WEBVTT - Bets Are Off: DFV, BUIDL, CFTC

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news anyway. Hello, and welcome

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<v Speaker 1>to the Money Stuff Podcast.

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<v Speaker 2>Your weekly podcast.

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<v Speaker 1>Okay, all right, we're gonna.

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<v Speaker 2>Get through this. Hello, and welcome to the Money Stuff Podcast,

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<v Speaker 2>your weekly podcast where we talk about stuff related to money.

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<v Speaker 2>I'm Matt Levine and I write the Money Stuff column

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<v Speaker 2>for Bloomberg Opinion.

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<v Speaker 1>And I'm Katie Greifeld, a reporter for Bloomberg News and

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<v Speaker 1>an anchor for Bloomberg Television. It's good on, Katie, great question.

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<v Speaker 1>We're going to talk about Meme stocks and the week

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<v Speaker 1>that has been. We're going to talk about biddle it's

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<v Speaker 1>a tokenized money market fund, essentially stable coin, whatever you

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<v Speaker 1>want to call it. And then we are going to

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<v Speaker 1>talk about election contracts and how much the CFTC does

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<v Speaker 1>not like them.

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<v Speaker 2>But I feel like I've said that on these signpostings before.

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<v Speaker 1>Yeah, certain amount is usually the answer. So Meme sucks.

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<v Speaker 1>This started on Sunday one, right right, This episode ended

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<v Speaker 1>in two, and we started and ended twenty twenty one.

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<v Speaker 1>Redormant for a while, Roaring Kitty. He came back, question Mark,

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<v Speaker 1>did he for real come back his account?

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<v Speaker 2>Did I just took it for granted? That he came back.

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<v Speaker 2>I'm not so sure anymore.

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<v Speaker 1>I also took it for granted that, oh, the account

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<v Speaker 1>posted it must be him. There is some speculation that

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<v Speaker 1>it's not actually Raring Kitty. We haven't he said.

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<v Speaker 2>Who Ryan Kitty is? Did we say who Ryan Kiddy?

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<v Speaker 1>Okay? His name is Keith Gill. He's a real man.

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<v Speaker 1>He had a starring role in the twenty twenty one

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<v Speaker 1>episode of Memes sock Mania.

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<v Speaker 2>You did tell Congress I am not a cat, which

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<v Speaker 2>is like.

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<v Speaker 1>A great it was. It was perfect. He also said

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<v Speaker 1>what was he likes the suck.

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<v Speaker 2>He really liked GameStop. Yeah, and he made a lot

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<v Speaker 2>of money really liking GameStop into the early twenty twenty

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<v Speaker 2>one rally and GameStop where he made tens of millions

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<v Speaker 2>of dollars.

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<v Speaker 1>I do think his origin story is really interesting though,

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<v Speaker 1>because in addition to being Roaring Kitty, he's also known

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<v Speaker 1>as d Yeah deep Value exactly. Yeah, like this truly

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<v Speaker 1>started because he actually did like the stop.

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<v Speaker 2>Yeah, he's become this MEMI character. But he's like a

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<v Speaker 2>guy who did fundamental research on GameStop and thought it

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<v Speaker 2>was undervalued and did like multi hour YouTube tutorials and

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<v Speaker 2>why GameStop was a good company. Like, he's pretty serious

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<v Speaker 2>about it exactly.

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<v Speaker 1>So he started from, you know, a place of fundamental analysis.

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<v Speaker 1>He tweeted again on Sunday after not tweeting since June

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<v Speaker 1>twenty twenty one. The pace of his tweets have been breathless.

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<v Speaker 1>He has been posting so much.

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<v Speaker 2>How many of them have been about game Stop?

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<v Speaker 1>Ah, that's the thing, Like it's zero surely, yeah, I

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<v Speaker 1>mean he did or the account posted a clip of

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<v Speaker 1>CNBC talking about game Stop, right, so that blurs the lines.

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<v Speaker 1>But you're right that the thing that kicked it all

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<v Speaker 1>off on Sunday was just a cartoon man leaning forward

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<v Speaker 1>in a chair. He didn't mention game Stop, but GameStop Skyrocket.

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<v Speaker 2>Yeah, I mean it's the cartoon man was represented him

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<v Speaker 2>and the leaning forward in the chair represented he was

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<v Speaker 2>coming back to lead the masses to victory and GameStop

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<v Speaker 2>to the moon. That's how people interpreted it. He is

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<v Speaker 2>not commented.

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<v Speaker 1>We haven't seen his face, he hasn't posted any YouTube videos.

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<v Speaker 2>Hasn't posted on Reddit, I believe. Yeah, so it's really

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<v Speaker 2>really magical that this Twitter account can move, you know.

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<v Speaker 2>It added to like three or four billion dollars to

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<v Speaker 2>the market cap of Game Stop on like Monday. Yeah,

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<v Speaker 2>just like forgetting the band back together, like for the rolls.

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<v Speaker 2>Nothing happened. Neither Game Stop nor allegedly Roaring Kitty said

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<v Speaker 2>anything about Game Stop. There's no news. There's just like, Oh,

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<v Speaker 2>that guy's back, that'll be fun.

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<v Speaker 1>So the question I have for you, and you pose

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<v Speaker 1>this in one of your columns in the context of

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<v Speaker 1>if you were designing an exam, could this count as

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<v Speaker 1>market manipulation given that he didn't mention Game Stop? But

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<v Speaker 1>what if he had bought a whole bunch of calls

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<v Speaker 1>on Game Stop and then he posted what I.

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<v Speaker 2>Learned about market manipulation? Though these many years ago, people

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<v Speaker 2>talked about materiality and like the reasonable investor information was

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<v Speaker 2>material to the reasonable investor, you know, if it was

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<v Speaker 2>useful and the reasonable investors investment decisions, and you know,

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<v Speaker 2>if you lie about material stuff, that's fraud. The materiality

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<v Speaker 2>is the sort of standard for all of the securities

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<v Speaker 2>last stuff. And one thing that has happened in recent

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<v Speaker 2>years is you're like, what does the reasonable investor have

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<v Speaker 2>to do with anything? Right? Because if he would gone

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<v Speaker 2>back to me in law school and said, is it

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<v Speaker 2>material to the price of game stop stock that a

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<v Speaker 2>guy treated a picture of a guy leaning forward in

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<v Speaker 2>a chair? I wouldy sapt that has nothing to do

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<v Speaker 2>with the reasonable investor or anything else or game Stop.

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<v Speaker 2>Like he's never mentioned, you know, he didn't mention GameStop

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<v Speaker 2>in the tweet, so he couldn't possibly have been like

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<v Speaker 2>tricking anyone about anything material. So it seems hard to

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<v Speaker 2>argue that there's any sort of market manipulation, even if,

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<v Speaker 2>by the way, like even if he was like doing

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<v Speaker 2>it as nefariously as possible, even if he like bought

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<v Speaker 2>a bunch of call options and like tweeted the thing

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<v Speaker 2>and then sold the call option. If you butt coll

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<v Speaker 2>options and tweeted like GameStop discovered the cure for cancer

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<v Speaker 2>and then told his co options, like, that's obviously market manipulation.

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<v Speaker 2>But like if you just replaced tweeting something about games

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<v Speaker 2>Stop with tweeting a picture of him leaning forward in

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<v Speaker 2>the chair, which has way more of an effect, right,

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<v Speaker 2>I think it becomes not anything that the SEC can

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<v Speaker 2>do anything about because he's not saying anything, he's not

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<v Speaker 2>lying misrepresenting anything. He's just you know, tweeting a picture

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<v Speaker 2>of a guy in a chair. Now, I will say

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<v Speaker 2>there's an amazing case about bed bath and beyond, where

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<v Speaker 2>like Ryan Cohen, the actually Game Stop CEO now was

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<v Speaker 2>also dabbling in that stock and he tweeted you can

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<v Speaker 2>reply to someone. He tweeted like a moon or a

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<v Speaker 2>rocket munamagi, which doesn't it looks like a smiley face,

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<v Speaker 2>but it's allegedly a munomagic and someone sued saying that

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<v Speaker 2>was a fraud, and judge we wrote a long opinion

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<v Speaker 2>being like, well, the moon emoji represents his views on

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<v Speaker 2>the fundamentals and basically decided the fox switch could go hard,

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<v Speaker 2>So like, there is some ambiguity here, but I do

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<v Speaker 2>think that even if he was like trading on these tweets,

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<v Speaker 2>he's still clean. Now, the really interesting question is, you know,

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<v Speaker 2>as you say, no one seems really sure that he's back.

