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- [00:00]
A
So why should crypto care, right? Like, AI has been like the big dog for a while now. It's our turn, right? No, but crypto should care because although we've never been the public's favorite industry, in my mind we're, you know, you could say we're winning, like institutions are. Here. Look at what prediction markets are turning into. We don't need to be liked. Maybe, but I don't really think that's true. And that's something I've been trying to carry through this episode, but also just generally, because the public is not just like a random mix of people in a different town or that our parents know. The public can be the jury. I think we've seen that happen in a lot of cases that end up at jury relating to crypto. I definitely saw it. The public can be the judge. Like, they can try and be objective, but, you know, everyone's affected by what they see. It's the Prosecutor, the customer, etc. And the voter.
- [00:51]
B
Hi all and welcome to Dex in the City, where the wallets are cold and the takes are hot. Before we get going, remember, we're lawyers, but we're not your lawyers. Nothing you hear on Decks in the City is legal or financial advice and it doesn't create an attorney client relationship for the fine print. As always, check unchained crypto.com and we're going to be back in one minute with a jam packed episode. As usual, a lot of spice for you. But let's hear from our sponsors.
- [01:17]
C
This episode is brought to you by Kape America's privacy First mobile carrier. Same premium service you'd expect from any other carrier, but designed so your number, your location and your data actually stay yours. Get 33% off. Six months at Cape Co Unchained. Fidelity has been investing in blockchain since 2014. They're not wondering if digital assets will shape the future. They're hiring the talent to help ensure they do. Explore opportunities today@crypto.fidelitycareers.com Fidelity is an equal opportunity employer.
- [01:57]
B
And we're back. So last week, something actually quite crazy happened. And we talk about crazy all the time. I mean, we work in crypto. Okay, this was extra crazy though, because this was tradfi crazy. What I'm talking about is CME suing the cft. Okay, so let me provide some background information to everyone as to why this is nuts. So the Chicago Mercantile Exchange is one of the largest derivatives marketplaces in the world. It's based in Chicago, where Jesse and I are, and it was founded, I believe, in the 19th century. It is the OG of exchanges. Okay. It was actually founded as the Chicago Butter and Egg Board. Fun fact, Agricultural commodities. And it really dominates Chicago, and it dominates America in derivatives. You cannot talk about derivatives without talking about cme, and you can't talk about the CFTC without talking about cme. So two crazy things happened. First, the day before they sued the cftc, Terry Duffy, who is the longtime CME CEO, really, I don't think I remember a time where CME wasn't Terry Duffy. He's been there forever. He announced that he was stepping down. The next day, they sued the cftc, and he's stepping down, I believe, in a year. And the reason I point that out is because Terry is actually affectionately nicknamed the Sixth Commissioner because the big elephant in the room. And the important context to this lawsuit is one, as far as I know, the CME has never sued the cftc, its primary regulator. This is truly unprecedented. And one of the reasons they've never sued the CFTC is because they've had a fantastic relationship with the CFTC that they've cultivated. You know, a lot of people have their issues with CME as kind of the big dog and the elephant in every room. They've had a lot of influence, but appropriately so, because they dominate the market with these products. So for them to sue the cftc, it was. It was. It was a really shocking development. I'll say.
- [04:17]
A
Like, it's.
- [04:17]
D
It's shocking just in general for a regulated entity to sue its regulator. Like, that almost never happened. So this is shocking on, like, multiple levels.
- [04:28]
B
Thank you for pointing that out, V. Because I think if you've spent too much time in crypto, you think it's normal. It's really completely abnormal.
- [04:34]
A
Okay.
