E297 - Peter Hammon

Speaker A: Do you sense that there's like a little bit of like a gold rush mentality with some people here where this is like, get in while the getting is good, you know.

Speaker B: Absolutely. Jump in with two feet into prediction markets if they have an opportunity today. Yeah.

Speaker A: And welcome back to another edition of the Business of Betting podcast. I am your host, Jeff Edelstein. I'm a senior analyst over@ingame.com and I am joined today by senior of counsel over at Velawood, Peter Hammond. Peter, good morning.

Speaker B: Good morning, Jeff.

Speaker A: Bright and early for you out there in California, huh?

Speaker B: Bright and early Monday morning out here on the west coast. So. But anything for you. Anything for you.

Speaker A: You're the first and only person who ever said being out in California. I am curious. I mean you're a gaming attorney, you've been in this space now, you know, it uh, looks like for well over a dozen years. Do you sometimes feel like you're out like, you know, in Siberia because, you know, the whole world's been like, you know, all of America has been legalizing sports betting. Some states with the I casino and here you are all over in California said, hey, I'm over here guys.

Speaker B: Well, I'd like to think of us as a bit of a late blooming state, Jeff, but uh, we're a uh, never blooming state as the case may be. But uh, I got my start working for a company called Smarkets which had offices in London and in Los Angeles. So I actually got super lucky because I didn't have to leave LA to really learn the sports betting exchange business. Obviously Smarkets was and is a sports betting exchange and now a DCM applicant actually. So I got a crash course from right here in California in, you know, how to run a, uh, what we would call an early version of a prediction market. So got very lucky. I will say this for this one would be for my wife, but uh, she gets super jealous because most of my clients are east coast based or European based. And every day by about 2 I'm kind of winding down the work day and uh, so that usually means I'm on cleaning up the kitchen or making dinner duty. So it's trade off.

Speaker A: It's not bad. It's not bad. So yeah, I want to go back to Smarkets actually. Uh, when you see what's happening now in the prediction market space and you look back to like, you know, your time at Smarkets and try to get the exchange betting, you know, off the ground, what's the feeling? What do you you know, too early. Were you too early to get it? I mean, like, how do you, how do you reconcile it?

Speaker B: It's one of those classic, you know, and Smarts was not a startup. Right. And for those who don't know the history of Smarts, I mean, before I started working there, which was in late 2017, so pre Paspa, but Paspa was coming down the pipe. Smarkets had a thriving challenger exchange brand to, to Betfair in London. And I think they still are the, the second largest, either them or Matchbook. I know you had Alfonso on for Matchbook a couple weeks back, but it's still Smarts or Matchbook that are really that second place to bet fair in the UK for the exchange market. And you know, for me, because I got my start there, I learned the exchange business first, really, before I learned the sportsbook business. So I have always come at this industry from the perspective of a, uh, prediction market or an exchange primarily. And it really was a case at Smarkets, I think, of being too soon. And, you know, I had another experience similar with that with Sportrade over the last four or five years as well. But I really think if we had started the Smarkets USA journey today or a couple of years ago. Yeah, it might have been a very, very different picture. And who knows, maybe they'll still get there.

Speaker A: Sure. Absolutely. You know, I look at like Alex Kane at Sportrade and, you know, the Sparkus team, in my mind, I have this like, image of like a child holding a fishing pole, waiting for like, you know, the divorced dad to show up to take them fishing. And they never show up. Like they were there, they were ready. And it just, I feel like they're being usurped by, you know, what's been going on with the, you know, prediction market thing. Listen, you're a lawyer, right? And so this whole sports betting versus trading, we're not taking bets, we're not the hell, you know, how durable do you think this distinction is going to be if it actually does end up in front of, you know, nine people in black robes?

