Original subtitles

Today we're watching Argentina and Spain in the World Cup final.

We're in Las Vegas, Nevada at the Mirage Mega Mansion.

This is a winnable World Cup watch weekend.

The winnable is essentially only fans for the sports betting creator economy.

The guys in this house have made millions of dollars on prediction

markets, probably eight figures just over the course of the World Cup.

I like betting on Calci.

Training on Pauly Market.

Beginning of the World Cup.

You get to pick who you think is going to win the whole World Cup.

So before I started, I put $5,000 on Spain to win the whole thing.

So I put Spain to win.

When you wake up, you got to put on your lucky underwear, take a deep breath, say

a prayer.

I think prediction markers are low-key taking over the world.

Welcome to day four of flipping 1K into 10 grand on Polymarket. Now to an

industry skyrocketing in popularity, Prediction Market.

What are you guys talking about?

Prediction Market app, dude. You know, online peer-to-peer betting. $100 on

Kane to school.

Done. 10K on Jake Hall makes you $90,000?

There are two major players, Kaoshi and Polymarket.

They just really, really don't like each other. Kaoshi has just posted its

most... lucrative market ever who will win the finals of the world cup it is

shocking the extent to which prediction markets have proliferated thanks to

prediction markets you can now bet on basically anything and i mean anything

from taylor swift's wedding date to the chances of an iran nuclear deal we're

gambling on war the longtime teleprompter operator for the president

he's on leave now for alleged insider trading the long-term vision is to

financialize everything.

This is my life. Me, just like refreshing, refreshing, refreshing. This

is the hyper-financialization or hyper-gamification of our entire lives.

The whole world, unfortunately, has become somewhat of a casino.

I've been writing about the prediction markets for almost 25 years now.

The first real prediction market that we know of was started at the University of

Iowa in the late 1980s. They started with a really obvious one, how likely

a candidate was to win a presidential election.

You would buy a contract in Michael Dukakis if you thought Dukakis was going

to win.

that market proved to be exceptionally good, really better than almost all

polls. And by doing so, they create this really powerful kind of collective

forecasting machine that taps into what I call the wisdom of crowds.

The basic idea of the wisdom of crowds is that under the right conditions,

groups of people can be remarkably intelligent.

So... If you can figure out ways to tap into that wisdom of crowds, then you can

actually create tools that will solve problems. And even in some

circumstances, and this would be where prediction markets come in, forecast the

future. This is how it works.

Every prediction market starts with a question.

Let's say, will the US government acknowledge the existence of aliens by

2029? And that is a real market in Kaoshi right now. So there are two

options, yes or no.

In a prediction market, there are always two people trading against each other.

So for you to make this trade, you would buy shares of yes at 25% odds.

Another person would have to take the other side of that trade at 75%. The

price in the market is always changing.

And that reflects the changing opinions of the people in the crowd.

And you can cash out your bet at any point.

When the outcome is known, the winner gets 100% of the payout and the loser

gets nothing.

Cauchy and Polymarket, they make money by taking a transaction fee. The more

people that bet, the more money they make.

You've got all of this enthusiasm over World Cup and a betting bonanza. And

Kalshi did more than $5 billion in trading volume this week. Joining us,

Tarek Mansour is a CEO and co-founder at Kalshi. When he left MIT, he joined

really the giants of Wall Street.

Prediction markets are covering things that are top of people's minds, things

that are very kind of core and front and center right now.

And so sports have been an amazing propeller.

I mean, it's massive.

I mean, $30 to $40 billion in volume.

The growth has been incredible.

A lot of people watch sports, so it's an easy way to kind of understand what this

is and get educated about prediction markets.

A big chunk of the users essentially convert to other things, like the

economy, politics, weather, culture.

If you're not making money watching Love Island, you're doing it wrong.

You know, it's interesting. When we started the company, it was 2018.

