Bet on Anything, Everywhere, All at Once

0:00Bobby Allyn:NPR continues to follow the breaking news out of Iran. U.S. and Israeli forces launched combat operations yesterday. President Trump announced the airstrikes were targeting regime change in the country. We'll bring you much more tomorrow morning on Up First. And you can also hear the latest coverage on our national security podcast, Sources and Methods with Mayor Louise Kelly, or in the NPR app. I'm Aisha Roscoe and this is the Sunday Story from Up First where we go beyond the news of the day to bring you one big story. The recent Super Bowl was awash with betting and while most people were betting on the game, TikTok user at Caden Booth had other plans.

0:46I'm camping outside the Super Bowl stadium with this listening device for the next few days. Because you can bet on how long the national anthem will be so I'm going to try to time them rehearsing it and make money.

0:53Bobby Allyn:When the TikTok influencer showed up outside the stadium to time the rehearsal, he expected lots of people to be there doing the same thing. I thought I was going to show up here and there would be 500 people sitting outside. Like everyone's saying it's like so genius, but I really thought there'd be 500 people in lawn chairs all trying to make easy money. Booth used the information he got from timing the rehearsal to place a bet on the length of the national anthem performance and he won. These kind of niche bets are growing in popularity, especially on apps known as prediction markets. And the bets being placed on these apps go far beyond sports.

1:34Bobby Allyn:People can bet on things like who will be the 2028 Republican presidential nominee, the weather in a number of cities, or even how long a government shutdown will last. NPR correspondent Bobby Allen has been covering this new way to place bets, and he joins me now. Hey, Bobby. Hey, Aisha. Okay, so, you know, look, I've never placed a bet on these sites. I really don't like losing money. You know what I'm saying? Unless I'm getting something in return. But I know the two most popular sites are Kalshi and Polymarket, and I've downloaded Kalshi. Can you walk me through how it works? Sure. So pull up the CalShe app and within within a couple of clicks, you can connect this to your checking account so you can directly put in money.

2:27OK, checking your savings account and then you could start placing bets. You could see there's sports. There's mentions.

2:32Bobby Allyn:I see elections. Who will be the 2028 Democratic nominee for president? Who will win the 2028 U.S. presidential election? Gavin Newsom is at 21 percent. J.D. Vance at 24 percent. I see a lot of politics on his. So let's zoom in on just one. So the State of the Union happened earlier this weekend. People were going on these apps and making all kinds of bets, you know, on how long it would be down to like the second. You know, what words Trump would say. So would he say fake news? Would he say hoax? Would he say windmill, drill, baby drill? And, you know, traders were placing money on whether he would or not say these things.

3:10and then they stream the event live. And then it becomes this kind of like high stakes, edge of your seat, adrenaline propelled kind of situation where you're like, should I cash out now? Should I wait? Should I cash out now? Is he going to say it? Isn't he going to say it? And the people who are into these, they're called mention markets on Calci and Polymarket, do this all day. They get up at like 10 a.m. and they do it till three in the morning, going to press conferences around the world, trying to cash in on whether people are going to say or not say things.

3:38Bobby Allyn:So wait. So as you're watching the press conference, you could jump out or watching the State of the Union, you could jump out if you're like, I don't think he's going to say it. Does that save you money? Exactly. So the odds are constantly moving depending on how the conversation is going. For instance, if President Trump starts talking about oil, the chance that he's going to say drill, baby, drill is going to go way up. Right. Because it's related to that. So you see the odds move. So your money increases so you can cash out there or you can hold your breath and hope that he says the word you put money on and get a big payday.

4:13I mean, it's just really a crazy situation.

4:14Bobby Allyn:And so is NPR on these apps? Is there something about the Sunday story? There's no Sunday story market yet, but our CEO, Catherine Marr, there was many thousands of dollars being wagered on whether she would step down by the end of last year. People lost money on that who thought she would. And there is also a market about what tiny desk artists will be performing this year. And, you know, Aisha, if you and I really wanted to make money on that, we could probably make a few calls to make that happen. We have inside information on that. So we could make some money. Yeah, we really could. Now, I'm not encouraging that since that would probably be a federal crime.