- [04:35]
B
Like, until crypto, this just didn't happen. So. So, excellent point. So what happened here? Right, Basically, the CME is furious that the CFTC approved a true perp. Okay, we've talked about this before. We've talked about this on a previous episode, but the CFTC opened the door to true perpetual futures, which are this absolutely massive product overseas. And when I say true perps, I mean contracts with no expiration date. They roll over permanently. And if you want to hear more about that, you can revisit previous episodes or a couple law and law of code podcasts that I've done that go into the nitty gritty of these products that we can pin in the show notes. So the CFTC approved this crypto cheered. The market cheered. We've wanted this product onshore. And I should say they specifically approved a Kalshi bitcoin product, narrowly tailored. And the CFTC was furious and they basically said no, this is not okay. And they sued the CFTC on two grounds. On two, and I'm summarizing this. But first they said that the CFTC is violating the Commodity Exchange act because perps are not futures, they are swaps. So they should not be able to list on designated contract markets in the United States. And two, they said the CFTC acted arbitrarily and capriciously by effectively the allegations that they're making in the complaint is they're saying the CFTC essentially copied Kalshee's own application verbatim. The CFTC ignored its own prior position saying that perps were swaps and that they also provided no public comment period. And they turn it around in one day, which is very, very, very quick. So these arguments, this was basically like this is not cool. They wanted or they, they want the CFTC to reverse course. And the biggest reason for this lawsuit is it's a competitive threat to their own business. And that's actually another important facet of this argument is that you need to have competitive injury to have a lawsuit. Like you can't sue someone if there's no damages. CME is alleging that CFT, the CFTC's actions inflict textbook competitive injury on the CME basically because by approving this they're facing competition. So I've laid all that out. I have a few thoughts and then I want to hear from Bea and Jesse. Any questions or any opinions on this. I'll first start with we're not going to get super nerdy legal but a while ago there was something called the Lober Bright decision, Supreme Court decision, really important and what it me men and I think we might have talked about this on a previous port pod.
- [07:30]
A
It says that about it about being overturned, I'm sure.
- [07:34]
B
Thank you. Jesse's rancid about it. I was about to say we've definitely talked about it. It means courts defer less to agencies. This actually helps CME on the kind of swap definitional arguments. But it also means the CFTC's prior classification of perps as swaps carries less weight. And what I'm talking about is there were several enforcement actions, most importantly the binance enforcement action where the CFTC did say these products are swaps, they're not futures. And CME is saying whoa, it's not cool. You can't change your mind. I will say legally they can change their mind. They are permitted to change their mind, especially if they took that position in enforcement action. So that one, I think is a little weak on CME's perspective. We know that swaps were defined by Dodd Frank. We've talked about this. But there's no definition of future in the law. So that means that there's ambiguity with all of this and there's legal room to work with by the cftc. Products also do not necessarily need to be swaps or futures. Like, they don't have to be one or the other. There's a bunch of different ways you could find a path forward where the product is neither or there's some sort of kind of novel designation. So. So I think there's going to be more to come on that the other thing I'll mention, and I'm not going to go into great depth. If you guys are interested, you can also check out a tweet thread that I did where I went a little nerdier than what we have time for on this pod. But CME's core argument here is that future delivery, and I'm putting those words in quotes because that is the the word legally or the term of art, legally is a requirement for a future. Like a future needs to have future delivery, a delivery point in time. So they're saying, okay, perps don't have delivery. There's no expiration. Usually a future has delivery mean delivery of the asset. But there's been no clear precedent requiring that phase, that phrase. So, you know, there's no requirement by the Supreme Court. There's no law that says fixed expiry means future delivery. So this is a lot of gray again in the law. And when I read this argument, my big take on this was like, oh my gosh, we're already going to see a Supreme Court fight over prediction markets and the cftc. I'm like, am I previewing the Supreme Court argument over the definition of future delivery?
- [10:07]
A
You a seat at that argument? If so, I think you've earned it.
- [10:11]
B
I'm such a nerd, guys, because I was reading this, it's kind of a long complaint, but I'm like, this is so injurious.
