Episode Transcript
[00:00:00] Speaker A: Predict predictable predictions.
[00:00:01] Speaker B: Predict predictable predictions.
[00:00:03] Speaker A: Predictable.
[00:00:03] Speaker B: Predicted. Predictable. Predictable.
[00:00:08] Speaker A: Predictive programming.
We're back from holiday break. Are you a Christmas guy?
[00:00:14] Speaker B: I am a Christmas guy.
[00:00:15] Speaker A: Christmas guy. Me too.
It's good to see you again.
[00:00:18] Speaker B: You too.
[00:00:19] Speaker A: Good to have you back in the mix. How is your. I mean, holidays are kind of a big season. You got college football playoffs, NFL playoffs. Haven't kicked you off yet, but a lot of standalone games.
How was your break? How did you predict?
[00:00:33] Speaker B: I enjoyed it very much. Novig enjoyer on Kalshi. That's obviously myself.
We were down in the dumps. Minus 700 at our peak.
[00:00:47] Speaker A: Minus $700 on Kalshi times 1,000. Okay.
[00:00:51] Speaker B: But we're up 1.5 million now, so. So we've had a little bit of an upswing.
[00:00:56] Speaker A: If the Ravens could have won last.
[00:00:57] Speaker B: Night, where would you be at 1.1.
[00:01:00] Speaker A: Okay. It's devastating.
[00:01:03] Speaker B: So, yeah, a little bit of a swing there. But fortunately, I do understand how variance works. And when you're trading hundreds of thousands a game, that's what happens.
It was fun to see people clowning on that. I enjoyed it very much. But we covered. We're good. Our predicting is. Is on point now.
[00:01:23] Speaker A: How about parlays? How are they doing?
[00:01:26] Speaker B: We tried to book some parlays and they're getting us, man. The parlays, they have the script.
[00:01:32] Speaker A: The people know. People really know what they're doing.
And we got Calcuttas coming up. We got playoff Calcuttas.
[00:01:39] Speaker B: Yeah. Excited for that one.
[00:01:40] Speaker A: We're gonna do one of those this week. I still don't totally understand that format, but I'm. I'm emceeing it, so I'll have it figured out by.
[00:01:48] Speaker B: It's not that hard. It's literally just like you give a name like this team name, and then.
[00:01:53] Speaker A: I'm just going to assume everybody is following the rules. So if I just nod along. Yeah, nothing is going wrong. Okay. So today there's. There's a bunch of mismatch, mishmash stuff that's happened over the last month.
And I think we do have some guests that we want to talk to this month. But we thought as a kind of jumping off point for discussing various topics, we would turn to one of the legends, the legends, the. The elite commentators on the prediction market landscape.
Our close personal friend, Dustin Galker, who, if you've never read his tweets, is just a completely locked in hater on all things particularly Kalshee.
[00:02:39] Speaker B: Yes.
[00:02:40] Speaker A: But prediction in general?
[00:02:42] Speaker B: Well, no, that's. We'll get into that.
[00:02:43] Speaker A: Well, yeah. It's not.
[00:02:45] Speaker B: I find his tweets very funny. I. I think he's. He's hilarious. He makes me laugh when I read his tweets. But he is a legendary hater and as very consistent.
[00:02:55] Speaker A: He and I think, like a lot. He's a big shots on goal guy. It's a lot of tweets. A lot of them not doing much engagement. And then when he hits, he hits huge. Yes.
[00:03:05] Speaker B: And.
[00:03:05] Speaker A: And that's what it's all about.
I don't. I don't know what his real job is. He writes newsletters and such. I'd be shocked if somebody wasn't cutting him checks who works at a sports book. But I don't know. So I don't want to.
I don't know the man's business, but. Dustin, we love you. Come on the show.
[00:03:25] Speaker B: Let's have Dustin. That would be great if we could get Dustin now.
[00:03:28] Speaker A: We can have Dustin.
[00:03:29] Speaker B: Okay.
[00:03:29] Speaker A: I might regret it. Halfway through. Dustin.
[00:03:32] Speaker B: This is my first. First we have a post up on the screen here. Thing is hilarious.
I don't know much, but I do know DraftKings and Jason Robbins were built for prediction markets. I'd imagine they're stoked to compete here, which I found hilarious.
[00:03:47] Speaker A: So this is in the category of bad Dustin tweets. Yes.
[00:03:50] Speaker B: This is.
[00:03:50] Speaker A: Which I would say is a minority, but this is, like, insane.
[00:03:54] Speaker B: I just love this tweet so much because it's in November and this is like, off of, like, months and months of hating on prediction markets. Prediction markets are stupid. I hate prediction markets. Kalshee's a fraud. Prediction market sucks. And then he tweets this. Just trying to suck Jason Robbins off so hard. I mean, it's. It's incredible. It's like your bias clearly showing here. Like, you like DraftKings more than Kalshee and Polymarket. That's fine. But let's have some journalistic integrity here. I mean, this is ridiculous.
