What the Rise in Prediction Markets Says About Us ft. Nick Hartland

0:00Hello, hello, everybody from the top of the World Trade Center in New York City at Newsweek headquarters. This is The 1600. I am Carlo Versano, of course. So guys, I want to do a little thought experiment today. This country was stone cold dead. It's 2027. It's next year. You wake up, you reach for your phone. There's a notification from your AI News app. It reads, good morning. NVIDIA is up 3 % today. It's 72 degrees, it's sunny, and chances of a government shutdown dropped 8 points overnight. As you walk to work, that app dings again with a new notification. Odds of an invasion of Greenland have dropped 11 percent since Donald Trump spoke at Davos this morning.

0:37You get to work. Maybe one of your colleagues has offered to bet you that the boss isn't going to come in today. He's got some insider information that your boss was out drinking late last night. So this is the world the prediction markets are trying to build if they haven't built it already. And when I say prediction markets, I mean specifically two companies that we're going to talk about today, Polymarket and Calci. You've probably heard about these companies. They're doing a lot of advertising. They're in the media. They're in the news a lot. So we're going to try and make sense of what they are, what they're trying to do, the pros and cons of this technology, and what it all means for you.

1:10But this is the future that's coming, basically unlimited betting on just about anything you can think of from sports to geopolitics to the weather. And, yes, potentially even your interpersonal relationships. The question, of course, is this a future that any of us actually want? So today I'm bringing on, I have with me in the flesh, Nick Hartland. Nick is a strategy director at TripTK, which is a brand strategy consultancy here in New York City. Nick, thanks so much for taking the time to come over. Very excited to be here. Thanks for having me. And it's Triptick. Got to get that. Triptick. Yep, got to get that right.

1:43Triptick. Got it. And it's spelled Triptick. So that was my mistake. T-R-I-P-T-K. Gotcha. Okay, well, Nick, I brought you on because you wrote a great piece on Substack recently, and it was on Triptick Substack. and we'll link to it in the description. But it was headlined, Odds or the New Oracle? Decoding the Rise in Prediction Markets. So before we get into the specifics of your piece, again, because this is all very new to a lot of people, what is a prediction market? Before we get into the actual technology, what are these things? So they've been around a while, but in their current form, a prediction market, for let's say Polymarket and Kaoshi, the two most common, It's an online peer-to-peer marketplace where you can bet on the outcome of a real-world event.

2:30So let's use as an example the biggest real-world event that has been bet on so far, which was the 2024 presidential election. So if I think Harris is going to win and the price is – she has a 51 % chance of winning, so says the odds. someone can take that bet on the other side and at 51 cents and they can bet against my belief that she will win and then those contracts will pay out accordingly so if you're correct you're kind of buying a future dollar at 51 cents if that makes sense it's like a futures contract so you mentioned the 2024 election this was really the point at which these these prediction markets started started to to gain traction yeah in this sort of like the national consciousness i I mean, and not for no reason.

3:17I mean, they were more accurate than a lot of the polling, right? So I think that's the thing a lot of people in my job in the media were sort of like, well, we need to be paying attention to these because some of these polls have Trump down five, Trump down 10 a day before the election, but Polymarket has it 50-50 odds or Trump even ahead by a point or two. And they ended up being closer than the actual polls, the people who do this for a living. Yeah. There's also – I mean so since then, we should probably talk about the Super Bowl, which happened last week. Yeah. Calci and Polymarket – I've got to check my numbers here.

3:50But I'm pretty sure that they together – just the two of them did over$1 billion in bets for the Super Bowl alone. So the context there, in Vegas, they placed$130 million bets,$130 million worth of bets on that game. Yeah. So this is almost 10x the amount of money that's – What was it, 1.3 billion? 1.3 billion, I think. OK, yeah. So 10x, the money that bettors are placing in Vegas, are being bet on these platforms for that specific game. And not just for taking the Seahawks versus the Patriots. You're talking about you can bet on the halftime performance. Who's going to be in Bad Bunny's halftime show?

4:24The coin toss. The coin toss, right? The color of the Gatorade that the coaches get, the winning coach gets poured on him. Also, there's crazy parlays, I think. I don't think you can do parlays on Polymarket, but I believe you can do them on Calci. I saw somebody had a parlay thinking that they bet that Trump was going to invade or strike Iran during halftime. Obviously that didn't happen. But the point is obviously you can basically create these parlays and bet on just about anything. Yeah, yeah. So just to jump in quickly, I think the difference between the two big guys, Kaushche, the green one, Polymaga, the blue one, they're very similar.