- [10:18]
A
Well, I mean, I think that's like such a good point, KK on this whole thing. And you really broke down the legal side and it is like very nuanced from the legal angle and that's important with really large, monumental legal concepts that the Supreme Court are going to have to touch. But there is a bigger argument here and A bigger picture. I think we should be thinking about whenever we're thinking about the judicial system or a legal concept such as Chevron, which is deference to agencies or arbitrary and capricious, we should really want the judicial system to apply those in a tech agnostic way. And if we just think about a year, two years ago or so when grayscale was suing SEC based on arbitrary and capricious and all of crypto was saying the SEC is so unfair. And to be honest, I agreed. I think that they did make that position unfairly or when a lot of the crypto industry, I wasn't this way and I don't know if you guys were, but like, we're like, we need to overturn Chevron. Look at what it's doing with the sec. It's going to help crypto. Like every legal concept that we argue for, we need to remember that it could come back the other direction. And crypto and the industry, when they think about these legal concepts, we need to be playing the infinite game here and not just be talking about this case because, I mean, this does seem like a competitive lawsuit. And I'd love to hear your thoughts on like whether it could win and, you know, whether there are real arguments about process here. But to the side that is outside of the crypto bubble, they probably think, oh my God, this is so freaking unfair and this was arbitrary and capricious, or this is one, you know, commissioner at an agency making a decision whether that's fair or not. That's probably a lot of that side of the industry's perspective, just like we rightfully had that perspective a few years ago with the grayscale case or other SEC actions in particular. So to me, like, whenever these cases come up, it's really important to understand the legal issues because they are going to apply to us and they should apply to us moving forward 1000%.
- [12:29]
B
And the other interesting thing here with all of this is a lot perps are brand new, meaning everyone, everyone forgets that perps effectively didn't exist. I mean, they technically existed, but they really didn't exist. Like the concepts existed when Dodd Frank was passed, but they really didn't exist. So they were. Congress never intended Dodd Frank to address perps. And one of the reasons I like the CFTC's odds with this case is they have a lot of discretion to categorize novel products. And I believe based on the law, their choice of future verse swap here is reasonable. And as I mentioned before, they can change their mind. You know, a Position in an enforcement action is not binding precedent. You know, an agency can change its mind as long as the theory is sound. I mean, look at the sec. Obviously it's changed his mind on the. Its mind on the basis of many enforcement actions.
- [13:25]
D
But, but don't you think the fact that this product is novel means that process is that much more important? Right? Like, I. So I don't know if you guys know this. I used to talk about this all the time. And anyone who wants, who went to law school with me knows this, but admin law was my absolute favorite class in law school.
- [13:44]
B
We really are nerds. And I love it.
- [13:47]
D
It's, it's like such a nerdy, like it's a nerdy class, like to be your favorite. I mean, every lawyer would tell you that. But the reason I always loved it is because for me it really like underscores what the whole point of the legal system is, which is that, like, the government can't just do things, right? If it does things, it has to have a process and it has to explain itself and it has to be justified, right, by law or regulation or whatever. And so I think like, with a product like this, it was especially important. You know, the CFTC wanted to treat perpetuals as futures, right? Like, and, and they, here, I guess they chose to do it through like a statement, like a product approval and a policy statement without giving us that kind of explanation. Right? Without seriously addressing Dodd Frank's definition of a swap or explaining why it decided to depart from its own prior position. I agree with you. Right? It's allowed to do that. Agencies do it all the time, but they shouldn't do it without explanation. I really firmly believe that. And I think like, you know, to Jesse's point, the reason it's dangerous for agencies to conduct themselves in that way is that like, something that we think might be good for us as a, you know, as an industry today can totally be flipped on us tomorrow. And you see that happen all the time. And it's just easier for agencies to wield that sort of arbitrary discretion when they're not forced to explain themselves. Right?
- [15:18]
B
It's much easier to flip flop. It's a great point. V. And you know, I do think that's an interesting point to raise because this is a big piece of CME's argument. But the only counter I'll take to that is, yes, the CFTC turned this decision around in a day. Maybe, maybe not the best. Look like Maybe hindsight is 20 20, but maybe the CFTC should have Sat on this for a week or two, they turned it around in a day. And the other argument that's been made is Chair C like did this alone. But I will say there's no legal requirement that they take 45 days or 5 days or 10 days. Arbitrary and capricious doesn't have a clear numeric definition attached to it. All they need to prove is that they appropriately considered it. And I do think that that is feasible in a day. So that is an argument. It's not a clear cut argument for cme. And I think we've also mentioned this on the pod, but in my opinion, the Commodities Exchange act actually section 2A3 allows a sole commissioner to exercise all the power of the Commission. There's more and more discussion here about how a lot of the CFTC's actions are going to be under attack if the administration changes. Because a lot was done when there is only Chair Selig acting alone. But how can they make that argument when the Commodities Exchange act, in my opinion, a plain reading of that clearly gives a solo commissioner the right to do everything he or she needs to do.
