Prediction markets in the news are a dangerous gamble

Today on Decoder, let’s talk about prediction markets, which continue to insert themselves into the news cycle and the news itself in increasingly weird, unsettling, and potentially illegal ways.

My guest today is Liz Lopatto, senior reporter at The Verge, who owns what we cheerfully call the chaos beat. Liz has been writing a lot about prediction markets lately and especially why they all seem so intent on being perceived as sources of news — a position that directly incentivizes insider trading. That, in turn, creates a long list of very predictable problems.

This past weekend, after the United States and Israel went to war with Iran, leading prediction market platforms Kalshi and Polymarket erupted with activity. That included extremely contentious markets around the death of Iran’s supreme leader, and some that appeared to be rife with insider trading from people with advanced knowledge of US military actions.

In 2026, you can, from the comfort of your couch, wager on when the US will bomb a foreign country. And for Kalshi and Polymarket, that’s quite literally the business model: betting on anything. (After we recorded this episode, Polymarket even briefly featured a wager on whether nuclear war would break out before 2027; the company removed it.)

Sports are where these firms make the bulk of their money, which is why both Kalshi and Polymarket are in the crosshairs of so many state gambling authorities. But this industry also thinks of itself as something far grander. Prediction market players want to be the news, and they’ve even devised new, frankly unconvincing frameworks for why they should be considered legitimate sources of information — instead of just anything-goes casinos. Yet more and more, news organizations are taking the bait.

Kalshi’s tagline is “trade on what you know.” Polymarket CEO Shayne Coplan has called insider trading “cool.” And later on in this episode, you’ll hear from Robinhood CEO Vlad Tenev, who came on the show last year to defend prediction markets as “the news faster; in some cases before it even happens,” which, last time I checked, is impossible without insider trading.

Insider trading is supposed to be illegal, and so is operating an unregulated sports book. So you’re now starting to see Kalshi and Polymarket getting hit from both sides of this broader regulatory debate, and 2026 is shaping up to be the year that all of this really comes to a head. To what end? It’s hard to say, especially as these companies cozy up to the Trump administration.

But it’s also becoming increasingly untenable for prediction markets to sit in the middle of the tension between gambling on the news and trying to self-regulate such that they don’t encourage insider trading.

Okay: Verge senior reporter Liz Lopatto on prediction markets, gambling, and the news. Here we go.

This interview has been lightly edited for length and clarity.

Liz Lopatto, you’re a senior reporter at The Verge. Welcome back to Decoder.

Thank you. It’s good to be back.

I’m excited to talk to you about gambling. I think we’re just going to talk about gambling. I’m saying gambling because I know the people who run prediction markets hate it when we call it gambling, and I’m trying to bait them into talking to either you or me for a piece on the difference between prediction markets and gambling. What do you think the difference is?

I don’t think there is one. I’m just being honest here. I think the structural difference is what they’ll point to, which is that on a prediction market, it’s a contract between independent players, and with a casino, you’re betting against the house. And so they’re just taking a cut of these contracts rather than playing against the players.

One of the reasons you’re on the show this week is because prediction markets are moving ever more aggressively into news. The inciting event here is Polymarket and Substack have launched a joint venture by which Substack writers can integrate Polymarket odds into whatever they’re doing. They might get paid for that, they might not.

The tagline for this is “Journalism is better when it’s backed by live markets.” I’ve been staring at that tagline for a long time. What do you think is made better by live markets in the context of journalism?

Well, first of all, Nilay, I think we have Bloomberg at home. But second, in the sense that markets and journalism have anything to do with each other, it is pretty much only markets reporting. If you’re reporting on, say, the stock market and part of your job is to put together the big movers of the day, and somebody publishes an exposé on a company that sends its shares plunging, those things are synergistic.

I don’t understand what these contracts would have to do with news except in a very specific context having to do with politics. And that context is, basically, trying to figure out who’s going to win an election.

