How Polymarket and Kalshi let you profit off of war — The Take

[0:00] Today, if you could make money predicting the next war, would you do it? [0:05] People making a lot of money on this is, to me, the least interesting part. [0:08] But the way that this is changing reality, I think, is really fascinating and kind of disturbing. [0:14] Prediction markets are booming, letting people bet on everything from the next best picture winner to the possibility of war. [0:22] What happens when people have money riding on the worst thing happening? [0:26] I'm Tamara Kondogar, and this is The Take. [0:29] I'm Bobby Allen. I'm a correspondent for National Public Radio, and I cover the tech industry, and I'm based in Los Angeles. [0:40] Bobby Allen, welcome back to The Take. [0:43] I'm really, really excited to talk to you about something that's not Elon Musk, because I think that's what you were here to talk about last time. [0:50] I've interviewed you about him, and we're finally not talking about him today. [0:54] But I think what we are talking about is something that feels kind of spiritually adjacent. [1:00] Yeah, definitely in some ways. [1:03] I took a bit of a pivot to plunge into the world of prediction markets, so here I am. [1:08] Thanks for having me. [1:09] Okay, so we're here to talk about the rise of prediction markets like Polymarket and Calci, which have become like your entire beat, from what I can tell, for the last little while. [1:17] But for people who haven't gone down this rabbit hole, can you just start by breaking down what these sites are? [1:24] So Polymarket and Calci are sites where you can log on and place a bet on anything imaginable, whether it's going to rain in New York City, whether President Trump will say, drill, baby, drill, whether Justin Bieber's Spotify streams will be up or down next week, whether there's going to be a strike in Iran tomorrow. [1:46] Literally anything is now something that can be wagered on, and it's basically the financialization of all things. [1:53] It's turning every possible thing in the world into a casino. [1:57] And the reason why they have been thriving is because right now they're existing with almost no checks, no guardrails, and the Trump administration is just letting them thrive. [2:07] Yeah, yeah. And we'll get into what's going on with the regulation later. But so basically, this is something where you can bet on every conceivable difference of opinion. [2:19] Like if there is an outcome that people disagree on, someone could turn it into like a little yes or no casino. [2:26] What's important to emphasize, I think, is like these used to be a thing in academia, like academics for a very long time have been interested in this idea of, you know, the wisdom of the crowd. [2:37] What if we have a bunch of people who have skin in the game, so put up money on their opinion? [2:42] Would that come up with results that are more accurate and more precise than like traditional polling, which, you know, tends to have sampling problems or the mainstream media, which doesn't always predict things correctly? [2:53] And academics have found over the years that this wisdom of the crowd idea actually works. [2:58] But now we have seen them totally unleashed into the world and it's creating all sorts of second order effects that are sometimes really unsettling. [3:08] Wow, that's really interesting. What are some of the wildest things that you've seen on these platforms and how would you break down the kinds of bets that we see on there? [3:19] Is it like mostly sports? Is it politics? Or what does it look like? [3:23] Yeah. So for the two big ones here, Polymarket and Kalshi, they differ slightly. Kalshi, it's actually like 80 some percent sports. [3:30] Polymarket, it's less of a sports app and it's more focused on what are what are known as mentioned markets. [3:36] So it's a type of market where like you're betting on whether someone's going to say something or not, which is really wild. [3:43] And there's lots of far flung crazy ones on Polymarket. Like there's some that are, you know, you know, that guy, Brian Johnson. He's like the he's like the guy who wants to he wants to live forever. [3:58] The blueprint guy. Three years ago, I asked the most unthinkable and crazy question possible. Are we the first generation that won't die? [4:07] Yeah. Yeah. He like he gets all like the blood transfusions from his son and he does all of these kooky things saying he never wants to die. [4:14] There's literally a market like like will he have sex next month? [4:18] And the reason why there's a market on that is because he literally publicly announces on his Twitter when he has sex with his partner. [4:25] It's it's very disturbing. And it's sort of like, what's the usefulness in this? [4:30] There's other ones that are just like silly and kind of trivial, like, well, Elon Musk, speaking of Elon, you know, like change his Twitter photo next week. [4:40] And like one person knows whether