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<v Speaker 2>If you hacked his Twitter and still his account, or

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<v Speaker 2>if you bought his Twitter from him and you were

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<v Speaker 2>just tweeting these things which have nothing to do with

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<v Speaker 2>Game Stop, but which have caused the price of game

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<v Speaker 2>slop to go up by billions of dollars, is that

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<v Speaker 2>market manipulation If you're trading on that, and again, you're

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<v Speaker 2>not saying to make games stop, so it's really hard

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<v Speaker 2>to argue that it is. But it also feels like

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<v Speaker 2>it is.

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<v Speaker 1>Yeah, yeah, I love it. And what if he just

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<v Speaker 1>sold his account.

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<v Speaker 2>I mean, if he just sold his account, he's out

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<v Speaker 2>of it. But who I was using the account is like,

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<v Speaker 2>if he sold his account to anyone other than someone

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<v Speaker 2>planning to manipulate the price of game stop, he got

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<v Speaker 2>a bad deal, right, because it's a valuable account. Yeah,

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<v Speaker 2>and Twitter or an ex Patrick McKenzie tweeted, you shouldn't

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<v Speaker 2>be able to increase the market capitalization of a company

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<v Speaker 2>by billions of dollars by pointedly not mentioning in a tweet,

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<v Speaker 2>But at least two people can. One is nearly the

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<v Speaker 2>richest person on Earth and the other's labor is deeply mispriced. Right,

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<v Speaker 2>so one is like Elon Musk when he tweets about something.

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<v Speaker 2>You know, he famously tweeted you Signal about the encorected

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<v Speaker 2>messaging app, and like the price of this unrelated company

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<v Speaker 2>called Signal went up. So when he like doesn't tweet

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<v Speaker 2>it out companies, he can still cause their price to

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<v Speaker 2>go up. He's made some use of that skill and

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<v Speaker 2>also happens to be extremely wealthy. But then Keith Gills

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<v Speaker 2>has done pretty well for himself. Keith Gill's labor is

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<v Speaker 2>not that underpriced. He's made a lot of money. But

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<v Speaker 2>even game still.

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<v Speaker 1>If you or I were only to become Keith Gill,

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<v Speaker 1>how do you capitalize on this power in a legal way?

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<v Speaker 2>I don't want to give legal it. More to the point,

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<v Speaker 2>if I just like acquired Keith Gill's Twitter account, right,

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<v Speaker 2>I think I would have tweated exactly what was tweeated here.

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<v Speaker 2>I don't know what people were trading. But what I

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<v Speaker 2>would have done is I would have bought a lot

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<v Speaker 2>of call options on game stop. I would have tweeted

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<v Speaker 2>something like I'm back there you go, no reference the

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<v Speaker 2>game stuff, and then I would have sold all the

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<v Speaker 2>call options. Yeah, and then let you do you get

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<v Speaker 2>diminishing returns, But.

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<v Speaker 1>I think we're there.

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<v Speaker 2>Yeah, yeah, well, I think you're probably right. But like,

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<v Speaker 2>if you do this once, you got to do it

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<v Speaker 2>for a lot of money, and you got to do

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<v Speaker 2>it as levered as possible, like call options.

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<v Speaker 1>I'm just piecing together the price action with how often

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<v Speaker 1>he has been tweeting on May fifteenth, he tweeted at

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<v Speaker 1>least twenty times, sorry.

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<v Speaker 2>You diminishing returns, going away and coming back right since

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<v Speaker 2>his first tweet from his Sunday comeback like heat. Nothing

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<v Speaker 2>after that unless you start tweeting about game stuff, which

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<v Speaker 2>seems riskier.

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<v Speaker 1>No one is really succinctly defined to me what him

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<v Speaker 1>being back means, Well, he's just.

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<v Speaker 2>Going to see it, but coming from his account about movies,

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<v Speaker 2>like movie clips are being tweeted from his account.

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<v Speaker 1>Yeah, but he hasn't posted anything substantial.

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<v Speaker 2>I don't know.

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<v Speaker 1>Why does it matter that he's back? Why does it

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<v Speaker 1>matter that he's tweeting?

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<v Speaker 2>I'm asking almost like the deepest questions of financial markets.

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<v Speaker 1>Yeah, doesn't matter that is.

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<v Speaker 2>Tweeting movie clips. Maybe it doesn't. Maybe we're wasting our

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<v Speaker 2>time here, but like, get know. I mean it caused

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<v Speaker 2>the price of game stops to go up by three

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<v Speaker 2>or four billion dollars, and like why because GameStop was

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<v Speaker 2>like the quintessential meme stock. And what a memestock is

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<v Speaker 2>like something whose trading action is entertaining and gives people

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<v Speaker 2>a sense of community. And it's like fun to be

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<v Speaker 2>a part of this online message board community where you

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<v Speaker 2>like trade jokes and share memes and then also by

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<v Speaker 2>call options on game Stop.

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<v Speaker 1>Right.

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<v Speaker 2>That died down for a number of reasons, one of

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<v Speaker 2>which is that the price of game Stop, after going

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<v Speaker 2>up a lot in twenty twenty one, came down. But

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<v Speaker 2>other are other ones, like the pandemic ended, and so

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<v Speaker 2>people who were like shut at home got to go

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<v Speaker 2>out or you know, entertainment moves on, right, and people

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<v Speaker 2>like found other things that were fun, and so the

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<v Speaker 2>community fun meme sensibility that grew around game Stop ended

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<v Speaker 2>and when he comes back by tweeting memes like there's

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<v Speaker 2>nothing to do with the fundamentals of game Stop business,

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<v Speaker 2>but it's oh great, this fun thing is back. Like

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<v Speaker 2>our online friends are back, Like we can go have

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<v Speaker 2>fun together online. And when they go have fun together online,

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<v Speaker 2>one thing that means is by call options on game Stop,

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<v Speaker 2>and so the price goes up.

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<v Speaker 1>Yeah. I think I'm searching too hard here. Yeah, I

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<v Speaker 1>just haven't.

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<v Speaker 2>None of it makes sense. Well, but it sort of does, right,

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<v Speaker 2>I mean, like it is a fun thing to do online,

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<v Speaker 2>and like part of the fund is like you do

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<v Speaker 2>trade the stock, and so like the entertainment franchise is back,

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<v Speaker 2>like we're in season two of Game Stop. And so

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<v Speaker 2>that does make sense on its own terms, it just

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<v Speaker 2>doesn't make sense on like financial terms.

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<v Speaker 1>The thing that I do find fun and that I

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<v Speaker 1>do find interesting is that when what you're describing this

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<v Speaker 1>sense of community, we're in it for the loles, when

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<v Speaker 1>it actually does translate into the fundamentals of the business.

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<v Speaker 1>And I'm talking about AMC and what AMC did this week.

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<v Speaker 2>Yeah, this has kind of always been how it's worked,

0:10:39.920 --> 0:10:42.120
<v Speaker 2>going back to twenty twenty one. Game Stop has always

0:10:42.200 --> 0:10:45.240
<v Speaker 2>been like, we don't understand what being a meme stop

0:10:45.520 --> 0:10:47.600
<v Speaker 2>meme stock is, and you know, like they are a

0:10:47.640 --> 0:10:49.640
<v Speaker 2>meme stock. They're run by a meme stock guy, and

0:10:49.720 --> 0:10:51.400
<v Speaker 2>like they like the memes, but they don't do anything

0:10:51.480 --> 0:10:55.240
<v Speaker 2>corporate financy with it. Whereas AMC, at every moment when

0:10:55.240 --> 0:10:58.080
<v Speaker 2>their price has rallied irrationally, they've been like, we are

0:10:58.120 --> 0:11:01.280
<v Speaker 2>selling stock, we are raising money. We are going to

0:11:01.600 --> 0:11:05.440
<v Speaker 2>get through like our tough financial times by selling stock

0:11:05.520 --> 0:11:08.360
<v Speaker 2>to people at the best possible time. And so AMC

0:11:09.240 --> 0:11:11.240
<v Speaker 2>actually didn't quite hit the best possible time.

0:11:11.360 --> 0:11:13.079
<v Speaker 1>They got really lucky, though.

