Joe Kernan (1:48)

And it is super bowl weekend. Americans are expecting expected to move well over a billion and a half dollars for bets, wagers and trades relating to the big game. Author Jonathan Cohen says sports books and prediction markets can be a slippery slope for society, especially for young men.

Jonathan Cohen (2:09)

What I think we should do is make it all but impossible for someone who's gambling like me, 10 $12 here and there, for that to be the start of a dangerous journey, for that to be a gateway drug into a more serious gambling problem.

Joe Kernan (2:21)

Those stories plus Amazon's shadow of honor and more fallout from the Epstein files. It's Thursday, February 5th, 2026, and Squawkpod begins right now.

Senator Bernie Moreno (2:35)

Stand Becky.

Contessa Brewer (2:36)

Bye.

Andrew Ross Sorkin (2:36)

In three, two, one.

Senator Bernie Moreno (2:38)

Cue it, please.

Becky Quick (2:41)

Good morning, everybody. Welcome to Squawkbox right here on cnbc. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. And this morning we are looking at a mixed picture for the US equities. Dow futures are off by about 86 points. But the Dow was actually higher yesterday. It is less than half a percent from its all time high. If you're watching what's happening with the s and P500, it's flat right now. Yesterday the Dow was down for five out of six sessions. But it was the Nasdaq that really bore the brunt of things yesterday. It is, it was down significantly. In fact, the NASDAQ 100 is now almost 5% from an all time high. Nasdaq is indicated a little higher this morning. You can see here though, off by about 1%, 1 1/2 percent yesterday for the week today down by 2.4%. And we haven't seen volatility like this since President Trump was unveiling his tariff plans last April.

Contessa Brewer (3:35)

Two straight declines of 1%. Back to back. It's been since April. But then I looked at a one year like that looks like, oh, and then I looked at a one year chart of the Nasdaq and it's, it's.

Andrew Ross Sorkin (3:46)

Been unbelievable like that, you know.

Contessa Brewer (3:48)

And then at the very end you just see this teeny tiny drop.

Becky Quick (3:52)

There are already people who are talking about is this the time for value stocks versus growth stocks? Again, if you look at value stocks versus growth stocks all the way back to 2008, it's a set of lines that have not crossed since that point. But there are people who are looking at this and saying, well, maybe this is a time don't want to get premature kind of spread speculation about some of these things. But it has been a few days and some concerns here about technology and about software companies in particular.

Contessa Brewer (4:18)

It's like anything that just went stratospheric, which includes you're going to get to Bitcoin in a second. I mean AI tech and crypto people go in other places.

Jonathan Cohen (4:31)

I don't know.

Contessa Brewer (4:32)

Does everyone decide at once? I don't know. They all using the same AI program.

Becky Quick (4:36)

To tell them what to trade.

Andrew Ross Sorkin (4:41)

Meantime, shares of Google parent Alphabet Trading lower the company beating profit and revenue expectations. But investors are focusing on spending plans. Tech giant says capital expenditures will range from $175 billion to $185 billion. That's just this year. Top end of that forecast would be more than double what was its 2025 capex, which people thought was remarkable unto itself. Joining us right now to break all this down is Ron Jose's Citi senior Internet analyst. Alphabet is one of his top picks across the Internet sector. And we'll start with whether it still is Ron.

Ron Josey (5:18)

It remains one of our top picks. And you're right, I think the big surprise out of the quarter, not last night was it wasn't a 17% acceleration growth in search, it wasn't the 48% growth in cloud and it wasn't the demand or at least called the backlog of cloud computing, but the guidance on CapEx which, you know, you said it right, sort of unfathomable a few years ago and here we are under $80 billion at the midpoint. But it remains our topic to your question specifically because of the results that they're seeing as a direct relation or result from their investments in AI and seeing how Gemini and also TPUs and the agent side of the platform are all delivering better overall results. You know, I think you should be investing in growth and I think you should be investing to gain as much possible share as you can.

Andrew Ross Sorkin (6:06)

I don't know if it's an inflection point in terms of just the psychology of the market. I don't know if there's a realization that the capex spending all of a sudden turns these technology companies which were by the way, capital light businesses.

Becky Quick (6:18)

Right, which is why they did so.

Andrew Ross Sorkin (6:20)

So long and all of a sudden they may turn into, I don't want to say utilities, but industrials in their own way given the amount of spending that's going to involve, given the data centers, given if the data centers are in space, even the amount of money you're going to spend to put to have all of that happen. So that is I think the question that sort of, you know, does the.

Becky Quick (6:40)

Growth potential circling right now, does the.

Contessa Brewer (6:42)

Growth better be good?

