Can sports betting overthrow Iran?

Speaker A: Hey, it's Sandy Crichton and this is the Risk Gaming podcast by Lux Capital. Well, it's January.

Speaker B: Even though we aren't supposed to be

Speaker A: sponsored by anyone, it does feel opportune to act like we are sponsored by a sports betting company. After all, they seem to be completely unavoidable in the present moment as the alcohol companies pull back in a lame attempt to undo dry January. Sports betting is larger than ever, with nearly a majority of American men holding accounts. But as betting turns to politics and culture capital, can it capture the same experience? I'm turning to Dustin Galker on this one. He's the author of the Closing Line and the Event Horizon newsletters covering prediction markets and the sports betting landscape. We talk about why prediction markets remain a small sliver of betting. How new underwriting models are taking market share from incumbents, the interface between betting and parametric insurance. Because why not? Why sports will always dominate the industry, how performativity is increasingly interacting with international relations, whether betting markets can be optimized for profitability, propaganda value.

Speaker B: Let's dive in. Dustin, thanks so much for joining us. Cheers.

Speaker C: Thanks for having me on.

Speaker B: Uh, so Dustin, you covered the prediction markets for a very, very long time. You have a couple newsletters, the Closing Line, Event Horizon. You write about the subject a lot. And I can't think of, uh, a particular theme outside of artificial intelligence, which quite frankly does dominate everything. But when you pull out artificial intelligence, you pull back into other aspects of tech and finance. But prediction markets seem to be everywhere and they seem to be going from a transition where they were very niche maybe two, three years ago, very, very closer to tech and very tech literate audiences to a little bit more of this broader gambling market. Young people, men in particular maybe. And uh, this year it really seems like they're poised to break out and become a nationwide phenomenon. Something that, you know, my parents are going to be using. Every retirement village is going to skip out on pingdon night and go to a poly market bet on the future of Iran or whatever the case may be. And so I, I'm just curious at the beginning of 2026, you've been covering this for such a long time. You know, what are you seeing? What are sort of your predictions going ahead into 2026 and what's changing in the market?

Speaker C: Yeah, the big thing I think is, is the information side of things is that's what the, the big, the big idea of prediction markets is, is that trading and people trading on information. That's the thought behind it. It's not the gambling part, it's not the sports part. That's the, that's where I come at it from a lot. But people believe in this as a disseminator of information. And honestly I believe them a lot of times when I see that, I always come back to Intercontinental Exchange. The owner of New York Stock Exchange said, we don't care about the sports stuff. What we care about is the information that we are going to glean from the rise of prediction markets and, you know, seminating that to their partners. So I, I take them at their word that they really see this big picture and, uh, you know, the, the people who are behind polymarket and Calcia also believe that they believe, you know, this might be a means to the end in the short term, but in the long term, this, this value of information and what we learn from it is super valuable. And I'm not here to argue with that. That's. That that's one of the things that we're really going to see driven home this year and into the future is what's the value of that information? Where else does this go? It also, of course, creates some controversy around insider trading and whether we actually need to be able to trade on XYZ markets. But that, you know, that information I. The one I always go to is federal government shutdown. It was hard to place probabilities on whether the government would shut down.

Speaker B: Right.

Speaker C: So we got that from prediction markets. Is the government going to shut down? The traders thought it would. And, um, you know, that obviously happened. It's obviously just giving us probabilities.

Speaker B: But.

Speaker C: And then how long will the government shutdown go? Here in the United States, we were able to price that in real time in a way. I don't think it was really possible other than you and me and other experts spitballing it on a bunch of information that we have in our heads. And so it's super interesting. I think that information piece is what's going to be interesting moving forward.

Speaker B: One of the questions I have in this market, it's been on my edit list for a very, very long time, is you go back to the early to mid 2000s and there was this. Of crowdsourcing knowledge and the power of the people and the idea of, uh, it's not experts. And I'm thinking of folks like Philip Tetlock who showed that expertise. You know, if you ask experts about political events, they're, they're not just wrong, they're like consistently wrong. If all the experts say X, you should Just bet against that, you'll almost certainly make money. Prediction markets actually sort of form out of this. There's some startups that started the late, late 2000s, early 2010s and it sort of peters out, it doesn't go anywhere. There's kind of no company, at least that I know of, that's from that early generation of prediction markets. And then you have now, you know, polymarket, Calcium, uh, others that sort of came out in the last couple of years and it seemed to have done extremely well. And I don't know if you have an opinion on this or if you focused on it, but I'm curious, like, why success today when at least, I mean even theoretically, prediction markets have been around truly decades, even if the experiments were only two decades ago.

