10 % you were offering. Yeah, I mean, there's a tax on the prediction market operator, and then there's tax on realized gains. And there are a few things in that thing. But the point is that you would have raised a substantial amount of money. But no, I think the point is the amount that you were talking about. Was it 10 % on the prediction markets? It's because mobile sports betting, they get 51 % of the tax.
20:14It's very different models. Again, in the sports betting, they are betting against the customers. They're making money from that customers. But just from the New York State perspective, if they can get a 51 % tax of that money. You can look at how much the sports books are paying and how much prediction markets are paying. And you net out that actually prediction markets are probably going to raise 2x given that proposal. But that's just because you have more users? Because the percentage does look like it's... Just talk me through this. I think the industry is going much faster because in our industry, liquidity begets liquidity.
20:39It's two different models. The gambling business model is take money from consumers and pay some part of it back to the state. We function like the NASDAQ. We take a 1 % transaction fee. Now, that generates a lot of gains in the state from consumers using it. What do you make a bet? You can tax those gains. But is that where things broke down in the negotiations? I don't think it was that. I mean, I think we just didn't hear any response. I think, you know, when you look at a tax that would have raised 5x of the pierre terre is going to raise over the next five years, and we're just not even sort of getting responses, it begs the question of, like, who is benefiting here?
21:09And the only, I think, constituency that's benefiting, I think, is the draft games and casinos. That's right. The sports gambling. Who else is benefiting? Definitely not the consumers, because when we say we're protecting them, we're protecting them against making money. The lawsuit asks us to restitute the consumers. What do I do? Should I go tell New Yorkers giving back the$200 million that you made this year? How do I make them right? Let me ask you, and maybe this is a philosophical question, and it really is, I think, underneath the New York State suit, which is to say their view of sports gambling is something that should be regulated by the state, full stop.
21:41And they effectively are arguing that the CFTC and the construct, just because you and I are now betting against each other and that there's no house, if you will, shouldn't change the dynamic because effectively at base what the user is doing conceptually is not that different. Meaning you're still betting on whether someone's going to win the game and by how many points. It's just, are you betting against a house or are you betting against another individual by using an exchange, right? Like that's what this is all about. But it's not, Andrew. This lawsuit is not about sports. It's about all event contracts.
22:20Well, I... Like you guys use the data. I mean, we've been on the show, right? By the way, I find the data very valuable for trying to understand certain moments. the data that comes off of this is a different story in terms of value proposition. That might have a societal value. The state is going after that. I understand that. But the question is whether the value, it's really about the value on who's betting on the other end. I just think the point here, and maybe the point I'm trying to make is that there is no limiting principle, right? Like, this is the law. I mean, I didn't write the law.
22:52I'm not, you know, I didn't write the law. There's no limiting principle. What is the sort of limiting principle that you are looking at. Financial markets have speculation. That is true. That speculation looks and feels and has characteristics that seem like that at face value could look like gambling. People talk about trading on options all day long as gambling. Because the reality is some people are exhibiting behaviors that are pretty much like gambling. How come they went after you and not Polymarket and not Robinhood? That's a question for the governor. Well, I'm assuming - I don't know.
23:18Do you feel like Poly is competitive with you here in New York State? I mean, what I would say - Can't be. I assume. If it was really about customer protection, cashier wouldn't be first. If it was really about customers. But Robinhood is doing a similar business like this. Everybody is in New York. In New York. And Polymarket is doing a very similar business in New York. That's right. I mean, Drafton and FanDuel and others have prediction markets as well. So you must have at least a suspicion about why you were the target first. I frankly don't, I mean, I don't know. This is not a question for, I mean, what I'm really focused on is at the core from these losses, I mean, going back to the question about this sort of state versus federal, any form of, Any types of these losses have been struck down relatively quickly by courts in the last few months.
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23:57I mean, and because... That's what's unusual about this. The idea that in other places, the courts have said you can't do this because federal overrules the state's perspective on it. So I guess why is this different? Why is this different? Why aren't they taking it up to the SEC? It isn't. It's actually more, it's more overbroad. It's actually going even a step further, which is trying to shut down all prediction markets and all of America for one state, you know, coming from one state. Right? They're just using you as the example first? Maybe. I mean, I don't know. I think we're obviously the largest in the industry, and there's other dynamics at play.