Becky Quick (6:43)

Right?

Contessa Brewer (6:44)

Better be good. Justify the gosh darn it, if it is really good, no one will ever have a job again. Let's just.

Andrew Ross Sorkin (6:50)

But that's the other piece of it. If it's that win, win, right? This is what I've always, this is what I've always said, even in success you could have failure because if it's so good, tell me about it. And then no one has the job, no one has any money to pay for it.

Contessa Brewer (7:03)

I know, I know. And the machines won't need us. So that's a.

Andrew Ross Sorkin (7:07)

Well, that's not even down the road. A little second derivative. Where we're trying to go with this is we were talking about how this quarter appears not just about Google but everybody. The first real inflection point where for some reason the psychology of the investment community is no longer necessarily rewarding smart spending. People aren't saying, oh my goodness, there's this great opportunity ahead. They say, oh, my goodness, maybe these, these, these capital light businesses are going to be like utilities.

Ron Josey (7:35)

It's amazing how quickly things have turned. You know, Google was the loser, so to speak, in 22, 23, 24, here we are. 25, they have a real product and now in 26, that product's going to start changing how we act and do and move online. And so how we use Internet, how we use websites, how we use apps are going to change completely. And Google is, is, is in the pilot seat right now.

Andrew Ross Sorkin (7:57)

All right, thanks so much. It's nice to see you.

Ron Josey (7:59)

Thanks, Andrew. Mike West.

Becky Quick (8:02)

OpenAI's models could help power Amazon's Alexa assistant and other internal projects at the company. A source tells CNBC that the collaboration between the two companies is being discussed in tandem with Amazon's ongoing talks to invest up to $50 billion in OpenAI. Separately on Amazon, the company announcing that CEO Andy Jassy will tap its Vice president of worldwide selling partner services as technical advisor next month. That role is often referred to inside Amazon as the CEO's shadow advisor. Employees in that role typically go on to assume greater responsibilities at the company. In the early 2000s, in fact, Andy Jassy served as Jeff Bezos shadow. Amazon is set to report fourth quarter earnings after the bell tonight.

Contessa Brewer (8:49)

You'd have to have a pretty good hope that you'd get to the top spot to agree to be called someone's shadow for a while. I would think it's kind of cool.

Becky Quick (8:57)

Everybody wants to be a shadow.

Contessa Brewer (8:59)

No, you don't. It sounds like somebody's shadow.

Becky Quick (9:02)

Want to be the shadow Fed chairman?

Contessa Brewer (9:04)

No, I don't want to be the shadow of Peter Pan. Peter Pan? I have a problem with that. It's a pretty good description coming up. You know, we don't. I don't ever want to grow up. I don't want to ever grow up. I can't.

Becky Quick (9:18)

I don't want to grow up.

Contessa Brewer (9:21)

Age doesn't do it. I was hoping it'd be like this, a Rubicon somewhere, but it never doesn't come with it.

Becky Quick (9:30)

President Trump offering some details on his decision to choose former Fed Governor Kevin Warsh to replace Jay Powell as Federal Reserve chair. Here's the president in an interview with NBC News.

Andrew Ross Sorkin (9:42)

Does your new Fed pick understand that you want him to lower interest rates?

Contessa Brewer (9:45)

I think he does, but I think he wants to anyway. I mean, if he came in and said, I want to raise him, we should.

Andrew Ross Sorkin (9:49)

If he said that, he wouldn't have gotten the job, he would not have gotten a job? No.

Becky Quick (9:53)

The President said he thinks the Fed is an independent body, in his words, in theory. But he suggested that the central bank should take his advice because he knows the economy better than most people, he said. He said he didn't have much doubt that interest rates would soon be lowered.

Andrew Ross Sorkin (10:09)

Meantime, Fed Governor Lisa Cook signaling that she won't back another interest rate cut until she sees progress on price pressures. Cook telling the Economic Club of Miami that she's more worried about inflation than a weakening labor market. She said, quote, we put a lot of easing into the pipeline at the end of last year. And I think that given where the labor market is, where inflation is, this is the right time to sit back and wait to see what happens. Cook voted with the majority in last week's 10 to 2 Fed decision to keep interest rates steady. And so one of Kevin Warsh's first moves will have to be to persuade her otherwise.

Contessa Brewer (10:46)

It's a hard job. The dual mandate is almost impossible, you know, to constantly.

Becky Quick (10:51)

That's why Alan Greenspan always said that he focused on inflation.

Contessa Brewer (10:53)

But if it's 45, 55 balance one way or the other, where the risks are and you're actually making policy basis, you don't have the resolution to do it effectively. It's like a crapshoot. It's hard, seat of the pants.

