Loads of Vultures: Funds, Agents, Bets

Summary

Money Stuff: The Podcast

Episode: Loads of Vultures: Funds, Agents, Bets

Hosts: Matt Levine & Katie Greifeld

Date: October 3, 2025

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Overview

This episode explores major shifts shaping Wall Street’s hedge fund landscape, focusing on the decline of mid-sized multi-strategy funds, the rise of “agents” for hedge fund talent, and the wild west of prediction markets (especially sports betting) in the US. Matt and Katie use wit and technical insight to discuss industry consolidation, economic realities for fund managers, and legal gray zones in new financial products.

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Key Discussion Points

1. The Demise of Eisler Multi-Strategy Hedge Fund

[03:30–11:15]

• Background: Edward Eisler’s multi-strategy hedge fund is winding down. Not part of the “big four” (e.g., Millennium, Citadel), the fund struggled with costs and unremarkable returns amid heightened market efficiency and fierce competition.
• Industry Evolution:
  • "It used to be that if you wanted to start a hedge fund, you started a hedge fund...Now, increasingly the hedge fund business is dominated by these big multi-strategy funds like Millennium and Citadel." — Matt Levine [04:12]
  • Mid-sized funds are squeezed out as top talent and capital consolidate at the major players.
  • Eisler pivoted from single-manager to multi-strategy in 2021, only to face the harsh realities of competition and economics at scale.
• Why the Pivot Failed:
  • "One of my readers emailed to be like, his mistake was pivoting to being a multi-strategy fund." — Matt Levine [05:32]
  • To compete as a multi-strat, you must reach a massive scale, otherwise you'll lose talent and clients to bigger firms.
  • There remains a niche for specialized single-manager funds, but multi-strategy survivors must be enormous.
• Talent Retention & Costs:
  • High “pass through” fees and expenses at Eisler prompted investor and internal anxiety.
  • "The pass-through fees are traditionally a hallmark of modern pod shops...paying performance fees to the individual portfolio managers regardless of the performance of the overall fund." — Matt Levine [07:32]
  • Reports suggest Eisler had “far too many junior people who didn't know how to take risk” as more seasoned talent departed. [09:03]

Notable Quotes:

• “The big funds are pretty good at identifying talent ... and so they end up with a lot of the good portfolio managers. If you're a good portfolio manager, your name's not on the door. You're kind of doing it for the money.” — Matt Levine [09:48]
• “Apparently some insiders noted Eisler's more mediocre portfolio managers will now simply fan out across the industry and dilute returns elsewhere. That's just so brutal.” — Katie Greifeld [10:40]

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2. The Era of Hedge Fund “Agents” vs. Recruiters

[14:05–21:43]

• Context: Discussion centers on Ryan Walsh, profiled as the “first” talent agent for hedge fund managers, as described in a Wall Street Journal story.
• Recruiter vs. Agent:
  • Recruiters are traditionally paid by firms, not portfolio managers. Agents, by contrast, represent the talent (the portfolio manager) and take a cut of the deal — structurally more aligned with agents in sports or entertainment.
  • "A traditional headhunter is probably more aligned with the employer, whereas an agent is more aligned with the employee." — Matt Levine [15:02]
  • The distinction is “nuanced,” and both ultimately broker deals motivated by commission.
• Why Agents Now?
  • Top hedge fund PMs, despite business savvy, may lack market transparency or the time to negotiate lucrative terms.
  • "If there's an agent who collates all of that information, he's going to provide value to you." — Matt Levine [17:17]
  • They joke that AI researchers, paid even more and often less worldly, truly need agents.
• Business Model Viability:
  • The agent business is booming as long as multi-manager funds dominate. If the model shifts, agency demand could evaporate.
  • Ryan Walsh, in one year, helped 12 clients land deals worth $180 million. [21:28]
  • "The pitch of 'I will take a single-digit percent when the number is very large' is actually pretty appealing." — Matt Levine [21:11]

Notable Quotes:

• “It's funny to have an agent for a hedge fund manager who... probably does have a pretty good sense of the market for portfolio managers... unlike a quarterback, who's not a business person.” — Matt Levine [16:07]
• “I think there's a range of people...a lot of people who have killer instinct as electronic traders, but don't want to negotiate with their boss for more money.“ — Matt Levine [17:43]

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3. Prediction Markets and the Blurring of Sports Betting

[24:43–36:40]