Obviously, who’s going to win the election is something that there are odds made about every single day. You can criticize politics coverage in many ways, but predicting whether or not someone’s up or down or whether some candidate is on the rise such that they might win an election, that’s just a core part of political coverage. And the idea that you should be able to bet on that has gone through long periods of uncertainty.

Mostly we’ve said that’s a bad idea. I think these prediction markets are saying, “No, it’s a pretty good idea.” There’s some kernel of the conventional wisdom embedded there that it’s more rigorous because the money provides stakes to your bet, and those stakes mean that you believe what you say is true, versus just lying to a pollster . Do you think any of that holds water?

No. Let me start by just explaining something. That explanation you gave me about “money stakes mean you believe something.” That comes from economists. One thing about economists is that they tend to discover 50 years later stuff that psychologists and sociologists have already known the whole time.

One of the things that we know from psychology is that there are a lot of people who get involved in betting and just bet for the pure feeling of being in a flow state. We know a great deal about this because casinos run on this. They do what they can to keep you in this flow state so that you’ll keep betting and keep losing money. Slot machines are the ideal way of looking at it.

While prediction markets are not slot machines, I do want to be clear about that, they share some of these basic mechanisms, specifically intermittent reinforcement. So if you are somebody who’s very serious about your prediction markets, you may not be betting because you believe in something. You may be betting just to bet, just to be involved, to be part of the action, because you can’t win if you don’t play. That’s thing one.

Thing two is that I think there’s something a little weird going on, and it has to do with polls and the fact that we no longer really trust polls. If you think about it, there was this long period of time in politics reporting where we would have a debate and then we would see how voters responded to the debate. Did the poll numbers move? And this was a proxy for saying, “Did somebody win the debate?” You can talk about whether or not this is good reporting or whether this is something that has driven the American political scene to its current nihilistic existence.

I think we should tell the audience that Liz and I would both very much like to talk about whether poll-driven political reporting is good or bad, but we’re not going to at this time.

You can hear it, it’s subtext, but not at this time.

So as these polls have become less reliable because people aren’t picking up their phones because we haven’t fixed the spam calls problem, the people who had been using polls as a way of guiding elections coverage just looked to something else. And that something else was prediction markets.

The prediction markets said that Trump was going to win in the last presidential election, and then Trump did win. For a lot of people, that was a confirmation that prediction markets were good. But for those of you who were watching the polls, they suggested that the race was a toss-up, which it was. And so the fact that Trump won didn’t necessarily mean that that particular kind of predicting was wrong. There’s a whole nest of things going on here that has started this move.

You wrote a long piece for us this week really unpacking from the beginning what the difference between news and events and pseudo-events is. There’s some philosophy embedded in there in classic Liz Lopatto fashion. Let’s start at the very beginning. This is a hilarious conversation for you and I to be having, but I’m going to ask, what do you think the word “news” means and why are we having to redefine news in the context of prediction markets?

If I were to give you a pithy statement, news is very recent history. I’m giving you the history of events that occurred as recently as yesterday or 20 minutes ago. But the primary thing that you have to keep in mind is that these events occurred. If you look at the history of news, and I go into this more in the piece, maybe more than people want, it evolves from trying to keep track of what’s going on in either governments or trade. You’re keeping track of specific events in order to orient yourself in the world.

That is what news is. At the very bottom, it’s about events. It’s about car crashes and assassinations,these kinds of things that really occur in the real world that you can really witness.

There’s this book called The Image: A Guide to Pseudo-Events in America that is about everything else that appears in a newspaper. The way that these are referred to is “pseudo-events.” They’re things that can be repeated, can be known ahead of time, and are essentially like marketing.

The Apple event, for instance, that’s a pseudo-event. That’s not an event in the same way that a helicopter crash is an event. Because everybody at Apple knows what’s going to happen ahead of time. There might be a couple of surprises if the audience acts up, but they know what they’re announcing, they know roughly when they’re going to announce it, they’ve rehearsed. And so this is a knowable pseudo-event.

