00:00It's interesting to see this at a time when prediction markets are just exploding in popularity and use,
00:06and so much of what's happening on prediction markets are sports-related, coincide with, I mean, one of the biggest
00:12sporting events on the planet.
00:14Is it a make-or-break moment for these platforms?
00:18Tim, Scarlett, thank you so much for having me.
00:20This is a super-charging moment for prediction markets.
00:25Tim, you mentioned at the outset just the sheer volumes that are happening.
00:28When you look at the Polymarket winner contract, just betting on who's going to be the winner,
00:33it's seen almost $3 billion worth traded on that contract alone.
00:38Kyle, as you mentioned, has seen $6 billion worth of notional trading volume.
00:42When the World Cup began, its notional trading volume surged by almost 40% in that week.
00:49So in terms of just where we're going with this, presidential elections really brought prediction markets into the game.
00:57The game now, being football, is making prediction markets so incredibly mainstream.
01:03This is a deeply important moment for the prediction market industry.
01:07What happens from here on in just shows the incredible popular appeal of prediction markets,
01:12particularly as we're having a 39-day tournament where the volumes are likely to grow as the game goes on.
01:19And Yeisha, you are particularly troubled, dismayed, by what you see as content creators who are college age,
01:25so really appealing to young people, using dummy trades to promote trading to U.S.-based investors.
01:31Walk us through what you've seen and why this is so problematic.
01:34Well, one of the big, you know, one of the big appeals of prediction markets has always been this incredible
01:40transparency,
01:42the ability of people to bring their information into the fore,
01:46like being able to sort of put their perspectives into the prediction market to be able to get a real
01:51sense of insight
01:52as to what the probabilities on a particular outcome are likely to be.
01:54Now, Polymarket, it's been alleged by the Wall Street Journal, has been putting out a whole bunch of viral content
02:00that the Wall Street Journal piece alleges was completely fabricated and untrue.
02:05What this was, you know, what the article was putting forward was that college-age creators
02:09trying to potentially appeal to that age demographic were making bets that were basically false
02:16and being persuaded or being pushed towards attracting U.S.-based clients.
02:21Now, why that's problematic from a legal sense is that Polymarket is not supposed to have U.S.-based persons trading
02:28on it.
02:28So just in terms of, like, the ethos of the prediction market industry, transparency, bringing information in,
02:34sits very uneasily with this marketing trend to maybe push viral content that, at its heart, is just not true.
02:41And that really creates a problem for regulators as they look to get their arms around how exactly to regulate
02:47this marketplace.
02:48Professor Yadav, I'm curious about the market integrity.
02:54And maybe it's not as big of an issue with the World Cup and more of an issue with so
02:58-called mentioned markets.
02:59But when you have so many players, Kalshi, Polymarket, Robinhood's Rothera, DraftKings, Coinbase,
03:05all getting involved in World Cup betting, who is responsible for market integrity across this landscape?
03:13Tim, you're asking the now $10 billion question, which is who gets to regulate this market.
03:19And I push back gently on the notion that market integrity is maybe not as important in the World Cup
03:24scene.
03:24The financial stakes here are huge.
03:27There are market makers here, which are professional institutional market makers that are jumping into this market.
03:31And as you and Donitza and Scarlett were mentioning earlier, insider trading continues to be an issue even in the
03:37context of the World Cup.
03:38So, for example, injury news, who the potential folks on the bench may be, who's going to start the lineup.
03:47These are all issues that can potentially be subject to knowledge that those in the locker room, those in the
03:54stands, very close to the action can get into.
03:56And so, you know, market integrity does get implicated here, potentially in a hugely consequential way.
04:02Yeah, look, I retract my point earlier because all the things that you mentioned, I was only thinking about the
04:08score and just the outcome of the games.
04:11But, yeah, but when you mention all those other things that can be predicted or bet on, you're absolutely right.
04:20The circle of who has knowledge or control of those things just gets bigger and bigger.
04:24So, Tim, you know, this is the 400 contracts, more than 400 contracts just in a single prediction market alone,
04:32you know, trying to reference any variety of outcomes, including things like, you know, who is an injury candidate for
04:38a particular game.
04:39You know, so these are these are potentially very problematic instances where regulators have to keep track of a deeply
04:46moving market and set of scenarios.
04:49Now, you asked at the very outset who's going to regulate this. Well, the short answer is the CFTC is
04:53pushing to be the regulator for this market.
04:56But 11 states now are pushing back and they're pushing back in a super hard way in a in a
05:02in a set of facts and circumstances that many commentators suggest will only be decided ultimately by the Supreme Court.
05:08Huh. Yeah. I mean, if not the Supreme Court, maybe someone else. We're talking about 20 billion dollar monthly volume
05:14with World Cup bets, sports contracts and crypto sports books all blurring together.
05:18I guess the distinction has kind of, you know, collapsed. And I wonder if Congress should just step in and
05:24perhaps regulate these as gambling platforms.
05:27Well, you know, you're asking a really deep question, Scarlett, which is what is this thing?
05:33The CFTC is arguing that these are essentially a form of derivative event contracts.
05:37The states are pushing back to say this is sports gambling. This is our domain. This is what we're really
05:42good at regulating.
05:44But as you can see, Scarlett, as you just mentioned, the financial stakes now are huge.
05:48The popular stakes now are huge. The complexity is huge.
05:51And so in that context, everybody has real skin in this game to be the chosen regulator for this space.
05:58Now, the fact that sports has become such a big component of it and not presidential elections as it was,
06:03you know, previously, you know, amps up amps up the level of controversy even more.
06:09And so it's really up to the CFTC to show, to make the case for itself that, in fact, it
06:15is a designated regulator.
06:16These are, in fact, derivative contracts and that it, in fact, has the capacity and capability to oversee what is
06:22now becoming a really mammoth and financially consequential market.
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