Speaker C: Yeah, I mean, I'll start like I started coming into prediction markets along with predict it. Right. Uh, that's my, that was my first time I really intersected with it back, you know, uh, uh, several election cycles ago you could bet on elections and the presidency and you know, down ballot races and uh, you know, they've been around for a while. And then uh, you know, polymarker and Kalshi kind of have been growing up sort of in parallel, but differently. Polymarket, you know, obviously I think grew and tapped into something from a crypto standpoint. Right. This is all on chain. This is crypto native and uh, um, you know, it's international, wink, wink. It's not in the United States. You can obviously trade on polymarket International if you have a vpn. And crypto that's, that's not impossible to do. But um, you know, they tapped into that like everybody doing it on crypto and you know, crowdsourcing information, uh, what's happening on Polymarket, at least internationally, a ton of all this other stuff, these valuable information markets about world events and financial events. There's a lot of sports trading too, but, but it's not just that, it's a lot of this other stuff, you know. And then Kalshi, you know, founded in 2018 but didn't really launch till much later, wasn't doing a whole lot, was doing a little election betting, started fighting the CFTC under the Biden administration to allow election betting win in court. 2024, they start blowing up, um, hundreds of millions getting bet on the election and Harris, Harris, Trump and then roll around into 2000 early last year, sports spending rolls around and this is, you know, it's been, that's been most of what's happened at Kalshi, a Lot of people talk about the other stuff, but 90% of the volume at Kalshi is sports event contracts. Uh, between football, basketball, golf, you name it, all of those things. Everything else has been really kind of de minimis. I mean, there's still tens of millions, hundreds of millions being, um, but being traded on this stuff. But it's dwarfed, absolutely dwarfed by all the sports stuff, which is, you know, arguably just feeding into liquidity, giving them retail, which is, you know, to the end goal of let's get to trading on all this other stuff and this, in this interesting information and making that the product rather than, you know, you and me betting on sports, uh, on, on an exchange, like that's where. That's sort of where their growth has come from. And now we're at a point where there's all these other players. And it'll be fascinating to see what happens in this. Like, there's tons of tons of crypto projects. There's sort of the blending of on chain and off chain like Kalshi is trying to do. There's just going to be a lot to happen in 2026 about where all this is headed and how, how ubiquitous it will be, as you say.

Speaker B: Well, I mean, particularly with, with sports betting, I mean, they're going up against these centralized trading houses. I'm thinking of FanDuel, DraftKings, et cetera, where, um, you know, they are the market maker, they are the, the bookie, if you will. They're the ones setting up the contracts. These are more decentralized. They are trying to create marketplaces where you can bet against each other. They're taking sort of their piece off the top there. Do you see any movement among people in terms of understanding, you know, the market structures of these and what it implicates for their own bets? Do people like a certain model versus another? Uh, are more traditional models, like a fan dual draftkings more understandable? Amenable people are. I get it. I'm working with this company. They're going to give me odds. I'm just spending a lottery ticket essentially, versus against other people.

Speaker C: Yeah. On the sports betting side, it's interesting because I come from that background. I came, uh, you know, I, I kind of grew up, but I, I cover the rise of legal sports betting here in the United States. Right. Over the past 10 years. And before that, daily fantasy sports, which is how DraftKings and FanDuel got big. You know, like there's a long way to go before the experience at a prediction market is replicated. Like what is in a legal and regulated sports book in terms of product offering and breadth of odds and uh, liquidity. Like again, DraftKings and FanDuel are the house right. They don't have to back all of this by fiat which is how it happens on exchanges. Like a trade has to be backed on both sides by cash. DraftKings and FanDuel aren't sitting on you know, billions of dollars to resolve every bet. They know how much they're going to hold, they'll pay you if they win. But they're not like every trade is, every bet you make is not backed in fiat. So you know that's where it's, you know that's where it's really interesting is that this product class of sportsbooks and being disrupted by prediction markets and what's available. Um, it's really interesting to see how that's going to change. Like Kalshi has obviously softly moved toward like replicating the sports betting experience. There's a six box that we know well in, in uh, sports betting that has here's the spread, here's the money line, here's the total for both teams. Just little, little six little squares that captures most of the betting. You can do that at most prediction markets. Now from the people standpoint for sports betting it's about bidding out retail users, right? Like the average person wants some odd boosts they don't really care about. They're not price sensitive, they just want a good experience. They want, if they're watching the game tonight, they want to bet on it. Um, and whoever gives them the best experience, experience overall, that's who's getting it and that's FanDuel and DraftKings. You know they have 70, 80% of market share depending on what you're talking about. So focal, she and Poly Market and the other prediction markets are not that yet. They have not replicated that. You know it's really cool for live trading but it's also just not intuitive. It's not the same product not offering these bonuses and odds boosts and other things that you get and people have come to expect from sports betting. So I think whoever like kind of replicates that at least on the sports betting side is going to win at least in the short term, short to medium term. And it's, it'll be interesting to see how that product goes. You know polymarket in us, their CFTC regulated thing is basically just sports. It's just trade on who's going to win a game. That's it. It'll it'll grow from there. But right now it's that and how much they grow into the sports betting and how much they can convert people to those other things that we were talking about earlier that they really care about in the long tail.