that's going to happen or not. Elon, how does he not just tell his friend that he's about to do that? [4:45] But the but the most the ones that really send me, you know, into a place of real concern about where this is all taking us are the prediction markets that can warp reality. [5:00] Right. The ones that can can create an incentive for the real world to change in really disturbing ways. [5:05] For instance, I live in Southern California. There's a wildfire season here and there are poly market markets about how far wildfires will spread. [5:16] Right. Is it this many acres or this many acres? How does that not encourage people to make the fire spread? [5:23] If you have money on the line and you want this to to sort of reach more acreage, why not just do it yourself? Right. [5:28] There's this whole question of like assassination markets. Right. [5:31] There's, you know, the the election markets where you can have foreign money from, say, Russia or anywhere pumping up a long shot candidate. [5:40] That candidate goes up in poly market. CNN then covers that that candidate is rising on poly market. [5:46] It makes their odds go even higher. And that could influence how somebody votes when they go to the polls. [5:51] It could directly undermine the democratic process or only we've only seen the kind of the tip of the iceberg. [5:56] But it's the thing that I'm most interested in, because, like, yeah, people making a lot of money on this is, to me, the least interesting part. [6:02] There's always people making money on the Internet off some kind of new financial hustle. [6:06] But the way that this is changing reality, I think, is is really fascinating and kind of disturbing. [6:12] Yeah. And I want to come back to all the potential for misuse of these markets. [6:16] But can you talk about how popular these platforms actually are? [6:20] I mean, it feels like there's been this explosive growth, but poly markets actually been around for a while. [6:26] Right. Since 2020, Calci is even older. [6:29] It started in 2018. But it's only recently that we've started to see them everywhere, like these partnership with news organizations. [6:37] Now they're embroiled in all this controversy, which we'll talk about. [6:40] But the pivot point, it sounds like, was when Calci allowed election markets. [6:46] Right. Like around the 2024 election. [6:49] Yeah, that that that's right. So so they so so it'd be good to explain because a lot of people have some confusion about this. [6:55] When you see a market on Calci or Polymarket, like you or I can't make that they're made by the staff. [7:00] And there's that firewall for a reason, because I could I if not, I could make a market and say, you know, what's Bobby Allen going to say on the next episode of the take and then say it's the word elephant. [7:09] And I'll say, hello, elephant. I just made some money right now. [7:13] That would be a little too corrupt. They come from the staff. [7:15] And Calci listed a market on who would have control of Washington, Democrats or Republicans. [7:20] And they knew that the position of regulators at the time was no, no, no, no. [7:24] We don't want betting on elections like this. This invites corruption. [7:27] It invites insider traders. And they sued their regulator and they won. [7:33] Right. And they won on this like very narrow technical ground where the courts looked at it and said, you know what, the way the law was written does not specifically prohibit election betting. [7:45] And what would the real harm of this be? We're going to allow this election market. [7:49] And the Biden administration said, oh, no, this is a terrible opinion. [7:53] We're appealing. But then Trump came into office, dropped the appeal and Calci took that court win that they had in the previous administration as a green light to list anything they wanted. [8:05] And Polymarket has done the same. So essentially what happened was a court battle followed by a new political environment in Trump 2.0 that rolled out the red carpet for this industry. [8:18] Yeah, it's like the perfect storm. And these companies, I assume they're not selling this as a way of of betting on world events. Right. [8:26] Like they say that there is a bigger purpose here. And I know you interviewed the founder of Calci, Tariq Mansoor. [8:34] What do he and Polymarket say is their goal? Like, why do they need to exist? [8:40] They like to talk about prediction markets in this very almost altruistic way where they say this is going to become a new center of knowledge, [8:52] that prediction markets are able to kind of take power away from the media and become an objective source of truth, [9:01] where you have thousands or millions of people putting their money where their mouth is, betting on what's going to happen. [9:08] And that's going to help inform our individual decisions, corporate decisions and what happens with the economy. [9:14] They also talk about prediction markets as as being an important