[00:04:29] Speaker A: Well, we talked about when we had Dahmer on that the first time I interacted with Domer was him telling me I was dumb for having a similar take, because I didn't say the same thing. But I said DraftKings delivers products that the PMs are not delivering right now. By which I meant, like, breadth of market time, et cetera, et cetera. A lot of which is enabled by the ability to limit customers and the clarity of knowing your counterparty and being an exclusive dealer and whatnot.
But. So I think there's like, there's a little Bit of truth to this that.
[00:05:04] Speaker B: Like, hang on a second because. Have you looked at DraftKings predicts? That came out. I downloaded.
[00:05:09] Speaker A: Yeah.
[00:05:10] Speaker B: So that slop and it's horrible.
[00:05:12] Speaker A: And I, I hate to like, it's always a bad look to take a shot at a competitor because it looks like you're, you know, DraftKings Predict is a really bad product.
[00:05:22] Speaker B: Kalshi and polymarket are good. Like, they're actually very good products.
[00:05:27] Speaker A: Like, with flaws that, you know, worth discussing.
[00:05:30] Speaker B: Sure.
[00:05:31] Speaker A: But like, if that's all you ever talked about, you clearly be a hater if.
[00:05:34] Speaker B: Yeah. Kalshi is. If you say Cali as a standard or polymarket as a standard and you rate them, you know, a 7 out of 10 or 8 out of 10.
DK predicts is like a 1 out of 10 or 0. I mean, it was abysmal.
[00:05:46] Speaker A: It might have been Dustin who floated this theory that DK Predicts is so bad in part to like. Oh, to try and destroy prediction markets on the whole. Like, if it's somebody's first prediction market, they would look at it and say, oh, this is terrible.
[00:06:03] Speaker B: Yeah.
[00:06:04] Speaker A: And conclude that Kalshi and polymarket are just as bad.
[00:06:07] Speaker B: Not an unreasonable theory.
[00:06:09] Speaker A: Yeah. But it seems insane for them to put it out.
[00:06:12] Speaker B: It seems like to me it looks like Jason Robbins, like, make it prediction market so we can compete with Calcium polymarket. You have one week to do it and they just like whip something up real quick and did it, it seems.
[00:06:23] Speaker A: Yeah. I don't know why they would put it out in that form.
Another thought about DraftKings and FanDuel prediction markets. So I'm actually. Let's get in the weeds. So this. We're going to use our Dustin jumping off point and actually get into some real detail here.
DraftKings has a DCM license by virtue of the acquisition of Railbird. So DraftKings has a exchange license. A DCM license by virtue of the fact that they acquired Railbird. What that means is they can operate their own exchange, like where. Where there's an order book, essentially. Order book and things are crossing and create markets that is not the current DraftKings predicts products. DraftKings predict right now is just a. A broker that gets you into the CME Exchange product, which is the Chicago whatever.
[00:07:21] Speaker B: It's.
[00:07:21] Speaker A: It's an existing exchange that has prediction contracts on it.
So DraftKings is a license to build their own exchange, but are currently just offering a like skin onto the CME exchange. FanDuel has only gotten a license to be a broker into cme.
So thus far they have signaled that that is the only form of prediction market product they are interested in building. Which could speak to humility on their end about their ability to deliver this.
Or simply it could be whatever they could be in the process of applying for a dcm. For all we know, the CME does not have an open API like Kalshi or polymark.
[00:08:09] Speaker B: I know you're very upset.
[00:08:10] Speaker A: They have no intent and nobody's talking about it. Nobody has flagged the fact that like it is virtually impossible to market make on the CME as a regular person. It is an incredibly difficult application process. I think it's very expensive. I'm just starting to dig into it.
So for those products to win would be a huge loss for basically everybody we've ever had on as a guest. Like anybody who's in that intermediate like sole operator at a small group. Like I'm a pro, but I'm not.
[00:08:44] Speaker B: A head shout out to like I don't want to name him by name because he took, he just took himself off the leaderboard. But you probably know what I'm referring to. There's a guy with over a million in profit on Cal State leaderboard in college market making booking RFQs.
[00:08:58] Speaker A: He was only public to get an internship for the summer. Right.
[00:09:01] Speaker B: Right.
[00:09:01] Speaker A: And once he got his internship, he pulled his name down.
[00:09:03] Speaker B: Absolute legend. Like I, I've always had issue with them, you know, by them.
[00:09:08] Speaker A: And that's the dream.
[00:09:09] Speaker B: Right?
[00:09:09] Speaker A: Like that, like and, and. But all the companies are kind of doing a bad job of saying that's the dream because that you have to kind of admit that you do have to be really good to win.
[00:09:19] Speaker B: Right. And I've always had an issue with people like you know, our friend Adi saying like Yannick Sinner is your pure. I've had an issue with that.