Speaker B: So, so when I think about sports betting, I think, you know, there's a lot of complexity these days. It's not just who wins, who loses. You know, people are betting on all kinds of individual things. Scores before halftime, you know, which players are up or down, or who scores touchdowns. People are doing parlays with very complicated math, none of which are really amenable or at least easily amenable to a prediction market where you do need multiple sides and someone actually, you know, there has to be sort of a complete, cohesive set of outcomes that you're sort of betting on, and people pick and choose which ones they want to actually bet. To what degree do people make those sort of more complex bets? Are most people just going into these games and saying, you know, I want my team to win or by a certain point value, or do people actually, you know, or the most valuable people go into some of those more complicated sets where Calcium Polymarket would be a little bit more challenged to offer a product there?

Speaker C: Before the rise of online sports betting, say the last, you know, especially in the regulated space here in the United States, it was pre game, right? Like you go to the sports book, you'd bet on a game, who wins, point spread, a, ah, total, whatever. And that was it. You're, you're kind of done. You're like, I bought my ticket and I watched the game and uh, cool, this is fun. Obviously, with the, as online sports betting has grown, especially here in the United States and, and with the competitiveness of the market here, like a lot of betting is live and a lot of betting is parlays. These, that is, these are the dominant ways to bet on sportsbooks.

Speaker B: Right now.

Speaker C: It is betting live on everything under the sun, props, spreads, money lines, totals, all of these things. And you can place parlays, uh, in real time too, uh, if you're, if you're doing it like with, while games are going on. FanDuel has again been the example of leaning into this the most. They have structural hold the United States with something like 7% of wagers when it was mostly just in Nevada. Vandal can hold up to 15% of all wagers now. And most of that is because of a little bit of higher vague on live betting and the fact that they're so good at Offering parlays and letting people bet parlays and you know, selling the idea and the dream of winning a lottery ticket, which is what parlays are. It's not, there's not a whole lot of people like you are analytically minded, like I'm gonna go crush this parlay, uh, by, by doing. And it's really hard to do correlated outcomes in a sports books because they're not going to let you do them. But so people are like, I'm gonna put 10 things into a parlay for a buck and hope I win a few thousand. They're going to lose almost all of the time. And that's how FanDuel and the sportsbooks make their money, right, because they're like that, they sell, they're selling the lottery ticket. That's, that's again the dominant form of betting in us right now. And Kalshi to its credit has replicated that to some extent. Like it's still not most of their trading. It's still pretty small in the grand scheme of things. But you can parlay a lot of things on Kalshi where I think people were dismissive of that even you know, six to nine months ago. And now it's uh, you know, a core part of their, their product offering. So everybody who, everybody needs to figure that out, right? How do I, how do we do this? How do we, you know, stand up markets behind parlays and Kalshi's obviously figured that out and has liquidity behind, behind the parlays. So it's not an, it's not a problem that it's not solvable. I think that prediction markets can definitely get there and get to product equity. I think in terms of parlays and it already is in live betting. It's a live betting thing. Like so much of what's happening on Kalshi is trading during a game, not trading. But there is trading before. But so much is trading in and out positions. And again that's where Kalshi and Kalshi especially makes money. They're making money on fees. When you trade, they don't care if you win or lose, they just want you trading and paying them their fees.

Speaker B: Now when we go from sports into politics, into culture, society, uh, we were recording this right after the Golden Globes. You know, people are betting on. It was actually not that interesting because I think most of the categories were fairly predictable. And I'm not sure there was a lot of interesting trades going on, but obviously it was in the news. There were a lot of bets. You can sort of predict things. I'm curious. These seem to actually make a huge amount of influence or at least in my world, you know, polymarket just signed this, a partnership agreement with Dale Jones, the owner of Wall Street Journal, Barons a bunch of other products. Presumably they're going to start to include some of that betting, some of those tickers, um, and predictions straight into articles and you can imagine that um, included in other formats, other places all around the media. You know, how does that interact with the sports? Is that just, you know, here's another vertical. This is great. This is another opportunity to bet. Or is there something deeper there that, that I'm not seeing?

