1 00:00:02,720 --> 00:00:08,400 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:11,000 --> 00:00:14,160 Speaker 2: On Sunday, one hundred million or more Americans plus fans 3 00:00:14,160 --> 00:00:16,840 Speaker 2: from around the world are expected to watch the Seattle 4 00:00:16,880 --> 00:00:20,360 Speaker 2: Seahawks take on the New England Patriots in Super Bowl sixty. 5 00:00:21,160 --> 00:00:23,680 Speaker 2: For some, it's a chance to gather with friends around 6 00:00:23,680 --> 00:00:27,160 Speaker 2: plates of nachos and wings, to root for a team 7 00:00:27,200 --> 00:00:31,960 Speaker 2: casually or not casually, and maybe to place a better two. 8 00:00:32,120 --> 00:00:35,320 Speaker 2: For others, it's the biggest work deadline of the year. 9 00:00:35,600 --> 00:00:38,240 Speaker 3: I'm betting right up until game time, and so it's 10 00:00:38,240 --> 00:00:40,199 Speaker 3: not like I can be a host. Ever, I'm not 11 00:00:40,200 --> 00:00:42,520 Speaker 3: really eating that much during the game anyway, or maybe 12 00:00:42,640 --> 00:00:43,800 Speaker 3: stress eating occasionally. 13 00:00:44,040 --> 00:00:47,120 Speaker 2: Rufus Peabody got his start in the sports gambling world 14 00:00:47,120 --> 00:00:50,200 Speaker 2: more than fifteen years ago. He was a college junior 15 00:00:50,280 --> 00:00:53,280 Speaker 2: when he heard about a company that consulted for bookmakers 16 00:00:53,400 --> 00:00:54,520 Speaker 2: in Vegas casinos. 17 00:00:54,880 --> 00:00:58,440 Speaker 3: It was like academia for sports. Basically, I didn't know 18 00:00:58,480 --> 00:01:00,600 Speaker 3: a job like that existed. I didn't know this whole 19 00:01:00,600 --> 00:01:03,800 Speaker 3: world existed. So I cold called them and tried to 20 00:01:03,840 --> 00:01:05,920 Speaker 3: talk my way into an internship. 21 00:01:06,360 --> 00:01:09,240 Speaker 2: It worked, Rufus, as he bugged the company for a 22 00:01:09,360 --> 00:01:12,600 Speaker 2: month until finally he landed a call with the boss. 23 00:01:13,000 --> 00:01:14,640 Speaker 3: It's the ultimate eight leg parlay. 24 00:01:15,200 --> 00:01:18,680 Speaker 2: In other words, it was a risky bet, but Rufus 25 00:01:18,720 --> 00:01:21,759 Speaker 2: got the offer, and that summer a major sports betting 26 00:01:21,800 --> 00:01:25,680 Speaker 2: scandal broke. An NBA ref had been betting on games 27 00:01:25,720 --> 00:01:29,640 Speaker 2: he officiated. Former NBA referee Tim Donneghe plated guilty to 28 00:01:29,680 --> 00:01:32,160 Speaker 2: two fel many charges at a federal court in Brooklyn 29 00:01:32,240 --> 00:01:33,280 Speaker 2: earlier today. 30 00:01:33,160 --> 00:01:34,959 Speaker 3: And so I was able to break down the numbers, 31 00:01:35,200 --> 00:01:38,399 Speaker 3: and they sent my analysis to the FBI and the NBA, 32 00:01:38,440 --> 00:01:40,319 Speaker 3: and they got the NBA as a client. So I 33 00:01:40,400 --> 00:01:42,840 Speaker 3: basically was able to show my worth and then they 34 00:01:42,920 --> 00:01:43,399 Speaker 3: hired me. 35 00:01:45,680 --> 00:01:48,520 Speaker 2: Today. Rufus still spends a lot of his time in 36 00:01:48,600 --> 00:01:51,600 Speaker 2: Vegas and a lot of his money betting on sports 37 00:01:51,600 --> 00:01:55,240 Speaker 2: and those same casinos, but recently he's been placing more 38 00:01:55,280 --> 00:01:57,680 Speaker 2: and more of his bets through prediction markets. 39 00:01:57,760 --> 00:01:59,920 Speaker 3: I predicted that the Patriots would not win the Super 40 00:02:00,400 --> 00:02:04,080 Speaker 3: earlier in the year on calls at ninety one percent, 41 00:02:04,200 --> 00:02:05,640 Speaker 3: So I'm a Seahawks fan. 42 00:02:06,040 --> 00:02:09,040 Speaker 2: For professional gamblers like Rufus, who are known as Sharp's, 43 00:02:09,440 --> 00:02:13,400 Speaker 2: prediction markets offer a lucrative new betting opportunity, one that's 44 00:02:13,480 --> 00:02:15,359 Speaker 2: taken off in the past few months. 45 00:02:15,600 --> 00:02:18,880 Speaker 1: A lot of these sports contracts have taken over these 46 00:02:18,919 --> 00:02:22,320 Speaker 1: prediction market sites, you know, like Kawshi and polymarket, and 47 00:02:22,440 --> 00:02:25,320 Speaker 1: because of the kind of haven't really met that much 48 00:02:25,360 --> 00:02:28,679 Speaker 1: like regulatory pushback, so it's kind of exploded. 