24:28But the key thing is that I think when we talk about customer protections, it's very hard to imagine asking anyone on the ground if the prediction markets, comparing the prediction markets to the online sportsbooks or others, and they would tell you that consumer protections, we trust the prediction markets less than we feel that they're safer. And when it comes to this, I mean, going back to the point on taxes, you know, I mean, this is a state that has been having massive taxation questions over the last few years, really last few months especially. And we're putting this sort of proposal on the table that's being struck down essentially without any word or any feedback.
25:05That would actually go to fund a lot of schools and a lot of health care. Maybe you'll elect Bruce Blakeman. That's not a question for me. But the point is that what's interesting is like what we're learning over time is that they don't want these things to happen. It's the same thing that's happened in New Jersey. We had a proposal for taxes. It got struck down by the casino lobby. And then Chris Christie came here on this show and told you that we're not paying taxes. And that's going away from schools and health care. And what we're realizing is that they like those talking points. They like to be able to say that prediction markets are not paying taxes.
25:33But I'm here and I'm telling you, I'm right here on Squawk. It's like if there's a reasonable taxation that you want to impose on prediction markets, let's have a conversation. How do the taxes work now, and how would you propose they work in the future? I mean, they should work. We take a 1 % fee. You can basically tax some portion of that fee, our net revenue. And that can go to a number of initiatives, whether it's schools or health care or other things. And that's something that we're favorable to. Would you be prepared, and I don't know if you do, if I had a big winning, do you file on my behalf or file to the government?
26:04Those are financial products, right? So you get taxed on your realized gains. Right. Same exact way. I guess I understand. I'm trying to think this through from the perspective of why New York has been opposed to things like Airbnb, because the the hotels pay a very big tax for a leisure tax that goes to the state or to the city. And then when you have an Airbnb, it doesn't get paid the same way. There's not that tax that was there on the hotels. Now, for the gaming industry in 2024, New York's revenue distribution for all gaming was four point three eight billion dollars that went to New York's public schools.
26:36What would they get if they are, you know, you see your market growing really rapidly. They're paying 51 % of a tax on that. I mean, they're paying 51 % of a tax on the gaming that they get at this point. You see your market growing really rapidly, but that's probably taking away from the gaming industry's take that they'll get. Because people may rather bet on a prediction market than bet on some of these other places. So there has been no evidence so far whatsoever that there's any cannibalization. You know, since the prediction markets have come and grown so fast, whether it's sportsbooks or land-based casino or iCasino or any type of gaming, all of those have been growing, but they're actually accelerating.
27:16They're growing faster than they've ever grown before. There's been no evidence whatsoever in the data there's any type of cannibalization. This is all incremental tax. And again, because, you know, one year... I'm just trying to figure out why. It doesn't make sense to me. It's a different model. I'm just trying to figure out why they're coming after you and nobody else and doing it. I don't think it's about how much tax is going to be raised by the state. I think there's no way to look at this where you see that the state is going to come out net positive. I just think the gaming, you know, people have been asking me recently, like, you know, oh, you're beefing up your lobbying efforts and you're doing more.
27:45As the American Gaming Association has as well. That's right. I mean, they've had lobby efforts for decades now. But I think they spent$1.3 million last year versus a little under a million dollars for you. Was that? I don't know how much you spent, frankly. They spent more than you did, is my point. I mean, they have been spending forever. But this is the type of thing that makes me think, like, maybe we should have been lobbying more. I mean, I just think this is more about these types of lobbies that are very well organized, whether it's hotels or casinos. I think it's less about how much tax the state is going to get.
28:11When you think about this as a national issue, do you see other states trying to do the same thing? Do you look at this and hope that it's not a harbinger or that you can win this case and, therefore, then the other states say they're not going to even try? What's this strategy from your perspective? I mean, North Carolina has imposed a tax on prediction markets, and they seem to be pretty happy about that. I think there's a number of other states that are falling in that same direction. And we're basically engaging and happy to have those conversations. I mean, there have been states that have done something similar as New York.