Speaker B: You know, you could ask, I think right now, nine different attorneys, and they'd give you nine different answers and they'd all be wrong. My, my attitude, you know, I think the, you know, I hate to kind of question the, the question here, but I think the more interesting question is what are the arguments that prediction markets can put forward for why they should be regulated differently for from Sportsbooks? Because to date, the primary arguments that I think have been rolled out are we're peer to peer or in some version of we're more fair than a sports book. Neither one of those is going to be persuasive either to state gaming regulators or to the Supreme Court. Because the reality is states already regulate gambling activity that's peer to peer. I mean that's what poker is. When you walk into a casino, that's what the early days of daily fantasy sports was, was actually a true peer to peer marketplace to go in and set a lineup and compete against someone else's lineup. And not to mention majority of states that legalized sports betting also included exchange wagering under the definition of what is a sports bet when they legalized. So the states, whether consciously or unconsciously, had already conceptualized of regulating prediction markets on sports or you know, sports betting exchange, whatever terminology you want to use. I set the politics aside, set the, you know, the war markets or you know, what did Tariq call them, Military action markets aside for the moment. I think that the argument that I haven't seen that I would like to see be made is the more in depth discussion from prediction markets about the business model and the revenue model. Because fundamentally the, the states that legalize sports betting, even though they may have included a reference to exchange wagering in their statutes, the way that they tax and regulate sportsbooks is completely untenable. If you were going to also regulate prediction markets or sports betting exchanges, it simply can't be done. Reason being states are taxing, you know, the traditional draftkings in fanduel model as how much money did your customers lose this month? Send us a percentage of that after some reasonable deductions. That's your gaming tax rate. Well obviously in a prediction market context or sports betting exchange context, that number isn't going to make any sense because whether it's a peer to peer wager or a peer versus a market maker wager, you're not going to have that same definition of a customer loss or that number is just not going to look the same as it does does on a Fanduel and DraftKings because theoretically as an exchange you want to be as close to neutral as possible. So the states simply can't take the current iteration of statutes and directly apply them to exchanges. This is a problem that when I was with smarkets and when I was advising sport trade for the last five or six years, we ran up against constantly because we would have to do three, six, sometimes a year of background with a state regulator, you know, New Jersey and Arizona and by the way, I got to give them credit, credit for being pretty receptive to those conversations. But it was like trying to fit a round peg in a square hole with the sport trade or smart kids business model, fitting it into the existing definition of state sports betting and how to tax and how to regulate that activity. So I would love to see, you know, Tarik and Shane and others take that argument and run with it a little bit more than just saying, oh, we're peer to peer, therefore it's not sports betting. Because that's the reality is that's not true. It's never been true. And I don't think that argument is going to be persuasive. And I, you know, for me personally, I would like to see a thriving prediction market or sports betting exchange market because it's good for me, it's good for my clients. So I, I would like to see this Runway last longer than the next

Speaker A: couple of years now. And I know like, I don't want to like step on your toes here like concerning your clients and stuff, but like for the established sportsbooks who are now trying to get into the space, DraftKings, FanDuel, you know, then you have the fanatics and underdog, like where do you think their best play is? Is it fighting hard tooth and nail against it, which they're not doing? Is it, you know, jumping into the deep end with them? Is it trying to get like that, you know, casual customer like that they prove to be good at? There's, I guess what I'm driving at. Let's say this all works out. There's no way that there's four dozen prediction market companies, you know, battling for the dollar. Right? So like, you know, if you're established and you're, you're already out there, how do you like now climb this hill and try to knock basically what amounts to Kalsi off of it?

Speaker B: I mean, Kelsey's got a pretty good head start now, uh, as you know, but I think the answer is going to be different for some of those names that you just described. So, you know, because I got my start in this business in house and not necessarily as an outside counsel, I, I learned the business first and did a ton of business development work early on in my career. What I see happening Here, you mentioned four dozen DCMs or four dozen exchanges. If that ends up being true, and I think you're probably right, in the next year or so, then the real value accrual, uh, or value driver is going to be at the layer below the exchange. So these are going to Be your market makers become incredibly valuable because of there's going to be scarcity of market makers to meet the demands of 48 or 50 exchanges when liquidity is key. I mean liquidity is king here. Whichever one or handful of those exchanges has the best liquidity, the deepest liquidity, they're going to be able to, you know, acquire customers and keep those customers from churning out to another exchange. So market maker layer critical. So I would be, if I'm one of those companies you just mentioned, I would be thinking about setting up a separate entity to just do market making. You see, DraftKings is already doing this. They're already hiring role, uh, trading roles. But if I'm fanatics, I'd be doing the exact same thing. The other layer where I think you're going to see value given how many exchanges there are going to be is the customer acquisition layer. So that will be your fcms, your future commission merchants. All new language to me, but basically think of them as in our traditional sports betting parlance, like your marketing affiliates. Although they do a heck of a lot more in the prediction market context than they do in the sports betting universe. So this is going to be. Can you, if you're fanatics, for example, I really think for them I would just be an fcm. And I know that's how they initially started maybe a year ago, but now it looks like they're doing a full pivot to dcm. And frankly I, if I were them, I would focus on how can I funnel my existing fanatics, sports betting users as well as this giant database of customers that I have from the retail sales market that I have where I, I know exactly what my customers favorite teams are. I know exactly where they're based in terms of which state and I know how old they are too. I would be thinking very seriously about whether if I'm fanatics, I could become the most important FCM in this universe and I could basically control the flow like Robinhood was doing last year of which uh, exchanges get these orders and which exchanges actually end up with liquidity. If you like Robinhood can control that market, then you are going to make a boatload of money without any of the risk of actually running the exchange itself.