49 00:02:29,000 --> 00:02:32,639 Speaker 2: Justina Lee is a reporter on Bloomberg's Cross Asset Markets team. 50 00:02:32,840 --> 00:02:35,880 Speaker 1: We write about everything in markets and now including sports 51 00:02:35,919 --> 00:02:37,680 Speaker 1: betting thanks to prediction markets. 52 00:02:38,200 --> 00:02:41,120 Speaker 2: Justina has been working with Ira Budwe, a Bloomberg reporter 53 00:02:41,120 --> 00:02:44,080 Speaker 2: who covers the business of sports, to break down how 54 00:02:44,120 --> 00:02:47,280 Speaker 2: a wave of savvy, full time sports betters like Rufus 55 00:02:47,600 --> 00:02:52,000 Speaker 2: are looking beyond casinos and sports books and embracing prediction markets. 56 00:02:52,360 --> 00:02:54,600 Speaker 4: These are people who you know, have just a lot 57 00:02:54,600 --> 00:02:58,520 Speaker 4: of them make their living as professional gamblers. That's their job. 58 00:02:58,760 --> 00:03:02,280 Speaker 4: And they're not betting on this because it's necessarily fun 59 00:03:02,360 --> 00:03:04,040 Speaker 4: or they have a favorite, or they want to make 60 00:03:04,120 --> 00:03:07,200 Speaker 4: watching the game more entertaining. They're doing this to try 61 00:03:07,240 --> 00:03:10,160 Speaker 4: to make steady margins over time. 62 00:03:12,960 --> 00:03:14,760 Speaker 2: I'm David Gera, and this is the Big Take from 63 00:03:14,800 --> 00:03:17,560 Speaker 2: Bloomberg News Today. On the show, we dig into the 64 00:03:17,600 --> 00:03:21,120 Speaker 2: platforms that are fielding an increasing number of bets and 65 00:03:21,160 --> 00:03:23,720 Speaker 2: the pros who may be on the other side of 66 00:03:23,760 --> 00:03:33,720 Speaker 2: your amateur wager. Since online sports betting became legal in 67 00:03:33,720 --> 00:03:36,320 Speaker 2: the US in twenty eighteen after a decision by the 68 00:03:36,360 --> 00:03:40,760 Speaker 2: Supreme Court, its growth has been staggering. In twenty nineteen, 69 00:03:41,040 --> 00:03:45,520 Speaker 2: Americans bet thirteen billion dollars on sports. Last year it 70 00:03:45,600 --> 00:03:49,000 Speaker 2: was one hundred and forty five billion. The Super Bowl 71 00:03:49,120 --> 00:03:52,320 Speaker 2: is the sports betting mother load. Americans are expected to 72 00:03:52,360 --> 00:03:55,560 Speaker 2: wager and estimated one point eight billion dollars on this 73 00:03:55,680 --> 00:03:59,200 Speaker 2: year's game through legal sports books, but the matchup also 74 00:03:59,240 --> 00:04:01,480 Speaker 2: has more than eight hundred million coming in through a 75 00:04:01,600 --> 00:04:06,640 Speaker 2: rapidly growing alternative prediction markets websites like call she and polymarket, 76 00:04:06,840 --> 00:04:08,800 Speaker 2: where you can place all sorts of bets. 77 00:04:09,240 --> 00:04:12,240 Speaker 1: You might remember that Kowshi got really famous around the 78 00:04:12,280 --> 00:04:16,200 Speaker 1: presidential election in late twenty twenty four, and that's because 79 00:04:16,240 --> 00:04:20,440 Speaker 1: they only kind of were allowed to start hosting election 80 00:04:20,600 --> 00:04:23,040 Speaker 1: betting around that time because of a legal victory. 81 00:04:23,440 --> 00:04:26,479 Speaker 2: Before that, betting on election outcomes had been illegal in 82 00:04:26,520 --> 00:04:30,080 Speaker 2: the US. In twenty twenty two, Polymarket had to settle 83 00:04:30,120 --> 00:04:33,919 Speaker 2: with the CFTC, the Commodity Futures Trading Commission, and restrict 84 00:04:33,920 --> 00:04:37,640 Speaker 2: its election betting to users outside the US. But in 85 00:04:37,680 --> 00:04:41,279 Speaker 2: twenty twenty four call She challenged that in court, the 86 00:04:41,320 --> 00:04:43,920 Speaker 2: company argued that it was a market like the stock market, 87 00:04:44,279 --> 00:04:46,960 Speaker 2: that the election outcome bets were a kind of derivative. 88 00:04:47,240 --> 00:04:51,719 Speaker 1: Kwshi was arguing in court that the reason they should 89 00:04:51,800 --> 00:04:55,279 Speaker 1: be allowed is because they're all about kind of hedging 90 00:04:55,360 --> 00:04:59,240 Speaker 1: economic outcomes and people using Kawshi to figure out, you 91 00:04:59,279 --> 00:05:01,839 Speaker 1: know what, what are the odds of the government being 92 00:05:01,880 --> 00:05:04,120 Speaker 1: shut down for a long time, or kind of where 93 00:05:04,120 --> 00:05:05,919 Speaker 1: are the odds of each presidential candidate. 