28:42Like Minnesota and Arizona are two notable examples where we end up striking it down in court. I just think it's inevitable. I mean, consumer demand is not—this is here to stay, right? I'm not the guy who's going to decide whether prediction markets are a thing or not. They're here. This is the reality. How do you feel about certain states, by the way, though, trying to separate out what kind of bets can be made? So that's the other component part of the story. I think it's very akin to, you know, states coming in and saying, OK, so options on Tesla are OK, but on S &P are not. That's exactly the same under the law.
29:14I mean, if you look at the law, this is the exact same sort of, it's like, you know. And by the way, you know, states have done that. Like in Kansas, you cannot trade commodity futures. It's illegal under their statute. the Kansas statute to trade grain futures. Now, guess what? You can trade grain future in Kansas. And that's the whole point of why we've created the Securities Exchange Commission and the Commodities Exchange Commission is to preempt these types of state laws. The CFTC is actually suing New York and other states, arguing that this is their realm for regulation, not the states on this front.
29:44If they're not successful, if you're not successful, you know, I think it's probably a long shot that you won't be successful legally. But if New York wins, your legal bills could be incredibly huge. The way they're coming after this, the state is seeking disgorgement of gains, penalties of three times the proceeds of all gambling activity in the state,$100 ,000 for every attempt to reach out to customers in the state. The AG's office is saying that's about$36 billion. I mean, this is a fun headline. I mean, you know, we're not too worried about having to pay$36 billion. dollars. You know, this is like, whatever you think about this, right, this is the very most some sort of turf battle, right?
30:24It's not like we've come in through some sort of backdoor. This is not the Wild West. I mean, we spent years getting regulated. Right. You went out of your way to make sure that you were a regulated part of the industry. I'm just curious how you're thinking about it because you have now New York. By the way, we haven't talked about what Wisconsin is doing. That's the election thing? That's the election thing, right? They don't want people voting Yeah, that's that's that's constitutional. Well, you argue it's unconstitutional. It's an interest. It's an interesting question because I and we actually talked about, I think, about a week ago on this broadcast, which is when elections happen, typically like the day of the day of an election specifically.
31:01specifically, the polling that happens as people are leaving. Typically, news broadcasters don't actually broadcast what those polls are suggestive until the markets are closed. Why do they do that? Arguably, they do that because, meaning media companies do that because they don't want to impact the potential election, right? Like that's what's going on. Prediction markets do the opposite of that. And so there's sort of very interesting sort of philosophical question about what the right answer is and all of that. Is it that interesting? I mean, to me, it's interesting. It's like, I would think that more information is always better.
31:41Like, you always want more information. You always want to inform people. Well, but the reason why news organizations historically haven't done that is because if, for example, the polls came back and said that there was somebody who was going to really, like, run away with it, if that's what the polls suggested, but it wasn't true, and it's that certain people then wouldn't go to the poll, It wouldn't go to the polls and actually vote. And we're trying to get people, right? Everybody wants everyone to vote. And similarly, the worry with prediction markets is that if you were a wealthy person, you could somehow try to manipulate the market in a way to suggest that one person is going to so outperform somebody else so that other people don't go to vote or vice versa, right?
32:17I mean, a few things. I actually think this is actually, I think prediction markets takes us in the opposite direction. It's actually an antidote to that because, you know, historically, the way that you learn about the political process, which candidates are in the lead and who's winning and what's happening, historically has been coming top down. You have a number or information that's handed to you by press or by some people that are running some polls and who's running the poll and who's paying that poll, et cetera, is always a question. Whereas prediction markets are this very unique political metric that comes bottom up.
32:46Like people are the ones, like it's kind of a people-driven metric. And so if anything, it's actually like solving some parts of that problem because you're not telling people who's going to win. It's not coming from some sort of like elite entity or other. It's people themselves, you know, in this case, you know, putting their money, predicting what's going to happen. On the question of manipulation, I mean, people, you know, there's this, people always talk about the manipulation in the election market. But if you look, there's been a number of studies, including one that was put out recently by the Washington Post, that looks at the calibration of these markets.