5:04One, I believe one of the differences is CalShe sets their own market. Polymarket is user-generated. I can create a market. Me and you can make a bet on something random in the street. So, yeah, like that's a bit of a difference about them. Right. So I could make a bet that you, Nick, are going to trip and fall on your way back to the office this afternoon. Have you got the no sign or the yes sign on? Right, on Polymarket. and then we'll get into why that's tricky because then theoretically I could go push you and then win that bet, right? But Cal sheet makes the markets itself, which is an important point here.

5:44But there's – so during the Super Bowl, there were – I was sort of watching this in real time. Mickey, let me see if – can we pull up this? This is an anonymous trader on Polymarket. this person, whoever they were, placed an 11-leg parlay about who was going to perform during the halftime show. And this person hit all 11 of these bets, right? So they bet, you know, will Lady Gaga perform? Will Travis Scott perform? And these were people that were not listed on the Bad Bunny roster, right? No public information that, like, just to use Lady Gaga as an example, no one had any idea except for... Right.

6:23So here's the thing, right? So obviously this person, whoever they were, knew. They knew because either they were part of the rehearsals or they were a camera person in the arena or they worked outside and they saw Lady Gaga coming through the entrance. Who knows? But the point is they had material information that you or I would not have. That's right. And that's what makes this so tricky. So the CEO of CalShe, Tariq Mansour, he was actually asked about this on CNBC the other day. Mickey, can we take that thought there? So, Tariq, here's a question for you, though. I'm going to give you a really complicated one.

6:59It's going to be fun, though. It's a fun, philosophical, but maybe practical question. Okay, so let's say you're a dancer for Bad Bunny, and you knew what the situation is, and then you made a bet. It sounds like that would be considered insider trading, right? So that's a great question. And it is a little bit of a philosophical question. What is information and what is insider information, right? If you go park in front of a Walmart and count the number of people going in and out to estimate their sales, that's information. That's not insider information, right? If you're an executive at Walmart and have the numbers beforehand and you trade on that, that is insider information, material non-public information.

7:38Same exact rules apply to a regulated exchange like Calci, right? So if you did research and you were in SF and you were running around the stadium to try to get information about what song was going to get played, that's information. It's fair game to trade. If you had access to information that you're not supposed to reveal to the public, material, non-public information, you cannot trade on that. So the hosts then come in and basically make the point that I'm about to make, which is, I mean, this was not a very good answer by him. He's trying to compare these markets to regulated markets like stock markets here in the USA.

8:11And CalSHE is regulated, at least theoretically, by the Commodities Futures Trading Commission. CFTC, yeah. Now, the difference is if you're on the board of Walmart, using his example, and you have some material information about what's going to happen with revenue the next quarter, you're a professional. You're not going to trade on that information. And even if you wanted to, there's guidelines, there's guardrails in place so that you don't. You have to either sign an NDA or if you don't and you do trade on it, the SEC is going to come find you and you could go to jail for that. But nothing is stopping – back to Bad Bunny – nothing is stopping the guy who works at the refreshments counter at Levi's Stadium who happens to see who Bad Bunny is going to bring on stage with him.

8:57Nothing is stopping him from placing that bet on Calci or if he wanted to take it another step, telling his brother or friend to place that bet. right? You know, they have an insider trading problem, right? And it strikes me as that's going to do real damage to their reputation. Do they see that? It could. I think they, to some degree, have an insider trading advantage as well. Explain. Okay, so part of the value of a prediction market is that it aggregates a lot of information. So a thousand people could bet on something and people know different things. So everyone has different sources of information.

9:41And then they bet on it with a dollar amount rather than a vote. So not everyone gets a single vote. It's like a capital-weighted bet. So therefore it's kind of a measure of conviction. So I just want to kind of set the scene that prediction markets are very effective because of insider information. and it's really like where do you draw the line? And obviously there is this definition of material non-public information. But it gets a little bit trickier than that because, okay, a lot of this comes from the fact that they are regulated by the CFTC, not as a gambling company. It creates a few benefits for them.