94 00:05:07,800 --> 00:05:10,160 Speaker 2: Call She won that case and the right to let 95 00:05:10,240 --> 00:05:12,960 Speaker 2: users bet on elections, clearing the way for people to 96 00:05:13,000 --> 00:05:16,400 Speaker 2: cross the US to put money on all kinds of things, 97 00:05:16,920 --> 00:05:21,120 Speaker 2: but mostly sports. Today, sports bets make up ninety percent 98 00:05:21,200 --> 00:05:23,680 Speaker 2: of Call She's trading volume, and placing one of those 99 00:05:23,720 --> 00:05:27,880 Speaker 2: bets is simple. On call She's or Polymarket's homepage, you'll 100 00:05:27,880 --> 00:05:30,000 Speaker 2: see a ton of different areas you can bet on, 101 00:05:30,440 --> 00:05:34,320 Speaker 2: say the twenty twenty eight Democratic presidential nominee, or where 102 00:05:34,320 --> 00:05:36,599 Speaker 2: Taylor Swift and Travis Kelsey are going to get married, 103 00:05:37,040 --> 00:05:39,239 Speaker 2: and of course who's going to win the Super Bowl 104 00:05:39,680 --> 00:05:42,280 Speaker 2: IRA When I last checked, Pollmarket had the odds of 105 00:05:42,320 --> 00:05:45,360 Speaker 2: the Seahawks winning at sixty nine on call she was 106 00:05:45,400 --> 00:05:47,880 Speaker 2: sixty eight. What exactly do those numbers mean. 107 00:05:48,360 --> 00:05:51,040 Speaker 4: That means that you could buy a contract for sixty 108 00:05:51,120 --> 00:05:54,080 Speaker 4: nine or sixty eight cents, and if the Seahawks won, 109 00:05:54,560 --> 00:05:56,480 Speaker 4: that would pay you back a dollar on. 110 00:05:56,440 --> 00:05:58,720 Speaker 2: The back end. What's happening when you place a bet 111 00:05:58,760 --> 00:06:00,560 Speaker 2: on one of those platforms. 112 00:06:00,160 --> 00:06:02,920 Speaker 4: They are matching you up with some other trader who 113 00:06:03,000 --> 00:06:05,479 Speaker 4: is taking the other side of that. So they're on 114 00:06:05,560 --> 00:06:07,560 Speaker 4: a no for the Seahawks and you're on a yes 115 00:06:07,640 --> 00:06:10,680 Speaker 4: for the Seahawks, And if the Seahawks lose, then they 116 00:06:10,680 --> 00:06:12,760 Speaker 4: get the dollar and you lose your money. 117 00:06:13,240 --> 00:06:16,279 Speaker 2: The whole business is matching up people on opposite sides 118 00:06:16,279 --> 00:06:19,880 Speaker 2: of a bet, and the odds or price fluctuate based 119 00:06:19,920 --> 00:06:23,440 Speaker 2: on market demand. If more people think the Seahawks will win, 120 00:06:23,760 --> 00:06:26,400 Speaker 2: it'll cost more than sixty nine cents to buy a yes, 121 00:06:26,920 --> 00:06:29,680 Speaker 2: and your profit margin gets smaller if they do win. 122 00:06:30,760 --> 00:06:34,040 Speaker 2: Prediction markets do operate kind of like the stock market. 123 00:06:34,360 --> 00:06:36,960 Speaker 2: In order to sell at a certain price, you need someone 124 00:06:37,000 --> 00:06:40,520 Speaker 2: to buy at that price. Polymarket or callshe is just 125 00:06:40,560 --> 00:06:41,400 Speaker 2: the exchange. 126 00:06:41,800 --> 00:06:44,320 Speaker 4: They are passing money between the winner and the loser 127 00:06:44,360 --> 00:06:46,880 Speaker 4: and taking a small cut, typically like two cents on 128 00:06:46,960 --> 00:06:49,839 Speaker 4: every one of those dollar contracts, and so theirs is 129 00:06:49,880 --> 00:06:52,479 Speaker 4: a volume business. They don't care who wins and who 130 00:06:52,480 --> 00:06:55,240 Speaker 4: loses those trades because it's the same to them. 131 00:06:55,520 --> 00:06:58,760 Speaker 2: This is different from a traditional sportsbook. Wager a bet 132 00:06:58,800 --> 00:07:00,960 Speaker 2: you might place at a casino or on a site 133 00:07:01,080 --> 00:07:03,320 Speaker 2: like fan Duel or DraftKings. 