• Kalshi’s Innovation: Kalshi now offers “same game parlays” — combinations of bets on a single sporting event — traditionally the domain of sportsbooks, not prediction markets.
• Regulatory Gray Area:
  • Kalshi bills itself as “the only legal sports gambling in all 50 states” but insists it’s a “prediction market,” not a sportsbook.
  • The distinction: prediction markets match buyers and sellers (peer-to-peer), while sportsbooks set odds and bet against customers directly.
  • "A sports book is on the other side of the bet from you. And a prediction market is just a platform where people can bet against each other." — Matt Levine [28:58]
  • Matt argues in practice, real-world differences are shrinking, especially with approaches like market-making in parlays.
  • "No individual retail gambler is like, I want to predict that one of these six things will not come true...Real retail gambling bet. The person on the other side of the parlay has to be a market maker." — Matt Levine [31:17]
• Market Impact: The move prompted publicly traded sportsbooks’ share prices to drop, even though Kalshi remains small.
• Legal Risk:
  • If Kalshi prevails in court, it could leapfrog DraftKings and FanDuel by being legally available everywhere and enjoy more favorable tax treatment.
  • "I think they're very strongly betting on in Trump's CFTC [Commodity Futures Trading Commission], they can do whatever they want and no one will stop them." — Matt Levine [35:03]
  • DraftKings’ CEO cited Kalshi’s legal troubles as a reason to avoid prediction markets—for now.
  • Matt speculates the next innovation: football ETF-style products. [36:31]

Notable Quotes:

• "Robinhood is like we're democratizing access to an emerging asset class... The emerging asset class here is same game parlays, which is just like a product for gamblers." — Matt Levine [25:54]
• "In either case, you're kind of facing ultimately some algorithmic price setter, some professional who sets the prices and tries to... set the prices so that... the market is just like any other market maker.” — Matt Levine [33:13]

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Memorable Moments

• Birds & Vultures Metaphor: Opening banter about Matt's dead backyard possum and local vultures morphs into an extended riff on vultures (as scavengers) as a metaphor for hedge fund “talent sieves” and the industry at large. [02:00–02:43]
• Creative Agent Pitch: Katie and Matt riff about whether they'd want agents, with side jokes about AI researchers needing the most help. [17:52–18:34]
• Kalshi’s Legality Circus: Katie asks if, under truth serum, prediction market founders truly believe there’s a meaningful difference from gambling. "Okay, 1. No. 2." — Matt Levine’s deadpan. [28:51]

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Important Timestamps

• 03:30: Intro to Eisler fund’s closure, hedge fund industry consolidation.
• 09:03: Talent drain, insider perspective on Eisler’s decline.
• 14:13: Wall Street's first hedge fund agent – the recruiter/agent debate.
• 17:57: Matt’s take: AI researchers need agents even more than hedge funders.
• 21:28: Agent business by the numbers — $180M in deals in one year.
• 24:43: Explaining Kalshi’s prediction market, sports betting gray area.
• 31:17: Technical explanation of same game parlays and market makers.
• 35:03: Regulatory bets and future landscape for prediction markets and sports betting.

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Conclusion

The episode is a wry, deeply informed exploration of how Wall Street’s current structure shapes talent, compensation, and innovation—with multi-strategy hedge funds swallowing the market, agents emerging to help talent navigate the new reality, and legal uncertainty fueling the evolution of betting and prediction markets. The world of finance, as Matt and Katie see it, is as much about vultures and bets as it is about big strategies and bigger players.

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Transcript

[Kelly Cavagnaro]

Hi, I'm Kelly Cavagnaro, Managing Director, Head of North America Institutional Distribution at Janice Henderson Investors we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your mission and our vision working in harmony to seek the right investment opportunities. Janice Henderson Investors Investing in a Brighter future Together the Chase Inc. Business Premier.

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[Matt Levine]

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Bloomberg Audio Studios Podcasts Radio News I have another piece.

[Matt Levine]

Of information that can't be used on the podcast.

[Katie Greifeld]

We'll say it in front of the microphone.

[Matt Levine]

There's a dead possum in my backyard and I'm trying to pretend that I haven't noticed it so that I don't have to.

[Katie Greifeld]

Matt, that gets worse by the hour.

[Matt Levine]

I know.

[Katie Greifeld]

The thing is, wait, we can't put this in the pod.

[Matt Levine]

Well, because then my wife would hear it.

[Katie Greifeld]

Does she listen?

[Matt Levine]

Sometimes.

[Katie Greifeld]

That's cute.

[Matt Levine]

So one day I noticed a dead squirrel in my yard and I was like and then I forgot about it. And then I came back the next day and it was gone. There's a fair number of birds of prey in my vicinity and I was like, hu. Ah. Good job, birds of prey.

[Katie Greifeld]

So you're just hoping one of them gets the job done.

[Matt Levine]

But this possum is now past his expiration date.

[Katie Greifeld]

By birds of prey, you most only mean vultures because I don't think like a hawk would eat.

[Matt Levine]

Okay, there's loads of vultures in my neighborhood. Right?

[Katie Greifeld]

Ew.