- [16:52]
A
There's the legal argument and then there's the perception argument. And that's what I keep coming back to here. Because if we really want an industry of durable onshore perps shouldn't have been done with notice and comment or some additional time that explains why the cases you talked about, I think there were four or five that sort of, that they're using in their complaint, you know, that explain why those don't apply or that was bad precedent because a framework that contradicts what the CFTC argued one year ago is not going to be durable and just further contributes to this perception and reliability issue which I think is continuously a big problem for our industry. And like we should care for many, many reasons. And so to me, like coming back to that, like very few people are going to read the Commodity Exchange act and be like, well they're allowed to do it, so it's okay. Right. So I just think maybe we need to think the next step further. And this litigation, whether it's crazy, whether it's going to be dismissed immediately or not, is raising those questions from a huge, really important party, not just like the Wall Street Journal, which is an important report, but you can say is biased.
- [18:05]
B
Yeah.
- [18:05]
D
I think the bottom line is like, you know, if, if you think the process was followed, even if you disagree with the outcome, there's still credibility and legitimacy there. Right. It's like when you're, you Know, like when you're in a negotiation or like in a disagreement with someone, like even if the outcome isn't what you wanted, if you feel like you were heard right and like considered, that really does make a difference, I think so. That's, I, I know I keep focusing on that but I think process is just so important.
- [18:35]
B
It's, it's a strategic question. The other interesting point I'll just throw out there is, you know, one of the complaints that CME cited was the Eisenberg complaint, the mangle markets issue that a lot of people probably remember where. You know, in that complaint the CFTC alleged that perpetual features and perpetuals on the Mango markets platform meet the definition of swaps under the act. And you know, I did a tweet thread analyzing this and Avi Eisenberg followed me and commented on my tweet thread and I was like, well this is interesting. You know, his point was I'm just of the view the CFTC should drop pending cases that classify perps as swaps if they're going to approve perps under an inconsistent theory. I'm not going to weigh in on that Eisenberg complaint. I mean there's a lot more to it than that alone by the way, like it's, you know, as we've talked about before, a lot of complaints, regulatory complaints are not one tiny issue. Like there's a multitude of issues levied against Eisenberg aside from perps. I think your points are valid. I still think CME has a real uphill now to win on any of this, frankly. I also think maybe CME didn't file this intending to win. You know, maybe CME filed this to make a statement to take a public facing position. Oftentimes especially larger corporations will file lawsuits as I don't want to say as a matter of principle but for reasons aside of not just to, to win. And the, the real follow on here is this order. The, the Kalshi order that the CFTC approved. It didn't like the CFTC didn't just approve Kalshi. It opened the door in the United States for any DCM in the United States designated contract market. Remember that's a derivatives exchange to self certify similar true crypto perps without prior CFTC approvals. So within days, you know, Kalshi itself self certified over a dozen additional perps. Other entities changed their kind of long dated futures to true perps. So basically the floodgates have been opened and we are seeing real time, you know, billions in volumes in The United States vis a vis perks, which I think is a good thing. We need this market in the United States. We need this market regulated in the United States.
- [21:06]
A
We need it to be durable is I guess the point.
- [21:09]
B
Yes.
- [21:09]
A
The question I have about. And it speaks to process. But KK, I'd love your thoughts or V2, you know, because it's related to process. But like the CFTC is simultaneously asking for comment on so many issues. Right. And they're all important and interesting and many are overlapping and have to do with definitions. So why would they have done it in this way? And like, I mean, maybe it was a rush for Kalshi, I don't know. But either do the notice and comment or sort of say, no, we're just making this decision. To me, that is like also them speaking out of both sides of their mouth. But perhaps I'm not understanding.