134 00:07:02,920 --> 00:07:05,080 Speaker 4: The sports book because they're taking the other side of 135 00:07:05,120 --> 00:07:07,240 Speaker 4: your bet. When you wager that ten bucks to win 136 00:07:07,440 --> 00:07:10,520 Speaker 4: thirty if the sportsbook loses, they're paying you that thirty 137 00:07:10,560 --> 00:07:13,960 Speaker 4: dollars out of their pockets. And so their business is 138 00:07:14,760 --> 00:07:18,840 Speaker 4: to basically balance their books and to get losing betters 139 00:07:18,880 --> 00:07:21,960 Speaker 4: to wager a lot. And typically the sort of margin 140 00:07:22,280 --> 00:07:25,160 Speaker 4: for a sports book is about ten percent. If they're 141 00:07:25,200 --> 00:07:29,000 Speaker 4: good at their jobs, then they will keep ten percent 142 00:07:29,240 --> 00:07:31,760 Speaker 4: of the handle right as their margin. And so in 143 00:07:31,760 --> 00:07:34,920 Speaker 4: that regard, it's a better business. It's more profitable than 144 00:07:34,920 --> 00:07:38,520 Speaker 4: in exchange. But it's also it's really difficult. The sort 145 00:07:38,520 --> 00:07:42,040 Speaker 4: of churn of customers and limiting out the best betters 146 00:07:42,080 --> 00:07:44,320 Speaker 4: so that they don't take all your money, and encouraging 147 00:07:44,360 --> 00:07:46,960 Speaker 4: the worst better so that they drive your profits takes 148 00:07:47,000 --> 00:07:47,640 Speaker 4: a lot of work. 149 00:07:47,840 --> 00:07:50,720 Speaker 2: That's why sports books will offer free bets or other 150 00:07:50,760 --> 00:07:54,440 Speaker 2: promotions to keep less sophisticated better as betting, and why 151 00:07:54,680 --> 00:07:58,440 Speaker 2: they'll limit activity among professional gamblers or sharps to keep 152 00:07:58,440 --> 00:07:59,440 Speaker 2: from losing too much. 153 00:08:00,000 --> 00:08:01,880 Speaker 1: It's too good. You know, if you're a sharp, you 154 00:08:01,920 --> 00:08:05,160 Speaker 1: could find that your account size could be limited in 155 00:08:05,200 --> 00:08:07,360 Speaker 1: that they're not really letting you put down a lot 156 00:08:07,360 --> 00:08:10,680 Speaker 1: of money, whereas prediction markets don't have these restrictions. 157 00:08:11,880 --> 00:08:14,200 Speaker 2: Some of those sharps come from the world of sports, 158 00:08:14,480 --> 00:08:16,600 Speaker 2: applying what they know about the game as they learn 159 00:08:16,680 --> 00:08:19,480 Speaker 2: the ins and outs of trading, but others come from 160 00:08:19,560 --> 00:08:23,000 Speaker 2: Wall Street. They're taking their trading and prediction expertise and 161 00:08:23,080 --> 00:08:24,680 Speaker 2: applying it to sports. 162 00:08:24,960 --> 00:08:28,880 Speaker 1: Prediction markets operate a lot more like traditional stock or 163 00:08:28,880 --> 00:08:31,760 Speaker 1: futures markets, so it's attracting a lot of these like 164 00:08:32,440 --> 00:08:36,720 Speaker 1: giant you know, trading firms like jeff Yass's Susquehanna Group 165 00:08:37,240 --> 00:08:40,040 Speaker 1: or you know, even Jump Trading in Chicago. And these 166 00:08:40,080 --> 00:08:42,920 Speaker 1: people are bringing, you know, all their quant power, their 167 00:08:42,960 --> 00:08:45,439 Speaker 1: computing power to sports gambling. 168 00:08:45,760 --> 00:08:49,040 Speaker 2: Can I ask you about relative riskiness, Justina, So our 169 00:08:49,080 --> 00:08:52,720 Speaker 2: prediction markets inherently more or less risky than sportsbooks, traditional 170 00:08:52,760 --> 00:08:53,560 Speaker 2: kinds of betting. 171 00:08:54,240 --> 00:08:56,840 Speaker 1: It's kind of hard to say. I think On one hand, 172 00:08:57,080 --> 00:08:59,880 Speaker 1: it could be better for gamblers in the sense that 173 00:09:00,440 --> 00:09:04,160 Speaker 1: it's meant to facilitate more competition for your bets, right 174 00:09:04,240 --> 00:09:07,800 Speaker 1: because on a prediction market, like anyone can come in 175 00:09:07,960 --> 00:09:10,439 Speaker 1: and be on the other side. So because of that 176 00:09:10,480 --> 00:09:13,760 Speaker 1: more competition, it could mean that you should get better 177 00:09:13,840 --> 00:09:17,120 Speaker 1: odds and lower fees, but at the same time it's 178 00:09:17,160 --> 00:09:19,319 Speaker 1: sort of a more competitive market. 179 00:09:20,360 --> 00:09:23,680 Speaker 2: Prediction markets also offer new options when it comes to gambling, 180 00:09:23,960 --> 00:09:26,960 Speaker 2: ones that can allow sophisticated betters to take advantage of 181 00:09:26,960 --> 00:09:30,720 Speaker 2: their expertise. These are liquid markets, so you can buy 182 00:09:30,720 --> 00:09:33,160 Speaker 2: and sell your position throughout a game as long as 183 00:09:33,200 --> 00:09:36,160 Speaker 2: there's someone willing to take the other side. The contracts 184 00:09:36,200 --> 00:09:39,680 Speaker 2: aren't locked in until the outcome is set one team wins, 185 00:09:39,920 --> 00:09:42,840 Speaker 2: the other loses, and you aren't limited to whatever bets. 186 00:09:42,880 --> 00:09:44,000 Speaker 2: A sports book is offering. 