Speaker A: Going back to the customer acquisition thing for a second I'm in New Jersey. I mean I've noticed there's some like marketing going on with Kalshi. That's about it. Boots on the ground in California. Like what are you seeing as far as like marketing and advertising when it comes to all this right now.

Speaker B: You know, I don't know if it's just my personal experience because I listen to so many freaking sports podcasts all day, but I can't avoid it. Whether it's on Apple podcasts, Spotify or, you know, when I put on YouTube. Every other ad is for Kalshi. You don't see the same for polymarket, but specifically Kalshi, out here in California it is impossible to avoid. And I was down in Texas in March and April, it was the same thing, which makes me think, understandably, so they are spending the majority or, you know, or significant plurality of marketing dollars in those two states, which makes perfect sense.

Speaker A: What's interesting to me, and obviously what's interesting to everybody is like, you know, it's so weird. It's like we're talking about two different things, prediction markets and sports books. Going after kind of the same customer on, you know, parallel but never the twain shall meet tracks, you know, and there's plenty of people who are trying to market makers, I'm sure, whatever. But there's plenty of people that are like at 9:10am they're in the sportsbook streets. At 9:12am they're in THE PREDICTION MARKETS at uh, 9:13, they got three tabs open. They're everywhere. How do you balance that? You know what, what's your role in helping out there?

Speaker B: Yeah, actually I actually saw a version of this question bouncing around LinkedIn over the weekend. Someone was asking for, you know, legal or consulting help on how to set up a market making business with employees in the States. But we want to trade on prediction markets here domestically, prediction markets internationally, because obviously you have the poly market international version as well as a ton of offshore prediction markets that shall go nameless for now. Plus you have the domestic US sports betting universe where market makers oftentimes play a, uh, different role, which is as a sports betting supplier, sometimes providing not liquidity, but providing advice on odds and risk management to sportsbooks. So one of the things that I've been working with basically since, you know, early 2025 is how to advise clients on managing the risk, both the legal and regulatory risk of trying to operate both in the regulated domestic sports betting universe as well as the domestic prediction market universe, as well as oftentimes a significant international prediction market or international sports betting or market making business. And the answer is going to be different for each client because the risk reward profile is going to be totally different depending on, you know, the size of the organization. So you might have somebody who is now running their own version of a market making business out of their garage didn't have that opportunity two years ago versus some pretty large, you know, 50 to 100 employee organizations with 35 to 40 traders who were previously just working with, you know, fantasy sports companies, maybe booking those large 15 leg parlays on DFS sites or working with sportsbooks to manage risk in the background that are now presented with this incredible opportunity of hey, I don't just have to be a risk manager and take a small percentage, I can now market, make or trade on these venues and keep the majority of those profits for myself. So that's tremendous opportunity for these companies. And oftentimes, you know, without giving out too much free advice, there's basically two risk profiles. One is that legal regulatory risk, the other is an operational risk because you have to manage your relationships with your preexisting clients like sportsbooks or daily fantasy sports sites who obviously understand what's going on and they don't necessarily want to see you splitting your time, but also to be able to manage those relationships with regulators and help those regulators to understand what you're doing, what you're not doing and why. So that has been a huge chunk of my day to day business is trying to kind of keep all those plates spinning because again for these market makers it is just a tremendous opportunity right now to make a ton of money in prediction markets. And I think some folks were a bit slow to adopt or adapt to that, but people are really catching up now.

Speaker A: You really seem to have a very like cellular level understanding of all this. And uh, I think, and I'm going to ask you later about your background because this is all like, you know, this is where you've been spent your entire career. But do you sense that there's like a little bit of like a gold rush mentality with some people here where this is like get in while the getting's good, you know, because you don't know how long it's going to last.