This was a time where, you know, you saw the sort of first wave of

misinformation.

polarization the country being driven to the extremes social media

was supposed to be a solution to that but it ended up adding fuel to fire i am

over it the beauty of prediction markets is the incentive structure is the

opposite the the incentive structure in the system is true it's a truth that's

coming from people with skin in the game

And, you know, and you think about it, right? Like, you sit sometimes at a

dinner table at Thanksgiving, and everyone has all these crazy takes, and

you're like, hey, like, let's put $10 on it. And all of a sudden, they get a lot

more careful, right? The person that was so certain about their belief and their

opinion, all of a sudden, they're not so sure anymore.

It's objective.

It's mathematical. It's statistical in a way that all the other mechanisms are

not. And I love math.

I grew up in Lebanon with a single mom.

I lived, you know, the way I describe Lebanon is a very volatile country.

In this sort of complex, constantly evolving dynamic environment, I found

math to be a refuge.

And prediction markets are a bit of an application of that. You want the people

that are doing the research. You want the people that are, like, very sharp or

well-informed or smart. And imagine a society where we basically tackle a lot

of our big questions by thinking more.

Another Capri Sun?

Yeah. I just get nervous and I like drinking Capri Sun.

We're a bunch of people who bet and trade on sports for a living and always

trying to make as much money as possible.

In terms of placing this bet, yeah, you know, you just get...

Probably way too comfortable with moving around large amounts of money.

Since Prediction Markets started offering sports trading, I've made mid

-six figures.

I remember not that long ago when if Dayton lost 100 bucks, it would be

pretty devastating.

And now I think it would probably take 30 times to maybe even register.

And that's worth it to you guys?

Making a million dollars in like two weeks?

That seems pretty great to me.

And he celebrates like LeBron James.

Wait, Belgium just scored. Yeah, we missed it. The prediction markets are

faster than the streams, so Belgium scored before we actually got to see the

goal. Oh, you made so much. This is crazy. DTM just made like $50,000 on

that goal. Look at him. Doesn't even feel a thing.

The way it works, you have market makers, and then you have market takers.

And in the vast majority of cases, the market makers are sharp or smart and the

market takers are not smart in the sense that they are making losing trades.

I mean, Dayton used to work at Jane Street.

The people at Jane Street are often described as mathematical.

They're problem solvers in the most advanced way.

I mean, yeah, we're all.

only able to make money because people smarter than us haven't entered these

markets yet.

Describe your perfect counterparty. I think it's just, like, someone who

randomly, like, place orders and has, like, zero information.

Yeah, someone who just logs in and just wants to bet on anything that they see.

They're not making a sophisticated choice as to what they're trading.

They're just buying or selling.

whatever it is that's in front of him.

It's a fancy way of saying that he wants to be against the 19-year-old who's

randomly firing off.

I'm 19 years old.

I work as a chef and I like to bet on Kashi.

I think I've always been a little more...

impulsive and maybe adventurous than my peers.

A lot of my friends I grew up with didn't want to do crazy things as much.

Crazy things like what?

Gamble away all their rent.

When the Knicks made the finals, that's when I would say started the peak.

of how much I was putting into the call sheet.

I started with $1,000, you know, went up and down, and then I borrowed another $1

,100 from my roommate.

You know, I lost it all, pretty much.

I don't understand, but this is going very well.

Gambling can be incredibly dangerous and problematic for a lot of people. It's

especially true for young people.

I mean, we just saw Timothee Chalamet on TV saying, sign up for Kalshi, it's

great. And one of the things that is most dangerous, in my opinion, is an

influencer saying how they paid their rent by guessing the weather or some

person on YouTube talking about how easy it is to get rich quick.

The more people you expose to that advice, the more people who are going to

have serious problems.

be spain against belgium in los angeles this friday tonight i i'm i'm lucky in

boston and norway yeah we can see it the final screen which which isn't much you

know but now my portfolio is 300 and it's pending payout but he is

still smiling it has been the cause of significant stress

Like I haven't paid my rent for a month because of this specifically.

You know, I can say no, it doesn't have that much of a grip on me, but clearly

it does a little bit.

As of right now, I have $57 in my checking account.

Did you ever consider putting limits on your Kalshi account?

