← Bulwark Takes
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- [00:00]
A
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- [01:00]
B
It's me, Sam Stein, managing editor at the Bulwark, and I'm joined by Congressman Richie Torres of New York. We're here to talk about betting online and futures betting and prediction markets and why this congressman thinks there needs to be some regulations. They seem sensible to me, honestly, although we'll talk about it. So, Congressman, why don't you outline to the the listener what it is that your new legislation would do for these prediction markets.
- [01:27]
C
Sure. So when I saw an anonymous trader on Polymarket pocket $400,000 from a bet predicting the capture of Nicolas Maduro, and keep in mind, the bet was made hours before the actual event. It had all the markings of insider trading. And so I just felt compelled to introduce legislation that would prohibit insider trading in prediction markets among federal government officials, because there's a risk of not only corrupting the market, but corrupting the government itself. Suppose you are a member of Donald Trump's inner circle and you placed a bet predicting the collapse of or the capture of Nicolas Maduro. You would have a profit, a personal profit motive to advocate for a particular policy outcome from which you would benefit. And that should be categorically prohibited.
- [02:23]
B
This is coming in the context of a lot of congressional activity around banning stock sales. I think back to, for instance, the run up to the COVID pandemic in the winter of 2020, and you had questionable sales of stocks around medical suppliers, for instance, that seemed like they were coming from a source of knowledge after members of Congress are getting briefings from health officials. It leads to the question of how widespread is this type of taking insider knowledge and applying it to the markets among lawmakers? And you're up there on the Hill. I mean, can you answer that question? How widespread do you think this type of action is?
- [03:09]
C
Look, I honestly don't know, but we should assume the worst case scenario because, you know, as a member of Congress, I could easily open an anonymous account and place a bet that Richie Torres is going to introduce legislation on prediction markets and then profit from the bet the moment I introduce the legislation.
- [03:29]
B
Have you ever felt compelled?
- [03:31]
C
I never would. But in what universe should that be legal? Like prediction market profiteering among public officials should be categorically prohibited. And the problem arises not only when you act on insider information.
- [03:46]
B
Right, right.
- [03:46]
C
But there are people who are making decisions based on bets that they placed.
- [03:51]
B
Obviously this is a matter of, you know, do we want to prohibit people who have insider knowledge from profiting off of that and creating the perverse incentives to actually pursue policies that they could enrich them? I'm curious by your thoughts, sort of more generally about the proliferation of this type of gambling and these markets. I mean, do you see problems from a society wide perspective?
- [04:11]
C
I mean, I do have concerns about the cultural consequences of gambling. Prediction markets is a brave new world. I think Congress is going to have to create a comprehensive framework for regulating prediction markets. And I see the ban on insider trading, particularly among federal officials, as the simplest place to start. But in the end, it's no substitute for a broader regulatory framework for an industry that has become the wild, wild west. It's, it's, it's, it's a brave new world.
- [04:42]
B
Yeah. And it's not just the prediction markets. I mean, gambling is ubiquitous. Right. You watch any sporting event now and it's basically deluged with advertising for gambling sites. Right. I mean, it's just all over the place. So there is some need for regulation writ large, I would argue. Right.
- [04:56]
C
I'm all for regulation. I'm starting simple and slow because Congress is famously dysfunctional and gridlocked and one within gifts. There should be nothing controversial about banning insider trading. And we should hold prediction markets to the same standard that we apply to the stock market.
- [05:12]
B
I want to go through a couple examples of prediction market bets that were available for people to give the viewers a sense of how ubiquitous and absurd some of this stuff is. And you can just take them and react to them if you'd like. But back in July, I'm reading here crypto gamblers were crying foul as they stood to lose millions of dollars in a bet over whether Ukraine President Volodymyr Zelensky would wear a suit to his meeting with Trump. There was a collective of $210 million on the line and they believe they were denied the rightful earnings. There was also polymarket. It was under fire a little while ago when the U.S. ukraine Rare Earth mineral deal with Donald Trump was resolved as a yes. Despite no such deal occurring, the betting market, which had over 7 million in trading volume, saw a sudden spike in popularity from 9% to 100% between March 24th and 25th, sparking allegations of manip manipulation. You mentioned the Venezuela situation. There were some questions about whether Venezuela was invaded. This polymarka denied that Venezuela was invaded. One anonymous client, hoping ostensibly to collect their earnings, wrote, then what the would be an invasion. So here you have these absurd bets. I mean, Zielinski wearing a suit. I guess it's fun to look into this stuff, but maybe not. And then finally, I'm just going to note and you tell me how you feel about these odds. You have been, obviously you're in, you're in, you're in the field, you're in politics, but you've been on. There's a couple polymarket bets around you. So most notably Democratic nominee for governor on Ki. And I hate to say this to you, but you never really broke through 2% in terms of the betting odds on Ki. Were you upset by that?
- [07:02]
C
Maybe I was the 2%. I don't know.
- [07:04]
A
Were you?
- [07:04]
B
Tell me, were you the 2%? So what? Have you ever made a bet on any of these markets, yes or no?
- [07:12]
C
I've never made.
- [07:13]
B
Be honest. Never made a bet.
- [07:15]
C
I've never made a bet.
- [07:17]
B
Do you ever like, go on and look at the odds?
- [07:21]
C
I do watch the prediction markets for prediction about electoral races because I am sympathetic to the argument that when you have skin in the game, when you put your money at risk, you have an incentive to tell the truth. And so I think of prediction markets as kind of an alternative to polling, but obviously perfect.
- [07:46]
B
Well, yeah, and it's also sort of the masses basically gravitating towards what they think is going to happen. I mean, I think that's. If I had to guess what the Kyle Sri Pauli market fans say in response to what you're getting at, which is they actually sort of embrace the idea of insider trading. Right? They want people to be attuned to their, to their markets to get some sort of competitive advantage. They want people to be clicking to see if there's any minor spike. For instance, in this case, maybe people. More people trading on the possibility of Maduro being captured. And their argument is that, well, you just got to be faster. That doesn't alleviate the, you know, the obviously ethical problems of insider trading, of course.
- [08:28]
C
Well, there's insider trading, which is unethical. Right. Then there's INS trading within the government, which not only corrupts the market, but corrupts government decision making itself. And I'm not aware of anyone who defends that.
- [08:39]
B
No, there's no one that defends that. All right, so what's the future of the legislation before we let you go? How real is this to get an actual hearing?
- [08:45]
C
Yeah, so there's no telling where the Republicans are gonna stand. But we're in the process of finalizing the legislation, identifying a Senate sponsor, so we're still at the embryonic stages of the legislative process.
- [08:58]
B
It's not yet on polymarket, a bet on whether this bill will pass, but I will be looking for it. I'm not going to tell you how I would bet on that, but we'll be watching to see how the prediction markets treat your legislation. All right, Congressman, thank you so much for joining us. I really appreciate it.
- [09:12]
C
Always a pleasure. Take care.