[Matt Levine]

But no, we see bald eagles a fair amount. And the bald eagle, famously a scavenger.

[Katie Greifeld]

You know, I feel like I did know that actually But I had to.

[Matt Levine]

It's like Ben Franklin's whole thing, like he wanted the national bird of America to be the turkey, because the turkey is a noble bird and the bald eagle is a scavenger.

[Katie Greifeld]

It kind of reminds me of when my cat vomits in my apartment and I pretend not to notice it until my husband does, and then he cleans it up.

[Matt Levine]

Hello and welcome to the Money Stuff podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.

[Katie Greifeld]

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

[Matt Levine]

Speaking of dead things.

[Katie Greifeld]

The death of a Multi strat.

[Matt Levine]

Yeah, so yeah, there's a big story this week about Edward Eisler's multi strategy hedge fund, which is called something like Eisler Multi Strategy Hedge Fund. Something along those lines is winding down because it's hard out there for a multi strategy hedge fund that is not one of the big four multi strategy hedge funds.

[Katie Greifeld]

Yeah, this was a great scoop from Bloomberg. I did enjoy also the postmortem written by Sarah Butcher over at E. Financial Careers, which spoke to a bunch of people who had worked there or were familiar with it. And I don't know, you add the two articles together, it seems like a lot of this just comes down to costs. Also, returns weren't great.

[Matt Levine]

Yeah, the hedge fund market has gotten so much more efficient in my time. It used to be that if you wanted to start a hedge fund, you started a hedge fund and you got capital based on your track record, but also your ability to appeal to LPs and what was in style and what institutional investors were looking for. And now increasingly the hedge fund business is dominated by these big multi strategy funds like Millennium and Citadel and 0.72. And if you are a person who wants to run money, you probably end up going to work for those guys rather than going off on your own. And to run money for those guys, you don't have to be good with LPs, you don't have to be necessarily in style. You're just doing a job at a big firm. And so as the market gets more efficient, like the people who are good at those firms get handed huge piles of capital to trade and it's just harder and harder work outside of those institutions. And in particular, it seems really hard to run a multi strategy fund.

[Katie Greifeld]

Yeah, I feel like just the story of Eisler in general is a sign of the times in two different ways because it didn't Start as a multi strategy. It started as just a single manager fund, then it pivoted to become a multi strat in 2021, and now it's winding down because it's not Millennium or Citadel. To oversimplify it.

[Matt Levine]

Right. One of my readers emailed to be like, his mistake was pivoting to being a multi strategy fund. Like, when you're a single manager fund, you have his own skill, which is what allowed him to launch a hedge fund. And you have much more ability to evaluate the people you're hiring because you're kind of hiring them to assist you in making calls that you have a good understanding of, rather than hiring them to stand up an entirely new business under your umbrella. My headline about this was something like hedge funds have to be big. That's not really true. Right. There's still a market niche for people running single manager specialized hedge funds, but it's probably true that multi strategy hedge funds have to be big. So if you're going to pivot from being a single manager fund to being a platform for a lot of portfolio managers, you have to be a big platform because otherwise they'll go to somewhere that can give them more capital and more money. I don't know why he pivoted. And clearly there is some pressure to pivot. Even if you run a single manager fund that has a good track record and is really the good at its specialty, you're still going to feel kind of like squeezed by the big multi strategy funds that have more resources and are like an easier check for big allocators to write. It's like harder to compete with them. And so you might think, well, the best way to compete with them is to be a multi manager fund myself. But that's the big bet. You have to become a giant multi strategy fund to really compete.

[Katie Greifeld]

Instead of getting even better at your thing, you spread out across all the things.

[Matt Levine]

Plus, by the way, all the people who run the big multi strategy funds did kind of start as hedge fund managers and then they became managers of hedge fund managers. There is a path. It's not clear how many people can follow it anymore.

[Katie Greifeld]

Yeah, I don't know if I would pivot my hedge funds that I run to become a multi manager fund in this day and age. I do want to talk about fees because that's a recurring theme here, is that the pass through expenses at Eisler were really high and they were trying to bring them down. And are pass through fees unique to the multi strategy dynamic?

[Matt Levine]

Yeah, the modern multi strategy funds are Somewhere between a hedge fund and a fund of funds, they're kind of like their business is to hire portfolio managers, allocate capital to them, and sort of pay them like hedge fund managers and then collect fees from the ultimate investors. And so, yeah, the pass through fees are traditionally a hallmark of modern pod shops because like what a pass through fee is, I mean, it's like paying for rent and Bloomberg terminals and stuff. But really what it is is paying performance fees to the individual portfolio managers regardless of the performance of the overall fund. Right. So like when you're hiring portfolio managers, you can pay them incentive compensation on their own performance. And I think in the current market, you pay them accelerated performance compensation on their own performance, so you pay them a bigger chunk. If the going rate is they get 20% of their profits, you might pay them 30% for their first year so that they have an incentive to join you. Because it's a really hot market for hedge fund talent. And if you're doing that and you run a big fund, you have some economies of scale and you have some offsetting. Like you have the ability to like aggregate a lot of good portfolio managers into something with like high and uncorrelated returns, but you have a big expense base. And if you are a smaller fund, it is harder to spread that expense base over a lot of winning bets.