187 00:09:44,640 --> 00:09:46,760 Speaker 4: What you and I would traditionally think of as betting 188 00:09:46,840 --> 00:09:49,320 Speaker 4: is you go on you see a price offered that 189 00:09:49,600 --> 00:09:52,480 Speaker 4: you know we'll pay. Let's say plus one ninety eight 190 00:09:52,520 --> 00:09:54,160 Speaker 4: for the Patriots to win the Super Bowl. If I 191 00:09:54,200 --> 00:09:55,720 Speaker 4: bet one hundred dollars, they're going to pay me two 192 00:09:55,800 --> 00:09:58,360 Speaker 4: hundred ninety eight dollars, right, And it's the house that's 193 00:09:58,400 --> 00:10:01,280 Speaker 4: taken the other side of that bet. With a prediction market, 194 00:10:01,320 --> 00:10:04,840 Speaker 4: you can go on and say I will pay a 195 00:10:04,880 --> 00:10:08,240 Speaker 4: certain price if the Patriots win, if you want to 196 00:10:08,280 --> 00:10:10,200 Speaker 4: take it right, and you can just sit there and 197 00:10:10,200 --> 00:10:12,680 Speaker 4: wait and see who else on the exchange is willing 198 00:10:12,760 --> 00:10:15,760 Speaker 4: to pay that price. And so you are now essentially 199 00:10:15,760 --> 00:10:16,920 Speaker 4: acting like a sportsbook. 200 00:10:16,960 --> 00:10:18,559 Speaker 2: So not to put too fine a point on it, 201 00:10:18,800 --> 00:10:21,160 Speaker 2: there's a saying among gamblers that the house always wins. 202 00:10:21,480 --> 00:10:24,080 Speaker 2: In the context of prediction markets, there is no house. 203 00:10:24,120 --> 00:10:25,720 Speaker 2: It doesn't operate in that in that way. 204 00:10:25,880 --> 00:10:27,880 Speaker 4: Right, and in fact you can become the house. 205 00:10:32,040 --> 00:10:34,840 Speaker 2: Coming up. What that growth in prediction markets means for 206 00:10:34,880 --> 00:10:39,680 Speaker 2: everyday betters, whether letting anyone originate bets on anything increases 207 00:10:39,679 --> 00:10:42,480 Speaker 2: the risks of rigged down comes, and who is in 208 00:10:42,559 --> 00:10:59,000 Speaker 2: charge of policing that. There's good reason for the competition 209 00:10:59,080 --> 00:11:03,320 Speaker 2: between traditional sport books and emerging platforms like CALSH and polymarket. 210 00:11:04,000 --> 00:11:08,000 Speaker 2: Unlike sports books, prediction markets can operate in all fifty states, 211 00:11:08,240 --> 00:11:11,840 Speaker 2: including places like California and Texas where sports betting is 212 00:11:11,840 --> 00:11:12,600 Speaker 2: currently legal. 213 00:11:12,760 --> 00:11:16,079 Speaker 4: Prediction markets kind of found a loophole and the CFTC rules, 214 00:11:16,120 --> 00:11:19,760 Speaker 4: whereas the regulated sports betting is regulated on a state 215 00:11:19,800 --> 00:11:22,960 Speaker 4: by state basis, and so those states where they have 216 00:11:23,360 --> 00:11:26,400 Speaker 4: legal sports betting have all pretty much tried to fight 217 00:11:26,480 --> 00:11:29,800 Speaker 4: this and come forward and brought lawsuits and sees and disisorders. 218 00:11:29,880 --> 00:11:31,240 Speaker 2: I imagine part if that has to do with the 219 00:11:31,240 --> 00:11:33,520 Speaker 2: fact that a number of states are making good money 220 00:11:33,600 --> 00:11:34,560 Speaker 2: tax revenue off. 221 00:11:34,400 --> 00:11:36,520 Speaker 4: Of sports books. Yeah, I mean, and it's really the 222 00:11:36,559 --> 00:11:39,079 Speaker 4: states more than the sports books that are leading that charge, 223 00:11:39,120 --> 00:11:41,520 Speaker 4: because it is their tax revenue that is at risk. 224 00:11:41,600 --> 00:11:44,840 Speaker 4: So you know, in a lot of states, your winnings 225 00:11:44,880 --> 00:11:48,360 Speaker 4: for sports books are taxed at really high rates thirty 226 00:11:48,400 --> 00:11:51,000 Speaker 4: forty to fifty percent, and that's not happening in the 227 00:11:51,040 --> 00:11:54,120 Speaker 4: prediction market context because these are federal trades. It's sort 228 00:11:54,120 --> 00:11:56,680 Speaker 4: of like in a whole different tax context when you 229 00:11:56,720 --> 00:11:58,520 