Speaker C: It'll be fascinating to see what else happens. Like going back to the politics and everything else. Bloomberg Bloomberg Terminal has added a bunch of functionality of ingesting and then putting back out polymarket and Kalshi data, which is a fascinating data point. Right. The fact that they're, they are doing this Bloomberg like people were talking about, oh, who's going to create the Bloomberg Terminal of prediction markets? Like, but it's Bloom by the way. It's gonna be Bloomberg. It's gonna be Bloomberg. Like there's still ways to do it that are gonna be free and more accessible, but it's Bloomberg. Bloomberg wins. But I don't know if it, the sports betting part of it is interesting because like we have this ingrained world around sports betting and how like the media does it and we'll get maybe a little too in the weeds. But like the value of a customer in a, at a sportsbook is way higher than a single customer at a prediction market in terms of lifetime value of that customer. Right. Like, so they're like a sportsbook is paying more to acquire a customer or to retain a customer than a prediction market ever will. That's not, that's not going to change I don't think, even with competition. So um, like, I don't, I like are we going to see this like on ESPN and all the other networks? Arguably not because they're ingrained with the sports betting industry. Right. They like, uh, like that like and it's, you know, I'm not saying it could never happen but like there's, there's reasons why the sports ecosystem is not necessarily going to jump into this. Now obviously we saw the NHL do a deal with Kalshi, seven figure deals with Kal and Polymarket to become their, their marketing partners and official partners. Like there's something there. But you know, at the same time like I just don't see it being adopted in the same way. The value of the data and the information again is, and everything else. There's not that much different than a prediction market is providing us than a, uh, sports book either. They're giving us odds, right? They're giving us. And you know, arguably Kalshi and Polymarket has a little graph, right. That you can see real time probabilities that's kind of interesting. It's also not really going to change anything. So it's like there's no difference. Like the difference with the other stuff is that we have this graph, we have these probabilities for things we never had probabilities for. Right. You know, like temperature in a place like you're looking for your uh, you're looking at weather apps or you're looking to your local meteorologist. Instead, we now have, here's what we think, what traders think the temperature is going to be, how many tornadoes are going to be, how many hurricanes. We think they're going to be all those things. Like that's, that's the data that, that, those, that data and those probabilities are the stuff we don't have and the stuff that we'll see. Like, would we see, um, a partnership with the Weather Channel in these. Sure, why not? Like, again, like, um, you know, it's another data point of trying to get to stuff like obviously the Weather Channel is probably really believes in its meteorologists and they do a good job predicting the weather. But at the same time, here's another data point that we can use to like validate what we think is going to happen on any given day and in any given season.

Speaker B: You know, it's interesting when I hear this because I think of parametric insurance. So this model that's moving in the insurance markets from um, traditional insurance where you're sort of guaranteed around damage, to a parametric model where you say, look, if you know, winds hit 135 miles an hour sustained for more than five minutes in your area, you just get a payout automatically whether there's damage or not. And so this dramatically lowers the cost of administration or lowers the cost of a claims, uh, adjuster that has to come out and evaluate the damage to your home whether a hurricane hit your house and it was flood damage or wind damage. And you know, this sounds subtle, but this is literally tens and tens and tens of millions of dollars of lawyer fees that go back and forth between insurance companies to figure out who's at fault and who's not. So it's interesting to me to think of, like the future will be prediction markets determining your parametric insurance rates of your home. Look, at some point these become institutional. This is why it's in Bloomberg. But you can imagine hedge funds going like, no, I'll, I'll take on some of the, the risk burden of a parametric insurance model for South Florida because I think you're wrong. I have a much more accurate model in some ways. That to me is like the gold standard of the belief of what prediction markets were all about was to say, like, well, I'm willing to put up real money and I don't think there's going to be any hurricanes. And I have my data, you have your data and one of us is going to be right and whoever's right is going to win and whoever's wrong is going to be out a lot of hurricane damage, you know, insurance payouts.