[00:09:26] Speaker A: But that guy took a set off. Yannick Sinner. Yeah, yeah.
[00:09:29] Speaker B: And like that guy like you did a really good job and I still stand by that. Like most people can't do it, but it's possible in the current landscape and you have to give credit to Kalshee for allowing that.
DK predicts doesn't allow that at all. It's like a joke. It's like unless you're like institution with like hundreds of millions of dollars and get a CME license, like basically go fuck yourself.
[00:09:50] Speaker A: And I like, I, I think it like if that model won out, I think it would honestly be good for you and me because I think we would Spend the resources to get on there. So it's really not a self interested thing. I'm like, oh, this would truly be reinventing the sportsbook from first principles if you had such a closed guard.
[00:10:10] Speaker B: That's why I think DraftKings did it. They want to reinvent maybe that.
[00:10:12] Speaker A: Yeah. I mean that certainly makes CME an attractive partner. But again, they've acquired Railbird, so. And that'll be interesting to see like what do they do with Railbird? Because I mean Railbird had no product but I believe was a crypto exchange. I mean, I guess they're not beholden to any existing philosophy of how that exchange was meant to exist.
We'll see. Every. Everything is still in early days with regard to the kind of more institutional players I also haven't. Yeah, like crypto.com is another kind of like quietly creeping up and shout out Chris Fargus. He's doing a nice job.
[00:10:48] Speaker B: Yeah, he is.
[00:10:49] Speaker A: Kind of just building partnerships.
Yeah. Anyways, so that's, that's Dustin Tweet one. What, what is the second tweet we've got?
[00:10:57] Speaker B: We can put it on the screen.
New record. Cali hit a weekly high in trading volume at 1.66 billion for the trailing seven days thanks in part to Anthony Paul. It was referring to the Joshua. Joshua Anthony Joshua fight, the college football playoffs, the John Wayne effect, et cetera. Sports was 92% of volume. Top 10 markets, which shows, you know, NFL at NFL money lines at 282 million NBA games at 250 million.
[00:11:24] Speaker A: It's all sports.
[00:11:25] Speaker B: It's all sports. And I think unfortunately he's kind of right right now. That's why I think Novig is so focused on sports because they know in the prediction market space that's what's the biggest thing that we know is the biggest thing. But I do think that, and we'll get into it later, that there is some potential for other markets to come up that aren't sports related, that have real value.
[00:11:51] Speaker A: So the first thing to point out is I love every time Dustin throws John Wang effect.
[00:11:57] Speaker B: That's so funny.
[00:11:58] Speaker A: John Wang's the, the crypto kol that when he was at. He was added like to the Kalshee roster right at the beginning of NFL season and volume obviously took off and people called it the John Wang effect. I mean a handful of people said that, but he's continue to mock it.
Yeah, the, the Anthony Paul fight, by the way, what an event.
[00:12:24] Speaker B: Hey, I, I traded, I predicted a million dollars on that one. Yeah, it Was fun.
[00:12:29] Speaker A: Yeah, that was. That was exciting. And then fanduel, of all places, got down to God as high as +1000. Minus1000.
[00:12:35] Speaker B: That was insane.
I've never seen that.
[00:12:38] Speaker A: I was thinking about it and I was like, oh, they're just literally not writing any Anthony Joshua action. Like, it doesn't. They could put any price on it.
[00:12:44] Speaker B: I mean, the crazy thing to me is, like, I was talking about. It's like, who wants to bet on Jake Paul? Like, he's kind of like an arrogant YouTuber. He kind of sucked. It's like when McGregor Mayweather happened. You're like, McGregor is, like, actually cool and, like, a fan favorite.
[00:12:59] Speaker A: Yeah.
[00:12:59] Speaker B: But Jake.
[00:13:00] Speaker A: And a little more towards his peak. Yeah, yeah, yeah.
[00:13:03] Speaker B: Jake Paul is just like, annoying prick and, like, who's betting on him or trading on him, rather? And then you look. You look at, like, the Kelshi, like, thing and you see the flow. It's straight Jake Paul money. No Anthony Joshua money in sight. It was truly like a once in a couple year, like, event where it's like, let's take all the recreational money and just give it. Give it to the retail.
Not the retail, the institutional money. It's crazy.
[00:13:32] Speaker A: Yeah.
It's hard to explain. I.
I guess it's more that people thought it was possibly rigged than that they actually liked Paul. Although, you know, the over rounds makes more sense in that framework, probably, which our guys were.
[00:13:49] Speaker B: I know, I know, I know. Louis was all on the over. I actually disagreed with that one.
[00:13:54] Speaker A: You know, like, that one. Well, it steamed in cash, Correct.
[00:13:57] Speaker B: Yes.
I'll give him his flowers.
[00:13:59] Speaker A: Shout out. Louie.
He did Risk Takers over the break. That was. Did you listen to that?
[00:14:03] Speaker B: It was a great episode.