kind of hedge against an uncertain event. [9:21] For instance, again, I'm in Los Angeles, so they say I can I can bet on a prediction market about whether there will be a wildfire this year and say that say I bet. [9:32] Yes, it's going to happen many thousands of dollars and a fire takes out my home. [9:37] I could then use that money from the prediction market faster than I would get insurance money and help build a new life. [9:43] Sounds like a ridiculous example, but it's one that they cite. [9:46] They say that these can be used to hedge against risk and the critics to that perspective say, oh, really? [9:52] I mean, what kind of risk are you hedging up against when it comes to betting on whether, you know, [9:58] Justin Bieber streams are going to be up or down or on, you know, how many bombs will Iran, you know, drop today? [10:04] What is that hedging against exactly? [10:06] So when you really press them on how their platforms are carrying out their their very cerebral, high minded vision, they don't have a ton of examples. [10:17] But this is the case that they make to investors and to the public that, wait a minute, wait a minute. [10:21] We know you guys see this as a new form of gambling. [10:23] It looks like betting, but there's an important societal function that these markets can play. [10:28] Hmm. And you said earlier that academics thought this might be a good idea and that it would produce accurate predictions. [10:37] Has that turned out to be true? [10:38] Like, do we have a sense of how accurate the predictions are on on these platforms? [10:42] I think a really big test of that is going to be the midterm elections in the U.S. in November to see exactly how accurate they are, because right now the results are kind of mixed. [10:52] One of the reasons why the Trump family so adores prediction markets is because both Kalshi and Polly Market called the last presidential election for Trump way before any polls or the media would. [11:04] Right. And if there's, you know, two companies that are saying he's going to win before anyone else will, they are not going to forget that. [11:11] So it might sound like a small thing, but it's actually a huge thing in the eyes of the Trump family. [11:17] But then there's other examples where these prediction markets totally whiffed and got it wrong. [11:21] And if you wonder, like, why is it sometimes accurate and why is it sometimes totally off? [11:28] I talk to these traders every day on Discord, right? [11:32] And they are like a bunch of, like, 23-year-old, you know, zen-popping, caffeine-chugging, chronically online traders who don't leave their computers and read the news constantly and are just literally just, like, issuing trade after trade after trade after trade. [11:51] It's pure speculation. So when you look at these odds, it's like, oh, well, it looks like this candidate is going to win based on what? [11:58] Based on the speculation of, like, thousands of 20-something kids in their basements, you know? [12:02] But they do sometimes show correct results. They also do sometimes show totally off results. [12:08] It really just depends. So it's been mixed. [12:10] Yeah. And I was curious, actually, like, we talked about the obvious moral issues here, you know, the idea of betting on the likelihood of airstrikes or the extent of a famine or something, [12:24] thinking about something that could cause a lot of suffering as a potential money-making opportunity. [12:29] So when you're talking to these traders or you're following their conversations on Discord, do they seem desensitized to some of these things? [12:38] What is—what's the tone like in these forums? [12:41] It's very nihilistic. It's very almost like post-politics. [12:45] Like, they will both make fun of Trump and also drag Mamdani. [12:52] Like, you can't really get a grasp on their collective politics. [12:56] It doesn't seem very legible. They more are into making a bag, as they'll say. [13:03] They really just want to make tons of money on what people will or won't say and what will or won't happen in the world. [13:12] You know, some of the—it's funny. You talk to these traders and, you know, we're both journalists. [13:16] These traders watch more press conferences a day than we ever will. [13:19] Some of them are watching, like, 15 a day just to trade. [13:22] And I've asked some of them, like, oh, has this—you know, you're watching these politicians more carefully than most journalists. [13:28] Is this changing your view of the world or your, you know, your policy positions or your politics? [13:33] And they just kind of shrug. They kind of don't care. [13:36] They really are looking at the world through this soda straw of just, like, can I or can't I make lots of money on this very specific, narrow thing? [13:45] And I often bring that up when I talk to the CEOs of these companies because another one of their arguments for why they should exist is if everyone was betting on the news and