So we’re betting on everything now?

Prediction markets.

They're websites that for some reason exist.

When you go to one, you'll find an infinite scroll of real world events

and their possible outcomes on which you can bet your hard earned inheritance.

Events like who will Donald Trump talk to in February?

Logan Paul first edition charizard sale price?

Will Jesus Christ return before 2027?

And when the U.S. will strike Iran.

But to this unholy list of questions, I'd like to add one of my own.

Why is this allowed?

In the rapidly

evolving genus of prediction markets, two species stand above them all.

Polymarket and Kalshi.

These companies are strikingly similar beasts who together

are largely responsible for the recent prediction markets boom.

In just the last year, they've partnered with news agencies and sports leagues,

launched massive ad campaigns and each reached valuations of about $10

billion while processing over $1 billion from users every week.

Folks it's prediction markets world and we're living in it.

Prediction markets are the future

Predictions markets

very hot right now

Google announcing it will integrate

Kalshi’s data into their search results.

The NHL just became the first major US pro league

to strike licensing deals

with prediction market platforms

an every day person could

could liquidate their 401k and bet it on how many times the

Chipotle CEO is gonna say carne asada in their earnings call.

Preediction markerst are going to be the next thing separating

your boyfriend from his salary.

I’ve been getting into prediction markets and I think more people should be involved.

So we bought 100 bucks that its gonna go up

I’m locked in I’m locked in

Noo0ooo00oo000oo0000o0000oo000000000

Yooooo this is emotionalllll

But prediction markets

weren't always the multi billion dollar addiction

apps that your husband checks on his phone immediately post climax.

In fact, prediction markets got their start

as the insignificant fringe interest of enormous nerds.

In 1998, faculty members at the University of Iowa created experimental prediction

markets to discover what we could learn from

letting people bet on things like the presidential election.

The Commodity Futures Trading Commission, which oversees pretty much all trading,

let them run the experiment so long as they kept the money dial

turned down to for nonprofit academia purposes

But now these things are most certainly non non profit.

In fact they’re mucho profit.

Did you see this coming?

This explosion of prediction markets?

Anybody who says they saw this coming is full of sh*t

I’ll tell you that much

It was so small there was nothing going on in the background.

Dustin

Gouker is a reporter who writes Event Horizon

a fantastic newsletter on prediction markets, if I do say so myself.

Dustin explained to me why

at its core, the idea of prediction

markets is so potentially valuable in the eyes of the world's beta-blocked

VC Bros.

Information is money, right? Information is super valuable

The more information you can have about world events and what’s to come

that information is power, like if you can tap into that information

then you have something and again this is why major

financial interests are

really getting into this and really find this interesting.

The major financial interests Dustin is talking about here are,

among other things, investment banks and hedge funds,

a few of which are hiring traders for prediction markets

titans of traditional news media, Venmo,

Giannis Atentetakuampah (?) Donald Trump Jr, who's an adviser to polymarket

and Kalshi and his daddy, whose social media platform is making their own prediction

market Truth Predict.

The fundamental argument for prediction markets

usefulness is that they tap into the so-called wisdom of crowds,

turning them into an extremely accurate predictive tool.

The idea is that if you get a large number of people betting on something,

you're going to approximate the best possible guess at the outcome.

With modern prediction markets specifically

this has to do with the sheer number of people betting,

but also the types of people betting -- experts and people with inside

information could be incentivized to get in on the action.

These traits were immediately noted by economists in the early 2000s

who noticed that the Iowa Electronics Market was actually

predicting political outcomes better than most experts and pollsters.

We also saw an example of this in the 2024 presidential election

when traditional forecasting methods

had the races a toss up, but prediction markets saw it as a clear Trump dub.

And it's this kind of stuff that has Kalshi claiming

their predictions are as good as Wall Street and as Polymarket’s

CEO Shane Copelan feeling confident enough to talk a big game to this

immortal news self.

And how accurate is it?

It’s the most accurate thing we have

as mankind right now

until someone else records some sort of super crystal ball.

But perhaps

you're wondering how the Benny Blanco of Peter Thiels

got away with running this multi-billion dollar company.

I thought prediction markets were supposed to be non profit.

And in Iowa, what happened?

Now, quick lesson on legalized gambling for ya: here in the United States, if you want to

first of all that’s a great idea and you’re gonna become a trillionaire.

But second of all, you’re gonna need to hire a high-functioning team

of cold, heartless lawyers to machete their way through jungles of red tape

to launch said gambling product.

