Jen Vietchner (3:11)

Shane is someone who, if you meet him, he's probably gonna be the most self confident and self assured person you ever met.

Polymarket Representative/Shane Copeland (voice or quoted) (3:18)

You know, in the early days when people were like, how are you gonna compete against these people? And you know, now it's like not even a question. So, you know, I think we've just.

Jen Vietchner (3:25)

Out executed candidly believing 100% in his own potential to become a billionaire, which, you know, has recently proven true. And he was obsessively writing, you know, kind of all of these annotations of people like Mark Zuckerberg and Travis Kalanick, these billionaire entrepreneurs. And he had just done, you know, studied them and emulated them and sort of, you know, was just determined to be the next one of that class. And he set out with that ambition and he has just kind of stuck to following it ever since.

Noel King (4:00)

All right, so he has smarts, real smarts, ambition, ego. And he decides that he wants to build something that lets you do what exactly what was the purpose of polymarket?

Jen Vietchner (4:12)

From the jump, he says that, you know, he was obsessed with prediction markets.

Polymarket Representative/Shane Copeland (voice or quoted) (4:17)

It's the most accurate thing we have as mankind right now until someone else creates some sort of super crystal ball.

Jen Vietchner (4:23)

Which, you know, kind of, sort of, in theory anyway, harness the wisdom of the crowd to become this sort of modern oracle where you can ask people to bet on various outcomes, whether it's in politics or sports or something else. You can kind of harness, you know, this knowledge and sort of bring, you know, forth these betting outcomes and then where they can actually win money if they're right.

Noel King (4:46)

Market. And I use it to vote on anything I think is going to happen in the near future, like sports, pop culture, politics. And I use it to get some coffee money. So let me click into one to show you.

Polymarket User/Example Bettor (4:57)

So there's this whale on Polymarket who bet over $37,000 that Jerome Powell will start the meeting by saying good afternoon.

John Herman (5:07)

Good afternoon.

Polymarket User/Example Bettor (5:09)

There it is.

Noel King (5:10)

Give me an example of where smarts play into this. How we see this at a macro scale being like a kind of intelligence.

Jen Vietchner (5:20)

Yeah. So I would say it's almost like, you know, kind of, it kind of brings out the common sense of people in the public and the most likely outcome to happen. That might elude, you know, some of the kind of smartest pundits, pundits, because they're just not willing to actually say it out loud. It's sort of like, what do people really believe will happen? And so here's a good example is if you remember the first presidential debate with Biden, and everyone immediately leaves that debate, you know, very concerned about Biden's age, you know, his ability to govern.

John Herman (5:53)

Out of the gate, President Biden's Voice faltered. The 81 year old spoke quietly and several times seemed to lose his train of thought. Dealing with everything we have to do with.

John Herman (6:06)

Look.

John Herman (6:08)

If we finally beat Medicare.

Jen Vietchner (6:12)

You were watching CNN or reading the New York Times. No one was actually thinking that the current sitting president was about to drop out of the race just a few months before the presidential election.

Sponsor/Announcer (6:21)

Come on, man.

Jen Vietchner (6:21)

But if you looked at polymarket, it was heavily leaning towards him dropping out right away, which surprised a lot of people. And that, you know, eventually came true. And polymarket essentially, you know, kind of had that news a bit earlier, if you take that as news.

Noel King (6:37)

And that is why polymarket takes off.

Jen Vietchner (6:40)

Yes, exactly. And so that kind of momentum builds and builds heading into the 2024 election.

Polymarket User/Example Bettor (6:46)

We might as well just call the election now because using polymarket, you can predict what's going to happen. And it's 63 to 36%.

Jen Vietchner (6:52)

So I downloaded the app. I'm giddy.

Noel King (6:56)

Welcome to the red kingdom.

Jen Vietchner (7:00)

If you looked at polymarket during election night, I mean, people went into election night thinking that it was a fairly close race hours before the election was called, even while if you were to watch CNN or watch other news, the New York Times, the race was far from called. Polymarket had Donald Trump at almost 100%, much before the results were even in.

Noel King (7:21)

When you were working on this piece, did you bet at all?