Speaker C: Uh, the insurance stuff is definitely interesting. Like I kind of, I'm skeptical that like average retail, you and me, like me trying to ensure my house is going to do that through a prediction market. Right. Like, you know, I definitely could see institutional capital coming in like, you know, trying to hedge against bad outcomes and hurricanes and things like that. That seems like a pretty likely outcome, honestly. Um, I mean the real interesting thing that just happened within like the past couple of weeks was kind of related. But polymarket did a deal with an on chain housing, um, site called Parcel to start launching friction markets about housing prices. And this is again, real estate is this huge market that the only way to really like, for you and me, the only way to do it is buying, selling houses, right? Like we can, I can sell my house or I can, you know, take out a home equity line of credit or you know, it's pretty limited how I can do it. If we have markets where you can hedge on the price, uh, the price going up or down over a day, a month, a year, a quarter, I don't know, whatever. And that's where it's headed. Then you have a real way to hedge against like the bad outcomes over your house. Like if we have a housing crisis, I could go hedge on that. Or if you're any company that's exposed to the real estate industry, realtors, builders, contractors, any of these things, like there's a real use case for that in the real world from an economic standpoint, a hedging standpoint. So like that's another great example of I'm, I'm excited to see what else comes out that's uh, really in this year and as product is developing and we're getting and everything becomes kind of grows up and becomes more serious, like what kind of stuff like that is coming out? Because that's what honestly, when I talk about prediction markets, that's the stuff that excites me.

Speaker B: Well, it's adding this to a lot of domains that don't exist right now, to your point. So looking at, you know, today we have like the Case Shiller index and you can look at housing prices and metros and we have a general sense. But I can see your point of like there's no hedging market here. There's no ETF to go in and say, look, I think m. Minneapolis, home prices are going to go up 4%. My hometown, you know, I others think it's 10%. I can predict against this I can make money because I'm right. Um, and there's ways of even hedging against a mortgage around that. And so that, that part is actually really interesting to me. I agree with you. I don't think it's a retail play, although retail folks can certainly be a part of that. To me, that is like a money marketing. You know, Citadel is going to get into that and a bunch of market makers can get out, go into that business, hedge funds, etc. Um, and that's how most of these products end up going. I mean that's what the stock market is ultimately as a prediction engine, um, on um, companies. Right. So Dustin, obviously we talked about, you know, polymarka, Kelshi. We're looking at sports betting. These have had huge impacts in here and not just, I think financially. You look at the leagues, you look at the broadcasters, they are signing massive deals. You're starting to see this, as I already mentioned with polymarket and Dow Jones, I think we'll see more than the cultural, political sphere. Golden Globes had an inclusion of some betting on screen that was I think a little bit controversial from, um, cbs. But I want us to take a step back because, you know, one of the goals with, with prediction markets was that they were observing these phenomena in the real world and you would get these sort of bets that were sort of, let's call them objective or they were crowdsourced up. But now there's a loop back which is that actions in the real world can be altered based on what the bets are showing. There's actually a full loop that can take place. We've uh, already seen some major scandals in sports for sure in multiple leagues where players either were taking money or sort of either throwing a game or trying harder to win the game and they were trying to hit their own betting targets, whatever the case may be. We're starting to see this a little bit with politics. I'm a little less convinced on some of the initiatives. I don't think we would blow up Iran to hit a poly market, uh, deadline by a certain period of time, although you never know. But I'm thinking of a little like tempest and a teapot scandal that a press conference went an extra couple minutes and this was a prediction that, you know, the press conference would go for longer than 60 minutes. And so, you know, is a press secretary looking at their clock and being like, if I hold another, another minute, I can make 500 in polymarket or whatever the case may be. So take me through this because I feel like at one point they were abstractions and they had no kind of observer effect. Now we're seeing that, you know, as you observe the effect, we are influencing the outcomes of that effect.

Speaker C: How real is that?

Speaker B: And is that something that you're concerned about long term for the sustainability of this entire industry?