4:57But yes, lots of people have access to information that could certainly give them an edge.

5:02Bobby Allyn:Today on The Sunday Story, we're going to do a deep dive into the world of prediction markets, what they are, where they came from, and where they're taking us. And we hear about who's winning on these platforms and who's losing. Stay with us.

5:25Life Kit can help you change your life in record time. In just about 20 minutes, a Life Kit episode gives you evidence-based tips you can put into practice that day. No fast-forwarding to get to the good stuff. Just smart, straightforward advice right away. Listen to the Life Kit podcast in the NPR app or wherever you get your podcasts.

5:46Bobby Allyn:We're back with the Sunday story, and we're taking a dive into the origins and growing popularity of prediction markets. And joining me to make sense of all this is NPR correspondent Bobby Allen. So, Bobby, can you give us an idea of like what these prediction markets are and where did they come from? Sure. So the idea of prediction markets, the first early instance of them was in Iowa in the 1980s during the 1988 presidential election, the George H.W. Bush election, because these political scientists thought, OK, we have punditry, we have traditional polls, we have the mainstream media. But what if people put their money where their mouth is and take wagers on the presidential election?

6:28And the result was so promising and it was more accurate than any poll at the time that this became a thing that political scientists have really been interested in and have tried to replicate in a sort of academic ivory tower kind of setting. And that's where it has remained until very, very recently. So jump ahead to right before the 2016 election, and Tarek Mansoor, who at the time was a Goldman Sachs trader, was getting calls from wealthy clients who said, look, if Trump loses, this could be bad for my investment portfolio. If Trump wins, this could be bad for my investment portfolio. How do I get exposure to this?

7:06Like how can I short this or how can I make money on this? What can I do? And there was no way to really do it. Tarek Mansoor likes talking about how there was ways to like invest in like a proxy. So you could invest in like the whole S &P 500 or invest in other things that might go up or down if Trump wins or loses. But there was no way to directly bet on the outcome of is Trump going to win or lose. And that was his kind of light bulb moment where he thought, I think there is demand here to allow people to just bet on outcomes. and here we are today and he has one of the most popular apps doing exactly that.

7:46It's called Kalshi. Here's Tarek Mansour at a recent event talking about his vision for the company. The long-term vision is to financialize everything and create a tradable asset out of any difference in opinion. So Kalshi, you know, they for years were at battle with regulators and regulators were really, really concerned that, you know, like we were just saying, insider traders could manipulate these apps, that they could create really disturbing incentives. Like imagine if there was a market for, you know, a politician's assassination and then that politician is killed and someone makes money on it.

8:19There's all kinds of situations.

8:20Bobby Allyn:It sounds like a Black Mirror episode or something. It sounds like a Black Mirror episode. It totally does. So because of just how potentially alarming the consequences of these markets could be, they were essentially illegal until very, very recently. Polymarket is another one. And it's Kaushy and Polymarket are basically the same thing. They allow you to bet on just about anything. Polymarket, the key distinction is it's mostly with cryptocurrency and it's overseas. So it's even more unregulated than Kalshi. You know, the Trump administration has cleared the lane for this industry to thrive.

8:53And it's just really, really, really growing in popularity.

8:56Bobby Allyn:Who's using these apps? Is it just, you know, your everyday person like who may hear this and go, I want to bet on what Trump may say or I want to bet on a tiny desk? It's a mix. There's people who maybe saw somebody on TikTok make a lot of money on one of these apps and they want to cash in on the latest get-rich-quick scheme. There's others who are former super-sophisticated, by-the-numbers Wall Street traders who are bringing a hyper-specialized understanding of finance and applying it to these apps, and they really have a lot of edge. There's people who maybe lived in a state where sports gambling was illegal, and these apps give everyone now the opportunity to bet on sports.