Becky Quick (11:09)

But Greenspan, as you know, his, his theory was if you took care of inflation, the rest take care of a lot.

Contessa Brewer (11:14)

I think Warsh is more like that.

Becky Quick (11:15)

Yeah, I think so, too.

Andrew Ross Sorkin (11:19)

The chairman of a major corporate law firm, Paul Weiss, resigning his post amid fallout over emails between him and notorious sex offender Jeffrey Epstein. The emails were among millions of Epstein related documents released last week by the Justice Department. Now, earlier this week, Paul Weiss said its chairman, Brad Karp, had attended two group dinners in New York and had what it called a small number of social interactions by email with Epstein, which the firm said Karp regretted. Now, in a statement, Karp said recent reporting has created a distraction and has placed a focus on me that is not in the best interest of the firm. He will, though, continue to work at Paul Weiss, though not in that chairman role. And here's the interesting part. This is like the takeover is now fully complete here. Scott Barchay, who had been the chair of the firm's corporate department, was appointed chairman. And the reason this is interesting is Scott Barchet had worked at Cravath for a very long time, was brought over on a lateral move. Effectively, I don't know. In the legal world, they Call it lateral. He's probably the biggest rainmaker at the firm, but he was the lawyer at the firm who really pushed for the settlement with the Trump administration at the very beginning of the administration's term. And. And Brad Karp ultimately did when it went along with it. And they were the first law firm to agree to this, which then led to all the other law firms to agree with it. There were lots. There was a number.

Becky Quick (12:44)

Karp's a big Democrat.

Andrew Ross Sorkin (12:45)

There were a number of. Of lawyers who left Paul Weiss because of that decision. And so it's. The whole thing is. It's fascinating just to see things sort of the drama playing out inside this firm. Paul Weiss, we don't talk about Paul Weiss so much because they're a private law firm that you can't buy or sell the stock. But they have a huge influence in terms of just the way corporate America even approaches the world in so many ways.

Contessa Brewer (13:13)

So that didn't hold him back from getting to where he is now, I guess, settling with Trump. When push comes to shove, this is probably a bigger deal.

Andrew Ross Sorkin (13:22)

Epstein, for Brad Karp, this is a bigger deal. Yes.

Contessa Brewer (13:28)

I like the way it was phrased, though. What was it? It was small number of social interactions by email. It's just crazy that in this day and age that there's millions of pages about anybody, A, and B, that you just put in a name.

Becky Quick (13:47)

It's all his emails.

Contessa Brewer (13:48)

That's what I mean. You guys showed me how to, you know, I was clueless over the weekend. I didn't check to see who was in.

Becky Quick (13:56)

Everybody else is like searching on the search engine.

Contessa Brewer (13:58)

Yeah, exactly.

Becky Quick (13:59)

Look for my name, look for my spouse's names, look for everybody. All my friends, and then look for everybody. I don't like.

Contessa Brewer (14:03)

I mean, I think I'd know if I met that sleazebag, but.

Becky Quick (14:08)

But it's. It's weird.

Contessa Brewer (14:09)

Like, no one knew who.

Becky Quick (14:10)

That picture where you just happened to be sticking.

Contessa Brewer (14:12)

I told you, I was at the Victoria's Secrets and he was standing on. It was 1995. And in the documentary on him, you can see me in the background. No one knew who he was in, but no one knew who he was. In 1995. I was the last.

Becky Quick (14:27)

But interesting.

Contessa Brewer (14:28)

I didn't know who he was.

Becky Quick (14:28)

In 2000, Victoria's Secret was Les Wexner. Les Wexner was Epstein's initial, if you want to call him Mark.

Contessa Brewer (14:35)

Thank God we all dodged that bullet because any of us could. For the grace of God. Could have been some, you know, in our business. And some. Some way.

Andrew Ross Sorkin (14:42)

Yeah, no, I happily never knew him.

Contessa Brewer (14:45)

Which I can't believe because you are Mr.

Andrew Ross Sorkin (14:48)

I didn't. I never knew the man.

Jonathan Cohen (14:49)

But.

Contessa Brewer (14:49)

But you were a little bit young when he was really in his. In. In his poem. I was like in the. That could have been. I could have met him at that Victoria's Secret thing. And hey, thank God.

Andrew Ross Sorkin (15:03)

Cheese will be next.

Joe Kernan (15:06)

Still to come on Squawk pod, Republican Banking Committee Senator Bernie Moreno. He's eager for a change at the Fed and he'll be pushing to confirm President Trump's pick for chair.

Senator Bernie Moreno (15:17)

Look, at the end of the day, Kevin Wash is highly qualified, highly respected. Everybody wants him in there. I hope that we can put all this political nonsense aside.