[Katie Greifeld]

Well, you think about some of the figures that Nishant Kumar wrote about. So the Firm charged clients $244 million in pass through fees in 2023. It was about 200 million in 2022. They had a restructuring earlier this year and were trying to bring their pass through fees down to 2022 levels. But then you pair that with the Sarah Butcher article and there are some snarky quotes from people who used to work there about how a lot of their real risk takers had left like their hotshots. And they just had. This is a direct quote. They had far too many junior people who didn't know how to take risk. So it seems like their costs are really high for at least what's being described in this article as subpar talent.

[Matt Levine]

Well, this is just the efficiency of the market. This is what Cappy Paglioligo said to us on the podcast, that the funds that he works at are sieves for talent. Right. Like you have, the big funds are pretty good at identifying talent, pretty good at firing people who they don't think are talented. And so they end up with a lot of the good portfolio managers. And if you're a good portfolio manager at a multi strategy fund. Your name's not on the door. You're kind of doing it for the money, right? Like if someone is like, we'll allocate you more money and give you more of your performance as a fee, then you know, you end up at the bigger places that can allocate you more money. And if the bigger places are really good at identifying talent, that's how the talent sieve works. And that makes it really hard for someone who runs a smaller place to keep the best talent.

[Katie Greifeld]

There was something in the article about how a lot of the meeting rooms after this letter went out were filled with people calling headhunters, etc. Apparently some insiders noted that Eisler's more mediocre portfolio managers will now simply fan out across the industry and dilute returns elsewhere. That's just so brutal.

[Matt Levine]

I don't know why that would be true. I mean, well, I don't know.

[Katie Greifeld]

You think they're going to leave altogether?

[Matt Levine]

I wish the best to all mediocre portfolio managers, but it's the talents of right?

[Katie Greifeld]

Yeah.

[Matt Levine]

No one's like, ooh, let's scoop up the mediocre portfolio managers, right? They're trying to find the people who have good returns.

[Kelly Cavagnaro]

Hi, I'm Kelly Cavanaro, Managing Director, Head of North America Institutional Distribution at Janice Henderson Investors. We believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your mission and our vision working in harmony to seek the right investment opportunities. Janice Henderson Investors Investing in a Brighter.

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[Katie Greifeld]

A lot of these Eisler employees were calling headhunters at the start of the week. They could have been calling actually their new agent.

[Matt Levine]

Okay, so there's this Wall Street Journal story about this guy Ryan Walsh, who is, I think has styled himself as the first talent agent for hedge fund managers or portfolio managers.

[Katie Greifeld]

I've certainly never heard of one before.

[Matt Levine]

Haven't you though? Because you've heard of recruiters.

[Katie Greifeld]

I've heard of recruiters. I've heard of recruiters.

[Matt Levine]

Are they different?

[Katie Greifeld]

They're a little bit different in terms of who's paying.

[Matt Levine]

Yeah.

[Katie Greifeld]

Okay, I said it.

[Matt Levine]

Yeah. All right.

[Katie Greifeld]

Do you think they're not different?

[Matt Levine]

Do you think they're different?

[Katie Greifeld]

I think they're a little bit different.

[Matt Levine]

Yeah, they're a little bit different. You could call a headhunter the head hunter. Will one, try to find you a job at a hedge fund, and two, try to get you the best possible compensation package because probably they get a cut of it, you know.

[Katie Greifeld]

True. Now, but that cut isn't coming from your paycheck.

[Matt Levine]

No. Right. It's coming from the hedge fund, which is so. So. Right. A traditional headhunter is probably more aligned with the employer, whereas an agent is more aligned with the employee.

[Katie Greifeld]

They should be.

[Matt Levine]

They should be. But both of them are mostly interested in brokering a deal rather than we're.

[Katie Greifeld]

All trying to eat, you know.

[Matt Levine]

Yeah. So I don't know. My point is that like a hedge fund agent is not so different from a hedge fund recruiter, but it's a little different.

[Katie Greifeld]

There's nuance.