9:41So there's like sports betting folks who are getting in on it. And then you find people – because here's the thing. I mean I talk to these traders all the time. Most of them are young. Most of them are male. Most of them are chronically online. And some of them even first got interested in trading assets and the financialization of everything through things like Roblox. Like one trader told me he got really good. This one guy told me he got really good at trading digital assets in Roblox. And then he saw an ad for Calci and now it's his favorite thing. And he has hundreds of thousands of dollars in his Calci portfolio.

10:19So people are coming from all over the place. But look, I want to caution here because it's not that every single person who uses one of these apps instantly becomes super rich. I mean, the most common experience is losing money.

10:33Bobby Allyn:Well, that's what I wanted to ask you. Is this something where people can make a quick buck or is it like the casino where you're probably going to lose your bucks? They lose your shirt and your shoes. Yeah, yeah, yeah. Again, it really depends. And because both of these companies are private and don't exactly release like profits and losses platform-wide, it's hard to have a complete sense. But outside analyses that have been done of Polymarket and Kalashy do show that most people are losing money. I mean that's just the way it is. So like that, it's no different than walking through the casino doors and plunging your quarters into a machine and then leaving the casino with less money.

11:19That's the experience I would say most people are having on these apps.

11:23Bobby Allyn:So who are the winners? Like, who are the people? Who's that slim minority that's making some money? It is a type of person who, you know, pops a lot of Zin, drinks a lot of monster energy drinks, stays up all night to do this. And it's just a, like, terminally online obsessive young male who has nothing else to do but trade on these apps. Like a guy I talked to, Logan Suddeth. He's a 25-year-old who left his job as a financial risk analyst to do this full time. I trade probably like 100 hours a week now. So I'm sort of trading all the time. And sometimes, you know, trading for like all night and stuff.

11:58And so I'm a little tired sometimes. I mean, those are the ones who are making the most money. And I've been hanging out in some of the online communities where they're sharing tips, sort of banding together and figuring out investment strategies, you know, suggesting markets to these apps that and then the markets will be created and then they'll start trading on them. Those are the ones who are really making the biggest bucks. But look, there are other people I talk to all the time who have managed to make a few thousand here, a few thousand there, becoming like hyper-specialized in one area, whether they know a lot about music or sports or politics or the tech industry, whatever it may be.

12:38It's become kind of a way to make money on the side. It's become a kind of side hustle. But again, the pitfalls are real. People realize that, yeah, you may have made$1 ,000 just now, but your next bet, you might lose$2 ,000.

12:52Bobby Allyn:Yeah, I mean, it's one thing to know a lot about a certain sport or, you know, we cover politics. We know a lot about politics. But as you mentioned earlier, a lot of people have actual inside information that can give them an edge. Are there rules against insider trading on these apps? Like, is it illegal? Right. So by the letter of the law, yes, insider trading on Kalshi and Polymarket would be illegal. But we are just in, Aisha, some really uncharted waters here. So recently there was a case of insider trading where Kalshi discovered that Mr. Beast, you know, the huge YouTuber, had a video editor who was watching his videos early, editing them, and then betting on what Mr.

13:39Beast would do or say in the video. So directly profiting on insider information that he had. And this person was banned from the app and was fined. And it was all done by Kalshi itself, right? It wasn't done by the federal government, by some kind of regulator. And that's because the way the Trump administration sees this industry is that it could kind of police itself, that they're going to lean on self-regulation. They have all sorts of surveillance tools and a staff of people who are monitoring markets for anomalous trades. Like, you know, if you see someone who, you know, 99 % of the time correctly guesses what Google is going to announce before they announce, that's probably someone with insider information.