33:17Essentially, you compare how accurate the prediction markets were against their forecast, against what ended up happening. And the accuracy is close to perfect. That could not be possible if these markets are being manipulated left and right. And there was a study actually on Spencer Pratt that Mayer raised. Someone put out$2 million at some point to move the odds up. So the odds, I think, I forgot. Let's say they were at 10%. They moved them to 25. Guess how long that move lasted? Nine seconds. And then the market brought it back. So all that happened, if you actually had$2 million that you want to manipulate something, you may move something for a few seconds.
33:50Until somebody else says, I'm going to take that money from you. It's markets. That's the beauty of it. So you lost that$2 million. You didn't achieve what you wanted. Might as well. You should have basically commissioned a poll or gave it to the campaign. That would have been better. Tarek, I want to thank you, as it was, for the conversation. And we should mention that CNBC has reached out to the New York governor and attorney general for comment. And we invite both of them to come on the broadcast when they can. and we'd like to continue that conversation. But if the governor is hearing us, we're here.
34:16We're still happy to chat. Well, we can have you both on it. We can do it right here on the set. That'd be fun.
34:24Next on Squawk Pod, how worried should Americans be about the water supply? Hackers, possibly from Iran, are targeting state water systems with cyber attacks. Head of cybersecurity at the Chertoff Group, Adam Isles, says bad guys using tech, that's nothing new. Open AI reported two years ago that the Iranian threat active group suspected of being behind these attacks was trying to use ChatGPT for offensive research. How good guys can steal themselves right after this. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills.
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36:23Welcome back to Squawk Pod. Hop on, Becky. Cue. You're watching Squawk Box right here on CNBC. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. The FBI says municipal water systems in at least seven states have been the target of cyber attacks. Iran is suspected to be behind these breaches. And joining us right now is Adam Isles. He is the head of cybersecurity at the Chertoff Group. Adam, let's talk through a little bit about what's happening here. We have now gotten reports that have come from about seven different states. We suspect it might be even more than that. But some of these water companies have seen issues where, you know, sensors have been turned off that would alert if there were chemical levels that were too high.
37:04Water pressure has dropped in some cases. It could potentially allow for sewage or other issues to sneak in. To this point, it doesn't look like there have been huge safety issues, but there have been boil water alerts that have been issued in some of these situations. What do you know about this right now? What can you tell us just in terms of what it looks like? Yeah, so beyond the seven states, we know that in some states like Minnesota, we've seen 30 municipal water systems impacted. Michigan's reported nine. So the numbers are higher. We saw going back to June, an attack on California Water Service.
37:41So we've seen this kind of build up. And, you know, why this is important, I think, is for three reasons. Cyber tradecraft by Iran, not a new thing. What's different about the situation we're dealing with here. One is the scale. We've seen attacks on water systems before, but it's been kind of a onesie-twosie thing. Here, if you just take Minnesota and Michigan alone, you're talking about almost 40 systems, and we know that more are impacted. Two, what are the bad guys doing? We know from CISA and the FBI that before disruptive activity is occurring, They're stealing these things called project files from these systems.
38:28What's a project file? A project file is like the brain of an industrial computer. Why are they stealing these things? This is not like IP theft. They're stealing them for disruption. And the third thing that we've heard from the government is that they're part of what's happening in at least some of these systems is they're shutting down the alarm logic. So we've got a different scale of activity than we've seen previously. You think this is a situation where they are looking to be retaliatory if we bomb a desalination plant there? They're going to go after our water supplies? Or is this just that these water plants are not as well protected as things like the energy grid or nuclear plants?
39:13Well, I'd maybe separate those two things. I think in terms of motivation, it's two things. It's generally raising the cost to us for going after them. Two, you know, there have been impacts to their water systems going back to June. And so is this a message? Maybe. I don't know. But the other flip side of this is the vulnerability of these systems. I mean, there was a sensing survey earlier that basically showed about 5 ,000 industrial computers from the manufacturers that were talking about having Internet exposed systems. So we're not doing nearly a good enough job at shutting these systems off from the Internet where they're reachable by bad guys.