world events, it would make the world a more engaged place. [13:59] We all know, Tamara, right, that the news is not in the best place right now. [14:03] And these prediction market CEOs are like, hey, hey, we have a solution for you. [14:06] It's called prediction markets. [14:08] I'm not so sure about that, but it is part of the argument that these guys are making. [14:11] Yeah, yeah, I think we agree on that. [14:13] Okay, so let's go—let's go back to some of the kind of the ethical issues that you brought up because this doesn't just feel wrong. [14:22] There's all these practical concerns that have been coming up recently. [14:25] So last week there was this kind of shocking example of alleged insider trading. [14:30] A Special Forces soldier has been charged for making more than $400,000 by betting on whether or not Venezuelan President Nicolas Maduro [14:40] would be removed from office. [14:43] And here's the thing. [14:44] According to the indictment, the officer participated in the planning and execution of the operation [14:50] and used that classified information to allegedly profit. [14:54] I know you covered his court hearing last week. [14:56] So did any more details come out about how he allegedly did this or how it was discovered that he allegedly did this? [15:03] I mean, the only thing we have right now are the charging documents in terms of understanding, like, [15:08] how exactly this happened. [15:10] One big question people had as soon as this dropped was, like, how did he get caught? [15:15] Because Polymarket is the sort of crypto-based prediction market. [15:18] And when you're betting behind crypto wallets and you have multiple crypto wallets that are connected, [15:24] it's very hard sometimes to figure out who is the human being behind this. [15:27] And he actually got caught, despite being a really high, you know, Special Forces Army official who was privy to classified debriefs every single day. [15:39] I mean, as a very high-level military official, he got caught in the most banal way possible, [15:45] which is he started a Polymarket account with his personal email. [15:49] And then when I and others did stories that saw how strange this bet was, like, this bet came out of nowhere, $32,000. [15:58] No one thought Maduro was going to be targeted. [16:00] He was captured in the operation. [16:03] You saw the payout of more than $400,000. [16:05] Everyone thought, what in the world? [16:06] Who would bet more than $30,000 unless they had some inside knowledge? [16:10] The indictment shows that right when the stories were coming out, he emailed Polymarket and said, [16:15] hey, could I close down my account now? [16:18] They have that in writing. [16:19] So, wow. [16:20] But I think this is a really important case because it's an example of the most high, highest profile U.S. government official [16:28] caught trading on these platforms in this environment when there are so many suspiciously well-timed bets [16:35] that many people are guessing are U.S. government officials, military officials, others in the Trump family. [16:44] Nobody has been caught. [16:45] But this is the first example of the government saying, you know what? [16:48] We did catch someone who was trading off classified information. [16:52] We want to put a signal to the world that this is not OK. [16:55] But even after that, there was, like, dozens of trade that look very, very insidered, as the traders like to say. [17:02] And they have not been caught. [17:04] I actually just saw that on Thursday, the Senate voted to ban senators and their staff from trading on prediction markets, [17:11] I guess, in response to this. [17:13] Yeah, exactly. [17:15] And we're seeing more of these kinds of very performative actions being like, we lawmakers in Washington declare we shall never log on to Polymarket. [17:24] Why would we ever do such a thing? [17:25] And we'll never tell our friends or family to do it either. [17:28] Don't you worry. [17:29] It's like, does anyone really trust or believe them? [17:31] I'm like, I don't know about that. [17:33] Yeah. [17:33] But the real world kind of unsettling second layer to all of this is, you know, I talked to former military generals who said this isn't just about corruption. [17:44] This isn't just about people abusing their access to classified information. [17:50] It's about putting the enemy on notice that if we have a world in which every future military strike is basically going to be telegraphed on these prediction markets, [18:01] it's going to put enemies around the world on notice that this is about to happen and put, you know, U.S. forces or Israeli forces or whoever in danger. [18:12] Right. [18:12] So when it when it comes to military planning, the former military officials I've talked to are saying this is kind of a nightmare scenario. [18:21] Yeah. [18:21] That's it. [18:22] I didn't even think about that. [18:23] If you're sitting. [18:23] So if you're if you're if you're the opposing