A lot of newspapers and news organizations are covering pseudo-events. These are things like press releases. Celebrities are arguably human pseudo-events. In this book, the argument is made that this happens because we don’t have enough events to fill the entire newspaper. And so these pseudo-events have crept in and become part of our language in understanding the world. And there is a market for these things. People do want to feel informed about these pseudo-events as much as they do about events. Our audience certainly wants to know what happened at the Apple event.

That really is one of the things that have tipped some of the confusion around what news is into the place where we’re going. And the place where these pseudo-events happen most frequently is politics. If you think of something like a debate or a protest, those are pseudo-events, and polls arguably are also pseudo-events. They’re not real events.

So because these things become knowable, because these things are not quite the same as news, I think there’s some sense in which they become easier to bet on. If you know there’s going to be a debate and you know there’s going to be a snap poll after the debate, you can bet on who’s going to win the snap poll after the debate to say who won the debate.

You just heard Liz explain the concept of pseudo-events, and the distinctions we draw between real, verifiable news and future events with outcomes known to only a select few people. But in the murky middle there are future events with unknown outcomes: the winner of a sports game or a political election, or even the moment when a new war breaks out in the Middle East after months of mounting pressure.

Our history of wanting to know, and profit from, the outcome of those events before they happen is long and complicated. Now, you can. And as we saw with markets around Iran last weekend, this can have some very disturbing consequences.

Last Saturday, a Polymarket trader made more than half a million dollars last Saturday by betting at the last minute on the date of the Iran offensive. And yet this person remains anonymous, with Polymarket refusing to ban trading related to these kinds of conflicts or the killing of world leaders, and with no plans to ban using inside information to profit off either.

So I’m just going to keep asking: if these markets want to replace the news, well, isn’t insider trading the whole point?

One of the things that comes up over and over again in the context of these prediction markets is whether or not the people who run them think insider trading is good. And as I hear you talking about pseudo-events and Apple events and Oscar red carpet looks or all the things that fill all of our newspapers, I do feel like I have to start by saying, one, The Verge covers a lot of pseudo-events. I love an Apple event. I’ve been to a lot of them. I highly recommend talking to Liz about celebrity gossip. There’s a lot of entertainment to be had in these pseudo-events.

But there’s a distinction you’re making. between random acts you can’t predict, that the news will inform you about what happened in history, and then the creation of drama or tension in a manufactured way, such that there’s some outcome you can bet on. “Who’s going to win the Oscar?” A lot of people know the answer, but you don’t, and most people don’t, so you can bet on the outcome.

Whether or not we’re going to go to war in a foreign country, in the Trump administration, has now become the sort of thing that some people know, and most people don’t know, and we are betting on. And then right inside of that is, well, some people know, and now they have an enormous incentive to bet on it as well. And so you see insider trading happening all over these prediction markets, and I, for the life of me, cannot tell if that is a bug or a feature.

According to the people who are in favor of prediction markets, it’s a feature. That is a way of eliciting information into the public sphere.

Do I agree with that? I do not. Because there are just any of a number of ways in which this kind of distorts reality. The easiest and maybe least consequential case happened on a Coinbase earnings call where Brian Armstrong pulls up Polymarket, and he looks at the bets that he would say certain words. Then he reads them off and all of those bets resolve because he has chosen to resolve them in a specific way. That’s a pseudo-event. That’s maybe not the biggest deal, but it is still a way in which these betting markets are affecting reality.

If you think back to when we invaded Venezuela and snatched their president, there was a massive bet on when that president would be removed from office. I think it was like, “Will Maduro still be president as of a specific date?” And whoever it was made these bets very shortly before the operation happened and then made a bunch of money and left. So you’re thinking, “Okay, the worst-case scenario is somebody on the inside in the administration, who potentially is advising whether or not this happens, has bet on this, and now is making sure it will happen.”

That’s insider trading. I think most people would see that and think, “Okay, that’s insider trading.” We usually have some laws against that. If you are an executive at a public company, you’re not allowed to trade on material information before your earnings. There’s all these rules we have about insider information in that context. Why do you think it’s just allowed in the prediction markets? Is it structurally that they’re different? Is it just that they’re not regulated? Is it that we think it’s fun? What is it exactly?