Speaker B: I understand it. You know, it reminds me a lot of, you know, it's funny, I, I started in 2017, so nine years ago, really eight and a half years ago. And I feel like I've lived three or four careers already with. Because I started pre Paspa, then you had Paspa, then we had the evolution of daily fantasy sports happening at the same time as states were rolling out online sports betting for the first time. Then you had the sweepstakes craze from a couple of years ago. And now again I started with exchange wagering. Now we're somehow all the way back to exchange wagering or prediction market. So I do have a little bit of a more 30,000 foot view, um, perspective because I've seen these different online gaming niches rise and fall rapidly and sometimes without warning. You know, particularly in the sweepstakes context that that happened pretty quickly. I have to be, you know, part of my job is to look at the crystal ball and help clients to understand what are the probabilities of what could happen. And while I do advise clients to absolutely jump in with two feet into prediction markets if they have an opportunity today, because otherwise you might be missing out on a, you know, a generational opportunity that that's not going to come around again if the Supreme Court case doesn't go their way. But also to do it with a perspective that in 18 months to two years you might have to walk into your partners, your sportsbook partners, your DFS partners, your state regulators and be prepared with a mea culpa. You know, I look at folks like profit and novig and sport trade that even DraftKings and FanDuel that are fully now embedded in the prediction market industry. And you know, particularly for those first three that I named, I don't think there's any going back. And uh, by the way, I think they're making the right decision in terms of risk and reward. But there is an understanding, I think within those organizations that this is it. There is not a really a pivot back to traditional sports betting after you have completely left that industry to start over in prediction markets. So if at all possible, I'm advising clients right now to make as much money as you can for as long as prediction markets on uh, sports are an opportunity. But keep one eye open or keep one eye on the existing, you know, long standing businesses that you've been running in the US for in some cases 10 years. Because it's very possible two years from now that we'll be back where we were pre2024.

Speaker A: I'm starting to get a sense and I'm seeing it, I've seen it written more than once, I've seen it uh, tweeted more than once. And like every day there's another story about prediction markets and a major media outlet. Uh, like, you know, it's huge, obviously. Do you think it's possible, and I'm not going to ask you to put yourself in the mind of a Supreme Court justice, but are we like getting to moving towards like too big to fail territory?

Speaker B: You know, I don't Think so. Because to me the question is so fundamental that I, I'm not sure too big to fail is going to matter to the Supreme Court because the question is really not whether, for example, the CFTC can regulate the activity. I think they could if they had the proper staffing and the right mindset about it. I think certainly different administrators, different past versions of the CFTC have both considered regulating the activity, you know, and thought really critically and thoughtfully about it. So I think the question is just fundamentally whether the states first get to decide what is sports betting or the federal government does. And I don't think too big to fail is necessarily going to matter. And by the way, I think part of the reason why you're seeing Kalshi in particular do so much publicity about the fact that the percentage of sports volume is shrinking rapidly. Now, I think you can question, you know, how they arrive at that number, but every week you do see posts from Kalsheet really, really referencing the fact that their percentage of sports volume is being reduced and politics, crypto, you know, other miscellaneous markets are taking up a larger share. The reason I think that they're doing that is twofold. One, I think it helps their case potentially in front of the Supreme Court that they're not just a sportsbook in disguise. But I also think in the court of public opinion and for their investors, they do need to show that there are other fundamental reasons to have prediction markets other than just for folks to bet on sports. So you can see that they're already either preparing that argument or potentially, if you wanted to be really cynical, preparing for a world without sports on prediction markets.

Speaker A: I mean, that was the whole original pitch was, you know, this is for economic price discovery. And you know, and then they really, you know, I've seen, you know, they've really stepped back from the. Well, if the Reds game gets rained out, you know, that's because to me and uh, to so many other people, I think that is the one like sticking point to all this is like, yes, I know it's different, but it's not, you know, it's this is if I'm betting the giants, I'm betting the giants. Whether I'm doing it on a sports book or on Kalshi, it's for me, for the end user, there is no difference.

Speaker B: You know, by the way, I think that's smart from them to stop hammering that argument because it's really easy for folks even outside of our industry to see through that argument because I think, you know, forget about the law Forget about the regulation for now. I think most people when they think about gambling, they don't think about a revenue model or a business model. They think about what is the customer, the person placing the bet doing, what are they risking. And fundamentally that is the same whether you're doing it on a prediction market or you're doing it on a sports book. Now I think there is some nuance there. Obviously you have a wider array of cash out options, a wider array of hedging options that, you know, we don't need to get too in the weeds there. But the reality is a consumer level, the activity looks and feels almost exactly the same whether you're trading on a prediction market for sports or betting on a sportsbook. Which is why I really think that the folks at ki employ market focusing more on other parts of the argument like the revenue model, like the business model, the institutional adoption is a smarter argument. For those of you to go back into history books for just a second, Jeff, the real nerds out there will remember in 2021, 2022 there was a company called Aeris X, I think it was represented by IFRA that applied to the cftc, uh, to do sports prediction markets. Specifically they wanted to offer hedges to I think it was basically just team owners and then folks that owned real estate directly around arenas. And it was never formally rejected by the CFTC because they pulled the application before a decision could get made. But you can go back and read, you know, the thought process there. So this concept of economic hedging on sports has already, you know, that argument's been made, it's not new and the cftc, different version of the CFTC has already quietly rejected that. So I just don't think making that argument if you're cow sheet or polymarket is going to have any legs.