Speaker 4: do that. And so there's actually a sense that this 230 00:11:58,640 --> 00:12:00,640 Speaker 4: is going to push more states to jump in the 231 00:12:00,679 --> 00:12:04,120 Speaker 4: pool of regulated sports betting, because if this is going 232 00:12:04,160 --> 00:12:06,680 Speaker 4: to happen anyway in their state, they would like to 233 00:12:06,679 --> 00:12:08,880 Speaker 4: get the taxes from it. And then you have to 234 00:12:08,880 --> 00:12:11,560 Speaker 4: figure out, okay, well, how are prediction markets going to 235 00:12:11,559 --> 00:12:14,000 Speaker 4: be taxed? And in the meantime, a lot of the 236 00:12:14,000 --> 00:12:16,240 Speaker 4: sportsbooks are saying well, we're just going to start offering 237 00:12:16,320 --> 00:12:19,679 Speaker 4: prediction markets in the states where we can't run regulated 238 00:12:19,679 --> 00:12:22,160 Speaker 4: sports books. We'll just go there and do prediction markets 239 00:12:22,200 --> 00:12:26,360 Speaker 4: so that KLSHE and these other prediction event exchanges don't 240 00:12:26,400 --> 00:12:28,360 Speaker 4: sort of steal our business before we can get there. 241 00:12:28,640 --> 00:12:30,559 Speaker 5: We are going to make some investment there. 242 00:12:30,720 --> 00:12:33,800 Speaker 2: That's the CEO of Draft Kings Jason Robbins on Bloomberg 243 00:12:33,840 --> 00:12:34,640 Speaker 2: back in November. 244 00:12:34,960 --> 00:12:37,400 Speaker 5: First, of course, and getting a product developed and making 245 00:12:37,440 --> 00:12:39,800 Speaker 5: sure that that's the best in class. You can't win, 246 00:12:39,840 --> 00:12:42,280 Speaker 5: and we've always said this product is the most important thing. 247 00:12:42,640 --> 00:12:44,360 Speaker 5: You can't win if you don't have a great product. 248 00:12:44,400 --> 00:12:47,640 Speaker 2: The prediction markets, meanwhile, have tried to distance themselves from 249 00:12:47,679 --> 00:12:50,160 Speaker 2: the gambling industry, which is known to take a heavy 250 00:12:50,160 --> 00:12:54,640 Speaker 2: financial toll on participants. At AXIOSS BFD summit in November, 251 00:12:54,840 --> 00:12:58,720 Speaker 2: Polymarkets founder Shane Copeland said the way traditional sportsbooks can 252 00:12:58,760 --> 00:13:01,319 Speaker 2: profile users and ban the ones that make too much 253 00:13:01,360 --> 00:13:03,640 Speaker 2: money is quote a scam. 254 00:13:03,760 --> 00:13:06,720 Speaker 1: Now, you can't expect to run a business that is 255 00:13:06,720 --> 00:13:09,720 Speaker 1: that rigged against the consumer in perpetuity in America. 256 00:13:09,760 --> 00:13:12,880 Speaker 2: But as the sports betting landscape continues to change, both 257 00:13:12,920 --> 00:13:16,600 Speaker 2: traditional sports books and prediction markets are navigating some potential 258 00:13:16,679 --> 00:13:20,400 Speaker 2: problems with an increasingly popular kind of wager, betting on 259 00:13:20,440 --> 00:13:23,559 Speaker 2: whether some pretty specific events will happen within a game. 260 00:13:23,960 --> 00:13:27,880 Speaker 2: It's called prop betting. Here's Rufus Peabody explaining his prop 261 00:13:27,920 --> 00:13:29,240 Speaker 2: betting for this weekend's game. 262 00:13:29,400 --> 00:13:33,240 Speaker 3: So I'll price out things from how many rushing yards 263 00:13:33,320 --> 00:13:36,400 Speaker 3: Kenneth Walker will have to you know, whether there'll be 264 00:13:36,400 --> 00:13:39,240 Speaker 3: a two point conversion attempt. The Super Bowl's kind of 265 00:13:39,360 --> 00:13:42,200 Speaker 3: a unique betting event in the sense that there is 266 00:13:42,240 --> 00:13:45,160 Speaker 3: this wide variy of prop offerings that aren't really offered 267 00:13:45,640 --> 00:13:48,520 Speaker 3: for any other NFL game, and so it's kind of 268 00:13:48,520 --> 00:13:49,520 Speaker 3: a big opportunity. 269 00:13:50,000 --> 00:13:52,960 Speaker 2: The value comes because with more people betting yes, the 270 00:13:52,960 --> 00:13:56,520 Speaker 2: price of no gets cheaper, So a sharp like Rufus 271 00:13:56,720 --> 00:13:59,319 Speaker 2: can profit from wagering against the casual betters. 272 00:13:59,520 --> 00:14:03,040 Speaker 3: And there's a lot of recreational actions, so oftentimes prices 273 00:14:03,040 --> 00:14:05,880 Speaker 3: can be sort of skewed towards what the public wants 274 00:14:05,920 --> 00:14:09,439 Speaker 3: to bet on. People like betting that players will score touchdowns. 