Transcript of How to Bet on (Literally) Anything

From the New York Times, I'm Natalie Ketrof. This is The Daily. Seemingly overnight, America has seen an explosion of new betting platforms that have radically expanded the universe of gambling. They're called prediction markets. They let you bet on all kinds of things, like will the US attack Iran? What specific words will the President say? And who will be at Taylor Swift's wedding? Today, my colleague David Yaffe Bellany explains how these platforms became so widespread so fast and how betting on everything could change the way we live. It's Wednesday, February fourth. David, it's wonderful to have you here in studio.

Thanks so much for having me.

We are coming to you because you cover crypto, which can often lead you to the nichest corners of the internet. I think of you as having a fringe capitalism beat.

Is that fair? That sounds about right.

Okay. You've been looking into these prediction markets, which I have a million questions about. But before we get into those questions, I want you to first just lay out for people who don't know these things, what are they? What are these markets?

At a really high level, a prediction market is a platform where you can bet on pretty much everything. Most people are familiar with sports betting, even the advanced sports betting that we get these days where you're betting on whether a player will make a free throw. Prediction markets expand that idea into all corners of politics and culture. You can bet on whether Trump will win the election. You can bet on the date of Taylor Swift's wedding. You can even bet on whether the Supreme Leader of Iran will make it to the end of the month. What it's done is expanded that gambling mentality to all sorts of parts of our daily existence.

The idea is Betting on everything everywhere all at once.

Exactly. Now you've got people, especially young people, logging onto their phones the same way they might use TikTok or Instagram and placing bets on elections, on pop culture, really on everything. These platforms have the potential to really change the way that people interact with the world, the way they think about the world. Everything now has a price. Everything can be communicated in terms of the odds that it will happen or it won't happen. I think we're already seeing signs that that's altering reality for people.

It does feel that this stuff has come out of nowhere. Am I right to think that these markets went from being quite marginal to suddenly being at the forefront of a lot of cultural and political events?

To some extent, that's right. Go back even two or three years ago, and no one was really talking about prediction markets. But if you zoom out a little further, what's happening now is really the culmination of a trend that started back in 2018.

A US Supreme Court ruling today has opened the door to a dramatic expansion of legal sports betting.

That's when the Supreme Court overturned a US law that had effectively banned of most sports betting in the US. Once that law was ruled unconstitutional, we saw an avalanche of gambling.

The gaming industry is calling this a groundbreaking decision that will revolutionize the gambling business. Right. This was a huge moment.

Yeah, it was enormous.

Draftkings announcing that it will enter the legal betting atmosphere throughout states that choose to legalize it.

Sports gambling companies across the country went state by state getting permission to offer their services, and suddenly people could gamble from their phones. This was a huge transformation in the US. I mean, in other countries, there's always been this type of gambling, but it wasn't really possible in the US. It was something you had to do in a clandestine way. Suddenly, it was all happening out in the open, and the marketing was enormous. You couldn't avoid it.

Okay, so that SCOTAS decision mostly affected sports betting, it sounds like. What did it mean then for prediction markets?

On some level, it's not directly related because legally, this decision didn't have anything to do with prediction markets, but it created this cultural moment where suddenly gambling, betting was totally accepted in the US. It had injected itself into the American consciousness in a way that had never happened before. It was in that context that a young entrepreneur named Shane Copeland started a company called Polymarket, which has become one of the leaders in this area.

Tell me the story of Copeland founding this company. What's his idea for it in the beginning?

Copeland's this young entrepreneur. He spends one semester at NYU before dropping out. He has this super techy background. He was really interested in cryptocurrencies. He had a nerdy fascination with markets from a pretty young age. The idea he had for Polymarket was actually quite high-minded. It came in 2020, just a few months into the COVID pandemic.

What really was the tipping point was during coronavirus, there was so many different opinions and so many forecasts that said entirely different things.

It was a time when a lot of information was swirling around. There was fluctuating case numbers, emerging variants of the virus. A lot of people felt like it was hard to make sense of the confusing swirl of statistics.

Effectively, when you've got lots of conflicting viewpoints and information and opinions, a market is a way to distill that information into one accurate fact or indicator or signal.

In Copeland's mind, prediction markets could help clarify this confusion. It's not just a way for people to gamble on everything. To him, Polymarket is about creating a new source of information in the world.

We are missionaries for the concepts of market-based journalism and helping people make better decisions by leveraging markets.

It's all based on an idea that has long been studied in academia, discussed in financial circles, that crowdsourcing information could produce more accurate projections about the future than what any individual expert might come up with. The idea here is that the source of truth and knowledge that prediction markets are offering could actually become a complement or even a replacement for things like traditional media.