Speaker A: And I'm m going to ask you about your beginnings in a minute. I keep threatening to but like again you've seen all this. People like myself, you know, who have to put, you know, pen to paper for a living have really like I've gone far and wide in trying to compare all this to, you know, poker and you know, that ending and DFS and all that and sweepstakes and all that. Like where are the similarities when it comes to this and what are the big differences, you know, from a legal perspective?

Speaker B: Yeah, I think the obvious similarity is the peer to peer nature. So just like when you go play either uh, online poker or if you walk into a casino these days, there's going to be poker tables and the casino is taking a rake, rake meaning basically commission on every hand played. Basically, this is what prediction markets are doing is they're not necessarily charging you vague on the bet itself, but they, you know, even in the early days when I was with Smarts, we might for example, charge a commission on winning bets, but not on losers. So you could come theoretically bet on smarkets in London and if you deposited a hundred thousand dollars and you lost every single bet you ever placed, then technically we as uh, smorcats might not have ever made a single dollar off of you because every dollar you bet was probably against another peer in the market or against a market maker. And all that money would accrue to those folks. We would take nothing, we would take a percentage from the market maker who won the bet against you or the peer that won the bet against you, but from you, you know, we might not get anything. Technically, that poker model is very, very similar to the prediction market model. But I also want to be clear that, you know, kalshiapoid market may not have been tracking the evolution of novig and profit and sport trade for the last five, six or seven years, but we've been essentially doing a version of prediction markets on Sports since 2018. You know, when I think Jason Truss used to host this show, but when, when we got our first sports betting license in Indiana and Colorado, that was 2018, 2019. So the model has been around, it's just been called different things. It used to be called exchange wagering, sometimes called sports betting Exchange, sometimes called peer to peer wagering. You know, there was a company in Tennessee, I think, called Zen Sports that was doing regulated sports wagering as a true peer to peer marketplace with no market makers involved. Didn't work. But the concept has been done before and done here in the US it's not a new idea necessarily. What's new is the regulatory application and the regulatory arguments that are being put forth and those, by the way, I am jealous of the chutzpah because I would, you know, like if I, for example, like sometimes for the last 18 months I've laid away kind of kicking myself for, you know, not basically making the same bet that Tarik did since 2022. Because companies I was working for and working with all had the technology and the chops and the market making relationships to do what Kalshi and Polymarket are doing now in some cases, like in Sport Trade's case and in Smarket's case, you know, they have applications out to the CFTC now to become A dcm, but, you know, yeah, kicking myself for not say, hey, why don't, you know, why don't we set aside a couple million bucks to just, you know, you know, I could run it on the side. And you know, I will always have that thought in the back of my head of, you know, why didn't myself or folks like myself see this? And I think that's, you know, part of the job. You said you kept threatening to kind of ask me how I got my start, but the way that I think about the job that I do now, which both in the formal outside counsel role that I have at Bella Wood, but also, you know, I have a consulting business that I run to, to work with clients on these more thorny issues of risk and reward that aren't necessarily legal questions. And I think it's been, uh, interesting to watch the sort of emotional evolution of folks like myself over the last 18 months from kind of, you know, the five stages of grief. Right. The initial one is, hey, no way, this is legal. Which, by the way, I, I never, I try not to take approaches like that because I think for consultants and attorneys in this space, you have to have a little bit of humility because when we are advising clients, sometimes we are going to get it wrong. And you have to be able to look at each new problem, each new business model with fresh eyes and be able to say, all right, what do we think the world is going to look like in 18 months to two years? And why might this time it be different? Because again, like I said, I do think, you know, again, I would love to give Tarik truth serum and say, you know, hey, if you thought this was going to be legal, why were you not offering Sports prediction markets in 2022? Why wasn't that the pitch to, I think Sequoia was the initial investor in Kelsey. Why was that not part of the pitch deck? And by the way, it is completely fine and I think appropriate for those businesses to evolve as the political and regulatory situation evolves as well. I think you have to, to stay in front. So it's incumbent upon us as, you know, you as a reporter and then me as a, uh, you know, sort of a boots on the ground problem solver basically to keep an open mind. Because if you would have asked me about this two years ago and I, you know, people did, I said, we said, no way, don't waste the application fee that, you know, that don't spend the 500 grand for the application and to hire the law firm to help you apply to the cftc. It's not worth it.