[Matt Levine]

There's nuance. And this guy is apparently the first hedge fund agent, but possibly the first one to have a work of art featuring Ari Gold, the agent from Entourage on his walls. Yeah, you know, you, like, watch, like, you know, some number of people are, like, watching entourage. Like, ooh, I could be an agent for hedge funds. I don't understand. But. So this is what I think about hedge fund agents. Like, you think about, like, agents, classically, it's like sports actors, television anchors, for sure. Things of this nature. It's like, traditionally, people whose day job is not financial negotiation and possibly somewhat unworldly, you think about a quarterback is not a business person. They're throwing a football. They're not thinking about business all day. It's funny to have an agent for a hedge fund manager who. I would think that if you're a portfolio manager at a hedge fund, you actually do have a pretty good sense of the market for portfolio managers at hedge funds in a way that.

[Katie Greifeld]

That's true.

[Matt Levine]

A novelist might not.

[Katie Greifeld]

That's true.

[Matt Levine]

Sort of like as a matter of temperament and personality, you'd pay attention to those things and you'd, like, be able to discuss the value of getting a higher percentage of your profits versus an upfront. You know, like, you'd think about related topics all day and you'd be keenly interested in this. So you'd probably have less need for an agent. But as the guy points out, like, you do have a demanding day job, and so you probably aren't closely tracking the market for portfolio managers. And, like, the market is not super transparent. So, like, you're relying on rumor and anecdote to know what people are getting paid elsewhere. And so if there's an agent who collates all of that information, he's going to provide value to you.

[Katie Greifeld]

Also, the idea of someone negotiating on your behalf and like, someone.

[Matt Levine]

Again, yes, I agree. I would want someone to negotiate on my behalf. It's possible that a lot of hedge fund portfolio managers are happy to negotiate. I don't know, maybe like a distressed guy. You're like, yeah, I'll. I'll. I'll curse at my boss.

[Katie Greifeld]

Maybe you just want to sit in front of your Bloomberg terminal or whatever and think your big thoughts.

[Matt Levine]

No, I agree. I think there's a range of people, and there are certainly a lot of people who have killer instinct as, like, electronic traders, but don't want to negotiate with their boss for more money.

[Katie Greifeld]

Yeah.

[Matt Levine]

And so they can hire an agent. Reading this article, I also thought about, like, you know who really should have agents?

[Katie Greifeld]

Tell me?

[Matt Levine]

AI researchers. AI researchers check all the boxes. First of all, they get paid, like, an order of magnitude more than hedge fund portfolio managers, which is crazy. Second, they are stereotypically kind of unworldly and they've done articles about, oh, these 23 year old AI researchers are consulting with their friends to see whether they should take a $250 million offer from Mark Zuckerberg. They should have an agent. I should be it. I mean, I shouldn't be because I mean you're terrible at all aspects of that job.

[Katie Greifeld]

Yeah. But you'd probably be slightly better than that 23 year old.

[Matt Levine]

That's true. That's right. Because like ultimately the job is to like appeal to Mark Zuckerberg.

[Katie Greifeld]

That's true.

[Matt Levine]

Maybe he likes the 23 year old.

[Katie Greifeld]

That's true.

[Matt Levine]

More than he'd like an agent.

[Katie Greifeld]

It's not even like cold calling. Your only call is to Mark Zuckerberg and trying to.

[Matt Levine]

Right. It's a degenerate market. It's not like, oh, this is what all the rates are. It's like, nope, this is Mark.

[Katie Greifeld]

It is funny that the Wall Street Journal article mentioned that their business is dependent on the scale and proliferation of multi manager hedge funds and could dry up if funds suffer a run of poor performance or redemptions. And of course we're talking about the death spiral of Eisler. And it's almost similar to the AI researcher. You know, you're calling up Mark Zuckerberg or you're calling up is he Englander or Ken Griffin? It's a slightly bigger pool, obviously.

[Matt Levine]

It's an interesting question. This world that we live in of these multi strategy pod shops paying a lot of money and sort of dominating the hedge fund space is a relatively new world. And. Right. It's possible that it's a blip and all of this will dry up and something new will replace it. But it does kind of feel like this is the correct organizing model for the hedge fund world where you have like these big institutions that can allocate a lot of capital to investors and measure their skill really carefully and maximize the fees they can charge their limited partners. It feels like it's a sort of correct and efficient organization of the hedge fund industry. And in that correct and efficient world, like agents will thrive. Right. If like all these multi manager funds blew up and we went back to a world of like single manager funds with the manager's name on the door, then you wouldn't need an agent. Right. Like you'd be a different thing. Like you'd be. These hedge fund managers would need capital introduction, they'd need to meet with LPs, but they wouldn't need to get Hired by big firms. But I think the world we live in now where the big firms hire the portfolio manager feels kind of robust. It's not just an accident that it's organized that way.

[Katie Greifeld]

Yeah, no, it feels like it's a ripe space for agents to be in. And I'm kind of surprised that this is the first.

[Matt Levine]

There have been recruiters.