There are several things here, and I’m going to walk through all of them because they’re all annoying.

Thing one has to do with how we define insider trading, which is that you are essentially trading on stolen information. It’s not because you’re ripping somebody else off that you get charged with insider trading. It’s because you have misappropriated information from another source.

The reason I say this as being important is that there was an insider trading case involving NFTs that essentially got thrown out after a conviction. It was thrown out on appeal because the theory of the case was essentially that the people who were being defrauded were the people who were trading against this insider. And the courts were like, “No, no. No, no, no. We don’t care if people lose money.” The question is, was the fraud in stealing the information to make the trade? That’s thing one: There’s a specific way that the law thinks about insider trading.

Thing two is that SEC enforcement has seriously declined under the Trump administration and probably is going to continue to decline. The SEC just has been declining in power generally over the last, I would say 20, 30 years. So we don’t really have an enforcement mechanism. One of the things that has been known for a while is you’ll see in pharmaceutical stocks around certain big conferences, the shares trade before the abstracts of studies are released. So somebody knows what’s in those abstracts and they’re trading on that information before it becomes public. This is a really well-known phenomenon and no one has done anything about it. So those are two things that are involved.

I think the third thing is that at this point, again, given the limited enforcement resources that our government has, prediction markets just aren’t big enough to really be on their radar yet.

That’s changing. It feels like the Trump administration is extremely aware of prediction markets and how important they are and how they can be gamed. There’s some back and forth about whether anyone should regulate them at all that we’ll come to, but the prominence of a Polymarket or a Kalshi, it’s only going up. And I’m wondering if you see the relationship between the existence of the prediction markets and the behavior of the principles — in business, in politics, in finance — in a way that suggests, “actually this is going to go very badly.”

The Brian Armstrong example is funny, but people are betting on all kinds of things for these companies to do that aren’t even necessarily in the company’s best interests, but the incentive to behave that way is only increasing.

Yeah. I can give you a couple of ways that this can go wrong, but I think this will be your favorite, which is that the ‘90s dream of assassination markets is alive and well. You can potentially win a bet about whether Tim Cook is still going to be the CEO of Apple by ensuring that he is not alive at the specific date at which that bet closes. Now that’s an extreme example, obviously. I don’t think it’s likely to happen, but it’s certainly a possibility.

There are also a couple of other things that are involved here, and one of them is that investigative reporters rely on insiders to tell us when something bad is happening in a company. If you think about Theranos, [Bad Blood author] John Carreyrou’s sources were people inside Theranos. They were Theranos workers who were saying, “Hey, what’s going on here is fraud.”

Prediction markets provide an incentive for these things not to be disclosed broadly to the public, just for the public good to try to prevent people from being harmed, but for you to trade on this information and make money on this information, in a way that if you are talking to a reporter, you don’t. By and large in the US, we don’t pay for information. I have never in my entire career given anyone a dollar for anything. It creates this weird perverse incentive when it comes to knowledge of wrongdoing, in part because now you can make money off of that instead of just trying to live in a society.

So when you see a Substack or a CNN or any of the other news organizations that are partnering with prediction markets, loudly announce their partnership, are they just undercutting their own newsroom or are they getting a better, more direct sense that actually some insiders think something is going to happen?

I definitely think they’re undercutting their own newsroom. They’re not only legitimizing the prediction markets by saying, “Hey, these are our partners. We’re endorsing them,” but they’re also using the information in those prediction markets in order to make the news, which in the world of pseudo-events can create this weird ouroboros.

Let’s say that prediction markets say Apple is going to buy Microsoft at such and such date, and there’s a big weird trade on it. That becomes news, which then folds back into the prediction market and changes the odds, which then, again, becomes news. This roundabout monetization of what is essentially a rumor mill is a problem. And that’s with something like CNN, where you have people who are actually paying attention to what counts and what matters.