You have this public good that's like a mecca of a real-time unbiased information where you go in Polymarket, you can just see, Oh, this is what the odds of this happening are in the future.

Interesting. It sounds like he's thinking that these could be more accurate sources of information than traditional media, in part because it's crowdsourcing.

It's crowdsourcing, and it's also a financial market, so people have skin in the game.

People can debate each other and be like, Oh, you're wrong, this, this, that. But the way that that really dissipates is when you let people put their money where their mouth is.

The idea is that when people have money on the line, they tell the truth or they're incentivized to research their opinions as thoroughly as possible. If you can pull all that together, then you've got a amazing new source of information.

Copeland is not just thinking of turning the whole world into some virtual casino here. He's imagining this as a tool for revealing things about the world, for gathering and disseminating information.

Absolutely.

Okay, at this point, I feel like we need to understand exactly how this market works, how the betting works. Can you walk me through that?

Yeah, this is a good question. A lot of people don't fully understand it. Prediction markets are essentially a series of yes or no questions. If you log on to the Polymarket website, you will see questions like, Will the Iranian regime fall before 2027? If you want to bet on that, you buy what's known as an event An event contract.

Yeah.

That's the yes option or the no option on any of these questions. The cost of those contracts, of a yes or of a no, always fluctuates between $0 and $1. That price is essentially a reflection of what the market of betters out there think is going to happen. If the yes option on the Iranian regime falling is going for 20 cents, then that means there's about a 20% likelihood of the regime falling.

It's relatively cheap to buy that contract because the universe of betters thinks it's relatively unlikely that this will happen.

Exactly. Then the payout arrives when the event either definitively happens or doesn't happen. If the regime does fall and you bought that YES contract at 20 cents and you correctly predicted what would happen, then the contract rises in value to $1 and you get your payout. Because this resembles a financial market, it falls under a different type of regulation than traditional sportsbooks. Sportsbooks are regulated by the states, their state laws, governing gambling, and the prediction markets instead are regulated at the federal level by a financial agency called the Commodity Futures Trading Commission, the CFTC. The idea here is that the CFTC should be protecting against abuses in the realm of prediction markets. Insider trading is an easy example of that, or market manipulation, things that could threaten the integrity of a financial market. But Copeland didn't go down that path. Initially, he didn't register Polymarket with the CFTC. That's in line with the move fast and break things ethos of the tech industry.

Right. The ask for forgiveness, not permission style of operating.

Exactly. Copeland was taking a similar approach. But ultimately, that got him into a lot of trouble. In 2022, the CFTC fined Polymarket $1. 4 million. As part of that legal settlement, Copeland had to agree that Polymarket wouldn't operate in the United States. It's only open to foreign users.

Why does Copeland agree to that? I mean, that sounds like a potential death knell for a company like this.

Well, the legal landscape in the US was complicated. It's complicated. On some level, it might have seemed actually less risky to try its luck outside of the US. But the other element to this is that there was a workaround. If someone really wanted to use Polymarket from inside the United States, they could download a VPN, a virtual private network, and essentially trick the website into thinking that they were logging on from another country. This was extremely easy to do. I've spoken to many people who did it. I I've spoken to at least one former Polymarket employee who told me that it was an open secret in the office that people were doing this. It meant that this US ban was largely theoretical.

At this point, do we know who's actually using this thing?

At this point, it's still primarily a base of tech-savvy people who are really interested in these things in a nerdy way. Got it. To use Polymarket, you had to use cryptocurrency. You're already limiting yourself to a pool of people who are comfortable transacting in crypto. In your world. In my world, yeah. If you wanted to use it in the US, you had to know how to use a VPN. It's not as if this was freely available to anyone who might potentially be interested.

Are people using it in the way that Copeland imagined they would to create new sources of information to illuminate things that maybe weren't clear before there was the potential to bet on them?

They are starting to do that. It's gaining popularity. It's growing. It's getting more attention in the media. It really comes to a head in 2024 as the presidential election is heating up. It starts that summer after Joe Biden's disastrous debate performance, when there's all kinds of speculation about whether Biden will drop out of the race. Suddenly, users of Polymarket start betting on that. At the time, many Democratic talking heads, pundits, It's the Biden administration, and of course, Biden himself were saying he's not going to drop out. But the betting market projected that he would drop out. When Biden eventually did, it felt like a moment of vindication for Polymarket and a preview of what it might offer to the world.

Because I can imagine Copeland sees this as proof of concept. Here you can come and get what I presume Copeland views as an objective sense of the odds.