10:24but the regulation is a little bit tricky for insider trading. I'm not a lawyer, but I've just done my homework a little bit and it's whether there's two major ways that that could be considered insider trading as per the CFTC, like a futures contract or something. The first is that if you had a duty to your employer, so that's where it gets tricky. Did the bad bunny dancer have a duty to their employer to not divulge that information. Perhaps not because – Who even is their employer? Exactly. Who is their employer? Perhaps they didn't have a responsibility because normally it's in the context of a Walmart employee and the competitors might need to know it and that.

11:10So what does it matter if it wasn't for the prediction market? What does it matter that someone leaks if not for the value of a surprise? And then the other point about insider trading is you can't be a government employee and leak information to bet on CFTC-regulated markets. OK. So here's the thing that sort of like scares me, right? So prediction markets, they – you actually wrote this in your piece. They shaped our understanding of reality to some degree, and that's the value add. Isn't it only a matter of time until it becomes a tool to manipulate that reality? yes i think uh i think that there's a lot of potential for the manipulation aspect i think things go wrong with prediction markets probably in two major ways there is the um unfair insider trading side of things where where you know um it may have seemed like a really good bet to bet against that like is lady gaga going to perform because no one had any idea right so she's paying 80 cents, like that 20 % on the other side, the no seems like a great bet, but it was an unfair trade because that person knew.

12:21So that's the first reason they go bad. And then the other is, can they be manipulated? I think that's where it gets like quite complicated. But there is, you know, we'll have to unpack this, I think, piece by piece, but can you theoretically shape perception by pumping the odds and increasing the odds? And in a future reality where we're really paying attention to this. I think, yes, you can. I think it'll get very expensive and who knows, you know, how, how deep some people's pockets are. So maybe we can pause there because there's a few layers to this, but, but can, let's just like take that first bit.

13:00Let's say, can I influence the public opinion? And if I have a millions of dollars and I pump the markets a bit to make an outcome seem more likely. I think that is a possible way to influence people's opinion, yeah, if we start there. Right. So here's sort of a hypothetical. I love dealing in hypotheticals, but we're sort of in a hypothetical world here. We are. So it's 2028. We have an election that is between whoever, J.D. Vance and Gavin Newsom. Probably. Something like that, right? So, you know, Newsom has a 30 percent chance of winning on Calci because Vance, and I'm not saying they would any of them would do this.

13:48I'm just saying like we're using an example. But the reason why his chances are lower than they might actually be is because Vance used, you know, some cutout or one of his donors to flood the prediction markets with bets that Vance was going to win. So it's manipulating the market, and that could then influence people because they might say, especially by 2028, maybe these are – maybe we don't even really use polls anymore. Maybe this is the polling. So then you have people who are going to say, well, look, I'm going to stay home because I'm not even going to bother voting because the markets are telling me that Newsom has only got a 30 percent chance.

14:23So why even bother when in reality it's closer to a coin toss? You see what I'm saying? Totally, and I've thought a lot about this because it's so possible. I think in the current state of prediction markets today, I don't see why that is not possible at all. There's no reason why. I do think it gets very expensive because let's say, so what were the odds? 30-70. Let's say they were 50-50, just to keep things clean and I'm not good at math. if the Newsom Vance odds were 50-50 and you started pumping money into the Vance side of that market in order to make it seem more likely to the public in your hypothetical you then have to buy that contract up at 51 cents, 52 cents, 53 cents it gets exponentially more expensive so I think that's probably the first thing to address they can still do it they've got money Well, that's the thing because if you're talking about something like – I mean you wouldn't do that for a Super Bowl bet probably.

15:25But if you're talking about the election for the US president, you've got real money sloshing around here. $10 million to manipulate a betting market 10 points, that's probably a piece of cake. Well, I know you had Curtis Lee Warren. Cuomo paid him$10 million to drop out. The Republican super – actually, I shouldn't say that. Super PACs, they have deep pockets. I suspect they're thinking about this already. There's a few more. I do want to kind of address this with a bit of nuance because I don't think it's as simple as number goes up, people stay home. There's a lot of interesting dynamics here.

16:01The first is that I think because it's a market, the number will self-correct a little bit, the percentage. So if we as like citizens of the public, I can't vote, but if I could, if I see that odd presumably artificially getting pushed up and I'm a trader, I'm thinking that's good money because now J.D. Vance is much – is super overpriced. So then I'm going to start buying new sim contracts because I know that it's not actually a 30 percent chance in this hypothetical. It's a 50 percent chance. So you're saying it almost self-corrects under that scenario. Yeah, I believe that to be true. I'm not a – I don't have a finance degree, but I understand that's how things will self-correct because the greatest incentive is the profit incentive, the profit motive.