With Substacks, there are real reporters on Substack, and I don’t want to pretend that there aren’t. There definitely are people who are reliable there. But at the same time, there are a bunch of people who are just some people. If they are making news but nobody’s checking to see if it’s true, you wind up with situations like we’ve seen with the prediction markets a couple of times now, where somebody makes up a Jeff Bezos quote, it’s not real, and Bezos has to come out and deny it. There’s just a way of polluting the information environment that I think this really contributes to.

Why do you think Polymarket and Kalshi are so motivated to say that they’re news instead of just saying that they are prediction markets? There’s something there where they are absolutely drawn to insisting that they’re the news, that the thing that they’re giving you is information before it happens. What do you think that motivation is?

Well, they want to distinguish themselves from being casinos. A significant amount of their trading volume is not actually on stuff that matters — it’s stuff around sports. We already have a sports betting industry and it’s already regulated in a very specific way on a state-by-state basis. Some of those state regulators are looking at the prediction markets and going, “Yo, you need to comply with our laws around sports betting because this is sports betting.”

And so these guys are trying to distinguish themselves and say, “Oh, no, no, no, no. We’re not sports betting. We’re information. We’re like the news. We’re part and parcel of the information environment.”

And this is actually a pretty big deal, there’s been a lot of motion around it. For instance, FanDuel and DraftKings both pulled out of the American Gaming Association because they want to open prediction markets. This is a really big deal with a lot of money involved and pretty high stakes. So you can see why there’s some maneuvering going on.

I want to take a quick beat here to point out where we are in fact seeing some enforcement around prediction markets. Last week, Kalshi made its first ever disclosure related to an insider trading investigation, and fined the traders.

One incident featured an editor for Mr. Beast who was betting on markets related to the creator’s upcoming YouTube videos, and the other was California politician Kyle Langford, who was found to have been trading on his own candidacy. These fines are in the low thousands of dollars, so small fry stuff for now.

But Kalshi says it’s opened hundreds of such investigations in the past year, signaling that it takes this problem seriously enough to begin a wider platform crackdown. Afterwards, the federal Commodity Futures Trading Commission issued a press release saying that insider trading might be illegal, but didn’t confirm any enforcement action of its own.

That brings us back to the central tension here with prediction markets, and whether insider trading is in fact the very feature that makes it all work.

So now I wanted to bring in Vlad Tenev, the CEO of Robinhood. When he was on the show last year, he went to bat for prediction markets in a number of ways on both the gambling and the news fronts. Vlad’s main goal with all of Robinhood’s new products and services is, as he put it directly to me, to acquire a quote “full wallet share with our customers across multiple generations.”

So I brought some clips of my conversation with Vlad to get Liz’s reactions.

Last year we had Robinhood CEO Vlad Tenev on the show. Robinhood obviously does investing, but they are partnered with Kalshi and they want to bring prediction markets into everything. Vlad is very high on prediction markets being news.

He said some things to me during that interview that I just want to play for you and get your reaction to, because I’ve been thinking about a few of these quotes, particularly about insider trading. And again, I’m absolutely puzzled whether this industry thinks insider trading is good or bad. Here’s this quote from Vlad:

NILAY PATEL: How do you manage the prediction markets against that incentive? Because I see that as totally distorting and in most cases negative.

VLAD TENEV: Yeah, I think that’s a great question. And that’s one of the areas where the traditional financial system already has lots and lots of infrastructure because we’ve faced this problem for decades. You have insider trading rules and regulations, and it’s very analogous to a company insider using proprietary information for their own benefit to make money in financial markets. That very much exists.

So I listen to that and I say, okay, Vlad wants to take insider trading rules from traditional markets, in which Robinhood participates, and bring them to the prediction markets that Robinhood is expanding to. Is that what you’re seeing?

No. First of all, let’s remember that there is already insider trading going on that nobody’s doing anything about in the existing financial markets. Arguably our enforcement mechanisms are not strong enough. And he’s saying, “We don’t need any extra rules. These rules are good enough.” That is what he’s saying, like, “Don’t regulate us, please.”