- [21:48]
B
Yeah, I mean, the only thing I'll say to that, Jesse, is I think notice and comment would have been a good look. And you know, just to be clear for our listeners who don't know what that means, that means that cftc, before it made this decision, could have opened it up to comment from market participants, to offer different perspectives. But again, I'll say there's no legal requirement to do notice and comment here. So this is again, less of a legal issue, more of a perception comment issue, more of a potential policy issue. And it's, it's a balancing act. Like how much does a regulator need to do for perception, for public policy? Yes, we want them to do that, but is it always absolutely necessary? I'm sure I give the CFTC enough credit in this circumstance. They probably considered doing it. I would have loved to be in that room and understand why they chose not to. But I'm going to give them the benefit of the doubt and assume they had their reason. But more, more on this, guys, I'll say stay tuned because I don't think this is the last time we're going to talk about. This is a huge market, it's a massive market overseas. If it comes to the United States, it's going to change things, it's going to change the liquidity environment. I mean, it could really have a positive ripple effect and we haven't even, we haven't even said the H word, hyper liquid in the context of this conversation. I'm not going to talk about it right now, so stay tuned for more on that. So I want to turn it over before we go to our next break. Talk a little bit on Our next interesting segment, full disclosure. Before I left for starkware, as as I think some of our listeners know, I was chief legal officer of CBOE Digital or CBO Digital, which was CBO Global Markets suite of digital subsidiaries. V is going to talk about sibo. I don't know what she's talking about. Oh, I have to give that disclosure. I left a couple of years ago. But VY tell us all about CBO and Schwab. I need to be filled in here.
- [23:48]
A
You're about to find out.
- [23:50]
D
Okay, so, so the news is that CBOE has launched prediction style S&P 500 contracts that Schwab plans to offer to its roughly, I think it has like 40 million broker brokerage customers. And then separately ICE and NYSE are partnering with the crypto exchange OKX to offer traditional futures and tokenized equities to OKX's like 50 million users worldwide. So there are separate stories, but I was thinking about them together and I think like they both kind of raised this question of, you know, whether the companies that create a new financial category, do they end up owning it or do, you know, once the established firms come in, like you know, the household names like Schwabisch that all our non crypto friends and family use, do those firms enter later and take over once the demand has been proven? Right. So you know, like I'm thinking about in this context, I'm thinking about Kalshi and Poly Market, right. I think, you know, it's fair to say they sort of built the modern prediction market category. They created the brand, they made it like really culturally relevant. They educated and attracted like tons of users. And then the other thing too, right, is that they, they have been bearing the brunt of the regulatory part of it, all of the uncertainty. They've been leading the fight over how event contracts fit within commodities law and you know, trying to argue that prediction markets aren't gambling and, and which regulator is in charge. And so now Siebel comes along and offers something, you know, that is admittedly a lot narrower. Right. So their customers can only bet yes or no on, on whether The S&P 500 closes above or below a certain level. And they're offering this as a traditional securities option. Right, but, but it's basically like the same like economic proposition as what the prediction markets are doing and to the customer, I mean it's going to feel like a prediction market or, or a bet. Right. So legally speaking though, and I think this is really important, like I said, it's an option listed on A regulated system securities exchange, it's centrally cleared and it's distributed through a brokerage with an existing like options compliance system. It's just like their regular like legal and compliance apparatus and, and all of their established like reg regulatory licenses and registrations and all of that stuff they have in place already. Right, so it's a very different legal wrapper because as you guys know, right. Ki Kalsh's position is that these kinds of bets are CFTC regulated as events contracts. But as we know, this legal dispute is actively playing out across the country. So that's what made me think about, you know, whether CBOE actually sees the wrapper itself as the competitive strategy. Right. Like I said, it's already authorized to offer options products under an SEC regulated regime that is very well established. There's a clear eagle framework in place and this of course would limit them to the kinds of predictions they can offer. Right. So they can only do options on things related to securities or financial indexes, but not stuff like elections, sports and cultural events, like all the stuff that you can, that you can do bets on, on call, SHE and polymarket. But it, what I think they might be doing is trying to capture that part of the prediction market scale category without having to, to like deal with any of these CFTC related legal battles. So anyway, I, I wanted to hear what you guys think. Kk, Especially you. Right. Like from a, from a CFTC perspective, like, do you think there's a meaningful distinction here between a CBO binary option under an established SEC regime and a KI event contract, even though like the bet is essentially the same? Right.