[Katie Greifeld]

Yeah, that's true. Well, it's cool that he struck out on his own and styled himself as an agent versus just another headhunter.

[Matt Levine]

Yeah, I mean, you see the appeal of a headhunter, which is the headhunter cold calls you at your current job. It's like, I'd like to get you a new job where you'd get more money and I will take 0% of it. And this guy calls you and like, I'll take a single digit percent of it.

[Katie Greifeld]

Yeah, well, apparently he's doing well.

[Matt Levine]

Yeah, well, the pitch of I will take a single digit percent when the number is very large is actually pretty appealing. Right. It's like, I'll negotiate on your behalf. I'll work for you, not for the hedge fund. Like, I don't know. That's an appealing pitch if the numbers are large enough.

[Katie Greifeld]

Yeah. Also single digit. Not bad.

[Matt Levine]

Yeah.

[Katie Greifeld]

So he founded this shop, according to LinkedIn and this article, a year ago, October 2024, he's helped 12 clients land jobs in deals worth a combined $180 million since launching.

[Matt Levine]

So it's so not the top of the top end where like individual deals are 50 or 100 million do million dollars, but they're pretty good. Pretty good. It's like a 15 million average.

[Katie Greifeld]

And maybe those people will, you know, their next jobs will be bigger. Yeah, yeah. Good on you. Ryan Walsh.

[Kelly Cavagnaro]

Hi, I'm Kelly Cavagnaro, Managing director, head of North America Institutional Distribution at Janice Henderson Investors. We believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy. Your valued assets and our valuable insights. Your mission and our vision working in harmony to seek the right investment opportunities. Janice Henderson investors investing in a brighter future together.

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[Katie Greifeld]

I love football and so do folks on the prediction market. That is Kelsey.

[Matt Levine]

I do love that Kalshi which is simultaneously a sports book and not a sports book.

[Katie Greifeld]

They advertise like you need to throw in a wink there.

[Matt Levine]

Simultaneously a sports book and not a sports book. Yeah, they like advertise on Instagram like you know, the only legal sports gambling in all 50 states.

[Katie Greifeld]

Careful.

[Matt Levine]

And then they're like we don't do gambling. This has nothing to do with gambling. Yeah, the other thing that makes them unlike a sportsbook is that they don't license like the NFL's trademarks. So like you can bet on the super bowl but it's called the Pro Football Championship.

[Katie Greifeld]

The Big Game you gave. You can't call it the Big Game.

[Matt Levine]

The Big Game is controversial. I think at some point the NFL tried to trademark the Big Game.

[Katie Greifeld]

It's awesome.

[Matt Levine]

Yeah, it's great. In any case, Kalshi will allow you to bet on the pro football competitions and the latest news in Kalshi is that they are now offering same game parlays. We talked about this on the Melvag episode. Prediction markets come out of this high minded idea of we're going to have these prediction markets that produce Information about geopolitically important events. Right. We're going to allow people to predict events and it's going to provide more information for the market and it's going to be great. And it's going to allow people to hedge the results of elections. Right?

[Katie Greifeld]

Yeah.

[Matt Levine]

And it turns out that the demand for that is like every four years you want to bet on a presidential election, but otherwise it's just not that hot.

[Katie Greifeld]

It's like the Olympics.

[Matt Levine]

Yeah.

[Katie Greifeld]

You care about track and field once every four years and then you move on.

[Matt Levine]

Unless you're Kitty Greifeld, but all dressage and track and field at your house.

[Katie Greifeld]

Yeah. Esoteric sports.

[Matt Levine]

But it turns out that when you have a prediction market, one thing people like to predict is sporting events. And those happen all the time. And people are really addicted gamblers who put a lot of money into predicting sporting events. And so if you can have your prediction market predict sporting events, then that's a big business. And everybody thought all of the time until this January that that would be crazy. And then obviously you couldn't have sports gambling in your prediction market, but now you can.

[Katie Greifeld]

Yeah.

[Matt Levine]

So now Kalshi does and we've talked about like the regulatory drama where like the states all try to stop them from doing this, but Kalshi has so far succeeded in telling the states to buzz off. But anyway, so now they're offering same game parlays, which everyone who talks about this sounds insane. Right. So like Robinhood is like we're democratizing access to an emerging asset class. Emerging asset classes like sports predictions. But it's like the emerging asset class here is same game parlays, which is just like a product for gamblers.

[Katie Greifeld]

Yeah.

[Matt Levine]

Like no socially beneficial information is created by people betting on like the joint odds of like a football team winning and hitting the over and like someone scoring a touchdown to self certify these contracts to like allow Kalshi to do this. They don't have to get approval from the cftc, but they have to like file a form with the CFTC being like we're doing this and with the forum they have to say what the purpose of it is, like what the hedging or price discovery purpose of it is. They don't have to publish that. So they've confidentially told the CFTC someone somewhere is hedging some economic risk by betting same game parlays in a football game. But seems like a pretty marginal use.

