00:00Professor, good to have you on here. Can you draw a distinction between what Polymarket offers, what Calci offers, and
00:08where the CFTC leaves room for what is and is not allowed? Is that clear?
00:14Tim and Isabel, thank you so much for having me today. Really, this is an evolving landscape at this point.
00:21As you guys just highlighted, there's a difference between Polymarket and Calci. At present, Polymarket, for the most part, operates
00:29outside of the U.S.
00:30It is technically, if U.S. persons are not trading on it, really outside of the jurisdiction of the CFTC,
00:37and Calci is, of course, very much within it.
00:38Right now, of course, there is a huge effort just to try and get the regulators' arms around exactly what
00:46is going on in terms of being able to set some guardrails for U.S.-based, U.S.-controlled prediction markets
00:54and actually create a value on compliance and good standards as something that is going to promote market growth and
01:04integrity.
01:04So, for example, last week, the CFTC came out with an advisory saying that they were very positive about Calci's
01:12actions to discipline two traders for insider trading on its platform.
01:16The CFTC emphasized that it has jurisdiction over these issues.
01:21But at the same time, of course, a lot of commentators are pointing to the fact that Polymarket is outside
01:27of the U.S.
01:28It is trading contracts that are potentially a little bit in that gray zone that the CFTC is really unable
01:38to get its reach around.
01:39So this is very much an evolving area, Tim.
01:42Do you think that Congress could step in to clarify the rules around maybe material non-public information in these
01:48kinds of markets?
01:49Isabel, this is something that the CFTC, I think, is actively working to do.
01:53Now, one thing to emphasize here is that the CFTC is a regulator for derivatives.
01:58These are contracts that are helping people to hedge their risk in the market.
02:02So with respect to oil or wheat or credit risk.
02:06Now, in the case of derivatives in general, if you're looking to hedge a particular risk, you're the person that
02:13knows the most about it.
02:15So in that context, generally for derivatives markets, there's a greater tolerance for being able to use information that is
02:22inside to you, that is really private to you, to be able to take those positions.
02:27Now, in the case of prediction markets, of course, there is a very different game in town, which is that
02:32increasingly what we're seeing are people who are very close to the action,
02:36people who are maybe at Bad Bunny's show, people who are, you know, like the camera people or the people
02:44working in the gardens, people who are working at Taylor Swift shows that are able to have some really detailed
02:49insights into what is going on.
02:50Now, establishing who has the duty to keep information secret, not trade on it, that is one big question.
02:57And then, guys, there's another big question, which is how do you enforce this stuff?
03:01The enforcement part is extremely difficult, particularly if you have markets like Polymarket, where folks are operating on blockchains and
03:10are therefore much more pseudonymous.
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