Joe Kernan (15:26)

We'll be right back.

Andrew Ross Sorkin (15:31)

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Stephanie Wong (16:00)

Ugh.

Joe Kernan (16:01)

Could this vintage store be any cuter? Right.

Becky Quick (16:04)

And the best part, they accept Discover.

Stephanie Wong (16:06)

Accept Discovery in a little place like this?

Becky Quick (16:09)

I don't think so, Jennifer. Oh, yeah, huh? Discover is accepted where I like to shop. Come on, baby, get with the times.

Stephanie Wong (16:16)

Right.

Becky Quick (16:17)

So we shouldn't get the parachute pants. These are making a comeback, I think.

Andrew Ross Sorkin (16:23)

Discover is accepted at 99% of places that take credit cards nationwide. Based on the February 2025 Nielsen report.

Jonathan Cohen (16:30)

This episode is brought to you by.

Andrew Ross Sorkin (16:32)

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Jonathan Cohen (16:41)

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Andrew Ross Sorkin (16:44)

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Joe Kernan (17:02)

Welcome back to Squawkpod, where we're talking Fed, GOP politics and more.

Contessa Brewer (17:07)

Here's Joe Kernan, Ohio Republican Senator Bernie Moreno. He serves on the Banking Committee. And we'll just. We can cut to the chase. Senator, it's good to see you. I'm from Cincinnati. I was happy for you, I'll tell you. Not a big fan of who your opponent was. I'm honest about a lot of things. I've gotten to an age where a lot of times, Senator, I just you know, take it for what it's worth, but congrats on the election. I don't think. Have you been on the show yet? Is this your first time?

Senator Bernie Moreno (17:35)

You haven't invited me, Joe, even though we have that Ohio.

Contessa Brewer (17:37)

I can't believe that. I can't believe that. Thanks for being here.

Ron Josey (17:40)

But.

Contessa Brewer (17:40)

But what I'm going to get to now is a little bit sticky. So it just looks like the President was mad about. About Tule Powell, as he calls him, not lowering rates. And then we get to this investigation. Do you think a lot of times where there's smoke, there's fire in this case, do you honestly believe that there were, there was some criminality that need to be looked into in terms of Chair Powell's testimony?

Senator Bernie Moreno (18:03)

Well, from my perspective, that's up to the Department of Justice. What I will tell you is he's absolutely guilty of being terrible at his job. He's absolutely guilty of being an egomaniac, and he's absolutely guilty of driving record inflation that crushed working Americans for four years. So that's unequivocal. This guy has run the Fed losing hundreds of billions of dollars a year. He's made the Fed very political, which shouldn't be the case. So he's just guilty of being inept in terms of. He's criminally guilty. That's not up to me. Right.

Contessa Brewer (18:33)

But Senator, we hear the President every day talk about how great the country is doing right now in terms of GDP and inflation is down and so are all these good things that are happening in spite of the Fed, or you don't give the Fed any credit for orchestrating any of the economics success we've had the last couple of years.

Senator Bernie Moreno (18:58)

Well, you said the last couple of years, so. Absolutely not. I mean, again, they drove inflation up. They were way too late on reacting to the fiscal stimulus that was out of control with the Democrats, were there. President Trump is the one that secured our border, has deported over 2 million people that came into this country illegally. He's driven GDP to record growth. In fact, on the campaign trail, if President Trump ever said we'd have 4 or 5% GDP growth, your show would mock him. But that's the reality. Record, record numbers. We did an incredible working families tax cut bill which prevented a $4 trillion tax increase. You know, my Democrat colleagues like to say that tariffs are taxes. You know, what's taxes? Taxes. And we prevented that tax increase. We gave relief to working Americans. They're going to start seeing it now in their paychecks. And 20, 26 will be a phenomenal year.

Contessa Brewer (19:45)

The good piece in actually the Journal Day, looking at tariffs there, you know, there are. People can argue both sides of the whole tariff issue, Senator, about whether it's a tax or not, but the people that hate the tariffs the most are the people that want higher taxes anyway. So I don't, I don't even really understand exactly. It's like you'd love to raise taxes. Now you're finally calling it a tax. But you don't like. But you don't like that either. Do you think Tillis will be able to stop Kevin Warsh from being confirmed in a normal time frame, or do you think there's some way around it, that it gets out of committee and you get to a full vote?