275 00:14:09,480 --> 00:14:12,040 Speaker 3: They like betting on things to happen, and so there's 276 00:14:12,080 --> 00:14:15,360 Speaker 3: often value betting against things to happen, betting that there 277 00:14:15,400 --> 00:14:17,680 Speaker 3: won't be a safety, that there won't be a two 278 00:14:17,679 --> 00:14:18,400 Speaker 3: point conversion. 279 00:14:19,680 --> 00:14:22,640 Speaker 2: The problem for both prediction markets and sportsbooks is that 280 00:14:22,680 --> 00:14:26,840 Speaker 2: prop betting creates opportunities for athletes, coaches, and others to 281 00:14:26,920 --> 00:14:31,080 Speaker 2: work with betters to influence outcomes. This fall, some NBA 282 00:14:31,160 --> 00:14:34,840 Speaker 2: players and coaches were indicted from manipulating game outcomes. Two 283 00:14:35,040 --> 00:14:38,480 Speaker 2: MLB pitchers facing similar accusations are scheduled to go on 284 00:14:38,560 --> 00:14:41,120 Speaker 2: trial this spring. Here's Bloomberg's Eira Budwe. 285 00:14:41,560 --> 00:14:44,000 Speaker 4: That is actually one of the most sort of pressing 286 00:14:44,040 --> 00:14:46,960 Speaker 4: issues around all of this is when these prediction markets 287 00:14:46,960 --> 00:14:49,760 Speaker 4: first started offering contracts tied to sports, a couple of 288 00:14:49,840 --> 00:14:53,240 Speaker 4: sports leagues, Major League Baseball, the NBA. Since then, the 289 00:14:53,360 --> 00:14:55,600 Speaker 4: NFL came forward and said, well, wait a second, We've 290 00:14:55,600 --> 00:14:58,880 Speaker 4: been working with state regulators to protect our interests when 291 00:14:58,880 --> 00:15:01,520 Speaker 4: it comes to sports betting. So we do things like 292 00:15:01,880 --> 00:15:05,120 Speaker 4: track and monitor for unusual and suspicious betting activity and 293 00:15:05,160 --> 00:15:08,480 Speaker 4: have lists of prohibited betters, and we've built these agreements 294 00:15:08,480 --> 00:15:11,280 Speaker 4: in this infrastructure to make sure that these markets are 295 00:15:11,320 --> 00:15:13,440 Speaker 4: not corrupted. And are you doing that. 296 00:15:14,000 --> 00:15:16,520 Speaker 2: One of the quirks here is that prediction markets are 297 00:15:16,520 --> 00:15:20,440 Speaker 2: not regulated by gaming authorities, remember calls. She's argument is 298 00:15:20,480 --> 00:15:23,480 Speaker 2: that its contracts are like the financial futures regulated by 299 00:15:23,480 --> 00:15:26,920 Speaker 2: the Commodity Futures Trading Commission. The CFTC has said it 300 00:15:26,920 --> 00:15:29,160 Speaker 2: will clarify its position on these contracts soon. 301 00:15:29,440 --> 00:15:31,800 Speaker 4: This isn't what the CFTC was built to do. This 302 00:15:31,840 --> 00:15:36,320 Speaker 4: is usually like corn futures, not sports betting. The answer 303 00:15:36,360 --> 00:15:38,800 Speaker 4: from the prediction markets is kind of actually no. There's 304 00:15:38,840 --> 00:15:41,520 Speaker 4: a lot of know your customer and anti money laundering 305 00:15:41,600 --> 00:15:44,520 Speaker 4: rules that we have to follow, and we have started 306 00:15:44,520 --> 00:15:46,960 Speaker 4: working with some of the very same companies that help 307 00:15:47,000 --> 00:15:50,680 Speaker 4: sports betting operators monitor markets for suspicious trading. We're doing 308 00:15:50,720 --> 00:15:53,720 Speaker 4: that in this context. And they will sometimes argue, you, look, 309 00:15:53,760 --> 00:15:58,400 Speaker 4: it's even more transparent. You can see every trade, and 310 00:15:58,440 --> 00:16:00,760 Speaker 4: you can watch the market move, and some thinks suspicious 311 00:16:00,800 --> 00:16:03,840 Speaker 4: happens every market participant can watch it happen. But I 312 00:16:03,880 --> 00:16:06,400 Speaker 4: think that is actually a question that has not really 313 00:16:06,440 --> 00:16:12,320 Speaker 4: been ironed out. How effectively are they monitoring for suspicious bets, 314 00:16:12,400 --> 00:16:15,800 Speaker 4: how much do they care about insider trading, and how 315 00:16:15,840 --> 00:16:18,640 Speaker 4: good will they be at catching bad actors. We've seen 316 00:16:18,760 --> 00:16:21,800 Speaker 4: leagues start to partner with them. The NHL did deals 317 00:16:21,800 --> 00:16:25,200 Speaker 4: with Polymarket and call she MLS did a deal with 318 00:16:25,480 --> 00:16:29,800 Speaker 4: Polymarket and so they're saying, when they sign these deals, 319 00:16:29,840 --> 00:16:32,640 Speaker 4: this is so that we can protect ourselves. But if 320 00:16:32,640 --> 00:16:35,200 Speaker 4: you ask different people, you'll get very different answers about 321 00:16:35,200 --> 00:16:38,320 Speaker 4: whether prediction markets can really and are really doing this 322 00:16:38,440 --> 00:16:40,440 Speaker 4: job already of monitoring for integrity. 