Let me play the next one because again, and I’m just saying this for all the people listening, I’m finding it very hard to tell whether this industry has a shared understanding of whether insider information is good or bad. So here’s the next quote from Vlad on Decoder last year:

If you want to outlaw insider information, you have to prevent people who have that information from trading on it. How does that get into the prediction market?

Yeah, basically individuals who have proprietary information shouldn’t participate in the prediction markets, and all of the DCMs basically have rules against this. Because we know who’s making the trades, everyone has to be KYC’d (know your customer) at regulated DCM / FCM (futures commission merchant)-regulated prediction markets, we have the capabilities of identifying abuse. And of course all of these rules can evolve over time. If there’s new vectors for abuse as the markets expand, there’s mechanisms for those to be incorporated and to become new rulemaking.

I would say in the months since Vlad and I chatted, there have been new vectors for abuse as these markets have expanded. “Are we going to kidnap Nicolás Maduro” is a new vector for abuse of a prediction market. Do you see any heat around, “well, we should stop that”? Because this is the industry classically saying, “We can regulate ourselves.” But I don’t see that push from inside the industry. Maybe you do.

Not only do I not see that push from inside the industry, if we rewind, we have people inside the industry saying stuff like, “Insider trading is cool, and that’s how we get information out.” And that’s the bonus of these markets, that people have an incentive to share information broadly via insider trading. I’m not making this up. There is literally an academic paper on this. So I find this very difficult to believe, because insofar as prediction markets have any value whatsoever, that value is tied specifically to insider information.

So this is what I mean when I say I’m finding it hard to understand if the industry thinks this is good or bad. Because here’s Vlad saying insiders shouldn’t trade. There are rules on the books and the rules can evolve if there’s new abuses and those rules should be analogous to the rules against insider trading in the public markets, which maybe we’re not enforcing enough, but everybody understands those rules.

Then there’s what you’re saying, which is the value of the markets is the insider information. The insiders will communicate what they know by placing bets or buying contracts against information that’s not yet public. Here’s Vlad just talking about what he thinks the news is. And I’m going to ask you to try to square these ideas between “you shouldn’t have insider trading,” and “here’s what Vlad thinks the news is”:

It’s an evolution of what the newspaper served in the past. You have the front page, which is events that people want information about that are trending right now, then you have the business section, arts and leisure, style, and of course you have sports. And the newspaper obviously had value. People were paying for it after the fact. Prediction markets actually give you that news faster, in some cases before it even happens. I think it certainly has enormous economic value.

So this is your framework. This is the most Decoder thing of all time. You provided a framework for news and pseudo-events. You said the news is history. Here’s Vlad saying prediction markets give you the news faster, in some cases before it even happens. Are these frameworks compatible without conceding that insider information is what makes the prediction market viable?

No. That’s the whole ball game right there. He’s admitting essentially that the reason prediction markets matter is because of the insider information, because it’s the news before it happens. You can’t get there in any credible way without having insider information.

Otherwise, you’re just betting right. You can bet right on a coin toss, but that’s not really information. The idea that it is somehow valuable, even more valuable than the news, is predicated entirely on insider trading.

So Liz and I have covered the news angle here, and the insider trading component. But the last big piece of this puzzle is the most important one: who is going to do anything at all about this?

As you can imagine, politicians are starting to speak up. And it’s not a clean break along partisan lines. Sure, the Trump administration loves Polymarket and Kashi for a number of reasons. Donald Trump Jr. is an advisor to both companies, and Trump and his inner circle repeatedly pointed to prediction markets as the real indicator he was going to win the 2024 U.S. election.

But, as we’ve seen since the start of the year, some Republicans are starting to break ranks, even as the CFTC says it will sue any state that tries to regulate prediction markets. The governors of New Jersey, Utah, and Nevada all seem pretty prepared to fight all of this in court, because prediction markets directly undermine the gambling taxes they collect from regulated sports books. There’s a host of other critics as well, all armed with different regulatory levels that might stop these markets in their tracks.