40:03That was really my question. Oh, sorry. Go ahead. Go ahead. No, go ahead. No, it's a combination of an easier target and a motivated adversary. Yeah. I mean, this is the Internet of Things gone haywire. This was what people warned us about all the time. Is there a reason that these water systems need to be connected to systems that run on the Internet? Why aren't they closed systems like you would have with a nuclear setup? For efficiency reasons, and certainly part of what we want to see in these systems is resiliency, right, where they do have the ability to shut off the Internet and revert to manual operations.
40:41And that's part of what the government is saying. Make sure that if you need to, you can run these things on manual systems. The Washington Post pointed out in its article covering this that the Biden administration at one point wanted to have much more regulatory oversight and a sort of auditing of what was happening at these water plants and that the industry pushed back. It looks a little silly now. Yeah, I don't know that the industry pushed back on the threat or the vulnerability. I think they may have pushed back on is this a federal mandate or something that occurs more at the state level.
41:18But certainly the risk is there. And I would say it's amplified by, you know, I mean, the other part of this conversation is is artificial intelligence. And what we're seeing in terms of the weaponization of artificial intelligence. And we've got a couple of things going on there. One is it's lowering the knowledge gap for the bad guys. Some of these systems, it's like, I'm not sure if security through obscurity is the right term, but it's lowering the knowledge gap on how these systems work. it's enabling automation. And we know that AI is being used by bad guys. I mean, OpenAI reported two years ago that the Iranian threat active group suspected of being behind these attacks was trying to use Chachibut for offensive research.
42:04We've seen an AI-driven attack on a Mexican water system in January of this year. So the bad guys are getting more tooling as well. How should we look at this, A, from a business perspective of any water utilities that are out there, and B, from a consumer's perspective, how safe are you in terms of drinking the water that's coming out of your tap, showering in it? Yeah, so I'll start with the consumer piece. The CISA and the FBI have warned about, like you talked about before, You know, some boil water orders impact to, you know, how pumps work, et cetera. But by the same token, for the states that are talking about this, they're all saying that whatever else happened, the water is safe.
42:49But the broader point I would make is this. We're about a month away from the 25th anniversary of the 9-11 terrorist attacks. And so there's another piece of this that's about preparedness and about, you know, as a consumer, you know, maybe we want to stock up on bottled water for this and for other reasons. But we keep calm and carry on. They already do that in Mexico. How could you tell if the Mexican water was packed? No, I'm kidding. I've had some issues in the past. I think it's gotten much better. I think it's gotten much better. Although bottom water might, you can't have ice. You can mess everything up if you have ice.
43:30Maybe I'm immune by now, hopefully. Or you just can't tell the difference with or without. Exactly. Adam, overall, how would you gauge this threat level you were just talking about, though, with the upcoming 9-11, 25th anniversary? Look, I think it's a function of where the larger geopolitics go. But the thing we need to be concerned about is that the technology that enables the bad guys is getting better and more advanced. And we've got some catch up work to do on the good guy side. OK. Adam Isles with the Chertoff Group. Appreciate your time today. Thanks. Great to be here. That's Squawk Pod for today.
44:12Thank you for listening. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin. You can catch them live for three hours if you tune into CNBC every weekday morning starting at 6 Eastern. To get the best bits of that TV show right into your ears, follow Squawk Pod wherever you get your podcasts. We'll meet you right back here tomorrow. Have a great day. We are clear. Thanks, guys. Thank you so much.
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From the publisher
After months of negotiations broke down, New York State filed a lawsuit against prediction market Kalshi. Kalshi CEO Tarek Mansour responds to the allegations that his platform is “quintessentially gambling” and that it seeks to avoid paying the appropriate taxes. Then, Adam Isles, head of cybersecurity for the Chertoff Group, discusses the cyberattacks on water systems across seven U.S. states. He considers the likelihood that Iran is behind the attacks, as well as how vulnerable Americans are to attacks with the newest forms of technology. Plus, the U.S. is intervening to prop up the Japanese yen, and it’s a busy summer at the box office, with The Odyssey extending its time in theaters to meet demand for 70mm screenings.
Tarek Mansour - 15:23
Adam Isles - 37:01
In this episode:
Tarek Mansour, @mansourtarek_
Joe Kernen, @JoeSquawk
Becky Quick, @BeckyQuick
Andrew Ross Sorkin, @andrewrsorkin
Cameron Costa, @CameronCostaNY
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