Speaker C: I think that whole thing is not impossible to imagine how it can impact. Yeah, Again, so far it's been, I think most people believe on the up and up, sometimes there's insider trading pretty clearly on some markets where somebody who has information is trading on it and profiting off of it. Or uh, if you're going to spin it from the prediction market size, giving us information that we need to know. I digress on that. But like the Venezuela markets are the one that's been, I've talked to like a lot of mainstream media folks about this where somebody who was probably an insider at polymarket traded right ahead of the attacks in Venezuela on Maduro, being out on three other markets. And like clearly, like, it's hard to believe it was a coincidence right now. Yeah. Is somebody going to like make us a strike or pull uh, somebody out because of a prediction market? Probably not. What I think is actually more interesting is would you, if these get to scale, would you trade something on a market to send a flat, to send false, uh, information to say like we're like, uh, there's gonna be a strike on X, Y or Z in this country and then you do it to like throw people off the scent and you use, you start using it for military intelligence purposes. Like, like that doesn't seem impossible to me if this gets to a scale of, of where this is how people are doing it. I mean there are already I'm certain governments using polymarket to like inform decision making about like, you know, world leaders and things like that. The Khomeini in Iran is like this is a huge part of what's going on. Like, that's a huge one that people are keeping tabs on. Like what do traders think? Are there insiders trading on it that know more than we do? Um, so I don't think there's this impossibility of using markets to like send information. Like you're definitely going to see it. I feel like in politics where people try to, you know, manipulate markets by putting a lot of money on X, Y or Z to make it look like somebody should win when they're done, they don't. That's impossible to do at the presidential level with the amount of liquidity you're going to get beat down. But on smaller down ballot races, it's not impossible, I think to manipulate that. Now Kalshi makes a point of that's prohibited. Right? You can't do that here. Uh, you're kyc. You're not going to do that here. I think there's some skepticism about how well they can actually police that and surveil it. But they say they do it on polymarket though. And anything that's on chain, it's very easy to. You're anonymous, right? You're linked to a wallet, but we don't know who you are and you're never going to know. Um, and some amount of Kalshi's markets are tokenized as well where you could bet this on Solana on chain and then not have that exposure to this. So I don't think it's impossible. Is it like, is it going to get to a scale of like we really have to worry about it? I don't know. But it's not, it's not unfeasible to say like people could start sending signals through the world on, on lower liquidity markets and try to, to, to influence how people view them. And I think politics actually is the best one. Like we're going into midterms here in the United States and you know, House, like certain down ballot races, resolve is going to determine who wins the House of Representatives, Democrats, Republicans and you know, are people going to try to do it? I can't say for a fact that they will or that they can influence it. But I think there's, I think there's, there will be up, there will be people that will try to manipulate it to make that happen.

Speaker B: Well, I think what you're getting at is a very well known concept of performativity which is do markets conform to the metric or do metrics conform to the market? And you know, in the, in the hypothetical of an efficient market, they should, the market should form and then there's a metric that comes out of the market. But I think there's a lot of work, particularly in the last 20, 30 years that show it's actually quite the opposite that we look at the market, we say, oh, the market's going up, therefore I shall go in, therefore, you know, narrative economics, things go up. Um, and so expectations set the market more than the actual market itself. You can certainly imagine that in the context of polls where a lot of people just care that their side wins or they don't want to vote for the loser and so they just don't show up at the polls. So they sort of, oh my God, if it's, you know, 70% likely that my opponent is going to win, then whatever, I'm not going to go up. And then that actually takes place. And so I could actually see where, you know, it's one thing, it's 50, 50, it's super close, uh, you know, et cetera. If it starts to go a little bit haywire, particularly in smaller raises to your point, you know, it is possible that this has a lot of influences, particularly as those sort of metrics start to show up in news articles, as people start to report on the horse race that used to be polling and is now prediction markets. I could see a world where it actually really does influence that over the long course of time. The other piece here that I think is really interesting though is I'm on Polymarket homepage right now. Obviously a lot of stuff on Iran. You know, the volumes here are really low. I mean, to your point earlier, you know, some of the Iran markets are $700,000, the Super Bowl, 700 million. Okay, so you're probably not going to win a lot trying to influence the Super bowl outcome. $700,000 in terms of a market making, I mean, it's probably not low. Thousands would massively choose the number. But if you put 30,000, 40, $50,000 on a $700,000 market, yes, it will adjust. Does that look like, you know, if the media were to start reporting like, oh, polymarket says 85, 90% chance of strikes in the next month, does that put pressure on a president to say, look, people think it's going to happen if it now doesn't happen, now I look like Taco, you know, to Trump Always chickens out or something like that. And so I, I, that that performativity is extremely interesting to me.

Speaker C: Yeah. And there's been talk of, I don't think I'm, I would have to go look up the exact quote but the CEO of Kalshi was like kind of at one point was kind of behind the idea of prediction markets, um, informing policy. I think it was, I want to say it was a podcast with the Coinbase CEO talking about like should we be taking prediction markets and then using that to inform policy? I mean that, that's something that could definitely happen too. You see, you know we can see approval numbers or how, you know how races are trending or what, or like what people think about the GDP or things like that. Can all of that turn into information that people use to like inform their policy decisions or how they react to the public? Like that one I think for sure is going to happen more and more. Again I might be a little fear mongering that we're going to see the collapse of the democratic system. I don't like, I don't think that's going to happen. But I do, but I, but I do, but I do think there's, there's concerns here. There's definitely concerns of like you can do, there are things that can be done and again the lower the liquidity the market is and that's why they want to get the, the scale right. Like if there's enough money, the market's gonna, you get hammered in the market you can't, there wouldn't be any amount of money that you could bet that somebody wouldn't say like well this guy's an idiot. I'm gonna trade, I'm gonna trade against that. Right. Or the market maker or SIG or whoever it is, it's doing it. So yeah, I mean I think there's concerns and I think you can't just wave them away of like there's no concerns here. There are concerns and it's just a matter of what's done about them. And again there's, there's a proposed legislation about insider trading that you know, may or may not help all of this. But you know, this is, this has all happened so fast that I don't think a whole lot of people have stopped to think about some of the knock on effects of we can trade slash gamble on anything in the world now.