It took the sports betting industry years and years of lobbying and groundwork

to launch their products, and because gambling is regulated by the states, not the federal

government so they had to do the whole process state by state.

And they’ve still got 11 more states to go.

But Kalshi and Polymarket? These cats work smarter, not harder.

They looked at everything you have to do to legally launch a gambling product and said:

Dustin hows this stuff not illegal?

That’s a big question, it’s the question everybody’s grappling with right now.

It’s legal because it’s federally regulated under the Commodity Futures Trading Commission.

Now, if you'll remember, the good people over at the Commodity Futures

Trading Commission who oversee futures and other derivatives trading,

not juicy enough

Excellent.

Basically, prediction markets like Kalshi and Polymarket consider themselves

to be closer to the Iowa Electronics Market than DraftKings.

By this logic, their argument to the CFTC is that what they offer

isn't a gambling product, but instead markets to trade futures

contracts on real world events that have meaningful economic consequences.

We're a neutral, transparent financial market.

We're like the New York Stock Exchange.

What is the difference between gambling and prediction markets?

There hasn't been a single financial derivative that has been set up in the U.S

or otherwise, that hasn't been called gambling at the beginning.

Now-

we're starting to get into some sticky legal territory here.

and if I'm keeping it 100, I do not 100% comprendo.

And whenever that happens, I'm always sure to call up

a professor of business law at Seton Hall Law School.

I'm a professor of business law at Seton Hall Law School,

Home of the-?

Home of basketball players?

What's your mascot?

What's your mascot you got over there?

I should know this-

You don’t know-

We'll edit that part out.

So home of the-?

Pirates.

There we go.

I tasked ol’ Ilya Beylin here with translating the legalese

by which polymarket and kalshi argue they're permitted

to operate their platforms across the country.

The instruments that prediction markets use are styled as derivatives.

And they can be styled as swaps.

They can also potentially be styled as futures or options,

but irrespective of which derivative they're styled as,

once they're characterized as a derivative, they -- subject to --

some considerations can be listed on a derivatives exchange

this goes back to, late 1800s, early 1900s

a major exchange, Chicago Board of Trade.

There were a few other exchanges, too.

It was hosting some real trading and grain, Civil

War, foodstuffs it also started trading what are called futures.

certain grade of a commodity at a certain price future

and these were the first exchange traded derivatives we saw in the US.

His words were going in my mouth and up to my brain

with a speed and complexity I was frankly uncomfortable with.

I needed to reestablish control.

I just want to let you know, no matter how hard you try, I'm right there with you.

I love it.

I know it might not look like it, but mentally, I'm.

I'm exactly where you are.

I like walking odd woods and companies.

Good in them.

I'm in. I'm in that woods with you.

I'm in the woods with your brother.

Kaboom

If it's economic function

and utility, that's the key to legalization here.

How come I'm looking on prediction markets.

and there's a 5% chance that Jesus is going to come back.

Yeahhhh

It's a great question.

Thank you.

The explanation is drift.

The explanation is regulatory drift.

What does that mean?

You start at a

place where something makes a lot of sense,

and then circumstances evolve, and products, financial products

as all these evolutions are taking place, they change,

at each step, the new one sort of resembles the status quo.

but the steps get further and further from that core

including the core purposes that an instrument at the time

it was brought into the regulatory system was designed to serve.

Thank you Ilya, that was beautiful.

but it also alludes to why, again, this all feels like

it shouldn't be allowed.

I think my problem with Kalshi

is they tell us that none of what they’re doing is gambling.

That’s the big thing.

The argument is, so under the CFTC

everything has an economic consequence. If you’re allowing event contracts

it has to have an economic consequence, right? In the world.

So in that world, everything has an economic consequence, I can invent an economic consequence

for everything but yeah

there’s this line of yeah, things that are really important

markets, Fed interest rates cuts the price of bitcoin

these are things that are very easy to diagnose they have an economic consequence in the world.

All these other things are more just for betting and speculation

and again, like, we have these things because there hasn’t been a whole lot of thought

Kalshi insists that everything is an event

everything can be traded and there you go, you get everything in the world

and again the CFTC has just kinda said “sure, it’s all an event.”

“We’re not gonna stop you.”

And amongst the events that take place

daily in our world, there is none bigger than sports.

Which dominate prediction market volume and make them seem pretty gambl-y.

Kalshi in particular

has made a big push into sports, which has been a huge source of growth.