- [27:51]
B
It's a great question. V. And look, the honest answer here is that this distinction is more meaningful to lawyers and regulators than to customers. Okay. And it actually goes to the question of aren't binary options swaps? Like binary options are swaps, right? Well, probably, yes. Because Dodd Frank, as we just discussed, defines a swap and they define it as an agreement that provides for an exchange of payments based on the value of a commodity that transfers financial risk without conveying ownership. So when you walk through what a binary option is, it fits it pretty cleanly. Like there's no, no one's taking delivery of anything. It pays out based on the underlying value. You know, it clicks cleanly, transfers price risk, so it fulfills the swap definition. But CBO's product is not regulated as a swap because of that explicit statutory carve out that you referenced. Meaning, you know, Dodd Frank explicitly excluded those options that you mentioned from the swap definition. Options on Futures options on securities. So this is important from the regulator perspective, from the perspective of lawyers who understand all this. But from the retail perspective, does it look and feel very similar, if not the same, probably like the actual execution of the product?
- [29:18]
D
Yeah. I also wonder whether, you know, and we know, like that's the SEC and the CFTC have a very good working relationship right now. I wonder if this will come to a head at some point or like maybe the Supreme Court will end up taking up this issue. Right. Of whether, like, you know, if it is a bet on something related to like securities or the stock market, then that's under the SEC's purview and then everything else the CFTC can potentially regulate as an event contract. Like, I wonder if you'll see the prediction market industry split in that way.
- [29:52]
B
It's a great question. The only thing I'll add before Jesse jumps in is I want to refresh our. Our viewers on. Remember, Mike Selig, who's the chair of the cftc, came from the sec, so it's unusual for them to be such good friends. So, like, there's a very real future scenario where they stop communicating at all like that historically. Sorry, Jesse, go ahead.
- [30:14]
A
No, I was just sort of thinking about. And this isn't in a judgmental way, this question. I'm just more sort of curious. Like, and Matt Levine was talking about this this week, but like, who is this product for? And when you actually think about like, who's demanding this and why are they doing it? I'm sure they have a reason for it and I'm sure there are people that can hedge based on this and there's some interesting sort of financial instrumenting there. But the customer for this is seemingly very, very different than the customer on Kalshi and polymarket. For at least is how they are promoting it, right. Which is not betting, but sports, social media, politics, etc. And like, how much overlap is there in that customer and how should we be thinking about those markets? Like maybe we've been thinking about prediction markets as one thing, when in fact it's not one thing, it's thousands of things or different type of financial instruments. Say it again.
- [31:20]
D
Like, you can bet on pretty much everything.
- [31:22]
B
So it really is.
- [31:23]
A
Exactly. And if you can bet on pretty much everything, why are we making a distinction between the price of eggs going up or down and the price of a stock going up or down? There are reasons. But like, are those reasons, like, concrete enough that we can understand them and explain them to people?
- [31:43]
B
Yeah, I. It's Look, I mean the only thing I'll mention, I'm actually laughing because this has long been one of my criticisms of crypto. Crypto has a habit of just like building cool products because they think that they're cool and they can do this without assessing whether anyone wants that product or would pay for said product. And I'm not saying Tradfi doesn't do that, but most of the time they don't do that. Most of the time they, they assess whether the market needs and wants and is going to pay for this or whether they have a contingent of the market or whether they have oftentimes the lineup strategic clients or counterparties. You know, will you pay X for this if we launch it? So I think it would be unusual if for SIBO or any other large institution to launch these products without having kind of an assumed or guaranteed or built in audience for this product. But I don't know who that is. So on that note, I'm a being distracted by how Smart Bee looks in her new glasses. So I'm just gonna say she is actually that smart even if the glasses make her look that much smarter.
- [32:59]
A
Are they real or do they even have lenses? So I've had a perfect vision my whole life, but I'm getting older and losing my vision a little bit. So that's the story.
- [33:09]
B
This is not a style choice for those who are watching the video. See, now you have to go and watch the YouTube just so you can see Vy's glasses. But on that note, I'm going to overcome my distraction by going to break. So we'll take a minute to hear from our wonderful sponsors that make this show possible.