Senator Bernie Moreno (20:22)

Well, I don't think any one senator should impede an investigation one way or the other. I think if there's a concern, then the concern should be followed through. Chairman Scott, who's a good friend, a great chairman of the Banking Committee, the guy I got rid of was a terrible chairman of the Banking Committee, has said he doesn't think there was intent. That's certainly a factor in there. Look, at the end of the day, Kevin Wash is highly qualified, highly respected. Everybody wants him in there. I hope that we can put all this political nonsense aside and let's get Kevin Walsh confirmed. Because most importantly, it is a huge upgrade from what we have right now running the Fed, that's for sure.

Andrew Ross Sorkin (21:00)

Senators, are you recommending that the case continue. Are you recommending that the case end? That's what I'm trying to, to understand. Given that there are questions, I think there's fair questions to be asked just about why the case was brought to begin with.

Senator Bernie Moreno (21:18)

Well, my position, Eric, is pretty straightforward. As a United States Senator, I should not weigh in in criminal investigations one way or the other. What I will say, like I said, clear to me, he's guilty of being incompetent in terms of whether that was a crime. That's not up to the Senate to decide one way or the other.

Andrew Ross Sorkin (21:33)

Can I ask questions?

Senator Bernie Moreno (21:33)

And by the way, that has nothing to do with, with whether Kevin Walsh is qualified and should be immediately confirmed.

Andrew Ross Sorkin (21:38)

Nothing. I agree with that. Do you believe that the President, United States should weigh in on criminal investigations? This goes to the question about the independence of the Department of Justice, actually.

Senator Bernie Moreno (21:50)

Well, look, the President has opinions. Every President has opinions. Politicians have multiple opinions even at the same time in many cases. That has nothing to do with that.

Andrew Ross Sorkin (21:59)

You just said that as a senator, you should look, you shouldn't have an opinion. You just said on the air two seconds ago, you shouldn't have an opinion. And then I said to you, well, the President. And then I said, you should. The President. And you said, well, the President has opinions. So do you have an opinion on what's going on here? And if you said it's inappropriate for you to have an opinion, explain the difference between that and somebody else.

Senator Bernie Moreno (22:23)

Am I able to answer your question now?

Andrew Ross Sorkin (22:25)

Yeah.

Senator Bernie Moreno (22:26)

So what you asked me was whether I thought something should happen, meaning that I should direct an outcome. Of course I have an opinion. Look, he was asked a question about the renovations at the Fed, which are completely ridiculous. Whether he intended to lie or did not intend to lie. The truth is he did give us false information. Intent is something that happens in a criminal investigation. You know that better than I did. I'm a business guy. You should know that as a lawyer. That's not. That's not the question. We have opinions. The question isn't whether I have an opinion or not, is whether I should direct the Department of Justice to go one way or another in a criminal investigation. That's what's at heart. Look, at the end of the day, Jerome Powell is the worst Fed Chairman of my lifetime. Kevin Wash would do an amazing job. Let's get the guy confirmed. That's the bottom line.

Contessa Brewer (23:12)

I think of Andrew as a lawyer, too. His dad was a very good lawyer, a famous lawyer. I think that Sorkin, but. And a lot of times he sounds like a lawyer. I think sometimes, Senator, you know what I mean? And not necessarily in a really good. No, sometimes in a good way.

Andrew Ross Sorkin (23:27)

I just play one on tv, Senator. I just play one on tv.

Contessa Brewer (23:30)

We just play one on.

Senator Bernie Moreno (23:32)

I see the difference now.

Contessa Brewer (23:33)

And I knew I liked you as a senator. You're not a lawyer. You said you're so. That's good. What did Shakespeare say? No, we don't want to say that. Shakespeare. That was horrible. Senator, thank you for your time this morning. We appreciate it. And thank you. Where'd you grow up?

Senator Bernie Moreno (23:50)

I was born in South America, grew up in South Florida. Been to Ohio for 21 years. Love it. Great state. In fact, if anybody's watching, place to go. Leave New York, leave California, come to Ohio.

Contessa Brewer (24:00)

The balmy Ohio. Yeah, It's a lot warmer than Florida, I think, in Ohio. Anyway, Senator, thanks. We'll see you later.

Joe Kernan (24:09)

A shameless plug here. Senator Thom Tillis, the North Carolina Republican whose new. No longer running for reelection, has been very outspoken in his break with fellow Republicans like Senator Moreno that you just heard, particularly on the Department of Justice's case against Jay Powell. Tillis was actually on Squawk yesterday, and you can scroll to Wednesday's Squawk pod to catch that interview coming up next, ahead of the Super Bowl. Prediction markets are playing a growing role in betting on the big game. Our Contessa Brewer reports from San Francisco.

Stephanie Wong (24:46)

People are using the prediction markets for sports in place of FanDuel and DraftKings sportsbooks.