Speaker A: A lot can change. Yeah. In my mind, I picture, like, two couch employees, like, walking in the hallway, one with chocolate, one with peanut butter, knocking into each other, like, hey, we should offer sports betting, you know? All right, my big threat. So I find this fascinating to me. You go to your LinkedIn page. Founder and president, but the founder that I really want to sink in of the UCLA Gaming Law association at UCLA Law School. This is back in 2015.

Speaker B: Now you're aging me. You're aging me, Jeff.

Speaker A: No, I'm not. Because I'm. I'm the old one here. 2015, to me, sound. I could tell you it's, uh, like breakfast to me. 2015, but for you, it's a long time ago. You're a law student at ucla, and you decide to start the UCLA Gaming Law Association. I can't imagine that you would have thought that you were thinking then about sweepstakes, about paspa, about Cal State, you know, about any of this stuff. But you, clearly there was something knocking around your brain that said, I'm interested in gaming law. But, uh, I can't imagine, like, did you have that crystal ball? Did you see, like, how far and wide this could end up? Or did you see yourself sitting at the Caesar Steakhouse, you know, talking to vice presidents, you know, of, uh, brick and mortar for your career? So I'm curious, what did you see? What provoked you to do this?

Speaker B: So I, I've always been interested in the gambling business. You know, I remember even in sixth, seventh grade, my buddies and I got. Not suspended, but whatever, whatever the version of detention was in 2000, 2006, because we were collecting money from kids for March Madness bracket during class. So I've already. I've always been interested in this business, and I think on my 18th birthday, we all went to the local Indian casino in Sacramento. But, uh, no. So what really sparked my curiosity? It's a classic law school story. My mom's a judge. I always wanted to be a district attorney or a trial attorney, right? My vision for my career was I'm going to go be a district attorney somewhere, make a name for myself, and then become a big name defense attorney doing big trials. Right? Because I'm a super competitive person and I have a bit of an ego. So the idea of standing up there in the room and all eyes on me was very appealing. Just being honest. So then I did it for a couple of summers and realized, oh, this is a little bit too, like, there's just not Enough entrepreneurial spirit here at the DA's office, which, of course, duh, right, I should have known better. But that right around that same time, 2015 basically, was when DraftKings and FanDuel, the early version of DFS, really, really started to take off. And that was the summer and fall where you could not avoid DK&FD ads. Didn't matter where you were, couldn't avoid it. And I remember playing, like, in law school, like, I'd have my lineup going. You know, we had night classes and be doing my lineup, watching Monday Night Football, whatever. And it just hit me one day because, say, well, why am I allowed to bet a hundred bucks on this, you know, fantasy lineup, but I can't actually bet on the outcome of the game? Or if I want to bet on the outcome of the game, I've got to drive 400 miles east through the desert to get to the Nevada border. So just for the kind of the future lawyer in me, the future kind of entrepreneurial guy in me said this, something has to change. Like this. If this DFS ver, if this DraftKings, the early DK and FD Pro product, is this popular, surely something has to change with respect to true sports betting. And so that's what caused me to start the UCLA Gaming Law association, which was really, as I tell people now, just an excuse to have an email address that said, President UCLA Gaming Law Association. Because the reality was no one at DraftKings or FanDuel was going to answer an email from some random law school kid. But if it says President Gaming Law association, they might take my call. Right? That was basically the goal. And it worked. You know, we had some really, really interesting speakers come and talk to us at ucla. And actually, one of my professors that knew I was into this stuff, uh, in 2016, pulled me aside after class one day and said, hey, you know, one of my buddies is an American guy that I went to school with like 15 years ago. He's an American guy that moved to London and started a sports book. Now, he didn't really know the terminology. He was talking about Jason Trost and Smorgas because Jason had. Jason was an American guy that moved to London because he was desperate to start a prediction market and couldn't do it in the US at the time. So that's how I got my first job, was I was introduced to Jason. You know, him and I got along. We saw the future in a little bit of the same way. And he hired me right out of law school. So I never I always joke with folks. I never had to be a real lawyer because I think my official title was like Head of Business Development and, you know, government relations or something like that. So that's how I got my start in this business, somewhat by accident, but I do think, yeah, I sat there and looked at a product, an early version of DraftKings and FanDuel, and said, yeah, there's something more here. Or this is so popular that something has to change. And I made that bet. I guess it turned out. Turned out to be a good one.