0:11:13.360 --> 0:11:16.120
<v Speaker 2>So they were selling stock for the last six weeks. Yeah,

0:11:16.160 --> 0:11:19.400
<v Speaker 2>and so they almost entirely missed this rally. They got

0:11:19.400 --> 0:11:21.880
<v Speaker 2>some of it, but like they ended their stock sell

0:11:21.960 --> 0:11:25.160
<v Speaker 2>plan basically on that first day when AMC rallied and

0:11:25.160 --> 0:11:26.960
<v Speaker 2>sympathy with game Stop and everything else and all the

0:11:26.960 --> 0:11:29.040
<v Speaker 2>other being stocks. But then they did turn around like

0:11:29.040 --> 0:11:33.560
<v Speaker 2>the next day and sell a bunch of stock, not

0:11:33.720 --> 0:11:36.400
<v Speaker 2>in the open market, but they like exchanged a bunch

0:11:36.400 --> 0:11:40.640
<v Speaker 2>of their debt for stock. Yeah, So basically AMC's always

0:11:40.679 --> 0:11:44.240
<v Speaker 2>this is always been AMC's strategy. They're like a very indebted,

0:11:44.960 --> 0:11:49.520
<v Speaker 2>somewhat struggling movie theater chain, and every time their stock rallies,

0:11:49.559 --> 0:11:50.679
<v Speaker 2>they're like, we're gonna get rid of some of our

0:11:50.800 --> 0:11:52.960
<v Speaker 2>debt by like exchanging it for this like incredibly over

0:11:53.080 --> 0:11:53.720
<v Speaker 2>valued stock.

0:11:53.920 --> 0:11:56.960
<v Speaker 1>Yeah, in terms of why they always seek to capitalize

0:11:56.960 --> 0:11:58.839
<v Speaker 1>and maybe game Stop doesn't. If you take a look

0:11:58.840 --> 0:12:01.199
<v Speaker 1>at the debt profiles, a still has four and a

0:12:01.240 --> 0:12:03.600
<v Speaker 1>half billion dollars in tent on.

0:12:03.720 --> 0:12:05.760
<v Speaker 2>Answers they need to. But you also think there's like

0:12:05.800 --> 0:12:09.080
<v Speaker 2>a personality issue. Really Yeah, AMC, like their CEO at

0:12:09.080 --> 0:12:11.120
<v Speaker 2>and Aaron, it's like I'm going to lean into being

0:12:11.360 --> 0:12:14.120
<v Speaker 2>the leader of the Apes as they call themselves, and

0:12:14.320 --> 0:12:16.600
<v Speaker 2>as he calls them, like the retail meme traders who

0:12:16.640 --> 0:12:20.239
<v Speaker 2>love AMC, like, yeah, all in on King an online personality.

0:12:20.280 --> 0:12:23.000
<v Speaker 1>It is wild to me that in the Year of

0:12:23.040 --> 0:12:25.720
<v Speaker 1>Our Lord twenty twenty four, like I get amc ape

0:12:26.000 --> 0:12:28.720
<v Speaker 1>or some variation of that trending on x for me

0:12:28.960 --> 0:12:32.040
<v Speaker 1>all the time. And I made the mistake of tweeting

0:12:32.640 --> 0:12:35.400
<v Speaker 1>that I fell asleep during Doune two. I went to

0:12:35.559 --> 0:12:37.960
<v Speaker 1>like midnight showing and I shouldn't have and I fell asleep,

0:12:38.000 --> 0:12:40.160
<v Speaker 1>and I tweeted that, and I thought it was pretty innocent,

0:12:40.520 --> 0:12:44.680
<v Speaker 1>and my mentions and my inbox were destroyed from people

0:12:44.760 --> 0:12:48.160
<v Speaker 1>who just love AMC and are in the cult of AMC.

0:12:48.360 --> 0:12:50.920
<v Speaker 2>They're not like Dune two was a great note and

0:12:50.920 --> 0:12:53.679
<v Speaker 2>we're offended by you not liking it. There like movie

0:12:53.720 --> 0:12:54.400
<v Speaker 2>theaters are.

0:12:54.320 --> 0:12:58.160
<v Speaker 1>Great and we're yeah sleeping exactly, yeah, because it was

0:12:58.480 --> 0:13:01.120
<v Speaker 1>like exclusive to AMC or or something that I didn't

0:13:01.120 --> 0:13:03.679
<v Speaker 1>realize before I said it. They weren't upset that I

0:13:03.720 --> 0:13:05.360
<v Speaker 1>didn't like the content of the movie.

0:13:05.400 --> 0:13:08.280
<v Speaker 2>It was really typically in the pay of AMC short sellers.

0:13:08.440 --> 0:13:12.160
<v Speaker 1>That's exactly what they thought. Let me clear the record

0:13:12.240 --> 0:13:16.640
<v Speaker 1>right now, I am not but anyway gave stop. I

0:13:16.679 --> 0:13:19.680
<v Speaker 1>thought this was interesting. It has long term debt of

0:13:19.800 --> 0:13:24.440
<v Speaker 1>seventeen point seven million dollars and it remains limited to

0:13:24.559 --> 0:13:27.920
<v Speaker 1>a low interest, unsecured term loan associated with the French

0:13:27.960 --> 0:13:30.360
<v Speaker 1>government's response to COVID nineteen.

0:13:30.840 --> 0:13:34.800
<v Speaker 2>Yeah, yeah, that's good debt. AMC's that was like, I

0:13:34.840 --> 0:13:36.800
<v Speaker 2>figure out exactly what it's called, but it's ten slast

0:13:36.800 --> 0:13:41.400
<v Speaker 2>twelve percent pic toggle secondly and supported. It's all the

0:13:41.440 --> 0:13:43.520
<v Speaker 2>words that you were like, oh, that's bad debt.

0:13:43.600 --> 0:13:47.680
<v Speaker 1>Yeah, my heart started racing. That's a lot of words. Yeah,

0:13:48.000 --> 0:13:49.920
<v Speaker 1>did get a little bit into the fundamentals. I would

0:13:49.920 --> 0:13:53.000
<v Speaker 1>also add that the movie business is really tough right

0:13:53.040 --> 0:13:54.480
<v Speaker 1>now to be a movie theater.

0:13:55.040 --> 0:13:56.880
<v Speaker 2>Chain, even keep Kenny Raff all the.

0:13:56.840 --> 0:14:01.360
<v Speaker 1>Week, No no, and you think about the lagged effects

0:14:01.440 --> 0:14:04.760
<v Speaker 1>of the writers and actors strike. There was some forecast

0:14:04.800 --> 0:14:07.760
<v Speaker 1>out there that there won't be a single summer blockbuster

0:14:08.080 --> 0:14:13.160
<v Speaker 1>to break a billion dollars, which is pretty terrible. And

0:14:13.200 --> 0:14:15.280
<v Speaker 1>then you take a look at GameStop and it's trading

0:14:15.360 --> 0:14:19.600
<v Speaker 1>at more than twelve hundred times it's expected twelve months

0:14:19.640 --> 0:14:23.120
<v Speaker 1>forward earnings. So a lot of movement on the charts

0:14:23.240 --> 0:14:26.600
<v Speaker 1>and a lot of silly valuations right now, right.

0:14:26.720 --> 0:14:29.960
<v Speaker 2>Right, If any of this were being discussed on Keeth

0:14:30.000 --> 0:14:31.120
<v Speaker 2>gils Twitter accat.

0:14:31.360 --> 0:14:33.280
<v Speaker 1>Yeah, different, it would be different.

0:14:33.680 --> 0:14:37.160
<v Speaker 2>The summer Blockbuster, the summer Entertainment is Keith giels Twitter account.

0:14:37.280 --> 0:14:39.720
<v Speaker 1>I'm just searching. I'm searching too hard for meaning, but

0:14:39.760 --> 0:14:43.520
<v Speaker 1>I need something to ground me in this life. Are

0:14:43.520 --> 0:14:44.720
<v Speaker 1>you done talking about this?

0:14:45.040 --> 0:14:47.040
<v Speaker 2>No, I'm going to talk about this more on the

0:14:47.080 --> 0:14:49.360
<v Speaker 2>Bloomberg Big Take podcast about memes thoughts.

0:14:49.480 --> 0:14:52.080
<v Speaker 1>Sounds like a riot. It's something you can listen to

0:14:52.120 --> 0:15:09.360
<v Speaker 1>it on Apple podcasts, Spotify or wherever you get your podcasts.

0:15:10.400 --> 0:15:12.120
<v Speaker 2>Wait, are there lots of sirens in.

0:15:12.120 --> 0:15:17.240
<v Speaker 1>This podcast going on? Should I call my mom? Should

0:15:17.280 --> 0:15:19.480
<v Speaker 1>we go to section two? I think I would feel

0:15:19.520 --> 0:15:22.600
<v Speaker 1>a lot better grounded, more in touch with reality if

0:15:22.600 --> 0:15:26.920
<v Speaker 1>we started talking about the blockchain and tokenized whatever this is.

0:15:27.240 --> 0:15:29.520
<v Speaker 2>Memeslas are so twenty twenty one. Another back. I feel

0:15:29.560 --> 0:15:31.800
<v Speaker 2>like I tried to walk away from the blockchain a

0:15:31.840 --> 0:15:34.000
<v Speaker 2>little bit in recent months, but now like really back.

0:15:34.160 --> 0:15:36.520
<v Speaker 1>You're really bad? You are you saying that officially? You

0:15:36.560 --> 0:15:37.440
<v Speaker 1>are really back?

