Unchained — DEX in the City: Are Prediction Markets Gambling, and Who Should Regulate Them? (Ep. 952)

Date: November 19, 2025
Host: Laura Shin
Guests: Jesse Brooks (Ribbit Capital), Katherine "KK" Kirkpatrick (Starkware), V. Lee (former SEC, now Web3)

Overview

The episode explores heated issues at the intersection of crypto, regulation, and prediction markets—probing whether prediction markets are gambling, how they're regulated, and the roles of federal versus state oversight. Featuring three powerhouse crypto lawyers, the conversation weaves through Twitter drama, the resurgence of ICO-like token raises, and the growing legal battle about who should control the future of prediction markets in the U.S.

Key Discussion Points and Insights

1. Crypto Twitter Fights and SEC Critique

[02:15–10:43]

• Amanda Fisher vs. Crypto Twitter: A spat between Amanda Fisher (Better Markets, ex-SEC) and crypto leaders unfolded over Uniswap’s governance moves and token “fee switch.” Fisher, a visible crypto critic, alleged centralization and security-law issues, fueling heated debate online.

• Regulatory Experience Dissected:
  V. Lee explains the inside workings of Gensler’s SEC, highlighting a policy-driven approach with non-lawyers in key positions. She warns this model led to inconsistent, sometimes misleading enforcement:

  "SEC chairs and commissioners and their top staff should not only be lawyers, but people who actually have a background in the securities 100%... We saw what happened when that was not the case." — V. Lee [07:34]

• Misinformation Risk:
  KK and Jesse Brooks lament Twitter’s role in fostering more mudslinging than constructive criticism:

  "Crypto Twitter is where nuance is going to die." — Jesse Brooks [11:11]

  Regulators pay attention to Twitter/X, even as the industry remains stuck in echo chambers. KK highlights the danger when critics lacking legal nuance spread misinformation about securities law.

2. ICO Resurgence and Regulatory Response

[14:38–25:11]

• Are We Back to ICO Season?
  The panel discusses if we're seeing a new ICO boom, with “public token sales” flaunting recent legal crackdowns. KK summarizes recent events (Mega ETH ICO, Venice Token ICO, Monad sale) and asks:

  "Are we back to ICO season?" — KK [16:34]

• Evolving Token Launches:
  V. Lee details the ICO era’s regulatory trauma, arguing SEC enforcement squelched innovation, and proposing that modern projects provide disclosures the SEC failed to systematize:

  "There was never a problem with ICOs... They're actually a very efficient and some would say, fairer mechanism for fundraising." — V. Lee [20:54]

• Disclosure Critique:
  Jesse Brooks notes that calling for “disclosure” is too vague, insisting investors need truly accessible and relevant information—not legalese.

• Regulatory Missed Opportunities:
  V. Lee opines that if the SEC had regulated constructively, Congress wouldn’t have intervened:

  "...the first-mover advantage doesn’t just belong to the startup. It belongs to the regulator that can demonstrate that it’s able to constructively regulate something new." — V. Lee [25:20]

3. Gambling, Prediction Markets, and Legal Turf Wars

[28:17–41:32]

• Explosion of Prediction Markets:
  With major platforms like Kalshi and Polymarket, prediction markets are now serious business—attracting Wall Street FOMO and raising existential legal questions.

• Federal vs State Regulatory Clash:
  Jesse Brooks deeply explores the concept of preemption: prediction markets argue they're regulated by the federal CFTC, while states defend their lucrative turf of sports betting. She gives context:

  "It's all about the argument of 'are prediction markets futures under the Commodity Exchange Act, or is it just sports betting?'" — Jesse Brooks [31:00]

• Legal Uncertainty:
  Katherine Kirkpatrick explains the lack of a clear definition of "future" in the Commodity Exchange Act, leaving interpretation to courts and creative lawyering.

  "The Commodities Exchange Act actually does not define what a future is... all we have now is US courts precedent..." — KK [36:31]

• SEC's Potential Role:
  V. Lee notes that if prediction markets cover events like a company's earnings, the SEC could claim jurisdiction, too—exposing a regulatory turf war mirroring the broader crypto landscape.

• TradFi Embraces Prediction Markets:
  ICE's investment in Polymarket signals institutional validation. KK speculates this increases prediction markets’ odds of regulatory legitimacy.

• The Spirit of Prediction Markets:
  The hosts debate whether these platforms serve hedging needs (like classic agricultural futures) or are just gambling, referencing real economy impacts—such as Taylor Swift’s hypothetical wedding in Austin—and contrasting this with pure speculation on trivial outcomes.

4. Crypto in the Mainstream and UX Struggles

[41:32–47:51]

• Crypto Conversations Go Mainstream:
  KK shares an anecdote about a suburban waiter energetically pitching crypto to her and her friends, signaling normalization even amid market volatility:

  "I loved that we're now at the point where…the waiter feels passionately enough about [crypto] to interrupt a mom's lunch." — KK [44:32]

• Enduring Retail Interest:
  Jesse notes that crypto chatter at family holidays reliably ebbs and flows with the price, but has never truly vanished.

• XRP: The Everyman’s Coin:
  The group laughs that “Uber drivers only ever ask about XRP”—a testament to its brand persistence.

• Crypto UX Remains a Pain Point:
  With stories about onboarding family and friends, and struggles with wallets and exchanges, the lawyers agree that crypto’s user experience is still a major barrier:

  "Episode three, Crypto has a UX problem." — KK [47:45]

Notable Quotes & Memorable Moments

• On SEC Staff Qualifications:

  "SEC chairs and commissioners and their top staff should not only be lawyers, but people who actually have a background in the securities 100%." — V. Lee [07:34]

• On Crypto Twitter:

  "Crypto Twitter is where nuance is going to die." — Jesse Brooks [11:11]

• On ICOs:

  "There was never a problem with ICOs... They're actually a very efficient and some would say, fairer mechanism for fundraising." — V. Lee [20:54]

• On Disclosure:

  "Saying disclosures as like a broad term just lets people get away with things… We need to hone in on what that means." — Jesse Brooks [24:11]

• On Regulatory Misses:

  "The first mover advantage doesn’t just belong to the startup. It belongs to the regulator… If they can’t, guess what? They risk losing not just their credibility but, like, their power over that industry." — V. Lee [25:20]

• On Prediction Markets:

  "It's all about the argument of 'are prediction markets futures under the Commodity Exchange Act, or is it just sports betting?'" — Jesse Brooks [31:00]

Important Timestamps

• [02:15] — Conversation kicks off: Twitter fights, Amanda Fisher, SEC structure
• [16:34] — ICO resurgence—are we repeating history?
• [20:54] — A defense of ICO mechanisms
• [25:20] — Why regulatory approach matters: first-mover advantage
• [29:51] — Legal landscape of prediction markets: Federal vs. State
• [36:31] — Lack of clear definition: what is a “future” contract?
• [44:32] — Crypto is mainstream enough for suburban waiters
• [47:45] — The ongoing struggle for better crypto UX

Conclusion

This episode deftly covers the uneasy intersection of crypto innovation, law, and public perception—highlighting the complexities regulators, industry stakeholders, and even average listeners face as blockchain and prediction markets transform financial and cultural norms. With sharp insights and legal expertise, the hosts break down why the stakes go far beyond Twitter’s mudslinging into the real and regulatory future of finance.