Jen Vietchner (7:25)

I did. And I had to kind of be a little sneaky about it. I needed to try it out for myself because I think it seems really complicated. And talking about it, you do it, you walk through it, it's pretty easy. The only thing for me was because I'm in the US and at the time and even today, as we talk, polymarket is not open for most US traders. And at the time, it certainly was illegal for me as a US Person to be betting on that. And so I had to download a vpn, basically log in as if I were in Spain. And then I traded 20 bucks on the website and I was betting on silly things like, you know, is Adrien Brody gonna win an Oscar?

John Herman (8:07)

And the Oscar goes to Adrien Brody.

Jen Vietchner (8:12)

But it was fun, you know, and when you make a bet, there's like a little eruption of confetti on the screen and you know, as someone who doesn't have, I think, particular knowledge in sort of any of those things I was betting on, it felt just kind of, you know, very unserious and for fun, I will wrap up.

John Herman (8:29)

Please turn the music off. I've done this before. Thank you.

Jen Vietchner (8:33)

But, you know, it's, I think, something that people will just enjoy because there is kind of this fun element to it.

Noel King (8:39)

And you did not win a ton of money?

Jen Vietchner (8:41)

No, I don't think in the end I won anything. I think, you know, whether at some point I was up like a 20 cents or 40 cents or something. And then by the, you know, by the time I. Well, they ended up shutting my account down because I wasn't trading legally. And I told them that I traded, I was, you know, I'd lost like 50 cents or something like that.

Noel King (9:00)

Okay, so nothing too tragic. Talk to me about legality. You danced on the edge of the law. How and why did Polymarket run into legal trouble in this country?

Jen Vietchner (9:14)

Yeah, so, you know, after they launched in 2020, it didn't take very long, you know, for the CFTC, which is the Commodities Futures Trading Commission, to begin investigating them, which is because, you know, companies like Kalshi that have been able to offer these types of predict markets in the US had to go and get a license through the CFTC and are still subject to a lot of limitations. Polymarket didn't do that. They just went ahead and said, look, we're a decentralized blockchain platform. You know, Shane's in his bathroom in the Lower east side, just went live and just let people trade on it. And the cftc, you know, said, you know, you can't do that. You can't just, you know, go ahead and, you know, make something available without, you know, that's not legal. And I've talked to Shane about it and basically they just went for it. They said, you know, better to ask forgiveness than permission.

Polymarket Representative/Shane Copeland (voice or quoted) (10:07)

People say breaking the law, it's like, which law? You know, so if anything, it's incompatible.

Jen Vietchner (10:12)

And as a result, they ended up paying $1.4 million to settle with the CFTC. But part of that agreement, through that agreement, they also had to promise that they would not allow US traders so they could operate from the US but they were only allowed to let people trade who did not live in the us which is why we got, you know, all these VPN workarounds where you kind of had to pretend that you didn't live in the US if you were trading from the US.

Jen Vietchner (10:44)

You know, and so after several years of that, where they had so many people like getting around it in this way, the Trump administration came in after winning, saying, you know, like, why is this even illegal? People obviously want this, there's huge demand for it. They relaxed the restrictions and Polymarket was able to reach an agreement, agreement earlier this year that cleared the way for them to operate again in the US after it became clear that Polymarket was going to be cleared for launching in the US you saw the Intercontinental Exchange, which is the company that owns the New York stock exchange, invest $2 billion into polymarket, which was widely seen that values the company at $8 billion. And that's widely seen as a move preparing for the huge increased demand that's going to come from this. And I think you just have a lot of people who weren't willing to kind of circumvent the law to use this. But now if you're saying, oh, it's legal, it's fine, we can do this, there's nothing illicit about it. That's going to bring a huge market of people in the US who want to trade on it because obviously the US Is the biggest financial market in the world.

Noel King (11:58)

Jen Vietchner of New York magazine Coming up, betting took over some sports and that made a lot of people justifiably nervous. Now it is taking over politics. Can you even imagine what happens if this goes wrong?

Noel King (12:27)

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Polymarket Representative/Shane Copeland (voice or quoted) (14:57)

It's the most accurate thing we have as mankind right now until someone else creates today.

John Herman (15:02)

Explained My name is John Herman and I'm the tech columnist at New York Magazine.

Noel King (15:08)

If we're okay with betting on horses, betting on football games, why does betting on elections, something that became really prominent on Polymarket, why does that skeeve us out so much?

John Herman (15:20)

I mean, it's a good question.