Speaker B: Well, I think it's coming up in the opinion place and I will say like a century ago, you know, um, and Sarah Igoe has a book called the Averaged American. You know, there was no concept of polls. I mean, Mr. Gallup, you know, invented the Gallup, uh, organization, started polling Americans. You know, I think there's an amazing statistic which I hope I'm not completely inventing, but one of the most popular books of the 1910s or the 1920s was actually, like, a statistical atlas at United States. Because the idea of, like, well, who is the average American? First of all, there were tens of millions of new Americans coming in and streaming in from 1870, 1920, through with immigration. Um, you had the war, and then you had this rise of kind of consumerism that comes in the 1920s. And so all of a sudden, I was like, what do people buy? Like, what. What are in their house? No one knew because there was no polling, there was no surveys. No one knew what the average American was. And so all of a sudden, we had this idea of, like, well, here's the average, and here's how I'm different. And it was a very different conception for folks. I think we're going to see the exact same thing rising up now almost a century later, which is to say, you know, polls are an opinion and. Or directionally, like, saying, here's what I want. Now we're going to a betting market. That's not saying what I want. It's what I think is going to happen. That's a very different intention. And so what I hear, it's like, well, it's going to inform policy or something like that. Like, uh, I actually agree with you in a deeply cynical way. You want to be on the right side. People want to manage their campaigns, uh, et cetera, but it doesn't express any value. It's actually quite the opposite. And you wonder at some point, like, if no one has any values and we're all sort of betting what we expect everyone else to be betting on to get to something. Like who ultimately is choosing a law or a rule or whatever the case may be based on actually what they believe versus what they believe other people believe. That kind of misdirection and indirection.

Speaker C: Yeah, I mean, it's. It's. It does get really meta when you start, like, they're listening to you talk about it, and my brain's melt. My brain's melting. But you're right, your brain's about to melt.

Speaker B: That's basically this podcast, entire SAG line is everyone's brain melts by the end.

Speaker C: That's why our viewership and listenership dive

Speaker B: in the last 10 minutes.

Speaker C: What you're talking about this cyclical uh, effect of like okay, like polls are, are one point of data, right? And we have a bunch of polls and but prediction markets obviously are ingesting that data, right? People who are trading are not just trading on a, like on a vacuum, right? Like I think this person or that they're taking data from polls and like how they think XYZ polls perform or taking you know, an average of them and that that data is getting into the prediction market. And the prediction markets like again this is a little high minded but like the prediction market's like we're the news. We're like you don't need the news, you just read the news with us. Which I kind of dismiss. Again I come from a journalism background and I'm like yes, it'll like prediction markets will tell you the probability of something. They will tell you if something happened, when it happened. But you get no context from that. You don't get why, you don't get how again like uh, the Venezuela attacks are a great example. Like okay, we knew that Maduro was like insider information. Maduro is probably going to get, you know, be out for whatever reason but we don't let even that at that point in time we didn't know how like why was he out? Was he going to get, was there a coup? Was the United States invading? Uh, you know like there's a whole lot of the feedback loop is super, is a super interesting problem of all of this I think. And again like it's like you still need the news because that is informing the data that's getting there. It's just one part of the data that is getting into a prediction market. But anybody who's trading is clearly like sometimes you have information, sometimes you're, you're reacting to the news and what that news tells us about the world. And again the prediction market then takes that information, distills it gives us a probability on something. That's the interesting part. It's not like uh, to me is that we have a probability, we have a number, we can put a number on a thing happening which again other than an expert trying to put a number on it, like people ask me things all the time like what I think a chance of something happening in prediction markets or the sports betting industry as they're happening, I have a pretty good sense but I'm also guessing I'm just putting a number on it. Like you know, will prediction markets survive? Will sports event contracts survive, uh, the Supreme Court here in the United States or will they go away. I'm like, ah, it's a coin flip. I don't know. If you let a bunch of people trade on it, like that's, I don't think that's necessarily a good idea. But then you get to the information. Right?

Speaker B: So that, that's the.