Right. Of Of course, it's not like this was some question nobody was considering or that there wasn't punditry about it or people predicting that it would happen. But Polymarket was a place where all of that was consolidated into one number, and you could get a sense of the way the wind was blowing. And that moment, that question of whether Biden will drop out, then sets Polymarket up for the next big question of the 2024 race, which, of course, is who's going to win the election? Will it be Harris or will it be Trump? It It feels like a really long time ago now, but-A tide race, dead heat among likely voters, 47% Harris, 47% Trump. It obviously doesn't get closer to that. Back then, it was a close race. The polls showed that the two candidates were essentially neck and neck. But the projections on Polymarket started to shift heavily in Trump's favor. Obviously, Trump did win.

Big night for prediction markets and calling President Trump to elect as the winner at the polls.

It was another moment of vindication for Copeland's site.

Another example, for him, at least, of it being a more reliable predictor than traditional media sources, traditional polls.

Exactly.

As the saying of free markets goes, a diverse group of market participants, like you see on Polymarket, is more accurate than any given expert.

What was especially fascinating about this example is that we got a peek under the hood at how these projections came about. Now, remember that these projections are the result of a financial market, and a few large trades can shift a financial market significantly. In this case, a wealthy trader in France came forward and said that he had made $30 million in bets that Trump would win the election, and that this was based on his own careful research. He'd actually commissioned his own poll because he thought the traditional US polling was misleading, and that just out of that conviction, he put all of this money on Trump, which effectively shifted the polymarket odds in Trump's favor. It was a profitable play. This guy made more than $85 million in profits when Trump won the election. People started calling him the French Whale.

Okay, so obviously a huge payout for this one guy. What do you make of this moment for the markets themselves?

It had a huge impact. Suddenly, these markets that had operated on the margins of the financial system, getting some notice, but not a ton. Suddenly, everyone stands up and says, Wow, huge amounts of money are changing hands on these things. We really have to take them seriously. Of course, Copeland is taking a victory lap. But soon we learn that this entire time, as the company has been blowing up, becoming a big mainstream phenomenon, they've been under a federal criminal investigation. In fact, shortly after the election, the FBI raids Copeland's home in New York City. They take his phone, and it's all part of an investigation into whether Polymarket is legally allowing US users to access the platform. At the same time, you've got this moment of public vindication. You also have this really fraught legal moment where it's not clear whether the platform can survive in the United States. But there's a light at the end of the tunnel for Copeland, which is that soon Trump is going to take office, and as soon as he's in power, everything changes.

We'll be right back. Okay, so tell me what exactly changes for these markets when Trump comes to office.

Since Trump's taken over, there's been a complete change in attitude toward these platforms. Copeland, whose house had only just been raided by the FBI, was invited to a summit for tech executives at the White House. Donald Trump Jr. Became a formal advisor to Polymarket. Most importantly, the Justice Department under Trump officially dropped this investigation into Copeland. This is all happening in the context of a legal battle involving one of Polymarket's competitors, a company called Kelshi, that also offers its own prediction market, which around the time of the election had won a big legal dispute with the CFTC.

So suddenly, all these legal troubles that had been hovering over the company and the markets in general, they seem to disappear.

Yeah, they vanished. So you've got this culmination of a bunch of things, a pro-business attitude brought by the Trump administration, this legal victory secured by Kelshi. And so while it didn't happen overnight, what that meant is that US-based users were now allowed to use these platforms without a VPN. They become easily available to almost anyone. I just found out about Polymarket.

I started with $10, and I'm up $100-something.

That feeds into this larger cultural shift.

I'm a full-time Polymarket trader, and a lot of people don't understand how you can make a full-time living on Polymarket.

But let me explain. People are using these platforms more and more. They're more available in the United States. The NHL just became the first major US Pro League to strike licensing deals with prediction market platforms, Kalchi and Polymarket.

Polymarket is going to become the official prediction market partner for the UFC.

Kal she just announced a new partnership this week with Coinbase. With every passing week comes some new major partnership that brings them more and more into the mainstream. Dow Jones is teaming up with Polymarket. This is an exclusive partnership, and it'll make Polymarket's real-time prediction data available across Dow Jones platforms, including the Wall Street Journal. Big media organizations like CNN, CNBC, the Wall Street Journal, have formal partnerships with Cal sheet and Polymarket to use data from the sites in their news reports. Wow.

Good evening and welcome to the 83rd Golden Globes.

The Golden Globes features considered Polymarket Odds on the live broadcast. Here are the colonies for Best Podcast. Roll the tape. Right before the Best Podcast Award was announced, Polymarket Odds were projected on the screen. It's been this huge cultural awakening toward these things.