0:15:37.600 --> 0:15:39.560
<v Speaker 2>Like youth Gil, No, I would say that like I

0:15:39.600 --> 0:15:41.800
<v Speaker 2>happened to write a lot about crypto this week.

0:15:41.920 --> 0:15:43.600
<v Speaker 1>Yeah, there's that there is.

0:15:43.600 --> 0:15:46.120
<v Speaker 2>Not like looking forward to doing it again next week.

0:15:46.040 --> 0:15:46.760
<v Speaker 1>But you did talk.

0:15:47.000 --> 0:15:47.800
<v Speaker 2>I was hoping not to.

0:15:48.080 --> 0:15:51.520
<v Speaker 1>You wrote about it in a very sedate, grown up

0:15:51.560 --> 0:15:55.440
<v Speaker 1>way because you wrote about blackrock involved crypto.

0:15:55.600 --> 0:15:57.520
<v Speaker 2>Yes, is that true? I always wonder like if you

0:15:57.600 --> 0:16:01.400
<v Speaker 2>walk into the black crypto floor like wearing shorts, and.

0:16:01.480 --> 0:16:02.600
<v Speaker 1>I somehow doubt that.

0:16:02.920 --> 0:16:04.720
<v Speaker 2>Yeah, it's still pretty blackrocks.

0:16:04.800 --> 0:16:07.840
<v Speaker 1>I don't think you're seeing any knees there, notions. I

0:16:07.840 --> 0:16:12.680
<v Speaker 1>think they're all wearing pants. But let's talk about biddle, biddle,

0:16:13.600 --> 0:16:14.240
<v Speaker 1>take it away.

0:16:14.440 --> 0:16:17.160
<v Speaker 2>That's spelled like build but wrong like b U, I

0:16:17.360 --> 0:16:20.720
<v Speaker 2>D like hoddle, like hoddle, right, hoddle, which is crypto

0:16:20.800 --> 0:16:24.440
<v Speaker 2>for hold and uh crypto for build, but actually it

0:16:24.480 --> 0:16:26.280
<v Speaker 2>stands or something right, it's an acronym and it is

0:16:26.320 --> 0:16:26.800
<v Speaker 2>the black.

0:16:26.720 --> 0:16:29.560
<v Speaker 1>Rock USD Institutional Digital Liquidity Funds.

0:16:29.680 --> 0:16:32.600
<v Speaker 2>Yeah, biddle, I have I love like crypto does a

0:16:32.600 --> 0:16:35.000
<v Speaker 2>lot of fun stuff with names, but like traditional finance,

0:16:35.080 --> 0:16:37.560
<v Speaker 2>you know, I grew up in a derivative structuring desk

0:16:37.600 --> 0:16:40.120
<v Speaker 2>and that job is forty percent coming up with acronyms

0:16:40.120 --> 0:16:42.200
<v Speaker 2>for things, and so like I respect that black Rock

0:16:42.360 --> 0:16:45.240
<v Speaker 2>is like we're gonna just very casually slip this acronym

0:16:45.320 --> 0:16:45.880
<v Speaker 2>name into it.

0:16:45.960 --> 0:16:48.720
<v Speaker 1>Yeah, I grew up in New Jersey, so a little

0:16:48.760 --> 0:16:49.360
<v Speaker 1>bit different.

0:16:49.760 --> 0:16:51.120
<v Speaker 2>You can come at it from trad file, you can

0:16:51.120 --> 0:16:53.480
<v Speaker 2>come at it from like crypto, the traditional answers, like

0:16:53.480 --> 0:16:56.800
<v Speaker 2>this is a money market musual. It's a short term

0:16:56.880 --> 0:17:00.880
<v Speaker 2>treasury bill liquidity fund. So it's just the money market fund.

0:17:01.120 --> 0:17:04.679
<v Speaker 2>But you can trade it on the blockchain, right, It's

0:17:04.720 --> 0:17:08.200
<v Speaker 2>on the Ethereum blockchain, and you can send your units

0:17:08.240 --> 0:17:12.399
<v Speaker 2>of Biddle from your Ethereum wallet to someone else's and

0:17:12.440 --> 0:17:16.639
<v Speaker 2>so you can use it on the blockchain for crypto trades.

0:17:16.720 --> 0:17:19.160
<v Speaker 2>If you're doing a cryptoderivative trade and you need collateral,

0:17:19.240 --> 0:17:22.360
<v Speaker 2>you can post Biddle as collateral, or you can use

0:17:22.400 --> 0:17:24.760
<v Speaker 2>it as money and pay people with Biddle. I guess

0:17:25.119 --> 0:17:26.800
<v Speaker 2>if you come in fro another way from the crypto,

0:17:27.000 --> 0:17:29.600
<v Speaker 2>it's a stable coin, right, Yeah, it's like a thing

0:17:29.960 --> 0:17:32.520
<v Speaker 2>that is worth a dollar, that is, you know, stably

0:17:32.560 --> 0:17:36.240
<v Speaker 2>worth a dollar, that is underpinned by like short term

0:17:36.280 --> 0:17:41.040
<v Speaker 2>money good US dollar debt obligations, and that was on

0:17:41.080 --> 0:17:43.520
<v Speaker 2>the blockchain. So it's a stable coin that is in

0:17:43.600 --> 0:17:48.200
<v Speaker 2>competition with the circle ustc coin or tether, but unlike those,

0:17:48.320 --> 0:17:50.880
<v Speaker 2>it pays interest like natively.

0:17:50.800 --> 0:17:53.960
<v Speaker 1>In a world where fed funds is like five percent,

0:17:54.280 --> 0:17:55.719
<v Speaker 1>that's pretty attractive.

0:17:55.960 --> 0:17:58.919
<v Speaker 2>Right. Crypto is in many ways a low interest rate phenomenon, right,

0:17:58.960 --> 0:18:00.679
<v Speaker 2>because it's like, oh, all these projects that have no

0:18:00.760 --> 0:18:03.800
<v Speaker 2>cash flows but like weird, grandiose promises, that's a better

0:18:04.680 --> 0:18:06.919
<v Speaker 2>pitch in a world of low discount It's but like

0:18:06.920 --> 0:18:09.280
<v Speaker 2>stable coins in particular are a low interest rate phenomenon

0:18:09.320 --> 0:18:12.880
<v Speaker 2>because when teather is like, we'll take your money and

0:18:13.440 --> 0:18:15.440
<v Speaker 2>do something weird with it, but we'll give you back

0:18:15.480 --> 0:18:18.000
<v Speaker 2>the dollar whenever you ask for it, that's a better trade.

0:18:18.000 --> 0:18:19.800
<v Speaker 2>If like you can't get five percent interest on your

0:18:19.800 --> 0:18:21.639
<v Speaker 2>dollar elsewhere, but now you get five percent on your

0:18:21.680 --> 0:18:24.800
<v Speaker 2>dollar elsewhere. Tether is not a particularly attractive pure investment opportunity.

0:18:24.880 --> 0:18:27.520
<v Speaker 2>Now there are ways to use teather in crypto to

0:18:27.600 --> 0:18:29.679
<v Speaker 2>make money, but the proposition at tether is like you

0:18:29.760 --> 0:18:32.400
<v Speaker 2>give them your dollar and they invest it and probably

0:18:32.600 --> 0:18:34.680
<v Speaker 2>charger is or something.

0:18:34.880 --> 0:18:36.200
<v Speaker 1>And that's what they would say.

0:18:36.240 --> 0:18:37.840
<v Speaker 2>That's what they say, But and then they are in,

0:18:37.880 --> 0:18:39.600
<v Speaker 2>you know, five percent interest and they keep it and

0:18:39.640 --> 0:18:41.520
<v Speaker 2>they don't give it to you, whereas like biddle is

0:18:41.560 --> 0:18:43.640
<v Speaker 2>like kind of the same thing, but we will give

0:18:43.640 --> 0:18:44.159
<v Speaker 2>you the interest.

0:18:44.480 --> 0:18:46.800
<v Speaker 1>So thinking about it in the framing of who is

0:18:46.880 --> 0:18:50.560
<v Speaker 1>this for and it's for people in crypto helped me

0:18:50.640 --> 0:18:53.679
<v Speaker 1>understand this a lot more because when you're talking about

0:18:53.680 --> 0:18:57.920
<v Speaker 1>it as a money market fund that's on the blockchain

0:18:57.960 --> 0:19:01.840
<v Speaker 1>in tokenized my first reaction is that is a long

0:19:01.960 --> 0:19:04.439
<v Speaker 1>walk for a short drink of water. But then you

0:19:04.480 --> 0:19:06.880
<v Speaker 1>think about it from the perspective of this is for

0:19:06.960 --> 0:19:09.840
<v Speaker 1>crypto people. It's not necessarily like a gateway to bring

0:19:09.880 --> 0:19:13.280
<v Speaker 1>institutional suppliers into cryptos. For people who are already in crypto,

0:19:13.800 --> 0:19:19.879
<v Speaker 1>who actually want to earn interest on basically their cash management,

0:19:19.960 --> 0:19:21.240
<v Speaker 1>it makes a lot more sense.