Yeah, there's a limit on my Kalshi account.

It's whatever I have in my checking account.

is the limit.

All right.

I'm going to hit the button in three, two, one.

My name is Dustin Galker. I'm the host of this podcast, The Event Horizon.

We're here to talk this week about prediction markets.

Over the course of the World Cup, Kaoshi has had the biggest days it's had in its

history. I don't think even I had a sense of how big this would be for

Kaoshi.

Prediction markets are the fastest growing industry this side of AI.

I have no doubt about it.

These companies have gotten big really fast.

Everything is disrupted by this. It's like it's changed how we view the world.

Polymarket kind of dominated for the early 2020s. They're crypto native.

and mostly unregulated offshore until recently.

Kalshi was doing this totally differently.

We spent four years getting regulated before we launched a single product.

We have more than a thousand markets across politics, entertainment, culture.

But the billions of dollars we're hearing are not on real-world events

that really matter.

Sports are about 85 to 90 percent of trading volume at Kalshi right now as we

sit here.

It may not be legally gambling, but what is happening is 100% just gambling.

Kentucky's attorney general is suing the prediction market platforms.

Accusing them of facilitating illegal sports betting. That's what all these

court cases are about.

Because gambling has always been the purview of the state.

A year and a half ago now, Kalshi said, we're going to offer this, but we're

going to do it under federal law.

No different than other exchanges where you can...

buy a stock or sell a stock we don't have to worry about state laws we are

legally under the federal government and that's it whether something feels and

looks like gambling doesn't necessarily make it gambling speculation exists in

all financial markets there's this patchwork state-based solution where

every single state is like some sort of weird backdoor lobbying the cftc started

off just being very hands-off then we got a new chairman of the cftc michael

selig And they became not just hands-off, but an active proponent of

the industry.

What is he doing?

I have to say this in a way that won't get me in trouble. Let's see.

Some people argue that it has to do with corruption.

Some people will say it's just deregulation.

I'm not here to pontificate on that.

It's hard to, like, separate the fact that Donald Trump Jr.

is an advisor to both calci and polymarket certainly the president his

family has a vested interest in the success of prediction markets and we

have a cfdc that is being very friendly now towards prediction markets

there's

agreements and and walls that are put in place such that We're not dealing with

any members of the president's family when it comes to policy.

We don't engage with the president's family on any of these types of issues.

So in my belief and understanding, there is no sort of conflicts of interest.

The prior administration didn't like the prediction markets.

I mean, that was very clear. They sought to ban the product with respect to

political prediction markets.

The courts threw it out.

And then we saw the gates open. Prediction markets are absolutely

exploding. Events in pop culture, in tech, in sports, in climate, in the

world, in literally anything you can think of. I've been in the seat for

about six months now, and there's no clear rules of the road yet. We're

trying to put those in place as soon as we can.

What's your message then to states who are trying to limit prediction markets?

The law is clear.

The law provides that the CFTC has exclusive federal regulatory authority

over these markets because they are national markets. To any state that

seeks to circumvent federal regulation and replace federal law with state law,

we will see you in court.

Bounced around this sort of startup tech crypto scene for a while. This NYU

dropout crypto bad boy.

He's now a billionaire.

I think that when people think about prediction markets right now, all they

think about is sports.

I love sports.

But I didn't start Polymarket for it to be a sports site.

Found myself in a lucky position.

It was during the pandemic.

I was broke.

I was living in the Lower East Side.

And I was like, when are things going to open back up? When people talk about the

vaccine, when's it going to be ready?

when's shelter in place going to be over? Are things going to go back to

normal? And I was like, this idea of information markets is the perfect, this

is the perfect use case in the perfect moment. And I think because of a mix of

my nerdy passion of markets and this sort of like academic literature about

what today, you know, we think of as prediction markets, plus maybe just

enough creativity and being so broke that I had nothing to lose.

The triad of that, I was like, screw it, I'm going to go build this thing.

You know, when polymarket really glowed up and became a thing, it was all about

politics. I think the real watershed moment, the inflection point, was during

the first debate between Biden and Trump.