Joe Kernan (24:54)

Critics, though, warn that the ease of access could have significant consequences for the financial and mental health of young Americans. Author and expert Jonathan Cohen joins us after the break.

Jonathan Cohen (25:09)

Within a few months of the arrival of sports betting or within a few years, you see an increase in bankruptcies, an increase in auto loan delinquencies and reduced savings and investment in low income households.

Andrew Ross Sorkin (25:25)

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Becky Quick (25:54)

Thy ticket lady, Jennifer of Coolidge. Well, many thanks, good sir.

Joe Kernan (25:59)

Hereeth my Discover card.

Becky Quick (26:03)

They accept Discover at Renaissance fairs? Yeah, they do here.

Stephanie Wong (26:06)

Discover is accepted at the places I love to shop.

Becky Quick (26:09)

Get it with the times. With the times.

Joe Kernan (26:13)

You're playing the lute. Yeah. And it sounds pretty good, right?

Andrew Ross Sorkin (26:17)

Discover is accepted at 99% of places that take credit cards nationwide, based on the February 2025 Nielsen report.

Joe Kernan (26:24)

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Andrew Ross Sorkin (27:00)

You're watching Squack Box on CNBC. I'm Andrew Sorkin along with Joe Kernan and Becky Quick. We got a lot of big stories.

Contessa Brewer (27:05)

We're just a couple of days away from super bowl kickoff at Levi's Stadium in Santa Clara, California, a state where sports gambling is illegal. But the prediction markets. So that's what you're talking about are filling the void. Contessa Brewer joins us with more from NFL's media row in San Francisco. Hey Contessa.

Stephanie Wong (27:25)

Hi there Joe. Yeah, look. FanDuel and DraftKings official partners of the NFL, our front and center here at Radio Row. Even though gamblers can't place wagers on their sportsbook apps, but their prediction platforms are up and running. The sports betting giants entered this prediction fray in the fourth quarter of last year, unwilling just to sit on the sidelines as Kalshi, Polymarket, Robinhood and others entered sports the prediction markets and Kalshee made a big splash with its advertising before last year's super bowl. Of course, look at the action the week before super bowl last year and this year volumes up almost 1400 percent on Kalshee year on year according to data from Piper Sandler analyst Patrick Moley. What's the impact on licensed sportsbooks? Well, shares of DraftKings and FanDuel parent Flutter have just brought plummeted 40 to 50% over the past six months. Bet MGM CEO Adam Greenblatt said in his earnings update yesterday, quote, we're not seeing a material adverse impact that could specifically be attributed to prediction markets. Market research estimates a low to middle single digit percent impact on online sports betting handle though and that trading volume guys is attributed to states where sports betting is not legal like California. It's attributed to Sharps or these, you know, professional gamblers who have been limited by the sports books in how much they can gamble and they think that customers 18 to 20 years old have migrated to the prediction platforms. Las Vegas casino owner Derek Stevens told me that some of his biggest California customers have told him, look, we're choosing Cowshi over getting in the car, hopping on the plane and heading to Nevada for sports betting. I just reminder here that CNBC and Kalshee do have a business relationship. I did ask Kalshee to explain to me how much of their business is coming from states like California and Georgia and Texas and they just said right now they're not giving away that data.

Contessa Brewer (29:23)

Oh yeah, they, they were not forthcoming with that information. That is, that is interesting. I know that the you probably prefer to be in Las Vegas. Do you feel that you're close? Do you feel the pole Contessa?

Stephanie Wong (29:37)

You know, I think this is the first time I've covered Super bowl where I have not been in a sports book. So the fact that you know, this is a state that doesn't have sportsbooks, it's just not possible. I'm on radio row coming to you live from the super bowl for the first time. It is different. There's a. There's a different level of energy. But what I can tell you is that people are using the prediction markets for sports in place of FanDuel and DraftKings sportsbooks. And so let's see whether FanDuel and DraftKings can. Can they make up on their prediction platforms what they lose by not being up and running in California as a sports gambling site. And by the way, that the whole issue of sports, it's not settled. There are 40 state attorney generals who have filed some kind of legal action cell and desist letters or sued. Tribes are suing. And so I think this probably heads to the Supreme Court to make a decision on what sports gambling is.

Contessa Brewer (30:37)

Right. What are the prospects for California legalizing it? And it just seems like if there's any state that could use the tax revenue, it would be that state. They do the opposite of what they should be doing on every issue, and the guy's going to be, you know, the candidate in 2028. It's insane.