0:19:21.680 --> 0:19:24.439
<v Speaker 2>I think that the fact that Blackrock has a cryptodivision

0:19:25.119 --> 0:19:28.240
<v Speaker 2>is a bet on some notions of crypto will become

0:19:28.560 --> 0:19:32.879
<v Speaker 2>more accepted in broader institutional finance, right Yeah, And so

0:19:33.560 --> 0:19:36.639
<v Speaker 2>one thing that means is that if traditional institutions are

0:19:36.680 --> 0:19:39.360
<v Speaker 2>going to get more into crypto, stable coins are kind

0:19:39.359 --> 0:19:42.760
<v Speaker 2>of like an important part of crypto trading, of collateralizing trades,

0:19:42.760 --> 0:19:46.320
<v Speaker 2>of payment for trades, and you know, at some level

0:19:46.359 --> 0:19:48.360
<v Speaker 2>institutions are going to say I'm not going to keep

0:19:48.359 --> 0:19:51.639
<v Speaker 2>my money in a stable coin that is one possibly

0:19:52.720 --> 0:19:55.720
<v Speaker 2>issued by someone who's in more regulatory hot water than Blackrock,

0:19:55.960 --> 0:19:58.320
<v Speaker 2>and two that doesn't pay interest, right, and so Blackroy's like, well,

0:19:58.320 --> 0:20:00.000
<v Speaker 2>we have this alternative product where you can get paid

0:20:00.119 --> 0:20:02.000
<v Speaker 2>interest and you can have your money with Blackrock, and

0:20:02.080 --> 0:20:04.600
<v Speaker 2>like not just Blackrock, but a Blackrock money market fund,

0:20:04.600 --> 0:20:06.399
<v Speaker 2>which is like a thing that people understand, right, Like

0:20:06.400 --> 0:20:08.199
<v Speaker 2>it's easy to understand what a money market fund is

0:20:08.200 --> 0:20:10.679
<v Speaker 2>because it's like exists and it's like well known technology.

0:20:10.680 --> 0:20:12.919
<v Speaker 2>And so if you're a sort of long term bets,

0:20:12.960 --> 0:20:15.200
<v Speaker 2>like more traditional institutions are going to get into crypto

0:20:15.280 --> 0:20:19.280
<v Speaker 2>than like having this traditionally appealing product helps with your

0:20:19.520 --> 0:20:22.040
<v Speaker 2>offering and crypto. But yeah, I also think, right, it's

0:20:22.080 --> 0:20:24.800
<v Speaker 2>like you're a crypto trader and like you need to

0:20:24.800 --> 0:20:27.520
<v Speaker 2>hold stable coins and like we'll give you interest, right.

0:20:27.400 --> 0:20:30.160
<v Speaker 1>I mean, maybe that is BlackRock's long term vision. I'm

0:20:30.160 --> 0:20:34.040
<v Speaker 1>thinking about the position of the securitized CEO. Blackrock of

0:20:34.080 --> 0:20:37.040
<v Speaker 1>course partnered with Securitize for this thing. His name is

0:20:37.080 --> 0:20:40.440
<v Speaker 1>Carlos Domingo, and his perspective on who this is for

0:20:40.760 --> 0:20:44.480
<v Speaker 1>is that this particular product, so specifically this one, it's

0:20:44.520 --> 0:20:47.399
<v Speaker 1>geared towards crypto institutions that want to have a cash

0:20:47.480 --> 0:20:52.880
<v Speaker 1>management product for treasury management on the blockchain. So it's

0:20:52.960 --> 0:20:54.480
<v Speaker 1>more for the cryptation.

0:20:54.600 --> 0:20:57.439
<v Speaker 2>Yeah. Right, If you're a traditional institution, you're just not

0:20:58.000 --> 0:20:59.320
<v Speaker 2>need to be on a blockchain r exactly.

0:20:59.400 --> 0:21:01.680
<v Speaker 1>You would just buy a money market fund.

0:21:01.800 --> 0:21:04.760
<v Speaker 2>I will say, though, the Financial Times article about this

0:21:05.080 --> 0:21:07.120
<v Speaker 2>mentions two plus one settlement.

0:21:07.240 --> 0:21:08.520
<v Speaker 1>Yeah, this is where it lost me.

0:21:08.680 --> 0:21:11.399
<v Speaker 2>It loses me as well. Yeah, but I'm going to

0:21:11.440 --> 0:21:13.800
<v Speaker 2>put it out there. This is more of a twenty

0:21:13.880 --> 0:21:17.760
<v Speaker 2>seventeen thing. But like people used to think that having

0:21:17.760 --> 0:21:21.760
<v Speaker 2>a blockchain would somehow speed up trading and settlement in

0:21:21.840 --> 0:21:25.680
<v Speaker 2>financial markets. That like, right now, things exist on computers

0:21:26.119 --> 0:21:28.760
<v Speaker 2>and in databases that are too slow, and if you

0:21:28.760 --> 0:21:30.600
<v Speaker 2>put them on the blockchain, and they'll be faster and

0:21:30.640 --> 0:21:33.720
<v Speaker 2>you can settle trades instantly rather than having to wait

0:21:33.760 --> 0:21:35.760
<v Speaker 2>for P plus one or two post two settlement. And

0:21:35.840 --> 0:21:39.199
<v Speaker 2>so the idea here, supposedly this is not decided to

0:21:39.200 --> 0:21:41.000
<v Speaker 2>black rock or securitize. This is just an idea that

0:21:41.119 --> 0:21:45.159
<v Speaker 2>is floating out there, is that tokenizing things like you know,

0:21:45.200 --> 0:21:49.160
<v Speaker 2>money cash management will allow for like faster settlement of transactions,

0:21:49.240 --> 0:21:52.639
<v Speaker 2>and ultimately the traditional finance system will move to a

0:21:52.680 --> 0:21:56.080
<v Speaker 2>blockchain based system and you'll need this for that to work. Now,

0:21:57.280 --> 0:21:59.600
<v Speaker 2>in twenty seventeen, people really did go around saying the

0:21:59.600 --> 0:22:02.040
<v Speaker 2>traditional finance system will move to a blockchain bysed system

0:22:02.160 --> 0:22:04.439
<v Speaker 2>in twenty twenty four. That's like a little embarrassing to say.

0:22:04.280 --> 0:22:06.480
<v Speaker 1>Because the Erry Think is still into it.

0:22:06.640 --> 0:22:08.879
<v Speaker 2>Well, then that's there, you go, Larry I Think is

0:22:08.920 --> 0:22:10.520
<v Speaker 2>the CEO of Blackrock.

0:22:10.200 --> 0:22:13.640
<v Speaker 1>Case you know, still in twenty twenty four expressing support.

0:22:13.880 --> 0:22:16.280
<v Speaker 2>For a long time, there's been a competitive tension between

0:22:16.400 --> 0:22:18.400
<v Speaker 2>money market funds and checking accounts.

0:22:18.640 --> 0:22:20.679
<v Speaker 1>Yeah, bank accounts, right, yes.

0:22:20.440 --> 0:22:23.560
<v Speaker 2>Because money market funds have advertised themselves as like, we

0:22:23.640 --> 0:22:26.320
<v Speaker 2>are a place that pays high interest rates and you

0:22:26.359 --> 0:22:27.920
<v Speaker 2>can use it as cash, you can use it as

0:22:27.920 --> 0:22:29.879
<v Speaker 2>for checking and you know, money market funds are interested

0:22:29.960 --> 0:22:33.080
<v Speaker 2>in being a cash substitute for companies and individuals and institutions.

0:22:33.440 --> 0:22:35.960
<v Speaker 2>And if you think the future of payments, for the

0:22:36.000 --> 0:22:39.720
<v Speaker 2>future of security settlement is on the blockchain, who controls

0:22:39.840 --> 0:22:43.000
<v Speaker 2>cash on the blockchain, Well, the answer is like tether, right,

0:22:43.080 --> 0:22:45.320
<v Speaker 2>the answer is like the big stable coin issures. But

0:22:45.359 --> 0:22:48.199
<v Speaker 2>like arguably, if Blackrock can build a better product for

0:22:48.320 --> 0:22:50.760
<v Speaker 2>offering cash on the blockchain, then not only does that

0:22:50.800 --> 0:22:52.840
<v Speaker 2>mean that they're you know, they have a good crypto product,

0:22:52.880 --> 0:22:54.840
<v Speaker 2>or like they're offering a good product to people who

0:22:54.880 --> 0:22:56.360
<v Speaker 2>are currently in crypto. But it's like, if you think

0:22:56.359 --> 0:22:59.440
<v Speaker 2>the future involves the blockchain, then this product can insert

0:22:59.480 --> 0:23:01.280
<v Speaker 2>you into the heart of the payments infrastructure.