military and you're like, when is the U.S. going to strike? [18:27] And you just see, oh, my God, there's been millions of dollars saying in an hour. [18:30] It's probably a pretty good guess that that's going to happen. [18:33] Right. [18:34] Totally. [18:35] Totally. [18:35] And actually, when Donald Trump was asked about this last week, he said that he didn't like the concept. [18:42] The whole world, unfortunately, has become somewhat of a casino. [18:47] And you look at what's going on all over the world in Europe and every place they're doing these betting things. [18:52] I was never much in favor of it. [18:54] I don't like it conceptually, but it is what it is. [18:58] But like you said, they've taken this this this hands off approach. [19:01] They're suing states for infringing on what they say is federal jurisdiction. [19:06] Why is that? [19:07] What do we know about why they're taking this hands off approach? [19:11] Well, one of one of the data points that often comes up. [19:14] And by the way, I just want to say it's very rich that Donald Trump is saying that he doesn't like that the world is turning into a casino as a former casino owner himself. [19:22] But yes, Donald Trump's son, Donald Trump Jr., has invested through his venture capital fund in Polymarket. [19:30] He's a strategic advisor to both Polymarket and Calci and others in and around the White House are very close to this industry. [19:41] So they are positioning it as a pro-innovation, pro-business stance to allow this prediction market world to thrive. [19:51] They want to see these American companies sort of win the prediction market race, collapse all the regulations, let them go, let them cook. [20:01] Right. But a more a more cynical analysis is, no, the Trump family is just sort of propelling this industry along because it's another money making scheme for them. [20:11] And we know about one investment so far by Donald Trump Jr. [20:15] It's a poly market, but maybe there'll be others down the road. [20:18] And perhaps the Trump family just sees this as a way to diversify their business empire. [20:26] Wow. OK, so that's a lot to wrap up, I guess. [20:31] After spending so much time in this world, I wonder where you think this is all going culturally. [20:39] What does it do to the way that people understand the world? [20:42] Yeah, I mean, I think so. Before I was covering prediction markets, I was covering a lot of online misinformation. [20:49] And I think most will be used to this sort of news cycle, one, two punch. [20:54] Something happens in the world. Right. [20:56] And then the next phase of that news cycle is all of these people online are spreading misinformation. [21:02] Everyone's trying to untangle the misinformation. [21:04] That is just like everything that happens now. Right now, it's going to be something happens in the world. [21:09] There's a misinformation chapter. Then there's a prediction market chapter. [21:13] This is just going to become more and more integral to how we see the world when it comes to politics, when it comes to culture, when it comes to geopolitics. [21:22] Everything is going to have a prediction market market implication until it is fully shut down and until there is a scandal big enough to really take the entire industry down. [21:33] And we may see that one day. The legal fights are all heading to the Supreme Court. [21:38] We'll see what happens there. But there's really quirky, interesting, weird situations happening on these prediction markets every day. [21:45] I mean, just last week, Tamara, I covered this instance of someone supposedly taking a handheld battery powered hair dryer to the Charles de Gaulle airport in Paris and putting it by a temperature reader to spike the temperature briefly because they had a bet on the temperature rising above a certain point. [22:04] There's now a police investigation into that. So you are going to see all of these people who are literally trying to manipulate the world to make money. [22:15] And we're going to see lots of people abusing confidential classified information to make money. [22:19] And maybe with the upcoming midterm elections, we're going to see how these prediction markets, A, are accurate, but B, maybe could could end up doing things that are tantamount to interference in the election. [22:31] We just don't know. But it's it's a force that we now have to contend with. [22:35] And at least for the next couple of years in the Trump administration, it's going to have absolutely no guardrails. [22:41] So if you're not on Kalshi and Polymarket yet, Tamara, I think you better get on because we got to stay up with what's happening. [22:49] But I wouldn't put any money down, but it's good to good to know what's happening out there. [22:53] Great. Great. Not scary at all. Thank you so much, Bobby, for a window into this world. [23:00] I really appreciate it. This is super fun and come back soon. Thank you. [23:03] I'd love to. Thanks for having me.