Stephanie Wong (30:58)

Well, look, a couple years ago, DraftKings and FanDuel and, and MGM, they all got together. They spent more money than on any ballot initiative in history to try to get sports gambling legalized in the states. And the. The biggest and most successful of the tribes argued against it. They did not want the commercial casinos coming in and peeling away some of the money that is spent on gambling in this state with the tribal casinos. My big question here is made the rise of prediction markets coax the tribes back to the table. Maybe we might see this again.

Contessa Brewer (31:35)

I just thought of whenever I've driven to the desert and there's huge structures there, the Indian casinos there, aren't they? I forgot. Yep. Going down to Palm Springs. All right. Thank you, Contessa. Have fun.

Stephanie Wong (31:50)

You're welcome.

Becky Quick (31:54)

The American gaming Association expects U.S. betters to legally wager more than $1.7 billion on the super bowl with sportsbooks. And that does not include the money that's flowing into prediction market sports contracts. Joining us now with what that all means and the impact on society is Jonathan Cohen. He is the author of Losing America's Reckless Bet on Sports Betting. He also leads the sports betting policy hub at the American Institute for Boys and Men. And John, let's talk about this. You say that we're at a point that you would call a public health crisis, where young men in particular are losing more money than they can afford. Lay out your argument.

Jonathan Cohen (32:35)

Yeah, I mean, the report from Common Sense Media just earlier this week shows that about a third of 11 through 17 year olds have gambled sometime in the year, including on sports. And we're seeing these aggregate effects at the state level where within a few months of the arrival of sports betting, or within a few years, you see an increase in bankruptcies, an increase in auto loan delinquencies, and reduced savings and investment in low income households. So to me, this is not about sort of individuals anymore and we need to help, you know, Timmy over there and Bobby over there. But this is sort of rising to the level of public health where it could be addressed at a systemic level.

Becky Quick (33:08)

You think fantasy sports is the equivalent of a gateway drug Here it is, right?

Jonathan Cohen (33:13)

It's not gambling, but it's not not gambling. And it sort of teaches especially young people, but everyone to sort of leverage sports for personal gain and to think about sports from a predictive standpoint rather than just sort of an enjoyment. So I think fantasy sports can be totally benign. And I don't mean to imply that if you actually do start doing fantasy sports, you're going to end up a gambling addict, but I do see how it was sort of a stepping stone culturally for us to get to sports, sports gambling.

Becky Quick (33:38)

So the question is, what's to be done? And you are not advocating that sports gambling should be illegal. You're actually in favor of it remaining legalized? Are you in favor of it spreading to states that have not legalized it to this point?

Jonathan Cohen (33:53)

I would say I'm okay with it spreading as long as it is done in a careful manner. And I would argue that over the last eight years, since the Supreme Court decision in 2018 that unleashed sports betting, that it has just not been done in a careful manner that we've done. There are of course regulations on sports gaming companies, but I don't think that there are sufficient consumer protections in place, especially for young people, let's say people under the age of 25, that can prevent them from running into trouble. So I'm in favor of the existence of sports betting, even online sports betting. You know, 60% of gamblers on the NFL account for just 1% of sports revenue, of gambling revenue. So I haven't, I don't think we should do anything to sort of take it away from them. But I think we should do is make it all but impossible for someone who's gambling like me, 10, $12 here and there, for that to be the start of a dangerous journey, for that to be a gateway drug into a more serious gambling problem.

Becky Quick (34:41)

You've got a long list of potential solutions. I don't know how likely any of these things are voluntary self control tools, loss limits and constraints based on affordability. I mean some of this stuff sounds like a little bit of a nanny state. You can only bet so much based on how much money you put in or you have.

Jonathan Cohen (35:02)

The, the byword for all of it is friction is the idea of friction and that's what we don't have in the app right now. There's nothing in the app really that's going to slow someone down such that they're going to probably fall into this process of loss chasing which is sort of a dangerous sign when it comes to gambling, which is, oh, you lose 10 bucks on the Knicks. Oh, I'm so mad I'm going to go bet on the Sacramento Kings. Oh, I'm so mad. But the NBA is over for the night. I'm going to go bet on Dutch baseball. Oh I'm so mad I'm going to go bet on check table tennis or whatever the case may be with bet sizes increasing and increasing. And that's the process just slowing down the gambling. Any, any person's gambling. I think that's sort of the byword for all of our policy recommendations and anything that would instill that friction that is currently lacking I think is a great idea.

Contessa Brewer (35:43)

Is that how it happens? You know I heard you talk about, I mean you're much bigger player than I am that you with your 10 to $12 bets. But how do people start? I guess that's how it happens.

Jonathan Cohen (35:54)

Right?