The numbers constantly changing, but as of late 2025, about 90% of the fees

Kalshi was collecting on trades came from sports, trades like taking

Los Angeles L over New York K in pro basketball

clearly day and night

from gambling on the Los Angeles Lakers to beat the New York Knicks on DraftKings.

And if you're thinking, well, gee, Dan Kalshi’s argument for this not being sports

gambling is feeling pretty thin.

Well, when they first launched sports contracts, they literally ran

ads saying sports betting is now legal in all 50 states.

Kalshi has now distanced themselves from this language.

But come on

Let's zoom out from the nitty gritty and activate Common Sense mode here.

The vast majority of

people think that sports contracts are gambling and not financial contracts.

God damn it

I even found a guy who's pretty much a professional prediction markets trader.

And even he thinks it's ridiculous

these things aren't classified as gambling.

On Kalshi I’ve got a quarter million dollars

and I’m out of cash constantly

because there’s so much stuff to trade on every single day.

So you've made-

you've made a quarter mil on Kalshi or that's what you currently have?

That’s what I currently have I think I’m at like $550,000 or $560,000 in career earnings there?

And I really started in March of 2024

I’ve been asked by companies to respond to reporters and say that it’s not gambling

and it’s like well I don’t really believe that so

look for somebody else

if you’re arguing that it’s not gambling you’ve got a tough battle ahead of you

but there’s different types of gambling

like if I’m flipping a coin and calling it

there’s no skill to that, right?

It’s 50/50, you’re right or you’re wrong.

But something like poker or prediction markets or the stock market

there’s ways to give yourself an edge so you have to have an edge of some sort

like if you’re an idiot you’re probably not gonna do well

So you gotta have some level of intelligence

Idiots are not gonna do well in these?

I would recommend if you’re an idiot

do not join this unless you wanna just lose money for fun.

Ultimately, law has to be about the people, not the legalese.

What's the difference when you open up a wager on the Red Sox game

on, say, FanDuel versus Kalshi? Why is one gambling

and the other legitimate financial activity

that's regulated by the federal government?

Because a layman

laywoman, can’t-

Layman.

Layman.

Can't come up with a good justification for that distinction

I think we're sort of in real trouble.

To be clear I don’t think prediction markets should be banned

I think that there is some value and I think that people should be able to interact

with them how they want

But I do think that the regulation around them has to shift

New correspondent is Kyla Scanlon,

an author and economics commentator who recently published an op ed

about the dangers of prediction markets in some rag called The New York Times

I try to stay away from good and bad as words

but I think the reason it might be something to be cautious about

is because of what the platforms incentivize which is insider trading

they also have a lot of really questionable markets

so there’s markets on whether or not the leader of Iran will be overthrown

there’s markets on all these things that maybe, again, maybe we shouldn’t be betting on

and so there’s sort of this validation that the mainstream outlets

are providing to prediction markets when they do partner with them

and talk about the odds as this sort of consensus reality

like this thing that we should all accept is happening because there’s bets

that it’s going to happen

I’m not saying that people are wrong for doing this

it makes sense and I think it ties into the broader issue of financial nihilism

where people feel like they can’t get ahead so they might as well go bet on this stuff

but that creates further desensitization too

so I think you can become more attached to something happening

but becoming more attached to a leader getting overthrown

cuz you have money on the line, I think that’s psychologically and morally

morals are tough but like that’s a tough one

to process, right?

Indeed, it seems to me that what these prediction

market companies are doing

isn't so much capitalizing on their potential economic value,

but rather the general chaos of our world, fueled by a never ending media cycle

and the crippling gambling addiction me and the boys developed

after parlaying on Aaron Rodgers back in 2011.

I mean, this is what happens when you pump your dorky finance product

with 100fl oz of VC backed cash steroids.

It's a brash strategy, but will that strategy

work out for them in the long run?

Seems to be a GAMBLE they're willing to take.

You can BET on that.

Casino.

For Good Work

I'm Dan Toomey.

Have you ever placed a Kalshi wager yourself?

No.

Who do you think's going to open for Bad Bunny at half time?

Do you think it's going to be ti ti me pregunto

or baile inolvidable

Shit.

Okay.

What song do you think Bad Bunny is going to play first at halftime?

Is it going to be ti ti me pregunto

or baile inolvidable

I lack expertise in that question

that might not be a market I wager on.

Sounds like ti ti me pregunto

I’ll put $100 on that.