[00:14:04] Speaker A: I came home the other day and my wife was listening to Louis on Risk Takers. Wow. What do you think of that?
[00:14:12] Speaker B: Is she still your wife?
[00:14:13] Speaker A: She's still my wife.
[00:14:14] Speaker B: Good, good.
But I mean, he. He's just a great guy, and it was great to see him actually, like, do well in like, a.
A pretty. Pretty big podcast in the space.
[00:14:26] Speaker A: That's what everybody kept texting me after. They were like, oh, Lou, this guy's unbelievable. I was like, yeah, he's. He's one of one for sure.
Not many like him.
[00:14:34] Speaker B: I like. I like Louis Luck because he's so, like, he's so honest. Like, when. If you. If you ask him something directly, he'll just be straight up with you.
[00:14:41] Speaker A: Yeah. Three weeks later, he'll be straight up with you. So everybody, everybody check out our friend Louie on Risk Takers and Risk Takers.
[00:14:48] Speaker B: In general is a great podcast. Like we hope to get GP on here one day. I love. I'll be honest with you, I don't like listening to the GP and SP solo. I like when the guest. I listen to it occasionally. But when they have a lot of good guests and I really like them a lot.
[00:15:05] Speaker A: Yeah.
I'll sometimes meet up with Rufus in the city and just walk around and talk about stuff.
And he's. I think he's doing the pod. I think he did it yesterday, so it'll be out later this week. And he has also accumulated a lot of respect for those guys and is doing a lot of interesting stuff.
Is he public with his username? I think he is. Right. Yeah. He's dog name on leaderboards currently.
[00:15:29] Speaker B: Number one on number one public.
Yeah.
[00:15:33] Speaker A: He. His team is doing some kind of interesting stuff, but he hasn't. Let's see what he talks about before I go disclosing some of his strategies. It's interesting, like you could kind of guess. But he's like, when I talk to him about market making, it's almost like he's applying this kind of logic of modeling football or modeling golf to modeling approaches to market making rather than like, you know, these deterministic like we deal with X and Y manner kind of things.
Yeah. All right, next, Dustin, tweet the poly.
[00:16:08] Speaker B: Market deal to do. Real estate markets is a tremendous use case of prediction markets. Actual hedging can occur.
Sure, some people will just speculate and gambling, but it's the kind of poster child of where all this should head.
[00:16:20] Speaker A: This was today.
[00:16:21] Speaker B: Yeah.
[00:16:22] Speaker A: And what do you know what he's talking about? The, the real estate markets?
[00:16:27] Speaker B: I think it's where I was trying to look into it. I believe it's just that you can predict on mortgage rates in the future or what housing prices will be in the future.
[00:16:37] Speaker A: Yeah, yeah, housing prices, which actually is pretty useful.
[00:16:42] Speaker B: I would have loved. I just bought a house recently and I would have loved to know is it projected to go up or down in four years? Because that would have changed my behavior.
[00:16:52] Speaker A: It certainly looks more like a real financial instrument and is the sort of thing where you could buy something that is negative EV but helps manage exposure on a positive EV asset and thus can be part of an overall positive EV portfolio, which is the kind of thing that you need to create to create super high volume because there is a cap on how much money people will pile into things that are net losers long term. Right. But it's Functionally, it could functionally be insurance. Right.
[00:17:32] Speaker B: It is funny cause I think that like if there was actually liquidity I would have traded a few thousand on it to like hedge my house value.
[00:17:41] Speaker A: Now the other.
Yeah. Cause your house is worth like a couple thousand bucks. You got to cardboard box in the West Village.
[00:17:48] Speaker B: No, no, I mean.
[00:17:49] Speaker A: No, no, I know what you mean.
[00:17:50] Speaker B: Yeah, you could trade it. I assume, I assume my idea of it would be like you can trade if like this area will like it will go up or down 10%. You don't, you're not hedging the entire house. You're hedging like the small percentage increase or decrease of the house.
[00:18:05] Speaker A: Yes. Yeah.
But it, it is. Now the, the other kind of hit tweet going around today around these new poly markets on housing prices is the Spongebob and Patrick LeBron dunk saying another new market with no liquidity which I presume there's not a lot of depth to these books.
Now so much of this business is building it and hoping the next customer and the next user shows up and contributes their part of a little more liquidity, a little more tightness, a little more flow. Like, like honestly you mentioned mortgage rates. These are you know and any kind of like fixed income long term products that there's trillions of dollars in notional out there. The markets are actually very efficient. Like they're. I'm describing tradfi fixed income stuff. So housing is very similar to that. Like the potential to price this very accurately at size is totally real.
But just because that is true does not mean you're actually going to see enormous size day one. I mean all this stuff has to be collateralized, right? So who's going to load up tens of millions for brand new market types? And you just always have. There's no point in putting up size with the counterparty doesn't exist. You're just vulnerable to adverse selection and you know, software failure and whatnot. So like all these, these things work against you. But like as a, as a user and onlooker you have to have a little bit of patience around all this.