Speaker A: It is interesting. I mean, I hadn't really thought about it like that before, but if DFS gets slapped down like it almost did, you know, like, would we be where we're at today? You know?

Speaker B: No, I really think. No, I think if the states had won the argument against DFS in. What was that? That was like 2015, 2016 when they did, you know, we had court cases all over the country. I really don't think you ever get passed by, because I don't know that there's the impetus with the sort of the groundswell from the general population. I don't think the general population ever gets as comfortable with having money on sporting events on like a daily basis or for that to be such a part of American sports media coverage. Right. I mean, these days, basically the entire American sports media ecosystem is propped up by dfs, sportsbook, prediction markets and some sweepstake stuff a couple years ago. So, yeah, uh, I don't think we get there. So I'm glad that that worked out because otherwise I'd be a DA somewhere in some backwater county in California.

Speaker A: But I guess also from an investor perspective, you know, on the heels of poker getting outlawed, if DFS got outlawed, I mean, you just might be a little bit more gun shy on where you're going to deposit your, you know, tens of millions of dollars and, you

Speaker B: know, IPO money or whatever, that investor money was really slow to trickle in. You know, I don't know if you remember this basically, but there was not a lot of VC money in online sports betting until like 2020, right? When money, when cash was basically free because interest rates like that, uh, I remember trying to raise at smarkets in 18 and 19 to pursue the US opportunity was huge at the time. We all thought a huge, massive, massive opportunity. You know, we didn't at that time anticipate just how complicated the state by state regulatory model was going to be and how difficult it would be under the state by state regulatory model to actually turn A profit. But yeah, VCs were still scared at that time in 18 and 19, at least, you know, American VCs because it was so new and it was only when money was free, everyone was home and the only thing you do was bet on sports that the money started to really pile in.

Speaker A: Another boots on the ground question for you. We all know the troubles and the problems and the reasons why California has not been able to get legalized sports betting off the ground or for that matter, online casino.

Speaker B: Do you see?

Speaker A: And I almost feel as prediction markets, or if prediction markets become the law of the land, it'll almost be too late. But have you seen any thawing of the permafrost on, you know, the 106, I believe is the number of tribes and you know, the people of the state and like, is there any, is there even a horizon out there?

Speaker B: So again, I hope to represent some of these tribes in the future. I'm be careful with what I say here. I have been impressed with the level of solidarity on this question, let's say, let's say that. And the level of intellectual consistency here. Because for 10 years California tribes have said if we do it, we're going to control the flow and if we do it, it's going to start with retail or in person first, and only in person first. And now here we are in 2026 and that is still the party line. So I think at some point those of us who are advising companies or you know, like you, tracking the progress, I think we're going to have to start believing them when they say that because I think they're not going to move off of that position. And by the way, I understand it. So the thing to understand about California Indian casinos and the market here that I think if you don't live here, you don't understand is geography. This is a massive state. The Indian casinos are largely not anywhere close to the major metropolitan centers. Like most of them are in the boonies or like the closest one to us. You know, I live in la. The closest one is probably, probably a two hour drive. I've either got to go north to Santa Barbara and go to Chumash, I've got to go east to San Manuel, or I've got to go south, like down east of San Diego. It's two hours from LA to get to an Indian casino. And so if online sports betting is legalized here, no one is ever going to go to an Indian casino to book a bet. It's just not going to happen. So that's the thing I think folks need to understand about California geography and how it impacts this discussion. What I do think is interesting about prediction markets as it relates to this discussion is, look, I've never represented tribes. You know, I've had good relationships with some of them here in California, but I've never formally worked for them. But the other thing to understand about tribal and state relationships is everything is done by compact, which is basically a written agreement, a contract between a tribe or a tribal casino and the state. And so that means the states and the Indian casinos are basically in constant conversation and negotiation with one another. It's not like that with other gambling businesses. With other gambling businesses, there's a set rule or a set law that has the tax rate, you know, has the compliance rules you have to follow, the types of gambling you can offer, and that's it. That's the law. You can come in and you can leave, but the law is not really going to change. But for tribal casinos and the. And the relationship of the states, it's constantly changing, right? The tax rate moves all the time. You know, the size of the casinos change all the time. The different rights that the tribal. That the tribal gaming entities have changes all the time. So I think what's interesting, if I'm a tribal attorney or tribal council right now, prediction markets are great for me because, for example, in California, all of a sudden it's gone from a situation where California is guaranteeing tribes sovereignty over all aspects of online sports betting. Right. Basically, the state has to guarantee that the tribes have monopoly over it. Well, now, if I'm a tribe, I can say, well, hold on, you know, Gavin Newsome, look at my phone. Here's couch. I'm betting on the Dodgers game tonight. So what's. What's going on there? So if. If I'm headed into a negotiation with the state of California right now, I basically have all the leverage. Because I'm saying you as a state are not holding up your end of the bargain because you have not m managed to boot these guys out of California, you know, sort of like Nevada did. And so now basically, you're violating the terms of our contract. And so I need something in return. So I think for tribes in California and nationwide, really, the sports prediction markets boom is giving them all a ton, A ton, A ton of leverage. And I will be curious to see what they do with it. You know, I think you and I talked on the phone a couple months back, and we were talking about kind of my. My aluminum, my tinfoil hat conspiracy Theory, which is basically that the prediction markets boom on sports in the current world, where there's uncertainty around how long it's going to last, is kind of perfect for everybody. Right. Because that uncertainty works. Is my example really for the tribes is it gives the tribes leverage in those negotiations. It gives them a boogeyman to unite against that they didn't really have. They had it in the sweepstakes a couple years ago, but now sweepstakes is shut down. You know, this is the next one that they can go to the states and they can say, hey, what are you. What are you guys doing for us here?