16:50So people are going to start buying the other side and push the odds back down and the market will self-correct. And maybe there's a huge back and forth there between like retail traders and super pack pumping money. But there's that too. So I think the market will likely self-correct. So I think like any politicians watching this who are like getting some ideas, like maybe think twice about it. I don't think it's that simple. And then there's this whole thing about like, okay, let's imagine you can effectively pump the odds and you can convince people that J.D. Vance is very likely to win the election, more likely than he actually is in reality.

17:31then the next question is how does that influence behavior with influence perception what about behavior and to your example of people staying home i think um there is a bit of precedent here through pulse like we know uh that there's been all kinds of studies done about what happens when poles are lopsided when it's um when it's a uh what's the term a uh a landslide yeah a landslide is predicted is, again, it has a double-edged sword effect because if I want Gavin Newsom to win and Polymarket showing him as having a very little chance, a lot of voters might stay home, as you said. But if I want Vance to win and he's very likely to win, I might also stay home because he's already won the race.

18:18Like, does he need my vote? Interesting. And to be fair, right, I mean, polls are, as we said, polls are not by any means, I mean, They're getting worse as a predictor themselves just because polls have always been done mostly by calling people on the phone. And as you know, nobody answers the phones anymore. So they have less utility than they used to. So I think that's just an important sort of caveat there. I want to talk a little bit about regulation, sort of like the lack thereof. So CalShe is regulated, as we said. I've noticed they're doing a lot of advertising on social media lately. I want to make you can we bring up the screen grab from one of these ads?

18:58This is I guess this woman is some sort of influencer and she's making the point that she stopped working because she's now predicting the weather. OK, well, I don't think that's a good idea to quit your job to predict the weather. But regardless, you would never in a million years see I mean, say what you will about Caesars and MGM and the big gambling companies. They would never, ever put an advertisement out like this on TV or on social media because they understand that they are just asking for regulators to pay attention to them and to find them at the very least. Now, I think what's happening here is these platforms are betting that Donald Trump is the president.

19:41He's not exactly big into regulation, to say the least. I mean his own son, Don Jr., is an advisor to both Calci and Polymarket from what I understand. and an investor, I think, in Polymarket. It gets a little bit deeper. Tell me. Okay. So, yeah, he's an investor and advisor to both. Axios reported that Trump media, the media entity that owns True Social, the other various things they do, that they are beginning their own prediction market. Okay. Which I'm not going to say much more. I'm not a citizen. I've got to be careful what I say. I don't want to get you in trouble. Yeah, don't give me trouble, caller.

20:23I'll leave it there. OK, well, yes, a true social prediction market. What could go wrong? But the point about this, I think, is that one day a Democrat is going to win and even a moderate Republican is going to wander back into the Oval Office. And they're going to look at these, at least I think, and they're going to crack down on this. And I think somebody on Twitter, we were talking about this off camera, made a pretty salient point that Calci is going to be the next Juul. So Juul was this – Juul came on the market about 10 years ago as this product to help smokers quit smoking. I used it. It was great.

20:56It was a nicotine vape product that was better than any other vape on the market. So it did a social good. It got smokers to quit smoking to do vaping. I'm not saying vaping is great for you, but it's clearly better for you than smoking cigarettes. So what happened? Juul ended up – they pushed the boundaries. They started marketing to kids. Then they started marketing to nonsmokers. And Biden's DOJ takes a look at them and they say, whoa, whoa, whoa, you're way out over your skis. They basically end up shutting Juul down. I mean I think it still exists in some form or not. But it used to own that market and now it's just a measly player.

21:30So that point about this is how it's going to go with Calci and potentially Polymarket I think is an interesting one at least, right? Yeah. There's every chance that it could go the way of Juul. I think their marketing is, Kalshi's marketing particularly to call like, you know, what we just saw on the screen is just deeply unethical to market to very young people. And it's also illegal. Well, okay, this is where it gets interesting. They're regulated by the CFTC. If they were regulated as a gambling company, that would just be patently illegal because there's a number of things a gambling company can't do.