0:23:01.440 --> 0:23:02.960
<v Speaker 1>So and that's that's I.

0:23:02.920 --> 0:23:04.520
<v Speaker 2>Think that's all far fetched, but I think it's an

0:23:04.560 --> 0:23:05.240
<v Speaker 2>interesting bet.

0:23:05.320 --> 0:23:07.639
<v Speaker 1>Well. I mean, I feel like that's the future that

0:23:07.800 --> 0:23:09.760
<v Speaker 1>the SEC would certainly that it's Blackrock.

0:23:09.800 --> 0:23:11.800
<v Speaker 2>Oh yeah, absolutely. I don't think the SEC is going

0:23:11.840 --> 0:23:16.919
<v Speaker 2>around hoping for a chain basedto future of payments, but like,

0:23:17.160 --> 0:23:19.240
<v Speaker 2>if they're going to have a crypto based future of payments,

0:23:19.600 --> 0:23:21.679
<v Speaker 2>I think they would prefer that it be Blackrock then

0:23:21.760 --> 0:23:22.560
<v Speaker 2>tether right.

0:23:22.760 --> 0:23:43.159
<v Speaker 1>Four dimensional chess by Blackrock. Are you ready?

0:23:44.440 --> 0:23:44.920
<v Speaker 2>I'm ready.

0:23:45.320 --> 0:23:48.399
<v Speaker 1>Time to bring it home. It's our third act and

0:23:48.440 --> 0:23:51.879
<v Speaker 1>we're going to talk about events contracts. Oh yeah yeah.

0:23:51.920 --> 0:23:52.440
<v Speaker 2>Elections.

0:23:52.560 --> 0:23:57.600
<v Speaker 1>Let the people trade, let them trade events contracts. You

0:23:57.640 --> 0:24:00.960
<v Speaker 1>have places like Kelsey you have predicted the pretty popular.

0:24:01.200 --> 0:24:04.359
<v Speaker 2>They're very popular despite being like people want to know

0:24:04.359 --> 0:24:06.679
<v Speaker 2>who's going to win the election, right, and like the

0:24:06.760 --> 0:24:12.160
<v Speaker 2>sort of standard model of looking at polls feels unreliable

0:24:12.240 --> 0:24:15.800
<v Speaker 2>and someone out dated, and the prediction market feels like

0:24:15.840 --> 0:24:17.760
<v Speaker 2>it should tell you the answer. It should be like, oh,

0:24:17.880 --> 0:24:25.640
<v Speaker 2>the smart money thinks that the odds of you know, Trump.

0:24:25.320 --> 0:24:28.840
<v Speaker 1>Winning, you can say it.

0:24:28.680 --> 0:24:31.240
<v Speaker 2>Or whatever, fifty five percent or whatever, and so therefore

0:24:31.320 --> 0:24:33.720
<v Speaker 2>that's like the correct dodds. Right, there's like the Nate

0:24:33.720 --> 0:24:36.480
<v Speaker 2>Silver model of translating polling results into probabilities. But there's

0:24:36.480 --> 0:24:39.120
<v Speaker 2>like the simple model of like markets providing the probabilities

0:24:39.119 --> 0:24:41.520
<v Speaker 2>and like people like that. But like those markets are

0:24:41.520 --> 0:24:44.360
<v Speaker 2>thin in part because they're illegal. Right. The US Commodity

0:24:44.359 --> 0:24:47.280
<v Speaker 2>Future Trading Commission has just never really been a fan

0:24:47.440 --> 0:24:50.119
<v Speaker 2>of election prediction markets. You know. The way it works

0:24:50.160 --> 0:24:53.119
<v Speaker 2>is you to list the prediction event contract, you go

0:24:53.160 --> 0:24:55.680
<v Speaker 2>to the CFTC and ask for permission, and if it's

0:24:55.680 --> 0:24:57.600
<v Speaker 2>an election contract, they just say no. And so CALSHI

0:24:57.640 --> 0:24:59.679
<v Speaker 2>has been told now and other exchanges like that have

0:24:59.720 --> 0:25:03.840
<v Speaker 2>been told no. And last week the CFTZ proposed a

0:25:03.920 --> 0:25:06.280
<v Speaker 2>rule I would just say it's always no, right, Like,

0:25:06.320 --> 0:25:10.960
<v Speaker 2>instead of asking us, we'll just categorically exclude certain kinds

0:25:11.000 --> 0:25:14.000
<v Speaker 2>of event contracts. Yeah, and the kinds are for the

0:25:14.040 --> 0:25:20.240
<v Speaker 2>most part, sports, the oscars and elections, those all count

0:25:20.200 --> 0:25:23.800
<v Speaker 2>as gambling and so they're not allowed to be listed

0:25:23.880 --> 0:25:25.760
<v Speaker 2>on US commodities exchanges.

0:25:25.840 --> 0:25:29.000
<v Speaker 1>Yeah. CFDC commissioners voted three to two to release the

0:25:29.000 --> 0:25:34.439
<v Speaker 1>proposed regulation for public review agencies. Three Democratic commissioners voted

0:25:34.480 --> 0:25:38.399
<v Speaker 1>in favor, you had two Republicans dissenting. I don't know

0:25:38.480 --> 0:25:42.679
<v Speaker 1>so I, as a journalist like prediction markets just because

0:25:42.720 --> 0:25:44.760
<v Speaker 1>it's nice to see what people are thinking.

0:25:44.840 --> 0:25:47.359
<v Speaker 2>As a consumer, I really want there to be a

0:25:47.400 --> 0:25:50.280
<v Speaker 2>deep liquid prediction market that could tell me what election

0:25:50.320 --> 0:25:50.600
<v Speaker 2>ods are.

0:25:50.680 --> 0:25:52.159
<v Speaker 1>Well, we were on the way there because did you

0:25:52.200 --> 0:25:55.159
<v Speaker 1>see the news from April that Susquehanna is starting a

0:25:55.200 --> 0:25:59.720
<v Speaker 1>trading desk focused on events contract in partnership with Calshi,

0:26:00.119 --> 0:26:03.320
<v Speaker 1>plan to act as a market maker for transactions with CALSHI,

0:26:03.720 --> 0:26:07.479
<v Speaker 1>which is obviously trying to expand. Obviously this would they

0:26:07.520 --> 0:26:11.000
<v Speaker 1>weren't able to do elections in gaming. I think the

0:26:11.200 --> 0:26:14.520
<v Speaker 1>reasons for why the CFTC doesn't want to do this

0:26:15.240 --> 0:26:17.760
<v Speaker 1>are interesting. Tell me what, I forget his name, but

0:26:17.840 --> 0:26:18.800
<v Speaker 1>the election cop guy.

0:26:19.000 --> 0:26:21.680
<v Speaker 2>The election cop guy. Yeah, that's Ross and Bedham is

0:26:21.680 --> 0:26:25.760
<v Speaker 2>the chair of the CFTC. Gaylor really interesting statement when

0:26:25.760 --> 0:26:28.400
<v Speaker 2>proposing these rules, saying basically he doesn't want the CFTC

0:26:28.520 --> 0:26:30.560
<v Speaker 2>to be election cops. So like the way it works

0:26:30.600 --> 0:26:35.760
<v Speaker 2>is that the CFTC mostly regulates the commodity's futures markets,

0:26:36.240 --> 0:26:39.280
<v Speaker 2>and so if you like spoof and putting in orders

0:26:39.280 --> 0:26:41.240
<v Speaker 2>for whak futures, then you get in trouble with the CFTC.

0:26:41.600 --> 0:26:44.720
<v Speaker 2>But also they regulate the underlying commodities to make sure

0:26:44.760 --> 0:26:46.720
<v Speaker 2>that futures markets are fair. So if you go burn

0:26:46.760 --> 0:26:49.040
<v Speaker 2>a cornfield, you'll get in trouble with the CFTC probably

0:26:49.040 --> 0:26:52.520
<v Speaker 2>other people too, because you've manipulated the market for corn features.