Speaker A: Well, the state, I mean, even if the state can do something and kick out Cal Poly market. What? Kick out prediction markets. That could just be very quickly upended by a Supreme Court decision, obviously. So as far as the negotiation level goes, I mean, from an outsiders. Outsider. I'm an outsider, outsider, outsider on all of this. But it really does seem to me that, like, if I'm, if I'm a tribe a, I don't need it, so I might as well hold out for the best deal I can get in the end, I don't need it. And two, I just. This is like, you know, this is Wikipedia. Jeff here think he's smart about something, but I just feel like, you know, the typical American mindset is faster, quicker now. And it seems like the Native American

Speaker B: mindset is not that understandably so. Right. Because the reality is if other than the couple of biggest tribes in California, you talking San Manuel, for example, all the other gaming tribes, even if online sports betting was legal today and the rules were, for example, let's say, like, I think eventually we'll end up. Is that much like in other states, a domestic or international sportsbook that wants to come in and offer their brand has to do it in partnership with a local Native, uh, American tribe. All right, let's say that that happens in California in like 5 years, 10 years, whatever. Regardless of what happens with prediction markets, there's not, you know, there's. There's 70 something deeming tribes in California. There's not 78 competitive marketable sports books or prediction markets that can fill partnerships with each gaming tribe. Which means if you end up with not DraftKings, not Fanatics, not FanDuel, not Kalshi or Polymarket, if you don't end up with one of the big partnerships, then you're screwed. You're left out, you're not making any money. And for those casinos also, you know, not to disparage the technical staff that they have now. But, you know, the engineering talent needed to build a sports book or a prediction market from scratch is hell of a lot different than the engineering talent needed to keep the lights on for a, you know, retail or in person brick and mortar casino. There's just not. They'd have to think in 10 year increments if they were serious about creating a competitive online sports betting product. And, you know, some of the larger ones, like San Manuel, have been thinking about that problem for a couple of years now. But, you know, there's not like it would be 10 years. I think before there, you had 20 or 30 California tribes ready to launch an online sports book. It's a hard business.

Speaker A: All right, last question for you here before I let you go. I'm gonna. I'm not a soccer guy. I'm just not a soccer fan. Are you repping somebody here right now with your kit? Is that a kit? Yeah. No.

Speaker B: So this is, um. My wife and I did our honeymoon in New Zealand, and so we had to come home with some rugby jerseys.

Speaker A: Okay, so it's a rugby.

Speaker B: Okay, this is the three Lions or this is the British. Uh, the rugby. The old school British jersey. We did come home with some all black skiers as well.

Speaker A: So now I'm just proving that not only do I not know much about soccer, I also know not much about rugby.

Speaker B: Hey, I don't know anything about it. I just know it's a cool shirt. That's all I know.

Speaker A: Peter Hammond, thank you so much for joining me today. Very illuminating. We'll do this again.

Speaker B: All right. Thanks, Jeff. Great to talk to you.