When Biden started stumbling with his words,

the polymarket for him dropping out was skyrocketing.

And the Polymarket for him winning was tanking.

And someone said to me, it was like a really funny quote.

They were like, Shane, there's really two things that can happen here.

Either he'll drop out and you build one of the most important sites in the

world, or nothing's going to happen and you've lost all credibility. No one's

ever going to take Polymarket seriously again. And I was like, okay, let's see

what happens.

We are coming on the air at this hour with breaking news.

President Biden has just announced that he is ending his reelection bid.

When he dropped out, that was a moment. Just a stunning announcement from... And

then election day was this crazy moment where the way that the market moved that

night and called Trump winning when the TV stations were still talking about,

oh, it's neck and neck.

At the very end, we find a tie nationally. 49% for Harris, 49% for

Trump. Harris having a slight edge over Trump in the latest national poll, very

slight. Polymarket was spot on the entire time. Yeah. That was one of the

most gratifying moments ever, just because the idea worked.

The idea worked, and from that moment on, there was the level of credibility

that Polymarket had and the way people thought about it had just changed

entirely.

So prediction markets have gotten very popular, but there hasn't been a steady

evolution.

Another exotic idea from the Pentagon's Defense Advanced Research Projects

Agency, DARPA.

A futures market, if you will, in terror.

In 2003, the intelligence community was planning on launching public markets in

geopolitical events called the policy analysis market.

It was going to be open to anyone.

The hope was that the collective judgment of that market would yield some

useful information for the U.S. intelligence community.

What they mostly wanted to forecast were things like the political stability of

regimes or what was going to happen to oil in upcoming years.

But when they went to work and kind of advertised the market, they also talked

about things like whether or not there would be a missile attack from North

Korea or betting on assassinations.

There was this just massive backlash against it. The federal government is

encouraging people to bet on and make money.

from atrocities and terrorist attacks.

You're gonna make money if terrible things happen.

Why are we potentially creating an incentive for people to, like, go out

and try an assassination?

It is a tragic waste of taxpayers' money.

It will be offensive to almost everyone.

And the amazing thing is, as soon as there was any pressure, they folded. I

mean, the whole thing was over within, like, two days.

I think the main thing that has changed, honestly, is that we are just much more

comfortable with gambling.

than we were 20 years ago.

So when you give people the chance to bet on pretty much anything, it gets

complicated really fast.

And it seems like there are three big issues. Let's call them the dark side of

prediction markets.

The first one is insider trading. A U.S. Special Forces soldier who helped to

plan the January capture of Venezuelan President Nicolas Maduro has been

indicted. Now pleading not guilty, authorities say he won more than $400

,000 using classified information to win on Polymarket.

Polymarket says it referred the suspicious bets to the Department of

Justice. The second problem is the problem of people...

gaming, the things that are used to measure the outcomes.

This involves tampered weather data.

France's national forecaster has filed a police complaint after detecting

suspicious temperature spikes at Paris' Charles de Gaulle airport. Somehow the

equipment was tampered with, maybe a lighter, maybe a hairdryer, to give this

5 degrees Celsius spike in the reading.

Third, and I think by far the most consequential, is when...

The existence of a prediction market actually changes what people do.

There was a Cauchy market on whether or not George Santos would show up at the

State of the Union address.

I'm going to be there for the State of the Union in the gallery, guys.

Santos had reportedly made a bet on Cauchy on the no side of the contract.

That is, he would not show up. During the address, he posted...

Watching State of the Union from an airport TV was not part of the plan. By

skipping the speech, sources say he pocketed tens of thousands of dollars.

I do think going forward, they're just going to have to figure out how to

manage this.

All right, so where are we on requesting materials from the

traders in Georgia?

Any regulated financial institution is going to face people who come to commit

financial crime, whether it's money laundering, whether it's insider

trading, market manipulation, etc.

So I lead our investigations and the enforcement actions that we undertake.

Our team's grown quite a bit in the last year.

