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prediction markets aren't just gambling | voidzilla | YouTubeToText
YouTube Transcript: prediction markets aren't just gambling
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Prediction markets are aggressively positioning themselves as legitimate financial instruments and "next-generation news" platforms, while critics argue they are essentially unregulated gambling operations that exploit regulatory loopholes and even embrace insider trading.
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Prediction markets are not just
gambling. There's also a lot of insider
trading, too. Here's the call sheet CEO
kind of explaining the goal here, which
is that eventually we can gamble on everything.
everything.
>> The long-term vision is to financialize
everything and create a tradable asset
out of any difference in opinion.
>> Now, understand that guy who wants to
make a tradable asset out of any
difference of opinion, anything you care
about, that guy just partnered with CNN
and CNBC. Already the news is embracing
or bear hugging entering gambling
markets into our news. Just like ESPN
put sports betting odds into their
programs and it became a big part of the
sports watching experience. It's all
about, hey, what are the odds on the
game today? What are the markets saying
the odds are? And part of what I find so
grading about this dialogue, the debate
right now is the insistence by these
CEOs that they are not actually
gambling. There is propaganda going on
that they are something completely
different all because they found a
regulatory loophole that allows them to
be gambling in states where it's not
allowed. So here's just one post that
expresses that he says Khi is not a
gambling company. Saying so is
incorrect. I assume that people calling
Khi gambling are uninformed rather than
being defamatory. But Khi is not gaming.
Now I want to point out to that guy that
most of the volume on prediction markets
like KHI is made up by sports betting
aka the same thing that people bet on
like with DraftKings, FanDuel, prize
picks. That's what people are actually
spending the majority of the volume on
on Khi specifically. Nevertheless, CEOs
are bending over backwards, who by the
way are financially invested in seeing a
difference. They say there's such a
difference between sports gambling and,
you know, prediction markets. Here's
Vlad Tinv, who actually has prediction
markets for sports, explaining the
substantial difference.
>> Qualitatively different than sports
gambling for for a couple of reasons.
One is these are CFTC, federally
regulated event contracts. And what that
means is instead of, you know, uh,
betting against the house or setting a
line, this is an exchange, a designated
contract market where buyers and sellers
are are meeting. So, by the way, by
meeting, he means they're betting
against each other. But he's right that
instead of betting against the house,
the house is pitting people against each
other and the house just takes a cut
based on trading volume. So rather than
actually setting the line themselves and
betting against you, they're allowing
you to bet against other people and
they're still taking a cut. It's just a
different way to take a cut.
>> Um you're not, you know, setting a line.
Um so I think it's very different.
>> But it's really not though. You can bet
on FanDuel or DraftKings one thing and
you can go bet the same thing basically
on Robin Hood. It's both sports gambling
one way or the other. And this has
generated an interesting fight between
the nent upcomers who want to be in this
prediction market game and the casinos
who kind of are feeling cheated right
now because they have to go through the
hoops of gambling regulation. And so you
actually saw the AGA who I'm actually
very against. It's a trade group for
gambling, but I guess the enemy of my
enemy is my friend for now. Uh,
basically they put up their own version
of a propaganda website against the
prediction markets because the
prediction markets are eating too much
of their lunch and they're like, "Hey,
this is unfair that these guys have the
loophole." So, they're now
propagandizing and running ads for the
fact that prediction markets are just
sports betting. Like, they are gambling.
>> When prediction markets become sports
books, they put consumers and the
integrity of sports at risk.
>> That's what the gambling industry is
saying, while the prediction market
industry is saying, "No, no, no, guys.
We're we're we're not we're not just
that. We are we're a truth engine
actually. So, it's kind of amazing. They
actually both ran their own like
propaganda polls. Like here's some AGA
research that supposedly shows that 85%
of Americans say these contracts are
gambling, not financial instruments. 84%
say they should only be available
through statelicicensed sports books.
Clearly arguing their point. And then if
you go to Kulshi's website, they have
their own propaganda survey. Quote,
"Nationwide poll shows broad support for
prediction markets. Nine and 10 voters
say Americans should have access to
prediction markets, viewing them as
financial instruments, not gambling."