0:26:53.000 --> 0:26:56.320
<v Speaker 2>The theory here is that if they're election futures, the

0:26:56.320 --> 0:27:00.280
<v Speaker 2>CFTC will regulate them, and if you then throw away

0:27:00.280 --> 0:27:03.880
<v Speaker 2>a bunch of ballots or whatever, then the CFTC will

0:27:03.880 --> 0:27:06.040
<v Speaker 2>have to come in and decide whether you've committed an

0:27:06.080 --> 0:27:09.600
<v Speaker 2>election fraud that affects a CFTC regulated contract. And the

0:27:09.640 --> 0:27:11.879
<v Speaker 2>CFTC is like, we don't want that responsibility.

0:27:11.920 --> 0:27:14.080
<v Speaker 1>I mean, maybe I'm being naive, but it just seems

0:27:14.400 --> 0:27:16.919
<v Speaker 1>unlikely that would ever be their responsibility. I get that

0:27:16.920 --> 0:27:20.080
<v Speaker 1>they have to regulate the underlying market, but even still,

0:27:20.240 --> 0:27:20.800
<v Speaker 1>I hear you.

0:27:21.080 --> 0:27:23.000
<v Speaker 2>But like, one thing that I've been writing about for

0:27:23.080 --> 0:27:26.840
<v Speaker 2>a long time is that the sec the securities regulator

0:27:27.800 --> 0:27:31.800
<v Speaker 2>has a surprising amount of responsibility for regulating all sorts

0:27:31.840 --> 0:27:34.760
<v Speaker 2>of stuff that doesn't sound like securities law because of

0:27:34.800 --> 0:27:37.080
<v Speaker 2>how it affects the securities of public companies. And so

0:27:37.119 --> 0:27:41.639
<v Speaker 2>the SEC is very interested in greenhouse gas emissions, regulating

0:27:41.680 --> 0:27:45.280
<v Speaker 2>how companies account for and disclose and also do like

0:27:45.320 --> 0:27:48.040
<v Speaker 2>their carbon emissions, because this SEC says, well, yeah, that's

0:27:48.119 --> 0:27:50.600
<v Speaker 2>relevant to investors, and so like, all this environmental stuff

0:27:50.640 --> 0:27:53.040
<v Speaker 2>gets wrapped up into stock prices and so we regulate it.

0:27:53.240 --> 0:27:56.560
<v Speaker 2>The SEC has rules about conflict diamonds. They did an

0:27:56.640 --> 0:27:59.359
<v Speaker 2>enforcement action against SeaWorld for its mistreatment of killer whales.

0:27:59.359 --> 0:28:02.800
<v Speaker 2>Like all this stuff where if it affects securities markets,

0:28:02.840 --> 0:28:04.439
<v Speaker 2>the SEC is like, oh, well we'll ti put her

0:28:04.440 --> 0:28:07.199
<v Speaker 2>hand in that. Well'll be interested in that. And I

0:28:07.240 --> 0:28:09.080
<v Speaker 2>write about this a lot. I say everything is security

0:28:09.119 --> 0:28:11.200
<v Speaker 2>is frud right, It's some combination of the SEC is

0:28:11.240 --> 0:28:13.480
<v Speaker 2>interested in expanding its power as much as possible, and

0:28:13.480 --> 0:28:16.320
<v Speaker 2>so they're like, ooh, we'll be an environmental regulator. But

0:28:16.400 --> 0:28:21.360
<v Speaker 2>it's also like us politics are not necessarily good at

0:28:21.359 --> 0:28:24.399
<v Speaker 2>writing substance of regulations, and so like people are like,

0:28:24.480 --> 0:28:26.760
<v Speaker 2>I want to fix this problem, and the way I'm

0:28:26.800 --> 0:28:29.879
<v Speaker 2>going to fix it is by suing for securities fraud.

0:28:30.000 --> 0:28:32.639
<v Speaker 2>It's a thing that courts and the sec are just

0:28:32.640 --> 0:28:34.800
<v Speaker 2>more responsive to than to a lot of other complaints.

0:28:34.920 --> 0:28:37.120
<v Speaker 2>You get a sympathetic hearing in court, and so like

0:28:37.359 --> 0:28:40.160
<v Speaker 2>all of this stuff in the world gets smuggled into

0:28:40.160 --> 0:28:42.920
<v Speaker 2>securities law. And the CFTC is looking at that and saying,

0:28:43.000 --> 0:28:45.800
<v Speaker 2>the election gets smuggled into commodities future's law. That's going

0:28:45.840 --> 0:28:48.000
<v Speaker 2>to be really controversial. We're going to get in trouble

0:28:48.240 --> 0:28:50.440
<v Speaker 2>for trying to regulate that. So I think they want

0:28:50.440 --> 0:28:51.960
<v Speaker 2>to stay away from it. And I agree with you

0:28:52.040 --> 0:28:54.440
<v Speaker 2>that it sounds far fetched to everyone except me because

0:28:54.440 --> 0:28:56.120
<v Speaker 2>it's the thing I've been thinking about for a decade.

0:28:56.160 --> 0:28:57.840
<v Speaker 2>So and I'm like, oh, yeah, I see where you're

0:28:57.840 --> 0:28:58.720
<v Speaker 2>coming from, CFTC.

0:28:59.040 --> 0:29:02.400
<v Speaker 1>So I mean decade, I'll be there as well. By

0:29:02.440 --> 0:29:05.080
<v Speaker 1>the same token this podcast for that one. Yeah, so

0:29:05.480 --> 0:29:11.840
<v Speaker 1>we'll revisit this before the four yeah, five hundred maybe

0:29:12.160 --> 0:29:14.920
<v Speaker 1>by the same token. You think about some of the

0:29:14.960 --> 0:29:19.760
<v Speaker 1>proponents of course betting on or sorry, predicting, prediction.

0:29:19.480 --> 0:29:20.680
<v Speaker 2>Marketing, betting on.

0:29:21.600 --> 0:29:24.160
<v Speaker 1>You think about some of the proponents for these political

0:29:24.160 --> 0:29:26.880
<v Speaker 1>events contracts. They argue that they could be a valuable

0:29:26.920 --> 0:29:29.680
<v Speaker 1>source of data for forecasting election outcomes. This is from

0:29:29.720 --> 0:29:32.360
<v Speaker 1>the Wall Street Journal. Kind of agree with that as

0:29:32.360 --> 0:29:34.960
<v Speaker 1>a journalist, it's true, but then that they would also

0:29:35.040 --> 0:29:40.239
<v Speaker 1>allow companies to hedge risk associated with either Democrats or

0:29:40.280 --> 0:29:42.880
<v Speaker 1>Republicans coming to power. I don't super know what that.

0:29:42.960 --> 0:29:44.560
<v Speaker 2>Yeah, I don't really believe that. I think that people

0:29:44.600 --> 0:29:48.200
<v Speaker 2>are pretty bad about predicting the directional impact of elections

0:29:48.360 --> 0:29:52.280
<v Speaker 2>on like financial quantities. So if you're like, oh, the

0:29:52.360 --> 0:29:54.680
<v Speaker 2>price of oil will go up if a Democrat is elected,

0:29:54.760 --> 0:29:56.600
<v Speaker 2>so I have to head that you just buy oil futures,

0:29:56.680 --> 0:29:59.120
<v Speaker 2>Like you shouldn't like if you think, oh, it'll be

0:29:59.280 --> 0:30:01.560
<v Speaker 2>bad for my business since some unspecified way if a

0:30:01.600 --> 0:30:04.120
<v Speaker 2>Democrat is elected, that's probably wrong, and like you should

0:30:04.160 --> 0:30:06.040
<v Speaker 2>probably think about how it will be bad for your

0:30:06.080 --> 0:30:08.560
<v Speaker 2>business and hedging like those financial markets, rather than hedge

0:30:08.560 --> 0:30:11.320
<v Speaker 2>by like betting on Democrats winning an election.

0:30:11.200 --> 0:30:13.840
<v Speaker 1>On Calshie on Calshie. Yeah, that's pretty funny.

0:30:13.920 --> 0:30:17.560
<v Speaker 2>To the extent you're hedging, you are undermining the predictive impact, right, Yeah,

0:30:17.560 --> 0:30:19.880
<v Speaker 2>it's like you're not like betting, You're you're like, I

0:30:19.920 --> 0:30:21.800
<v Speaker 2>don't know who's going to win, but if they win,

0:30:21.920 --> 0:30:22.880
<v Speaker 2>that's bad for me someone.

0:30:22.920 --> 0:30:25.640
<v Speaker 1>That's something I think about a lot with these prediction markets.

0:30:25.720 --> 0:30:29.000
<v Speaker 1>I don't know much about betting. I'm not a better

0:30:29.120 --> 0:30:31.760
<v Speaker 1>But the way I understand it, if like they're super

0:30:31.960 --> 0:30:36.160
<v Speaker 1>long odds on something and I wanted to bet on

0:30:36.200 --> 0:30:39.720
<v Speaker 1>something outlandish but that has a high potential payout, I

0:30:39.720 --> 0:30:42.080
<v Speaker 1>would take that bet. And that's not necessarily what I

0:30:42.120 --> 0:30:43.080
<v Speaker 1>think is going to happen.