[Katie Greifeld]

There's certain people in the world that I want to sit down with and give them truth Serum and ask them specific questions. And one of those people is probably Vlad Tenev. And I want him under truth serum to tell me, what do you truly see in this prediction market that's different from just sports gambling or the founders of Calci? Those are questions that I would like to ask.

[Matt Levine]

We could have Kelsey people at any time. I know.

[Katie Greifeld]

But we can't give them truth serum.

[Matt Levine]

I think they'd be pretty honest about.

[Katie Greifeld]

It, but I want to know if they truly, truly believe that there is a real substantial difference between a prediction market where you can offer single game parlays versus just sports betting.

[Matt Levine]

Okay, 1. No. Yeah. 2.

[Katie Greifeld]

But I know that you think that.

[Matt Levine]

2. I think that what people have historically said about this is that there's a big difference between sports books and prediction markets. And that difference is that a sports book is on the other side of the bet from you. And a prediction market is just a platform where people can bet against each other.

[Katie Greifeld]

A faceless, emotionless.

[Matt Levine]

No, no, it's not faceless, emotionless. It's a peer to peer platform. It's a place where I want to predict that the Bills will win. You want to predict the Patriots will win? We bet against each other.

[Katie Greifeld]

Go Bills.

[Matt Levine]

Kelshi brings us together. They provide a platform for us to bet, but they're not the bookmaker. They're not setting the odds. They're not taking the other side of it. They're. They don't want you to lose. They don't care. They're just like intermediating between people on one side and people on the other side. They don't want anyone to lose. They're not trying to trick anyone. They're not trying to limit winning betters. They're just bringing people together. Whereas a sportsbook is betting against you. So they want you to lose. They want you to bet a lot of money and lose. And if you bet and win, they will limit you so that you can't win too much money from them because they're taking the other side of every bet. I've always found this distinction overstated because, like the way, for instance, Robinhood works when you trade stocks is nominally like you can buy or sell stocks. Robinhood is not on the other side of you. But like, practically your orders are going to a market maker. Right. Like modern markets have market makers who are taking the other side of you and they want, loosely speaking, to win.

[Katie Greifeld]

Right, Right.

[Matt Levine]

And in prediction markets, it's a mixed bag. Like, it is clearly the case that small dollar prediction markets on local elections. Jane street is not taking the other side of your bet on that. Right. They really are peer to peer. Right. Some people are more professional than others, some people have more capital than others. But ultimately their prediction market is just a platform for people to bet against each other with sports. It's not clear that's true. Right. Like, you have, like, some of the big market makers. Susquehanna has a big sports betting business now. The big market makers will, like, support sportsbooks or trade on sportsbooks. And like, it seems clear that some big market makers, you know, if there's a big enough demand to trade sports bets on prediction markets, they'll be on the other side of the sports bets.

[Katie Greifeld]

Right?

[Matt Levine]

So again, there's a market. You can take either side, but like a market maker will sit in between and try to take the winning side of the bat. Right? And this is especially true with parlays because, like, the way a parlay works is like, there's no natural person on the other side. Like, if I pick, like, here are the six things that I think will happen in this football game, and if I hit all of them correct, I win a lot of money. And if I miss even one, I get nothing. Like, no one, no person is taking the other side of that. No individual retail gambler is like, I want to predict that one of these six things will not come true. And if they all come true, I'll pay a lot of money. And if none of them come true, then I'll make a little money. Like, it's not a thing. Real retail gambling bet. The person on the other side of the parlay has to be a market maker. And it's like, not entirely clear exactly what the mechanics are, but like, it seems like the mechanics are like, there's a market maker with a pricing model. And like, if you pick a parlay, you can get it sent to the market maker who will fill it for you at like a, you know, price that the market maker sets. And so that's different from everything else on Kelsey, right? It's different from the story of, like, we're just a neutral platform where people could trade. This is clearly a story of like, you are trading with a market maker. It's not Kalshi. Kalshi isn't directly betting against you, but someone is directly betting against you who has partnered with Kalshi to provide this service, right?

[Katie Greifeld]

Yeah.

[Matt Levine]

Or maybe more than one somebody, right? Maybe a bunch of market makers who are providing the prices. But that's like, pretty different. And like, much, much, much, much, much closer. Not only in the product, but in like, the structure to traditional sports betting.

[Katie Greifeld]

So I see how obviously, from the perspective of Kalshee, that that is a really substantial and meaningful difference.

[Matt Levine]

But I'm saying they're getting rid of that difference by doing the parlays.