Well, gee, guys, which which is it? Can
we figure it out? It's like the
prediction market books and the sports
books and gaming companies are like
battling out over which is gambling,
which is not. Of course, I think the
logical view is that if you are offering
sports betting the same product as the
gambling company, those two things are
the same thing. I mean, yeah, you can't
use your loophole, but uh I really it's
a weird position to be in to be agreeing
with like the propaganda arm of the
gambling companies, but yeah, they're
now fighting against the propaganda arm
of the prediction market. In fact,
recently the prediction market companies
have gotten together and created a
coalition. It's like their own trade
group called Predict Action and they've
partnered with Crypto.com, Robin Hood,
Coinbase, and Underdog. These are all
guys who are getting in the prediction
market game. They said, "We created the
coalition with a simple mission. Provide
a voice for the prediction markets
against adverse legacy lobbying groups,
aka the casinos. They're fighting the
casinos because they want to win and not
be seen as gambling so they can win a
majority share of the gambling in
America. It is insane. Meanwhile, you
have the prediction market guys just
stumbling over themselves for whether we
should allow actual insider trading in
their markets. Because that's a part of
this that we haven't discussed, which is
that these prediction markets are so
grading in that they not only don't
admit what they are, they also try to be
something they're not, which is they say
we are not only not gambling, we are the
news actually and we are such a valuable
source of information. Here's Vlad Tenev
again expressing this.
>> I also think that um you know if if you
think about the news, right? I I like to
think about prediction markets as the
next generation of the news. We know the
news is economically valuable. You know,
people pay for getting the newspaper. Uh
they pay indirectly for, you know, shows
like this through advertising.
And so if if you get the news before it
happens, that should be even more
economically valuable. So I think a lot
of people it's it's easy to just kind of
lump it in with with gambling, but this
is a a liquid market that gives people
information in real time. I think
there's a ton of economic value in that.
>> Yeah. You know what else gives people
information in real time are sports
betting odds. Like you could make the
same argument for sports betting. It's
like, oh, you can get a real look at
who's going to win the game by what all
the sharp bers are betting at that time.
You can say the same thing here. But
this whole idea of like you get the news
early. The only way you get the news
early, by the way, is if it's insider
trading. Everyone understands that,
right? All these prediction markets are
doing is just aggregating sentiment on
the news. The only way you can get
something that's not in the news from
these markets is if someone with non
news information trades, which is aka
inside information. And there's a funny
moment where the CEO of Coinbase, who
again is part of this prediction market
new Grift, he kind of realizes this and
he goes, you know, I was talking to the
CFTC nominee the other day, who by the
way may regulate these markets. And he
was kind of trying to decide maybe we
should allow insider trading cuz maybe
that makes our product even better. You
know, I actually had a really
interesting conversation with uh one of
the folks that was nominated to be CFTC
um commissioner about this and I he
asked me he said, "Do you think we
should allow insider trading in
prediction markets?" And I said, "It's
it's actually a pretty it's not as
clear-cut question, right? Because if
your goal is to actually for the 99% of
people trying to get signal about what's
going to happen in the world, like is
the Suez Canal going to be reopened or
whatever, you actually want insider
trading. You want, you know, some
admirable admiral sitting on a ship in
the Suez Canal who has really good
information to be trading so you get
better higher quality signal out of
them. Right? Now, if you want to
preserve the integrity of those markets,
maybe you don't want insider trading,
right? So, there might be like a
decentralization test that has to go in
here, but it's it's not it's not a
clear-cut answer.
>> That's right, guys. Maybe we want the
insider trading so we can get the news
of tomorrow today by encouraging people
financially to go ahead and give us the
news now, right? You encourage basically
leakers because you financially
incentivize them trading in your market
and having an inside edge. I want to be
super clear. There's a reason we didn't
allow this in the securities market. I
mean, you can make the same argument for
like, well, what if we want the stock
market to give us tomorrow's news today
on public companies? You could just
allow insider trading and that would
tell you, right, the market would move
before the news came out. But there's a
lot of reasons we don't do that. Mainly
that it's cheating the average trader.