[00:19:44] Speaker B: Well this whole thing reminds me of like a, like some back and forth I've seen online where it's like after the, you know the hit piece on Somalian daycares came out there is, there was a great market where it was like what are the odds? I think Tim Walsh gets arrested or like here's some criminal charges and it had some percentage and someone tweeted out I hate when People use like betting odds as like probability. And then all the comments are like, you can, you can trade the other side because, like, if it's actually wrong, go collect the free money and then, but then, you know, the counter to that is, well, that 60% number or 70% number was off of like 10,000 liquidity, which is a nothing burger when, like someone can move a market that much. So it's like, yes, it's, it's really nice that people are using probability in like these prediction markets. I think that's a great use case for them. But then it's frustrating when like, they're using them for like, illiquid markets to make conclusions where it's like, there's, there's.
[00:20:48] Speaker A: No conclusion to be drawn beyond the literal state of an order book.
[00:20:53] Speaker B: Right?
[00:20:54] Speaker A: I mean, like, it's literally there's, there's this much here and this much here at this price and this price and, and any kind of story about like, what that means about the probability or the, or how accurate the number is, like it's anybody's kind of methodology and art to transform that order book into some kind of.
[00:21:16] Speaker B: Yeah, it's addictive. Meaning. I know, like thinking back to last election, people were like, oh, like the Trump odds don't make any sense. There was like millions of dollars traded, you know, billions in some cases. Like, that's a lot of, like, people would be punting a lot of money if they really don't believe that.
[00:21:33] Speaker A: Well, the other thing that we've seen happen a lot too, right, that I think you see in PM is because of the relative illiquidity, but also because of the kind of, the larger ecosystem they exist in is a lot of times order books and trade feeds tell very different stories, right? Like if you have, if you have some market on, you know, an NBA player prop, and somebody has information or has their own model that is good or whatever, they come in with a stance, they might like, attack a market for a space and then pull out of it. And it's only, it can be for only a few minutes that you might see like, oh, this, this, this order book did not resemble the broader market as a whole.
But then it very quickly kind of goes back to this static state.
And it's only if you're looking at like, trade feeds that you see, right? So if you're like, okay, right now this is kind of trading at 51, 51. But there's this flurry of activity around 55, 20 minutes ago, like, which of those things actually is More signal. And it doesn't necessarily mean, like, this is the truth or whatever, but, like, a lot more is happening during that execution that is happening in this, like, static order book.
[00:22:44] Speaker B: Another thing with always irks me with order books here is, like, some of the sports markets, you'll get, like, you know, Penny will have, like, it'll be like, minus 150 plus 1 or, sorry, minus 170 plus 150 on, like, a money line. And then there will be, like, millions on open orders on, like, $0.10 worse on both sides. And with fees, it's like $0.20 worse on both sides on, like, a Kalshi or a polymarket or even some cases like a novig. And it's like, oh, wow, someone's taking a position on the side. Like, no, they're just trying to get, like, a really good price in case someone, like, in case the market steams or something like that. Like, this is nothing. This order book means nothing.
[00:23:27] Speaker A: Yeah, people read too much into size sometimes on some of these things.
But okay, so the other piece of this tweet that is a little interesting for those of us who really care about dust and lore is why is this so positive? Why is he talking about how this is such a great market?
Is it because it's a poly market market and he really just hates Kalshi?
[00:23:49] Speaker B: I don't think so. I don't think so.
[00:23:53] Speaker A: Dustin, what are you doing?
[00:23:54] Speaker B: I think something.
[00:23:54] Speaker A: Explain yourself.
[00:23:55] Speaker B: Sometimes his real journalism comes out and he's like, oh, this is actually good.
[00:24:00] Speaker A: That's a generous reading. I agree with you that it could just be that. That he's. He has to at some times acknowledge the positives of his competitors.
[00:24:10] Speaker B: All right, now let's go to a big negative.
[00:24:12] Speaker A: Okay.
[00:24:12] Speaker B: Yeah, I am a broke.
[00:24:14] Speaker A: This is more like, this is standard fare for Dustin.
[00:24:17] Speaker B: This is. This is like, I can't even hate Dustin for this truth because this is.
[00:24:21] Speaker A: His bread and butter right here.
[00:24:22] Speaker B: I'm a broken record. Bokashi literally couldn't keep an actual candidate from trading on his own election.
[00:24:28] Speaker A: It's a screenshot of a candidate for governor of California tweeting his slip that he. That he bought himself to win the governorship.
[00:24:38] Speaker B: Kyle Lankford.
[00:24:40] Speaker A: Yeah. And he tags Kalshee. It almost looks like a sponsored post.
So we got a candidate for governor of California tweeting a slip on himself, which, by the way, in all reality, not a big deal to take.
[00:24:55] Speaker B: So what I don't understand.