14:20It just looks suspiciously good, right? And another incident that captured a lot of headlines was around Nicolas Maduro's capture, right? Somebody bet well before it was publicly known that the Trump administration had a plan afoot. Somebody put down$32 ,000 that this was going to happen, which looked like a completely ridiculous bet in the moment. But then when the Maduro operation happened, that bet turned into a$400 ,000 payday on Polymarket. And that started all sorts of conversations like, are there other members of militaries who are using classified information to make money on prediction markets.

14:55What can be done about it? You know, what does this signal to the enemy, right? That if there's a bet that some kind of strike is going to happen, you're basically putting the target of that strike on notice. So there's not just the, you know, the ethical questions, but there's the concern that this could put lives at danger.

15:12Bobby Allyn:When we come back, predicting the future of prediction markets. Stay with us.

15:23Bobby Allyn:We're back with the Sunday story, and we're talking with NPR's Bobby Allen about the recent rise of prediction markets. So, Bobby, you mentioned that these markets have been around for a while. So why are they everywhere all of a sudden? Right. Well, when Kalshi first entered the scene, they were able to list markets on really niche, specialized questions, Like what will the Fed's interest rate be in three months or what – how will sort of commodities futures like crude oil and soybeans, how will those prices move up and down, right? And so they weren't regulated as a security like the stock market is, but they were regulated as a commodity, as a type of derivative, as a future contract.

16:10And so the CFTC regulates them, right? And they really wanted to allow people to wager on elections and to wager on sports. And the Biden administration fought them hard on this. But then what was the huge rocket booster for Kalshi was when they sued their regulator, they sued the CFTC and said, hey, guys, we should be able to let people bet on elections. And in a really surprising decision, the federal appeals court agreed. And they said, look, right now the concrete harm of letting people turn elections into a casino is just kind of speculative. Like there's no actual proof this is going to interfere with elections.

16:53So the court said, for now, it's fine. Let's allow it. And that was in 2024. And since then, they have just really multiplied the number of markets and the type of markets that are available. To give you a factoid, during the Biden administration, there was around 15 to 20 of these markets available for people to bet on. And today, there's more than 400 ,000. So that court case really opened the door to not just elections but to being able to bet on absolutely anything. And the Trump administration got in and dropped investigations, made regulations much more lax, and installed someone, Michael Selig, to chair the CFTC, who is a huge fan of the industry.

17:39And we do know from all available evidence that the Trump administration wants to see this industry thrive. In fact, there was a new White House advisory board that was comprised of leading figures from the crypto, fintech, and prediction market industry who are going to be giving the White House sort of advice on how to ensure that this industry continues to prosper. Uh, Logan Suttis, the trader you heard from earlier, who spends like 100 hours a week on these apps, told me Trump has really cleared the lanes for these apps. I guess Trump winning was definitely beneficial for me, even though I didn't vote for him.

18:18Um, yeah, I guess even like regulatorily, he's better, but also just like in general sort of chaos makes more trading opportunities. And it's worth noting that the Trump family is directly invested in this industry. Donald Trump Jr., the president's son, is an advisor to both Kaushche and Polymarket, and he's a partner of a venture capital firm that has invested$10 million in Polymarket.

18:45Bobby Allyn:So, Bobby, I mean, to me, this looks a lot like gambling. You have markets on who's going to win Best Picture at the Oscars and who will win the NBA championship. But these apps make the argument that this isn't gambling. How do they make that argument? And what are they saying? Yeah, they say there's no house, right? That it's not like gambling. Here's Carl Lockhart. He's a law professor at DePaul University explaining the logic. They're saying, oh, well, we're different from a sports book because for a sports book, you know, the sports book is taking the other side of the bets that the bettors are making.

19:24We don't do that. You're betting against other users, right? You're buying and selling these contracts between you and other users. Their argument essentially boils down to that. But they have a huge incentive to not be legally classified as gambling because that would subject them to state and tribe gaming commission regulations and all sorts of rules and paying lots and lots of taxes to states. It would be a total sort of regulatory headache and a business headache for them to be considered gambling because gambling is much more regulated than prediction markets are.