But these new prediction market CEOs
don't see it that way. They don't want
to be regulated by gambling laws. They
don't want to be regulated by
securities, insider trading laws. Here's
the poly market CEO being asked a
question about insider trading, too. He
seems to suggest maybe it is also a good thing.
thing.
>> But predictive markets do rely on
someone having some inside information.
>> Yeah, I think that people going and
having an edge to the market is a good
thing. Obviously, you need to curate
them and you need to be really clear and
stringent on where the line is drawn and
like sort of ethics and we spend a lot
of time on that. But it's sort of an
inevitability that this will happen and
there's a lot of benefits from it and
you know people will adapt. Wait, what?
What does he mean? It's inevitable that
we're going to have insider trading and
people should just adapt to the idea
that they're going to be frontr run by
some insider. I mean, is this not crazy
to anyone else? Like I saw on our Reddit
the other day, you know, somebody was
like, "Hey, Coffeezilla, you should
expose this Google inside trader on Poly
Market and I was just thinking to myself
like expose what?" Like this is
explicitly part of the offering of
platforms like this is they say, "Hey,
you're going to get the signal early."
How do you think they're getting this
signal? Like this is a feature, not a
bug of these platforms. And by
implementing non-insider trading rules,
they're actually hurting the edge of
these markets. Now, the last thing I
want to say is that not all gambling
companies see prediction markets as a
bad thing. Actually, there has been a
big split and divide at the American
Gaming Association. DraftKings and
FanDuel recently dropped out. This is
the NCAA president saying, "I'd be
willing to conclude that that's a big
part of their reasoning is they're going
to get into the prediction market space.
They can't afford to let those folks
dominate all that green space they can't
currently access. Giving away the game
again that this is all gambling. The
whole reason that the gambling companies
hate this is because they're stealing
their lunch. The whole reason that some
gambling companies are embracing it is
because they see it as the future of
gambling because they can target more
people at a lower age in more states.
And when you actually hear the CEOs of
sports betting companies talk about
this, they say they think they have an
edge in this space
>> and draft kinks and finax. I think we
have such strategic advantages from the
enormous customer base that we have to
all the experience and we have
>> are you saying like an advantage over
the couches and polyart?
>> Yeah def definitely.
>> Yeah. So some of the gambling companies
the ones that are leaving the American
gaming association they're the ones that
are like yeah this is actually great. We
love this. We're entering this. We have
a strategic edge because this is all
gambling of course and so we're going to
you know of course clean up cuz we have
the most experience in the gambling
space. The only way to really solve this
is regulation, which we are absolutely
not going to get clear rules of the road
on, at least not ones that make any kind
of meaningful stop to the kind of crazy
takeover that's been happening. And the
reason I'm willing to bet on that,
ironically, is because uh of this
headline right here. Trump media enters
prediction market business. If you
didn't know, the Trump family is getting
very invested into prediction markets.
In fact, you had Don Jr. uh become the
poly market adviser. He was also an
adviser of KHI as well. Now, I guess
they're taking all that experience and
offering a truth social prediction
market called Truth Predict. It's a
partnership between Trump's media social
network, Truth Social, and Crypto.com's
Derivatives of North America. It'll
allow our loyal users to engage in
prediction markets with a trusted
network while harnessing our social
platform to provide totally unique ways
for users to discuss aka gamble and
compare their predictions. So, our
president literally has a financial
stake or at least his family does in the
prediction markets going well. And part
of going well means keeping the
regulatory sort of free open ocean of
opportunity right now. Uh which means no
regulation or very little regulation. So
honestly, I have very low expectations
for regulators doing anything. The very
fact that they're debating with Brian
Armstrong about whether we should just
allow insider trading with one of the,
you know, possible commissioners is
basically a giant red flag of what's to
come. But I just wanted to cover this. I
wanted to give people a primer on what
these platforms are, what they do, what
their arguments are, and the fact that
they're fighting with the gambling
companies over market share of our
country, which I think is is probably
bad. Uh pro probably bad. When the
casinos say you're cheating, you're
getting ahead by breaking the rules. Uh
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