22:10Like let's say DraftKings. they can't say uh easy money or sorry like um like a free money kind of thing right they can't say that uh they can't say uh that uh that that is like a source of income and if you look at the other one mickey if you wouldn't mind am i going to pull stuff up yes i was about to be unable to pay my rent but i got two years rent through kaoshi's predictions it's amazing like that that So many red flags there. I don't even know where to start. Exactly. We could spend a lot of time on that. But that is illegal because you're positioning betting as a source of income. And aside from all the other achiness of put someone in a bad financial position, encouraging them to do that.

22:59But that's why the regulation thing is so interesting. If they were a gaming company, they would be shut down for that ad. But they're allowed to kind of like arbitrage this regulation by being regulated by the CFTC but also kind of not really with insider trading. It's such a gray area. And Polymarket also, which is – Polymarket had Nate Silver, who is somebody I really respect as a journalist. He's an advisor to Polymarket. And I always think of him because if you follow Polymarket on Twitter, they have one of the most insane sort of like Twitter manifestations I guess you would call it that I've ever seen.

23:34I mean they tweet things that are just patently false. We'll bring up a couple as examples. But it almost – it just feels like they're – I mean I guess they understand that the regulatory environment is good for them at the moment. But I don't know if they understand the way American politics does not – everything – things change. Yeah. I would be shaking in my boots about them come 2028. That could work out very well for them depending on who wins. but yeah it's it's not exactly a long-term play if i was operating in a gray area you know i work in marketing i have worked directly in advertising there's no way we would be making ads for our clients about that stuff like they're really pushing the boundaries when they're already operating in a gray area to bring it back to jewel exactly like that um some of the decision making is quite bizarre like i i don't really understand the play for the chaotic twitter presence where they're posting things that just don't appear to be true at all.

24:35I don't know the legality of that. I guess they're just looking for attention at all costs. I guess it's like everything else, right? It's attention. And I even saw this. I've got to find this. So Calci is expanding into attention markets was a headline I read. I don't know what that means. I have no idea what an attention market is. I have no idea, but the CEO said we want to financialize everything. I have no idea what that means either. So the financialization of everything is really what this is all about, right? So there's currently an active market on CalShe. Mickey, can we bring this one up?

25:05This market is will Jesus Christ return before 2027? Okay, so this is currently trading at 5%. That seems a little high. I thought so too. It seems like they're selling dollars for 95 cents there. And also, I mean, even if it's a good bet because even if you're right, I mean you've got bigger fish to fry if the resurrection is coming this year. Well, how good of a Christian have you been? I guess it depends. Right. But get this, right? So you have this market. You also now have a second market, also on Polymarket, asking if the Jesus Christ resurrection market will go above 5%. So you're essentially trading derivatives on the odds of the resurrection.

25:48Who is that good for in society? Bored people. People who have very little to do. So I think, no, there's no benefit for that. So that's the thing because the securitization of the resurrection, all of the financialization of the gamification of our society is something that – it's been talked about a lot. It's been talked about in the context of the sports betting apps, also some of these financial services apps like Robinhood. This is taking it to a whole other level. and what again the thing that i i just that strikes me about this is that there is a value add to these to these prediction markets right they're not it's not just crap and it's not just slop like you even said you cited the statistic in your piece one month before an event uh the poly market odds are 92 accurate four hours before that event the odds rise to 95 right so this is the wisdom of the crowds it is providing value it's providing some sort of like accurate accurate accessible signal to interpret the future, right?

26:55But it's just like if you also – if it's also populated by this sort of slop about the resurrection, it's just – I don't – it seems like they're just sort of shooting themselves in the foot I guess. I don't know. I think so yeah well I think my my take I've been very critical like to now of them and their marketing and all that but I do think there is a lot of interesting going on which is probably more what my piece actually explores um but yeah that I think there is some social good with having if we accept that this uh signal of probability is actually quite reliable I think it is I think that independent report by whatever company, Dune Analytics or something, if that is true, and I believe it to be, then that is quite a useful signal.

27:46So I do think they are kind of shooting themselves in the foot a little bit. I'm sure they would disagree. I'm sure they're seeking growth at any cost. But I think if we think about what type of markets are on, my assessment of them is that they use everything that's not sport as a marketing tool to bring in attention of like the novelty of all that, of Jesus, of invading countries. And I think someone was able to measure the proportion of Calci markets that actually are sports betting, and it's 90%. Right. So that's where their money is being made on sports betting. But yeah, it's just like this idea of like every part of your life being gamified.