It is wild, David, to just consider the trajectory that you've laid out for us here a year ago about these markets were operating as a niche, a legal legal backwater on the internet where you had to pay in crypto and have a VPN to use them, and now they're fully in the mainstream.

Yeah, the scale is enormous. There was about $12 billion in trading volume on Polymarket and Calshi in December. That's a 400% increase from the year before. Well- Look, granted, that's still a smaller user base than bets on traditional sports books. But the level of growth is pretty impressive. One recent example that got a lot of attention is a betting market on PolyMarket about whether the President of Venezuela, Nicolas Maduro, would be removed from power.

Right, I saw that.

Some of the betting on that Maduro question actually raised new concerns about how these platforms operate. Shortly before the US operation in Venezuela to remove Maduro, an anonymous better on Polymarket placed a It was a large bet that Maduro would be removed from power. Then, of course, he was, and that trader made a big profit. But the timing of that bet was so good that it convinced a lot of people that this trader must have had some advanced knowledge about the operation, that this must have been some insider trading based on a government leak or somebody in government improperly using the site.

Right. I remember when that happened because I was following the Maduro news very closely. People saw that bet and just did assume that this person who made it was potentially close to the White House and knew in advance it was going to happen.

Yeah, to be clear, there was no evidence of that. It was never proven. But I think what we're seeing here is something that we've already seen in the realm of sports, which is when betting becomes super mainstream, there's an aura of suspicion that develops around everything. People become convinced that things are rigged, that somebody's cheating to try to make money. Now we're seeing that aura extend to all sorts of other things in the real world outside of sports. That's even bled into how the newsmakers themselves are operating. There was an incident last fall where Brian Armstrong, the chief executive of Coinbase, which is the largest crypto company in the US, was doing an earnings call. At the same time, there was a betting market on both Kelshi and Polymarket on what words he would utter during that earnings call.

Can I just pause and say how amazing it is that there were bets being made on what words he would use in an earnings call?

Maybe someday there'll be bets on what you'll say on the daily. I mean, who knows? It's all fair game at this point. No, thank you. Anyway, at the end of this earnings call.

Yeah, I hope we answered your question on that. I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call.

And I just want to-Armstrong says, Oh, I've actually been looking at the prediction markets. I just want to add here the words Bitcoin, Ethereum, blockchain, staking, and Web3 to make sure we get those in before the end of the call. Then he just reels off a list of the words that people were betting on influencing the market directly. Now, Armstrong has said that he personally wasn't betting on this market. He didn't have a stake in what he was going to say. But it's an illustration of how easily these markets could be manipulated.

Right. The CEO says this didn't benefit him, but it's pretty easy to imagine a situation in which someone does actually have a stake in outcome that they can influence and colludes with people to make a lot of money manipulating it. Yeah, it could happen. We've obviously seen that in sports betting, players colluding with betters to change the outcome of games or of things that happen within the games. In sports betting cases, those lead often to criminal charges. But in this case, is this cheating actually punished?

The CFDC does have a rule against insider trading, but this is such a new area that it hasn't really been tested. So it remains a big question mark. Calshe, which is Polymarket's biggest competitor, has taken the position that insider trading is bad and that there are protections in place on the platform to prevent it and to report it. But there are other people in the prediction market sphere who actually think insider trading is a good thing. And that goes back to that high-minded goal behind some of these products, that they could become a source of truth in the world.

Wait, tell me how cheating is part of the high-mindedness? Sure.

If what you want to do is produce the best possible projection about what will happen to Nicolas Maduro, then if someone who has insider information about that is placing bets and moving the market, you end up with a much better projection.

But isn't there a case, David, for these companies that operate these markets to be worried about the business implications of cheating? Wouldn't a Shane Copeland, for example, be concerned that people wouldn't want to participate in Polymarket if they know that they may be taking a sucker bet on some of these big events where the person on the other side actually has good information and they're just making a guess?

Yeah, absolutely. These companies have taken a big reputational hit from some of these incidents over the past few months. But look, I've covered these sorts of strange financial instruments for a long time, and it's pretty amazing what people will throw their money into. I've seen people buy useless meme coins that are clearly part of a pump and dump scheme, but they do it anyway. People aren't always rational with their money. You're always convinced that you're the one person who has the inside scoop and can figure out how to make money from something that everybody else is losing money on. Right.

You're not the sucker.

Exactly.

David, you made it clear that these platforms have persuaded regulators that what they're doing is not facilitating gambling. They obviously call themselves prediction markets, not betting apps. But the reality is the way they work, as you've described it, is much more like gambling than the stock market, right? These are quick fix bets.