[Katie Greifeld]

Well, I was going to say, like, if I'm an investor or a better a trader on Kalshi versus a gambler on fanduel, like, is my experience any different? Probably not.

[Matt Levine]

Well, it's different in various ways. The news this week of Kelshi offering parlays, like, caused the big drop in the stocks of the traditional sports books. Yeah, they both went down like 10% like FanDuel and Flutter. But Kalshi is still like a teeny tiny fraction of the size of them because they offer more bets and a better user experience and everything. But that's converging. But is your experience different? Yeah, I mean, the buttons you push and the sort of layout of the thing is different. But I don't know how big a difference it is that they're a platform and other places are sportsbooks. Because I do think that in either case, you're kind of facing ultimately some algorithmic price setter, some professional who sets the prices and tries to, you know, tries to set the prices so that like, the market is just like any other market maker. Like, you want to have a relatively balanced book. Right. You don't want to be facing a huge risk of, you know, you don't be betting all on one side so that if you lose, you lose a lot of money. But, like, you take some risk. You're not looking for a perfectly balanced book. Right. You're like looking to have some bets where you think the odds are in your favor.

[Katie Greifeld]

Yeah. The fact that you did have those shares drop meant that sell side analysts had to react to the news. And there was an article by the Wall Street Journal quoting this benchmark analyst, Mike Hickey, who made the same point that this is small until it scales or becomes more robust. It doesn't appear competitive. And it seems like DraftKings and FanDuel still have an edge. He also mentioned that the strategy by Kalshi to make themselves look just like a sports book certainly comes with some risks, which is interesting. I mean, you made the point that there's all this legal drama, but then the calendar flipped and it was January of this year and now you're in Trump's America.

[Matt Levine]

Yeah, I don't think they think it comes with that much risk. There's risk. Their court cases are still on appeal, there's still some risk that it will turn out that they're subject to state gaming regulation. And then basically this kind of goes away. Yeah, like not entirely. It kind of goes away, but I think they're very strongly betting on in Trump's cftc, they can do whatever they want and no one will stop them.

[Katie Greifeld]

It's funny because DraftKings, the CEO, apparently has specifically cited Kalshi's legal troubles as part of the reason why that they've steered clear of prediction markets. But I think they should fight back. They should launch their own prediction markets and go for it. Or they should offer stock trading. Why not?

[Matt Levine]

Offering stock trading is actually a separate set of questions from whether prediction markets are gambling. I think if Kalshi ultimately ends up a really big competitor to FanDuel and DraftKings and the legal stuff is all resolved in favor of, you can offer whatever bets you want on a prediction market, then Kelsh has a huge advantage. They're legal in 50 states and it's not free from doubt. But they seem to get a better tax treatment and so there. Yeah. I think FanDuel and DraftKings flip into finding a prediction market. Right. I think it's hard, right, that you have to like register with the cftc, but it's like, yeah, there's a path to doing it.

[Katie Greifeld]

FanDuel did it and apparently sort of.

[Matt Levine]

They partnered with CME for like.

[Katie Greifeld]

Yeah.

[Matt Levine]

But yeah, I've written.

[Katie Greifeld]

Go on.

[Matt Levine]

And this will be of interest to you that within the next two years we're going to see a football bet etf.

[Katie Greifeld]

You're right.

[Matt Levine]

We can end it here.

[Katie Greifeld]

Yeah.

[Matt Levine]

And that was the Money Stuff Podcast. I'm Matt Levine.

[Katie Greifeld]

And I'm Katie Greifeld.

[Matt Levine]

You can find my work by subscribing to the Money stuff newsletter on bloomberg.com.

[Katie Greifeld]

And you can find me on Bloomberg TV every day on the close between 3 and 5pm Eastern.

[Matt Levine]

We'd love to hear from you. You can send an email to moneypodlumberg.net Ask us a question and we might answer it on the air.

[Katie Greifeld]

You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show.

[Matt Levine]

The Money Stuff podcast is produced by Anna Mazarakis and Moses Ondahm. And special thanks this week to Kel Brooks.

[Katie Greifeld]

Our theme music was composed by Blake.

[Matt Levine]

Maples, Amy Keen is our executive producer.

[Katie Greifeld]

And Sage Bauman is Bloomberg's head of podcast.

[Matt Levine]

Thanks for listening to the Money Stuff Podcast. We'll be back next week with more stuff.

[Katie Greifeld]

There are two kinds of people in the world. People who think about climate change and people who are doing something about it. On the Zero podcast, we talk to both kinds of people. People you've heard of, like Bill Gates.

[Matt Levine]

I'm looking at what the world has do to to do to get to zero, not using climate as a moral.

[Katie Greifeld]

Crusade, and the creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Ratty. Listen to Zero every Thursday from Bloomberg Podcasts on Apple, Spotify or anywhere else you get your podcasts.