We have about 15 to 20 employees, individuals who are just focused on

surveillance. We have individuals who are surveilling for fraud, and then also

a legal team.

We've hired surveillance analysts from the FBI.

We have people with backgrounds with the CFTC and the Department of Justice.

There's been a significant increase in our investigative and referral efforts

over the last six months in particular, just as the exchange has grown.

surveillance algorithms are running over every single trade happening on the

exchange when they demonstrate some anomalous behavior whether that's a very

well-timed trade a pattern of very well-timed trades a very significant

price jump that occurs right after an unusual trade all those things might

trigger a trade that comes across my desk or the surveillance team's desk so

then There's probably 100, 150 each quarter that are meaningful

investigations that may lead to some finding of wrongdoing or disciplinary

action. And we've made dozens of referrals to law enforcement.

Any new product or evolution in technology leads to really smart, bad

actors figuring out how to game that system.

And the key is to try to stay one or five steps in front of them at all

times. You won't always succeed at that.

This is one of the big things that I spoiled myself with.

This is paid for by prediction markets.

With the press of a button, you can go from a sunlit room to what becomes

total darkness.

Brought to me 100% by Kalshi. My wife would not let me spend this money if it

wasn't just, like, bonus money.

Back in March of 2024, Kalshi really started to hit the culture markets hard.

In theory, their music and movie markets, the way that you win them is by

using math.

So I turned a $10,000 deposit into over $200,000 in about

six or seven months.

The most common plays that I would do on Spotify is who will get number one

during a given month.

June 28th.

I noticed some weird pricing on Olivia Deen.

Somebody thought that there was a more than 11% chance Olivia Deen was going to

get first.

And I thought the true odds of Olivia Deen getting first place naturally was

zero. This was an old song.

When I dug into the details, I was very concerned.

The data that I was looking at is the top 200 songs.

Most of them saw a drop.

Two of them were newer songs, like newer small songs. It's not unusual for those

to go up.

but for a well-established song to go up almost 20 percent like this drake song

did or seven percent like this olivia dean song did this is a very strong sign

that fraud was happening in theory somebody is stream botting or stream

boosting it's just artificial automated ways of of listening to music where

nobody's really listening to it they're just trying to run up the numbers so at

this point i had seventeen thousand dollars that drake wouldn't get first

place and i had thirteen thousand dollars that olivia dean wouldn't get

first place and i was quite worried so i started sending emails i emailed cal

shee i emailed spotify saying i was completely convinced that the drake

and olivia dean's streams were being botted But they didn't seem to take it

very seriously.

Then the results come out, and I look at who's in first place, and it wasn't

Olivier Dien.

And it wasn't Drake.

It was Malcolm Todd.

Like, what? That makes no sense. Malcolm Todd wasn't even on the radar.

as a possibility.

And if you look at this chart, you can see, boom, just this huge spike.

So his streams went up by 70% in a single day.

And then they paid it out. And then I was pissed.

Spotify removed the streams.

And they admitted that they were fraudulent.

But then in seeing how Kalshi handled it, how they just stopped replying i

liquidated my calci account so i withdrew maybe 220 000 there

are individuals who take a look at something and say i can conclude this is

bots and it's manipulation and they may very well be right but from a legal

perspective you need evidence to make that determination you can't just say it

looks like a duck and it quacks like a duck so it is we're gathering the

evidence we would need to make that determination but that's pretty much the

most that i can comment on in terms of specifics about that okay patricio it's

kind of the wild west right now regulation has not caught up to what

these markets are doing at all and as long as it's the platforms basically

policing themselves they're going to grow as much as they possibly can

Offer as many markets as they possibly can and consequences be damned.

It is day 11 of the U.S.-Israel war with Iran.

The strikes lighting up the night sky and sending people rushing to shelter.

My name is Emmanuel Fabian.

I've been working for the Times of Israel for around six years now.

I basically cover everything related to the Israeli military.

I'm at this point covering the Iranian attacks on Israel and Israel's attacks

on Iran.