This is going to get very messy this year, so I really wanted to dig in here with Liz on where she sees this going, and what we can learn from what happened with the crypto.

So this brings me to the regulatory piece, and you actually started this conversation by saying they don’t want to be casinos, and the mechanism by which a prediction market operates is not the same as gambling. And I said they hate it when we call it gambling. And it’s true that the mechanism is different, right?

Instead of buying odds against the house, you’re buying contracts that other people can buy the other side of, and you can actually sell out your bet early. The share price of your contract goes up and down. And that’s actually what makes the prediction market work, is that it’s a two-sided market.

So if no one’s buying what you’re selling, there isn’t any gambling to be done. That’s the entire argument for why this isn’t gambling, why the gaming commissions in various states should not regulate these platforms, why it’s not creating an assassination market. Because you need to have somebody credibly buying the other side of your bet.

Give these companies the benefit of the doubt. Is that meaningfully different?

I don’t think so. Let’s say you and I decide that we’re going to make a bet. What do you want to bet on? The Green Bay Packers winning sometime in the near future?

It’s rough for me right now that you went there, but it’s fine. It’s fine.

So we make this bet, right? And then I decide, actually, I don’t love my side of the bet. So I sell it to Dieter. And Dieter is like, “oh, I don’t love this bet either, so I’m going to buy your portion of the thing for less than you paid.” I just want to get rid of it, so I’m like, fine.

There’s still a bet happening. There’s still functionally at the bottom, an actual bet. The thing that I’ve just described is kind of convoluted, but the contract is still a bet. And if you think about futures contracts, which is the analogous thing that they want this to be like, the origin of that has a commodity underneath.

The commodity for a long time was grain. That’s originally what was going on on the Chicago Exchange, and then you had pork bellies and a variety of other agricultural goods. The idea was that at the point that the futures contract expired, you would deliver the goods.

There’s been a bunch of weirdness around people betting on futures contracts in this way. Every once in a while oil goes negative because some of the people who are goofing around and betting realize they actually can’t take delivery of the oil that’s about to come due and so they just need to get rid of their contracts.

But that fundamentally is what a futures contract is. There’s an asset underneath. That sort of got abstracted into financial products, where the thing underneath is a stock, where you buy or sell a stock at a certain price on a certain date. I guess what they’re trying to say is, this is a second level of abstraction. There’s a similar financial product, except the financial product underneath has to be a bet. That’s just what the contract is, that’s what you’re saying. I recognize why they want to be distinct from gambling, but I can’t say that I think it is.

I have to ask you this because you also cover crypto for us. It feels like a straight shot from the crypto economy to gambling with real money in this way, and it’s a lot of the same players. Do you think that there’s as much of a connection, or is that just vibes?

It is a total straight shot, not least because some of these players, some of these markets are trading in crypto. When we talk about the Venezuela bet, that person walked away with crypto. That wasn’t a KYC transaction. This person has crypto that they are presumably going to launder before they cash out.

To the degree that this is something you can follow, maybe that’s true on some of these platforms. But a bunch of them are built on crypto. That connection is just direct.

The other thing that I’ll say about it is that we also saw that sort of gambling spirit behind the GameStop phenomenon during the pandemic, where the actual underlying value of the company was irrelevant to what was going on in the market. “I feel good about the stock” was essentially what you were saying when you bought the stock.

“I like the stock” was, famously, the rallying cry. So there is this sense in which reality doesn’t matter. The representation of reality matters. For some of us who’ve read some French theory, this is a very uncomfortable place to be, but it’s where we are.

The sense of financial nihilism, especially among younger people, is a really important part of this. Both the increase in inflation and the decrease in opportunities have resulted in people being like, “all right, well, if I ever want to be able to retire, I have to gamble and get really rich because I can’t do it on my current salary. I’m just barely keeping my head above water. I can’t sock away enough that I know that I’m going to be able to live out my golden years comfortably. So if I want to ever have real money, I have to gamble somewhere.”