[00:24:56] Speaker A: What are you gonna do?
[00:24:56] Speaker B: You can't. What? I don't Understand Correct me if I'm wrong here but it's legal if you're a boxer to bet on yourself to win.
[00:25:02] Speaker A: Yes. Boxing.
[00:25:03] Speaker B: I don't understand why would it be illegal for you to bet on yourself to win on governor Like I don't understand that.
[00:25:12] Speaker A: Well so in, in swaps it's insider information is more important.
[00:25:20] Speaker B: Fair.
[00:25:21] Speaker A: So like if you for instance, if you worked at Google you'd be a major shareholder, shoulder shareholder in Google whatever. Like you're completely exposed. You never tank the value of Google. But if you know that you're about to crush earnings, it is illegal for you to like go buy fair, fair, fair, fair, whatever kind of contracts on just for like market fairness reasons.
[00:25:43] Speaker B: And yeah, and this seems like kind.
[00:25:45] Speaker A: Of weak sauce because that's definitely not what this person was. It's also 400 bucks.
[00:25:49] Speaker B: I also don't know like what insider information can you get if you're a candidate for.
[00:25:54] Speaker A: You have internal polling you could.
[00:25:55] Speaker B: That's not intern.
[00:25:56] Speaker A: Somebody could call to concede a race to you and but they haven't done it fairly fair.
[00:26:00] Speaker B: That is fair. The Internet, the internal polling is like you can just like if you really want to make a trade, go pay for a better polling and do.
[00:26:10] Speaker A: And by the way, in the, in the context of this tweet and the broad kind of retweet quote screenshot chain is Kalshee saying that this is against their terms and services as seen in Article 3, Section 2, blah blah blah which so there's been kind of a broader. And this is true. So like this has been going on recently with the Spotify top played artist market. As soon as the day ends, certain options in those markets are spiking and is it Gaten Douglas is that guy's.
[00:26:45] Speaker B: Name you might be mispronouncing but yeah.
[00:26:47] Speaker A: Yeah, he's like a top Spotify traders is like this just stinks. Somebody has this data. Somebody can see like a Spotify employee or whatever and. And this market is broken and I can't trade it until they fix it. And this is definitely outside of the terms. And so this general tension of like not not wanting to acknowledge that this is going on and sort of not knowing what whether or not the company line is we take this very seriously and and force the hell out of it or like insider information is a feature, not a bug. Like that that tension and messiness.
[00:27:26] Speaker B: Insider trading is definitely a bug and not a feature. I don't, I do not understand the argument.
[00:27:33] Speaker A: Yeah well if you're like a Robin Hansen.
Like, you know, food. Tari the world will be governed by prediction markets. Person like a. And by the way, people who like, are into that kind of stuff kind of rarely actually trade the thing.
[00:27:49] Speaker B: That's so frustrating. Look, I kind of understand the point where it's like if I don't trade prediction markets and I just look at it for probability. Yeah. I actually do want insiders because I want the most accurate information.
[00:27:59] Speaker A: What's the point? Unless I'm actually getting.
[00:28:00] Speaker B: Yeah, right. But the counter is, in practice, it never works because if insiders are rampant, no one will be the counterparty because no one wants to just like, I don't want to just give money to insiders. That's not what I'm trying to do here. So market makers will stop making markets and then the liquidity dries up and then the exchange dies. Because now insiders cannot profit. So you need to crack down on insiders. It's gonna be hard to prevent it entirely, but you cannot endorse insider trading. It's awful. And I mean, we saw it with the Mandora, like, am I pronouncing that right? With the Venezuelan, it was instead of what? Maduro. Maduro, sorry.
[00:28:43] Speaker A: Yeah, there was another 30k on that. And again, who knows? Because there are all these open source intelligence accounts and people who are actually monitoring air traffic who could beat the news on. And if that's how somebody is beating a Maduro market, that's awesome.
[00:29:03] Speaker B: I think, to be clear with insider trading, I don't think, like I saw this is a meme on like R. Wallstreetbets where it's like, if I'm in a plane, a Boeing plane, and it's crash, it's starting to crash and I buy puts.
That's not insider trading, in my opinion. That's just like, that's proper trading. And it's a lot of these things.
[00:29:24] Speaker A: Like a lot of the lines are not clearly drawn yet.
[00:29:27] Speaker B: Right, right. But I think we know what insider trading is.
[00:29:29] Speaker A: Yeah, but everybody. There's also a little bit of tension because Polymarket, they have like a soft launch American product, but they still have this offshore product that is not subject to any of this regulation. So with that product, they're allowed to be like a lot more casual about what markets they offer and who can trade them. And so I can understand not wanting to feel like you're boxed in and that Polymarket gets to run circles around you with all this stuff.
And then there's this effort to be part of every story.
[00:30:04] Speaker B: Right.
[00:30:04] Speaker A: Like Every news story could be a prediction market story if you can find a way to frame it that way.