On March 10th, there was one of several missiles that day which struck outside

the city of Bet Shemesh near Jerusalem.

They reported there was no injuries, no damage.

There wasn't anything particularly unusual in the grand scheme of things of

this war.

Much later that day, I get kind of an unusual email, essentially asking me to

change my earlier reporting.

And they were claiming that the missile that struck was fragments that were

following an interception of a missile.

And I respond to them and said, look, Residents told me that they felt a

massive explosion and a shockwave that shook all their windows.

And the army also confirmed to me that it was a missile that struck the area.

And then I started getting a barrage of messages.

They wrote here, if you do not correct this by 1 a.m. Israel time, you're

bringing upon yourself damage you never imagined you would suffer.

You make us lose $900,000.

We will invest no less than that to finish you.

It was scary at that point. I'm married. I have a young daughter.

I didn't know what this person was actually capable of.

At that point, it was very clear to me that it was bets on polymarket.

Essentially, the bet was, did Iran strike Israel on a specific date?

You can see that the amount of money that was bet here reached $23 million.

Those who had voted no were the ones trying to convince me to change my

reporting to say that it was intercepted.

But I was not going to change the story and it was going to stay exactly how it

is.

It wouldn't surprise me if there are many more cases.

Journalists being threatened to change their reporting, I don't think I'll be

the last.

Prediction markets are a cesspool.

Even if it is legal, right, is there something immoral or ethically

questionable here about betting on geopolitical events when lives are

potentially at stake?

We haven't done a good enough job in terms of, you know, distilling why we do

what we do.

I know that we are probably in some, like, vibe debt, maybe.

in terms of just how people kind of group PolyMarket in with a lot of other

stuff. It's the latest allegation of insider trading on prediction markets.

Someone opened an account on PolyMarket, and now they can make over a million.

What are your thoughts on this? This is just another coinkydink.

Cash is proven itself for the last few months.

We are applying these rules. No matter who it is, if somebody's going to try to

cheat, we will catch them.

It's not some sort of offshore thing where it's done in the shadows. It's

done right here in the middle of our financial system.

I know what happens in this office. Like I know the conversation we have. I know

what I care about and what drives me. And you have to kind of oscillate

between like cutting out the noise, but also understanding people's criticism

and concerns.

Maybe there's things that you missed that other people are flagging and maybe

they hate you, but maybe they're actually making some good points. This

is inherently evil and bad.

Do you think Kenzie's going to do the splits? It feels nihilistic, right? It

feels like.

Why are we betting on everything?

There's a place for prediction markets. I think they should definitely exist.

I think they have values.

I just think there needs to be more guardrails, more thought put into how

this industry has come about and where it's headed.

Right now, it feels like all gas, no brakes. When this is everywhere and you

have a completely gamblified world, people are not going to integrate it

healthily into their lives. And I'm as guilty of that as anybody.

I'm kind of just letting it ride.

When everything's a market, the opportunities for cheating are basically

endless. That's a reality that we're gonna, you know, be facing now, and it's

gonna be much more difficult to sort of, you know, find what's true now, and

that, I think, really worries me.

With a couple months to go until the midterms, we've already seen volume

that's far exceeded 2024.

What I'm most interested in about them is their usefulness for forecasting the

future. And these midterms are going to generate a lot of interest because

there's a lot at stake in them.

And so in that way, this is kind of one of the bigger tests of prediction

markets.

I think prediction markets have definitely hit critical mass.

The growth in the prediction market has been so fast because they work.

We're bringing the prediction markets data next to the news, next to polls,

next to everything else, so people can look at everything and make their own

independent assessment.

I think that it's inevitable that everyone will be looking at it to kind

of understand what will happen.

The only thing that you have to believe, to believe that prediction markets are

going to keep growing the way they've been growing, is that there's going to

be interesting news in the world.

I feel like there's so much work left to be done in terms of like the inventive

side of prediction markets and what could be that isn't yet.

we're very committed to this vision because we think it's one of the most

important things we could be working on and i feel like if i don't go and invent

that or realize that vision it probably won't happen