0:30:43.320 --> 0:30:46.520
<v Speaker 2>You're implicitly saying the probability that happening is higher than

0:30:46.560 --> 0:30:50.240
<v Speaker 2>the probability reflected in the market. That's true, implicitly, like

0:30:50.280 --> 0:30:52.400
<v Speaker 2>you're not really Probably a lot of people are taking

0:30:52.400 --> 0:30:54.160
<v Speaker 2>one percent bets, not because I think the odds are

0:30:54.160 --> 0:30:56.480
<v Speaker 2>two percent, but because you.

0:30:56.440 --> 0:31:00.320
<v Speaker 1>Know, I just think that. Yeah, I get I did

0:31:00.400 --> 0:31:03.720
<v Speaker 1>like two party elections. Yeah. True, But it's not like

0:31:03.760 --> 0:31:06.520
<v Speaker 1>a survey where I'm one hundred percent always going to

0:31:06.560 --> 0:31:08.840
<v Speaker 1>say what I think is going to happen. I'm betting,

0:31:09.120 --> 0:31:10.680
<v Speaker 1>and there's some strategy to that.

0:31:11.000 --> 0:31:15.480
<v Speaker 2>Yeah. But the counterpoint is, like surveys doesn't affect you, Right,

0:31:15.560 --> 0:31:17.520
<v Speaker 2>there's real money online betting. You know, if you had

0:31:17.560 --> 0:31:21.800
<v Speaker 2>a big liquid prediction market for elections, that would incentivize big,

0:31:22.760 --> 0:31:26.040
<v Speaker 2>smart financial institutions to invest time and resources into figuring

0:31:26.040 --> 0:31:27.600
<v Speaker 2>out who's going to win, so they could bet on

0:31:27.640 --> 0:31:29.720
<v Speaker 2>the winning side, and then they would probably be.

0:31:29.640 --> 0:31:31.720
<v Speaker 1>Accurate and they could hedge themselves.

0:31:31.880 --> 0:31:34.280
<v Speaker 2>They could hedge themselves. Sure, I don't think it's something.

0:31:34.560 --> 0:31:37.080
<v Speaker 1>I'm curious to see how this actually turns out. So

0:31:37.120 --> 0:31:39.640
<v Speaker 1>they're opening it to public review. I mean, there's a

0:31:39.720 --> 0:31:42.480
<v Speaker 1>chance that nothing changes before the election itself.

0:31:42.360 --> 0:31:44.120
<v Speaker 2>Big chance, right, and then like after that, you know,

0:31:44.280 --> 0:31:48.160
<v Speaker 2>like a'll butts are up. I will say that one

0:31:48.200 --> 0:31:51.000
<v Speaker 2>of the Republicans City Center was like, this is a

0:31:51.040 --> 0:31:53.520
<v Speaker 2>weird thing here where there's like two ways to bet

0:31:53.560 --> 0:31:56.520
<v Speaker 2>on sports. There's like event contracts regulated by the CFTC,

0:31:56.720 --> 0:31:59.160
<v Speaker 2>and then there's like regular sports coupling, which is regulated

0:31:59.160 --> 0:32:01.280
<v Speaker 2>by the states. And it used to be that the

0:32:01.320 --> 0:32:03.560
<v Speaker 2>way it worked is that gambling was kind of illegal

0:32:03.560 --> 0:32:05.880
<v Speaker 2>almost everywhere, and so like the CFTC was like, you

0:32:05.920 --> 0:32:09.400
<v Speaker 2>can't have betting on sports on CFTC exchanges, and I

0:32:09.440 --> 0:32:11.040
<v Speaker 2>was like, oh, of course. And all the states were

0:32:11.040 --> 0:32:12.280
<v Speaker 2>like you kindt of betting on sports here, and I

0:32:12.440 --> 0:32:14.840
<v Speaker 2>was like, okay, fine, we'll do it illegally. Most states

0:32:14.880 --> 0:32:17.640
<v Speaker 2>now have like legalized sports campling, and so there's a

0:32:17.680 --> 0:32:20.400
<v Speaker 2>lot of sports campling. O. It's very easy to gamble

0:32:20.440 --> 0:32:22.560
<v Speaker 2>on sports. It's very easy to gamble on sports on

0:32:22.600 --> 0:32:25.360
<v Speaker 2>your computer. Right. And then also there are these people

0:32:25.360 --> 0:32:27.240
<v Speaker 2>who are like, we're going to run a national futures exchange,

0:32:27.280 --> 0:32:29.160
<v Speaker 2>We're have events contracts, and the CFTC is like, no,

0:32:29.240 --> 0:32:31.000
<v Speaker 2>you can't do that. There's like a really kind of

0:32:31.000 --> 0:32:34.440
<v Speaker 2>like fuzzy distinction between like what is a futures exchange

0:32:34.720 --> 0:32:37.560
<v Speaker 2>that allows events contracts and is ready to by the

0:32:37.560 --> 0:32:40.440
<v Speaker 2>CFTC and what is a sports book that is on

0:32:40.520 --> 0:32:43.160
<v Speaker 2>the internet and that allows sports betting. Right, one of

0:32:43.160 --> 0:32:46.280
<v Speaker 2>the commissioners who dissented was like, we are stepping on

0:32:46.280 --> 0:32:48.959
<v Speaker 2>state jurisdiction by saying, you know, you can't have sports gambling,

0:32:49.200 --> 0:32:51.440
<v Speaker 2>and I actually don't know how it works, Like I'm

0:32:51.720 --> 0:32:53.719
<v Speaker 2>very puzzled if any sports book is going to get

0:32:53.720 --> 0:32:56.520
<v Speaker 2>in trouble with the CFTC saying actually, you're running a

0:32:56.560 --> 0:32:59.040
<v Speaker 2>futures exchange with events contract and you're not allowed to

0:32:59.040 --> 0:32:59.280
<v Speaker 2>do that.

0:32:59.320 --> 0:33:01.200
<v Speaker 1>We've talked about for us who've talked about the election,

0:33:01.240 --> 0:33:03.480
<v Speaker 1>Are we going to talk about the oscars or oh yeah.

0:33:03.280 --> 0:33:06.240
<v Speaker 2>The oscars. The CFTC like doesn't want to promote gambling,

0:33:06.280 --> 0:33:08.520
<v Speaker 2>and so they're like, you can't bet on the oscars.

0:33:09.240 --> 0:33:11.280
<v Speaker 2>But Ray, why the heck not? It seems fun.

0:33:11.520 --> 0:33:12.360
<v Speaker 1>It does seem fun.

0:33:12.440 --> 0:33:15.000
<v Speaker 2>And I wrote this, but like, the CFTC doesn't want

0:33:15.000 --> 0:33:17.040
<v Speaker 2>to be an election cop, and I think that is

0:33:17.240 --> 0:33:19.200
<v Speaker 2>wise of them. But they aren't have fun to be

0:33:19.240 --> 0:33:22.080
<v Speaker 2>like the oscars cop. Right, they have the CFTC auditor

0:33:22.080 --> 0:33:22.920
<v Speaker 2>in the room.

0:33:22.640 --> 0:33:25.600
<v Speaker 1>So I'm sure it's rigged already, so they'd find that

0:33:25.680 --> 0:33:29.040
<v Speaker 1>they'd get to get the CFTC in there to finally.

0:33:28.720 --> 0:33:31.440
<v Speaker 2>Get it right. Wouldn't if you were a CFTC enforcement layer,

0:33:31.440 --> 0:33:33.880
<v Speaker 2>wouldn't you want to be the one cracking whether the

0:33:33.880 --> 0:33:38.640
<v Speaker 2>oscar I would be salivating. There's a case this week

0:33:38.640 --> 0:33:40.640
<v Speaker 2>about someone running a cattle ponzi scheme.

0:33:40.760 --> 0:33:43.320
<v Speaker 1>No, that's also good of it, But how on earth

0:33:43.360 --> 0:33:48.200
<v Speaker 1>does that? Do the cattles not exist? I figured it out.

0:33:50.680 --> 0:33:52.160
<v Speaker 2>And that was the Money Stuff Podcast.

0:33:52.400 --> 0:33:54.760
<v Speaker 1>I'm Matt Living and I'm Katie Krayfield.

0:33:55.280 --> 0:33:57.160
<v Speaker 2>You can find my work by subscribing to the Money

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0:33:58.480 --> 0:34:00.680
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0:34:19.280 --> 0:34:21.240
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0:34:21.480 --> 0:34:24.240
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