But if you want to inject your business into what's happening, you have to go to the main characters, right? Like, polymarket's got their sweatshirt on the guy who's reporting on the Somali dakers. And it's like, that's. That's the guy who's at the heart of the story.
And so if you're constantly trying to get the people at the heart of the story to talk about the product, you're gonna make for strange bedfellows in this kind of way. And we've got good soldiers like Dustin pointing it out at every turn.
[00:30:43] Speaker B: If Dustin watches this good tweet.
[00:30:45] Speaker A: Dustin, please watch this, please.
[00:30:47] Speaker B: I'll send it to him.
This is a good tweet, and I think this is. I like. I like this from him. Some of the other stuff, not so much, but this I like a lot. It's a great one.
[00:30:56] Speaker A: All right, next one.
[00:30:59] Speaker B: Oh, this is great.
You ought to take this one.
[00:31:02] Speaker A: Yeah, this is just a meme, but it's. It was somebody with a Kalshee badge, by the way, he does a great job of going after people with couchy and poly badges tweeting nonsense.
But somebody just basically tweets out their incredibly day one strategy of if a favorite team falls behind, you should take them because they'll probably come back, or at least they'll come back enough that you can sell, like, just the classic way. Like, I've. I've talked to traders at sportsbooks and stuff who, like, this is the first example they always use for why devigging doesn't work. They're like, oh, you can't just divig to a mid price. Like, for instance, if a favorite goes down early, everybody bets on the favorite. So all the vig is on the favorite. Like, that's the live bet you can possibly make.
[00:31:49] Speaker B: Is the tweet that was in that galler is quote tweeting is shipper's comment, which is just boom, value.
Because the tweet is incoherent nonsense.
[00:32:00] Speaker A: And yeah, I'm sorry to have not explained, but it's somebody. You've seen a million people do this. Like, oh, if you wait till they're down, then you get them at plus money, and then if they're up, you can sell it. How could you possibly lose if you just kind of.
[00:32:12] Speaker B: Tldr is really. Is really, really easy. It's like, say, hypothetically, the Steelers in last night's game Scored the first touchdown and they were underdogs. And you can now get Ravens at plus money live. You're like, oh, I get the better team. I get the better team at plus money must be free. Well, the game, which by the way.
[00:32:33] Speaker A: Is a lot of people's strategy.
[00:32:34] Speaker B: Yeah. But the game state has changed. Like when the game started, it was 00. It's now 7 nothing. And the Ravens are losing. So like, so anyways, none of it.
[00:32:43] Speaker A: All of this is to say, say Mr. Galker quotes this with the scared LeBron meme and says Sig right now. Which is very funny because Sig is one of the largest market makers.
[00:32:54] Speaker B: Probably the largest. Yeah.
[00:32:56] Speaker A: And it's nice to see him actually acknowledge who is doing all this stuff. He doesn't really go after any of the partnered businesses that much.
[00:33:05] Speaker B: It is also funny cause I do a lot of live trading personally.
And it's so funny because the odds if, if there's like a double digit underdog in the NBA and they're winning at halftime, the odds that I have a trade on them.
[00:33:23] Speaker A: Oh yeah.
[00:33:23] Speaker B: Is like so high because it's so true. It's like everyone bets the favorites.
So it's so much at a Jackson.
[00:33:32] Speaker A: Once you've been doing this for a month, all of a sudden you just know all your position, like you know your bots positions. Just put on the game. You're like, oh, I know, I need this team to win or whatever.
[00:33:40] Speaker B: Exactly.
[00:33:41] Speaker A: Like we've had that. We're like, oh, you just know this person's gonna come back on this.
[00:33:46] Speaker B: My, My wife was like, do you have a good day? I'm like, here's how you do it. If the favorites lost, I did good. The favorites won, I did bad. That simple.
[00:33:55] Speaker A: And if the favorites won after being down in the first half, very good. We don't.
[00:34:00] Speaker B: No, no, no. Oh, sorry. Sorry. Yeah, yeah, yeah.
[00:34:02] Speaker A: If they, if they came back, it's. It's brutal.
I, I threw this in there because I just also, as we talk about more and more tradfi adjacent markets getting onto PMs, it's interesting to think about whether or not like SIG Sports is a pretty separate desk from Susquehanna. But are they. Who is, who is pricing these kind of tradfi markets? Where, where are those numbers coming from and how incorporated are they into like broader hedge funds and whatnot? Like, what does that leakage look like right now?
The guys at those companies don't really talk about it.
[00:34:42] Speaker B: Yeah, I don't think they want to, but especially.
[00:34:44] Speaker A: Yeah, Whatever.
[00:34:46] Speaker B: All right. Oh, this is you. This is another one you want to put in casual betters. When they realize there are going to be no voids at prediction markets. You have to take this and explain.
[00:34:58] Speaker A: Well, yeah, it's this guy.