John Herman (15:25)

If we think back to the way that sports betting online in particular, sort of took over sports media, there was a lot of squeamishness early on. And so you had these media outlets being like, all right, we need to be careful with this gambling thing. This is really going to contaminate sports where it's not about sportsmanship and your team winning. It's going to be about the money. Yeah, you'll be able to profit off of their pain and misery. It's the integrity of the game that everyone's worried about. Well, in the transparency, this is sort of like grimy. It makes you think of the track, you know, and sad old men, you know, spending all their family's money that took maybe five years to break and 10 years to be completely meaningless. And that's in a situation where we're betting on games, we're betting on sports, we're betting on things that aren't life or death, that Aren't you know the types of things you can bet on now on Polymarket or Kalshi, like how many people will be deported in the next six months? With politics, for decades it has been a way to sort of judge other people's consumption, to say, oh, well, you're treating this like a horse race or you are behaving as though you're in a fandom or maybe even, you know, you're being cultish about your politics or something like that. In the cult of Trump, it's all about MAGA and the storm and fake news, the deep state, etc.

Polymarket User/Example Bettor (16:54)

The vibe behind it all is just, ah, politics, fandom is toxic.

Sponsor/Advertiser (16:58)

Right.

Noel King (16:59)

And so I think that you have a lot of these people who are actually looking at their politics like they look at their football team.

John Herman (17:06)

There's concern about virtue because this is the way that we primarily are supposed to be making the world around us and giving that to betting. It's not the world that I think people would say they want more. Obviously you have just unbelievable opportunities for corruption here. If you scroll through Kalshi today in politics alone, you have will Trump be impeached?

Noel King (17:33)

Will Trump release any of the Epstein files? Who will be the first to leave the Trump cabinet?

John Herman (17:39)

Some of these things are genuinely up in the air, others are things that people in the world know about. These are all just such a target rich environment for someone who is, let's say, corruption. Curious that it's hard to believe that it wouldn't go there.

Noel King (17:52)

Okay, so here's my question to you and I'm glad you're the one answering it and not me because my head went to some very dark places. If we think about the ways in which betting on, let's say, a presidential election could go sideways, what is a worst case scenario?

John Herman (18:07)

The presidential election is a good example for the platforms because it is full of people, it's hard to distort, there's a ton of money. But beyond just the prospect of the bets not being fair, you have a vision in recent elections of a completely different type of engagement. In politics you have people who have basically removed themselves from the democratic process to engage instead in a market process. It turns everyone into speculator rather than a voter. I think in politics, the types of things that we worry about affecting elections in negative ways are like people getting bad information, people following bad impulses, people being too tribal. All the types of things that you hear talked over forever and ever in media. A world in which people are just trying to figure out who's Going to win makes everyone into not just a speculator, but a pundit. It sort of takes them out of this decision that will have a massive effect on how the world works. And it potentially just replaces a lot of the also problematic ways that they interact with elections and politics through media and through social engagement with something that is just like reading the financial news or like reading about options calls or something like that. It's just a completely abstract way to engage with politics. And to me, it represents, if enough people do it, kind of an exit from politics.

Noel King (19:34)

The dark scenario. Here's where my brain went. Tell me if I'm being nuts. Someone has the opportunity to win $10 million. If a candidate is assassinated, there's an enormous incentive to do a very bad thing.

John Herman (19:48)

That's actually one of the early, like, foundational concepts of prediction markets, where people were sort of imagining and contriving ways where a prediction market might be set up to function explicitly as an assassination market. And it was an interesting thought experiment, like it would work. Now these actual platforms in the world have prohibitions on that. But yeah, I think it's completely plausible in the world we live in that someone might manifest events in order to settle a polymarket or a Kalshi bet in the way that they want. We should probably prepare for a world where much in the way that sports has become nearly impossible to follow or talk about without talking in this sort of meta way about odds, betting, outcomes, et cetera, politics will. Will start to feel like that.

Noel King (20:39)

I'd like to ask you about sports because we just did an episode about prop betting and we talked about how fans are saying that when they learn about these betting scandals again and again, again, their trust in the sport starts to erode. They start to say, is anybody actually playing baseball these days or is everyone faking baseball these days? I think if people are losing trust in sports, it seems possible that if we bet on elections, we could be looking within a couple of years at people losing faith in the outcome of elections. Is that a viable worry?