Contessa Brewer (35:54)

You see, do they not realize? Jonathan, I'm telling you, I do. $5. And like first thing I did when I woke up, I looked and Alabama didn't cover and I had a parlay with Notre Dame. They cooperated. Providence and at first thing it was a $5 bet but I could have won $40. That does it for me. 5 is fine. 550, 500, 5000 if 5 works. Why can't people do it that way and just have a little.

Jonathan Cohen (36:25)

That's great. And so for my conversation with Becky, I don't want to do anything to take away your $5 bets. I think that's great. I think you're behaving safely and rationally. And the problem is gambling really does work like a drug where at some point progressive disease. Like a progressive disease to get the same high that you used to get. And this is apply for everybody. But that's the fear and that's the fear is that you're going to go from $5 to 50 just because you're going to get really close one night you're going to miss your parlay and then you're going to want to chase your losses and then all of a sudden you're sort of on this dangerous journey that you didn't intend.

Becky Quick (36:54)

John, your point is that the incentive structures are set up improperly. That you know, both the sports gambling books and the states have these incentives where the more you lose, the more money they make. I don't know how to change that structure. How would you potentially do anything to make it? I have no idea how you go about changing that incentive structure.

Jonathan Cohen (37:16)

Yeah, and just before you accuse me even more of being a nanny state liberal, I'm okay with sort of industry wide self regulation.

Becky Quick (37:22)

And Jonathan, by the way, I have to say I agree with you on this stuff. I'm trying to come at this for how people, because I have a son too, I see some of the problems with this. I don't know how you fix it though.

Jonathan Cohen (37:35)

Yeah, I think starting with some industry wide self regulation is a great idea and there are some even cases from Europe of companies sort of going the extra mile on their own. Flutter, which is FanDuel's parent company, imposes limits on betters under the age of 25.

Andrew Ross Sorkin (37:49)

But Jonathan, here's the piece that I don't understand about the industry regulation meaning the self regulation piece. You'll have a company like Flutter do the regulation that you like maybe, but then some other company which may be ultimately bigger doesn't you have a prediction market company that is offshore and by.

Becky Quick (38:08)

The way, as a result of not doing that, they win more and they win more business.

Andrew Ross Sorkin (38:11)

So, so, so this, this, the self regulation piece is always this sort of super complicated situation because it's so hard to actually, you know, across the board make it work.

Jonathan Cohen (38:22)

I totally agree and I do think the self regulation idea might have died a death with the rise of prediction markets because we can get, you know, the fanduels, fanatics bet MGM Caesars on board. But then there's this whole other category now of operators, not to mention, you know, illegal casinos based in Antigua or whatever that are of course never going to cooperate. So which is why, which does bring me back to the, to the possibility of regulation. Both of prediction markets which as you know are 18 plus whereas sports gambling apps are 21 plus, not to mention sort of are the prediction markets are completely lacking in consumer protections. So I actually do think there sort of needs to be a dual strategy here. One untraditional sportsbooks, one on prediction markets, even a third when it comes to sort of black market operators. And all three of those needs to work in concert to create consumer predictions.

Becky Quick (39:05)

John, thank you for coming in. It is an issue. It's something we're all watching and we appreciate your time this morning.

Jonathan Cohen (39:12)

Thanks. And just for the record, I like Kenneth Walker under rushing yards for this first Sunday. I think that's a great.

Contessa Brewer (39:17)

I've heard a couple of prop bets for that are like slam dunks. Cooper, what's his face. Cooper cup over the first touchdown.

Jonathan Cohen (39:24)

Those are pretty good odds. Yeah. Yeah. I mean, I'm not gonna bet it, but I'll take your $5 if you want.

Contessa Brewer (39:30)

Andrew told me the other day that Kylie. I had no idea who you were talking about.

Andrew Ross Sorkin (39:35)

Kylie Jenner.

Contessa Brewer (39:36)

I had no idea you used her first name. Kylie. She likes the Patriots or something.

Andrew Ross Sorkin (39:40)

She likes the Patriots. She spoke to Tom Brady on Jimmy Fallon.

Becky Quick (39:44)

I think it was Kendall.

Andrew Ross Sorkin (39:45)

It was Kendall.

Becky Quick (39:45)

Yeah.

Contessa Brewer (39:46)

You get your Kylie's and your Kendall's mixed up now. I know who Kendall is. He was on Succession, right? Oh, that.

Andrew Ross Sorkin (39:52)

Wrong person.

Joe Kernan (39:54)

That's Squawk Pod for today. Thank you for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin weekday mornings on CNBC at 6am Eastern. To get the best bits of that TV show right into your ears, follow Squawkpod wherever you're listening now. We'll meet you right back here tomorrow. Have a great day.

Andrew Ross Sorkin (40:17)

Now we are clear. Thanks, guys.

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