There are so many expectations we've built around sports trading and in particular voids and refunds when they're appropriate, that the nature of the contracts just don't allow for like.
So especially the way that Most of the PMs are structured so far is that all of these contracts are fungible and can be bought and sold. Right. So if you buy a player to score a touchdown and then sell the contract later at a profit, the idea that then that market would void if that player doesn't play and so your cash out gets clawed back just doesn't work from the way the platform designs.
[00:35:54] Speaker B: I think for this. Why don't we do a real example? Because anyone watching this was explained to me and how I understood.
Say I buy the Steelers.
[00:36:05] Speaker A: Oh, actually, you know what a great. Anthony Joshua is a great one.
[00:36:07] Speaker B: Okay.
[00:36:08] Speaker A: Yeah. Because so this idea that, you know, if you, if you unloaded into Anthony Joshua and you were paying 90 cents for him or some very high price because he's a big.
That fight had a real chance of getting canceled. And that price that he was trading at swings around the way every prediction market is structured thus far. If that fight had gotten canceled, they would have had to settle that contract to one price. So if you, if you entered at $0.92 and they decided to settle at $0.88, then even though the fight didn't happen, you would lose a bunch of money.
[00:36:40] Speaker B: They were going to settle 50 cents.
[00:36:42] Speaker A: Well, and that's. I think polymarket settles a lot of voids at 50.
Kalshee is at last traded. Right.
[00:36:50] Speaker B: For the Joshua fight. It was, it was, it was specifically 50.
[00:36:53] Speaker A: Oh, really?
[00:36:53] Speaker B: So some of the markets are last traded. I think tennis is last traded. But interesting. But, but this is here.
[00:36:58] Speaker A: Yeah. So that, that was like a very. And I think a lot of people were arbitraging prediction markets against sportsbooks, not realizing, but not realizing, like they had this, this huge opportunity to get annihilated.
[00:37:11] Speaker B: And a draw is 50. 50% as well.
And so I want to explain this concept real quick because I think it's good to understand why there can be no voids or why there can't be voids, rather.
So in the Joshua fight, say I trade Jake Paul with Henry.
I spend 10 cents, Henry spends 90 cents. Then later, Henry trades, I sell my position for 15 cents to, let's just say John Appleseed.
So I now have profited 5 cents. I get 5 cents.
Henry and his 90 cents are effectively trading against someone with 15 cents.
If we were to void and I take my 5 cents that I've profited and I withdraw it from the sport, from the, in the exchange or whatever.
Now if that trade is canceled and the event is canceled and it voids, who gets that 5 cents, the exchange has to eat the loss. So if you give Henry back his full 90 cents and the other John Appleseed back his full 15 cents, the exchange is out that 5 cents. And what this allows is if, you know, if you had, for example, inside information that an event was going to get canceled or something like that, you could wash trade against yourself.
[00:38:32] Speaker A: Anything that leaks a little bit can.
[00:38:33] Speaker B: Leak a lot, can crush them for tens of millions easily. So it kind of sucks that it's like that. And trust me, there's been some spots where there was. I forget what game it was. I think it was the packers this year, the tied. And I was, I had traded them on as a favorite and they settled at 50 cents. And it sucks to lose because you usually don't. But you have to understand why it.
[00:38:57] Speaker A: Is now the alternative is to restrict all funds until markets have settled. And so it's like everybody, everybody's held in place until we actually know how this thing resolves. Which for a fight that's happening this weekend seems like really sensible. Why don't you just do that? But you understand this infrastructure is built for any market type. And some of these things are like.
[00:39:17] Speaker B: People who are presidential elections.
[00:39:18] Speaker A: Presidential elections, right. If you're, especially if you're a market maker, you cannot just have fully collateralized positions accumulating for four years on these things. You have to have some way to like sell in and out of a contract and not have millions and millions of dollars loaded up in collateral.
So these are the kind of trade offs that are really tough from a product perspective.
And yeah, Dustin knows how to lean into them. All right, do we have any more Dustin tweets?
[00:39:45] Speaker B: No, that's it.
[00:39:46] Speaker A: That's it. All right, Dustin, thank you so much for providing our new year content.
Really happy to be back.
[00:39:53] Speaker B: And why don't we talk a little bit about what the future of predictive programming is going to be. We're going to try to get some more guests on. I think we're going to do a little bit more of just you and me talking.
[00:40:04] Speaker A: Sometimes we do a little more remote too? Yeah, we've avoided doing remote, but I.
[00:40:08] Speaker B: Think there's a lot of good guests, you know. You're saying I want to reach out to Gaten after this? Actually, I want. I want some better guests. And not everyone lives in New York. There are some good guys that don't live in New York.
[00:40:21] Speaker A: My producer's saying we got Dustin locked up. He's, he's, he's coming on soon. Nice. That's settled. So we got that covered. Yeah, it'll be good. New Year, new us.
Cheers.