John Herman (21:14)

Yeah, I mean, there are a couple really interesting things that you bring up there.

John Herman (21:19)

One is that if your candidate, for example, loses an election, you might be crestfallen, you might be scared, you might be worried for the future, but none of those sensations are quite the same as losing a bunch of money on a bet. Like they're not. They're not humiliating in the same way. They don't alienate you from the thing that you're betting on in the same way. That is a new flavor of interaction with politics. I wouldn't say that politics in general, and certainly like American electoral politics, is like a trust rich environment, but losing even more trust in the process is like, I mean, where I don't know how much lower you can go, but it seems like we're trying to find a way and someone is maybe making a lot of money on it. Think about like the biggest news junkies, you know. Now imagine a similarly sized group of people, but it's all about bets. They are frantically trying to settle something in the way that someone scrolling a feed endlessly might be doing already. But they're doing it with skin in the game. They're doing it with the belief that they might know something other people don't or that they know something about other people that other people don't. It is that hyper focused engagement with politics captured in a business.

Noel King (22:38)

But wait, but I do. You are actually making me wonder if there is an upside to this. And I will say, John, you did this. You did this to me. So the thing, one of the problems that we've seen in politics my entire lifetime is that people are not engaged. Is there an upside here if we're letting people bet on elections that they become more engaged?

John Herman (22:58)

I could, I could sort of see that. But I don't think that gambling in general is the type of thing that is like a gateway to other stuff. I think generally things are gateways to gambling. So I don't know, I don't want to invest too much in that, but I do want to make sure that we mention up front here that prediction markets, markets as just an additional source of information in the world are really interesting and I think useful. I will make a case for prediction markets as good aggregators of information. And I think it also allows people to sort of check out where you are, on one hand voting and on the other, betting. Are these things complementary? Do they synergize or whatever or are they kind of at odds with one another? And I think it's very possible to imagine that they could be at odds.

Noel King (23:48)

Trump world, the people who surround the president, they absolutely love this stuff. Yeah, Don Jr. Is advising both Kelshi and Polymarket I've seen reported. What role do you think prediction markets are going to play in this administration and what do you think it means that they're playing a role in this administration?

John Herman (24:09)

I do think that the Trump administration's relationship to, you know, nonpublic information and trading and markets and just, you know, corruption in general is something that I'll say a lot of people are concerned about.

Polymarket Representative/Shane Copeland (voice or quoted) (24:25)

Yeah.

John Herman (24:26)

And so, you know, if you are in the family that has arguably more non public important information than any other family in the world and you are doing everything you can to make as much money as possible in a variety of ways, here is a situation where it's basically not illegal to bet on something where you know the outcome. That's just your advantage. There was a great thing that I believe Matt Levine at Bloomberg, or maybe one of his colleagues at Bloomberg pointed out a little while ago, which is that at the end of an earnings call, Brian Armstrong, the CEO of Coinbase, jokes that he had been following the prediction markets.

John Herman (25:07)

I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call. At the time, there were bets about what he would or wouldn't say on the earnings call. Would he say Web3, would he say Bitcoin? And so he gets to the end of the call, he says, add here the words Bitcoin, ethereum, blockchain staking and web3 to make sure we get those in before the end of the call.

John Herman (25:31)

Like it's a joke. It is like a joke to him. And he's not just some guy. He runs a huge company. He is in the mix. He is like shaking hands with the people we were just talking about. It just feels very much like part of the suite, you know?

Sponsor/Advertiser (25:44)

Yeah.

John Herman (25:45)

In ways that are, that are very intuitive, sort of cultural and political, but also just like wouldn't. I mean, this is a family that has Donald Trump himself. You know, he ran casinos. This is like, why shouldn't there be more types of gambling? Like, this is just. Of course this should be. Of course this should be the future. Of course we should be involved in it. And of course they like us. And of course the people using it like us. It's all very like, you know, synergistic.

Noel King (26:16)

John Herman of New York magazine. Arianna Espudu produced today's show. Jolie Myers is our editor. Patrick Boyd and David Tadashore engineered and Miles Bryan and Kelly Wesinger. Check the fact that facts. I'm Noel King. It's today explained. Remember, Vox.com members if you want to join our membership program.

Polymarket User/Example Bettor (26:52)

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