323 00:16:43,280 --> 00:16:46,800 Speaker 2: Last month, Polymarket users traded over seven point six billion 324 00:16:46,880 --> 00:16:50,200 Speaker 2: dollars in volume. Call She users traded over nine point 325 00:16:50,240 --> 00:16:53,000 Speaker 2: five billion. That's up from one point three billion on 326 00:16:53,080 --> 00:16:56,120 Speaker 2: polymarket and under a million on call she just six 327 00:16:56,160 --> 00:17:00,000 Speaker 2: months earlier. Like any good professional, Rufus Peabody has been 328 00:17:00,080 --> 00:17:03,200 Speaker 2: following the trends in the sports betting industry today. He 329 00:17:03,240 --> 00:17:04,960 Speaker 2: says he makes as much as a quarter of his 330 00:17:05,040 --> 00:17:08,520 Speaker 2: bets on prediction markets, but even he isn't sure though. 331 00:17:08,560 --> 00:17:12,400 Speaker 3: Last I think myself and other professionals are all kind 332 00:17:12,400 --> 00:17:15,240 Speaker 3: of trying to gauge that to figure out how much 333 00:17:15,280 --> 00:17:20,600 Speaker 3: we should invest in building things for prediction markets. I'm 334 00:17:20,640 --> 00:17:24,560 Speaker 3: banking on them remaining sort of a viable option for 335 00:17:24,600 --> 00:17:27,720 Speaker 3: the next I'd say three years or so, at least, 336 00:17:27,800 --> 00:17:30,000 Speaker 3: based on like the political climate. 337 00:17:30,200 --> 00:17:32,800 Speaker 2: Well, if you ask Rufus for advice as someone placing 338 00:17:32,840 --> 00:17:35,520 Speaker 2: amateur bets on this weekend's game or any other for 339 00:17:35,560 --> 00:17:36,040 Speaker 2: that matter. 340 00:17:36,200 --> 00:17:40,359 Speaker 3: Well, hey, first don't. But if you do it, you 341 00:17:40,400 --> 00:17:42,920 Speaker 3: know it's realized it's for entertainment value. And if it's 342 00:17:42,960 --> 00:17:44,960 Speaker 3: like going to the movies, and you accept that there's 343 00:17:45,000 --> 00:17:47,119 Speaker 3: a cost to it, and you're paying that cost to 344 00:17:47,119 --> 00:17:51,639 Speaker 3: make watching the game more entertaining than by all means. 345 00:17:52,000 --> 00:17:53,040 Speaker 2: Seahawks or Patriots. 346 00:17:53,000 --> 00:17:56,960 Speaker 4: Sarrah, I'm gonna take the underdog, you know, because I'm 347 00:17:57,000 --> 00:17:57,480 Speaker 4: not a pro. 348 00:17:57,680 --> 00:17:58,479 Speaker 2: Just seeing how about you? 349 00:17:58,720 --> 00:18:00,560 Speaker 1: Oh man, I feel like to take the other side. 350 00:18:00,840 --> 00:18:03,320 Speaker 4: Yeah, you can find an exchange to. 351 00:18:03,320 --> 00:18:05,000 Speaker 1: Line it up for I know that because that is 352 00:18:05,040 --> 00:18:06,680 Speaker 1: how you know prediction markets fork. 353 00:18:06,720 --> 00:18:08,800 Speaker 2: We've made it happen, Justina, Iira, thank you very much. 354 00:18:13,160 --> 00:18:15,560 Speaker 2: This is the Big Take from Bloomberg News. I'm David Gerret. 355 00:18:15,800 --> 00:18:18,639 Speaker 2: The show is hosted by me wanha and Sarah Holder. 356 00:18:19,119 --> 00:18:21,959 Speaker 2: The show is made by Aaron Edwards, David Fox, Eleanor 357 00:18:22,000 --> 00:18:26,160 Speaker 2: Harrison Dengate, Patty Hirsch, Rachel Lewis, Chrisky, Naomi Julia Press, 358 00:18:26,240 --> 00:18:30,359 Speaker 2: Tracy Samuelson, Naomi Shaven, Alex Cura, Julia Weaver, Young Young 359 00:18:30,760 --> 00:18:33,320 Speaker 2: and Takei Yesizawa. To get more from the Big Take 360 00:18:33,400 --> 00:18:36,520 Speaker 2: and unlimited access to all of Bloomberg dot Com Subscribe 361 00:18:36,520 --> 00:18:40,560 Speaker 2: today at bloomberg dot Com. Slash Podcast offer Thanks for listening. 362 00:18:40,680 --> 00:18:45,320 Speaker 2: We'll be back on Monday.