I see that all over. I see that in our audience. I certainly see that in crypto. There was a part of me that thought the meme stock phenomenon was just a bunch of bored people at home during the pandemic, and now I’m increasingly convinced it’s the entire economy in a way that is maybe not good.

That said, it’s still gambling. There are some states that collect a lot of revenue from legal gambling. There are some states that want these prediction markets to participate in that system so they can collect even more revenue. There are some states, Republican states like Utah, that think gambling is immoral, and there’s already a fight between Utah governor Spencer Cox and the only commissioner on the Commodity Futures Trading Commission, Mike Selig.

Mike Selig says he will prevent all states from regulating prediction markets. Governor Spencer Cox says, “Try me and find out.” We can see it in New Jersey and Nevada, that they would like prediction markets to be regulated the same way as their existing gaming industries.

What is the likelihood that this bipartisan coalition of states and gambling commissions and anti-gambling advocates is going to find a way to meaningfully regulate the prediction markets?

Great question. I don’t know the answer to that, by the way. I can tell you what happened, and one of the things that has happened is that these prediction markets have hired Donald Trump Jr. as an advisor, and this administration is astonishingly corrupt. We’ve seen people have their SEC actions dropped essentially after donating to Donald Trump.

The fact that Trump Jr. is involved tells me that the feds are going to fight tooth and nail to avoid letting the states regulate this. So we’re going to end up in court and how that turns out is anybody’s guess; whether or not we decide that we’re going to actually enforce the court’s ruling is still anybody’s guess. To be continued, I suppose.

But for now, I expect this to continue rolling out and continue trying to embed itself in the national consciousness in such a way that if there ever is any action against the prediction markets, a lot of people are going to feel upset about it. That sort of public sentiment potentially protects them.

I think there’s something absolutely wild about famous sports stars becoming spokespersons for prediction markets. There is something very weird about our literal major leagues trying to keep gambling away for so long and now embracing it so wholeheartedly that the players are telling you to gamble, and I actually wonder if that’s going to cause this all to crack, right?

At some point, the thing that you create is the sense that everything is rigged and all this insider information means that you will never get an edge and that you’re just watching a giant conspiracy theory unfold, and eventually the bottom falls out of that. I think that is probably catastrophic. I think that is an outcome everyone should try to avoid, but it does seem like the outcome we are headed towards.

I think it’s also the reason that we initially had banned sports betting, is it not? There very famously were a number of players who were disgraced because they had bet on their own games or thrown their own games. And it’s also something that’s in the history of boxing as well.

This is something that we have dealt with before, decided that we did not want, and got rid of, and now everybody who experienced it and was like, “this is bad,” is dead, and so we’re going to do it again and think it’s going to turn out different.

Well, no, we’re doing it again this time with computers. That’s what’s different.

The last time there weren’t computers. This time there’s KYC laws and computers.

Besides just the catastrophic loss of trust and everything, is there anything else that you think would flip the conversation? Is it just young men — who, by all sorts of public opinion polling, know that gambling is bad for them — stopping? Is it some other catastrophe in the culture that makes more states more amenable to regulating these industries?

I don’t know what that would be. It could potentially be something in sports where we discover an entire team is fixing outcomes, or that an entire league is fixing outcomes. It could be something else, where we discover that some important politician has fixed an outcome, and there is a real consequence, a real event that occurs because of this fixed outcome.

But young men going bankrupt isn’t going to move the needle. And it hasn’t moved the needle so far because it’s been happening pretty regularly with crypto for a decade now, and no one cares. So I really think that we are headed someplace very, very bad, and there doesn’t seem to be a lot of urgency in preventing it.

And then on top of that, a lot of our trust in our public institutions has really been shaken and is being corroded by the Trump administration, I think deliberately, to benefit Donald Trump. Which makes it even harder to try to stop this, because who would you trust to stop it?

I don’t know what will happen next. Liz, I suspect we’re going to have you on several times this year to figure out what’s going on with these markets. You’re covering them for us in great detail now. Thank you so much for being on Decoder.

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