Look, as I've started reporting on these platforms, I've also started using them with a small amount of the New York Times's money. Oh, wow. How much? $20. Oh, wow.

Generous.

Any profits would go it to charity. It was a real philanthropic opportunity for me. How'd you do? I've already blown it. I'm down to $10.

Okay. You're no French whale.

Exactly. But one thing I learned from playing around with these platforms a little bit is that it does feel like gambling. These platforms are designed to suck you in. They've got bright colors and you see numbers going up and down, and it's exciting. When you're just playing around with a few dollars of your company's money, that's totally fine. But when When you are potentially vulnerable to addiction and you're spending money that you need for other things on these platforms, there's a real risk. One thing we know about this type of betting is that it's especially popular among young people, especially young men. It's their vice of choice these days. So whatever the long term consequences of this are, it's probably going to be felt by that demographic, young people.

Right. If you have a gambling addiction, like you said, there's all these reasons why you're compelled to keep betting. If you're just someone who finds them fun, you're looking for entertainment. You're looking for this world that's been created by these markets, Which, as you've described it to me, turns reality into something like a video game.

Yeah, and the consequences of that are starting to become clear. It's changing the stakes of reality for people, changing the way they relate to things that are happening in the world, even things that are really important and have human consequences. We have seen prediction markets betting on the LA wildfires, on how quickly they would be contained. The air was betting on the war in Gaza, whether that situation would be classified as a famine. All those things are devastating for the real people in those situations. But now you have a class of internet speculator who's engaging with them as potentially profit-making opportunities.

Yeah, I have to say it's pretty dark to imagine people putting money behind the notion, for example, that Gaza would be declared a famine or that the fires in LA wouldn't be put out and then potentially having a rooting interest in that outcome. Just to put a fine point on it, it means presumably you have people hoping that these terrible things will happen because they'll make money on it.

A lot of people have that reaction, and it's totally a real concern. I'll just turn it around and try to capture what the companies would say to this. Specifically on that example of the LA wildfire, people have a real interest in knowing when the fires would be contained. They're making decisions that affect their lives based on that. If you have a crowd-sourced verdict on that question, that could potentially be really helpful. On some of these markets, you can still make a version of that high argument that Copeland came into this industry with. But on some of the others, it's definitely a lot tougher to justify.

I guess then, even if you buy the premise that there's utility in these bets, I think it's worth asking what the cost of that is. What it does to us as a society to suddenly be relating to the real world and sometimes to real world suffering in this gamified way.

Yeah, it has a distancing effect. Suddenly, these things become abstract the same way the price of a stock is abstract to people. What the long term consequences of that will be, it's hard to say. But it's clear that this is a future that these companies want. One of the cofounders of Calshe says that he wants to financialize everything, to turn every difference in opinion into a tradable asset. It's the idea that any event in the real world could be communicated in financial terms as odds of this happening, odds of that happening, even if it's something as simple as the weather. To their founders, that's really exciting. But to a lot of other people, a world in which everything is reduced to dollars and cents is depressing. To a lot of people, it sounds dystopia. What's clear is that we're at the beginning of this. The legal landscape is still taking shape. There are some challenges to prediction markets happening in the states right now. Still, as someone who's covered this fringe financial stuff for a long time, I can feel momentum behind these markets. There's a real appetite for them culturally, and I don't see that changing.

People want to bet on everything.

Well, David, thanks for coming on the show.

Thanks so much for having me.

We'll be right back. Here's what else you need to know today. President Trump signed a bill that ended the partial government shutdown on Tuesday, hours after it passed the House. The legislation funds much of the government for the rest of the year, except recept for the Department of Homeland Security, which was only funded until the end of next week. Democrats are insisting on new restrictions for federal immigration agents before extending that funding, and Trump now has 10 days to strike a deal with them before it expires. And House Republicans canceled a vote to hold Bill and Hillary Clinton in criminal contempt of Congress. The move came after the Clintons agreed to testify on camera in the Jeffrey Epstein investigation and requested to be deposed at public hearings. The agreement marked an end to a month's long standoff between Republicans and the Clintons, who had resisted testifying and accused the GOP of carrying out a political vendetta against them.

I think it's a shame, to be honest.

I always liked him. When asked about the developments, Trump expressed empathy for the Clintons. I hate to see it in many ways. I hate to see it. They will appear on February 26th and 27th for depositions. Today's episode was produced by Ricky Nowetsky, Nina Feldman, Claire Tennisgetter, and Rochelle Bonja. It was edited by Chris Haxel and Devon Taylor, contains music by Ron Nemistow and Alishaba Itup, and was engineered by Chris Wood. For The Daily. I'm Natalie Kytrowaf. See you tomorrow.