Speaker C: I think when, whenever I think about all this other stuff and how all the noise about this, the, the thing that's at core is not, it's not getting it right. It's giving us a probability, giving us what are the odds of something happening. And that's super interesting. We don't need all the other, all the rest of it seems to me to be noise. But that's the, you distill it down to that one number at any time and in a rolling fashion, like super interesting data.

Speaker B: I think I, I uh, I do have a status background and the, the cardinal rule of all probability is no one understands how probability works unless you're super trained. And even people who are super trained really mess up probabilities all the time. I'm thinking, particularly medical doctors, one of the fields that is sort of notorious for just being terrible about probability in so many different ways. Uh, but I was thinking about like as you're going into surgery, you just sort of get a poly market update that's like your chance of survival is 84% based on what the market says is some combo of AI algorithm plus like poly market trading data. And uh, you could bet against yourself or something, I don't know. Like uh, it's, it's going to be a crazy world. We already talked a lot about 2026, but let's, let's project out way out the next couple of years. It feels like Polymark and Kalsi have pioneered, may not even Pioneer, but they seem to have really built up a category as I mentioned at the beginning of the show that was sort of dormant. Took a long time with Predicted and others who were trying to make this market into a bigger thing. It took a long time. They seem to have glommed on either because of product or virality or marketing or because they're on chain. They connected into this crypto world or Robinhood has made betting and the idea of like quick hits on, on your phone, uh, a uh, popular choice. Regardless, they are some of the fastest growing companies in Silicon Valley. They're likely to continue to grow. We have additional societal effects. How does this all come together over the next couple of years? I mean do you think there's going to be a, a huge wave of legislation against them. Do you think that people are going to be very uncomfortable with this? And so therefore it's just going to be a natural form of entertainment and information value for traders. Where do we go in the next couple years?

Speaker C: I mean the real short term it is about sports, right? This is, I can't overestimate how much this is how the growth has started. Like again, if sports, if we hadn't started seeing self certification of sports event contracts, basically sports betting, we would probably not be having the same conversations. That is how Kalshi kind of willed itself in this category into this and again and by, by relation the Trump administration coming into power, right? Like this is the Biden administration was fighting election betting, let alone being able to trade on sports on any, anytime you want. So like these political considerations and the legal considerations about that kind of forms the contours of what we're going to see depending on what happens in the court again, two to three years we're going to have a Supreme Court case about all of this and whether it's legal and whether the federal law preempts all the state gambling laws or not, we get it, we get something there, then we have clarity, right? One way or the other, this is either here to stay or it's gone. That's the end. That's that. I still, I still think there's a, in that world. I think there's a huge outcome still on all the other stuff. I'm still bullish on all the other stuff. The other one that I tell people is a, is a presidential regime change in 2028. If the Democrats come in or even if they win, Democrats win in midterms. Like there's going to be, I think more against this, right? Uh, against the sports part of this. I'm not overstating it. Say there's like there's dozens of states. Their attorney generals, both red and blue, have said this is a sports gambling can't have it here. So there's, there's been, there's all this political and legal contours are going to shape all of this. Uh, that might be years down the road but like so two, three years I think it's kind of we're here, this is the way it's going to be. But longer term, I don't know. That's the like again, if I'm pricing it, coin flip is that it all survived, that sports betting survives and then how much have they during these two to three years have uh, as everybody pivoted people to all this other stuff to the election stuff. Again elections are going to be huge no matter what. But getting people to trade on crypto out crypto markets, getting people uh, you know, not the crypto itself but trading on markets on what's the price of bitcoin, financial markets, cultural markets, how, how much adoption do they get? And again Kalshi has been pretty de minimis so far. It's been sports and then everything else is a, uh, is a rounding error more or less like, like 10% of trading is everything else that's not sports. Polymarket has done a good job again rest of world saying getting people to care about all these other things and put their money on it. Right. So if they can replicate that here in the United States, either of them or anybody else who comes along, that's the part that again I think is interesting and is going to be here no matter what. Uh, we're going to have election betting, we're going to have all this other event contracts, the sports stuff is whether it's here or not. And again I would presume it gets smaller as a share over time that they do get people into all these other things that institutional capital gets involved and we see more and more of the trading on everything else, all the other world events. That again is the big idea around prediction markets.

Speaker B: Well, I couldn't agree more and I'm looking forward to seeing what happens. The Supreme Court SCOTUS case is coming up and uh, I guess we're going to get a lot more information. That's something we can bet on, at least for now until it's all over. But Dustin Galker, the editor and author of the Closing Line newsletter focused on U.S. gambling news and the Event Horizon newsletter focused on the predictions market. Thank you so much for joining us.

Speaker A: Cheers.

Speaker C: Thanks so much for having me.