- [33:25]
C
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- [35:03]
B
and we're back and this is not a segment, but I'm sorry, we just can't keep going until we talk about the Pump Fund Chief Legal Officer job description. So just really a really quick aside because we were talking about it during the break, so I don't mean to shade Pump Fund. I know Pump Fund's current gc. He's great, he's very smart. But this went viral yesterday because they basically tweeted that they were hiring a chief legal officer, which is usually above the GC, but seemingly was reporting to the GC in this structure for the base salary of 1 to 5 million dollars. So I love inflation has reached the point where we're now into like Austin Powers esque numbers for random GC roles,
- [35:54]
A
all GC salaries. That's all I can say.
- [35:57]
B
Did it make you like, I mean,
- [36:01]
A
right, like it's not making me question any life decision, but I do hope it's a good sort of thing we can all point to. Are you guys passionate about meme coins and offshore entities? Oh, I'm gonna let you answer that for me.
- [36:15]
B
The only thing I'll say is I think a lot of people don't realize being a general counsel, you're actually a control person, which means you legally have to be the adult in the room and not do bad stuff or you will get in trouble for it. So. So that always makes certain GCs nervous about projects that have a high exposure to risk. And that's where I'm going to leave it with that. With that job description.
- [36:37]
D
But that was the most important legal
- [36:39]
A
news of the week, by the way.
- [36:40]
B
Yeah, we just couldn't have the POD without mentioning that. So good luck to Pump Fun and whoever gets that role. If you want to take me to drinks, I'll give you some advice. Not legal advice, but caviar and Drinks, apparently. So back to our next segment, our last segment. So usually I would call this the AI segment of the week, but, Jesse, what did you call this a minute, a minute ago? The. Like, let's just.
- [37:07]
A
It's bleak. No, I think we've gotten very deep on legal theory today, which is important. This is not that. This is a conversation about what the heck we should do about public perception of tech and whether it matters.
- [37:23]
B
Yep. And it's not a what grinds your gears. This is.
- [37:27]
A
I think I'll find something in it that grinds my gear.
- [37:30]
B
I think you'll. Yeah, I think Jesse's gonna call this like a let's talk about it. So, Jesse, let's talk about it. Tell us what's going on.
- [37:38]
A
Okay, so the AI news this week is that the vibe check for AI is just super bleak. And I think it's worth talking about because it has ramifications for all tech, including crypto. So polls came out this week and last week showing that despite the tech bubble that we all happily float in, the public trust is squarely turning against AI, which is sometimes hard to see because people talk about using chat GPT and really liking it or claud or etc. But a few readouts are. And I'm going to read this poll. Exactly. But the share of Americans who think AI could quote, unquote, literally end the human race is at 43% now. People are vandalizing AI ads, they're booing tech founders that are speaking at college commencement speeches. I don't know if you guys saw that. And things being thrown at them. Nearly half of voters want a full ban on data centers, and most of them don't even live near one. So it's not like a NIMBY argument. It's like not in my future or something. Like, I don't want this part of my life because more and more. And I don't think tech is helping. I don't think AI founders are helping. People are seeing AI as something happening to me, not for me or with me. And people are just getting richer. And my work is training the model. My data is being controlled. My face is giving the data. My neighborhood is getting the data center, it's taking my water, it's polluting our. Our lakes, etc, and that narrative is really, really sticking. So why should crypto care, right? Like, AI has been like the big dog for a while now. It's our turn, right? No, but crypto should care because although we've never been the public's favorite industry in My mind, we're, you know, you could say we're winning. Like, institutions are here. Look at what prediction markets are turning into. Look at. We don't need to be liked, maybe, but I don't really think that's true. And that's something I've been trying to carry through this episode, but also just generally, because the public is not just like a random mix of people in a different town or that our parents know. The public can be the jury. I think we've seen that happen in a lot of cases that end up at jury relating to crypto. I definitely saw it. The public can be the judge. Like, they can try and be objective, but, you know, everyone's affected by what they see. It's the Prosecutor, the customer, etc. And the voter. I mean, we have seen how important that can be. And so when an industry loses public trust, every bug in crypto or bug in the AI code looks like what the purpose of it is or the business model of it is. Right? Like a hack becomes proof of the whole thing being safe. Like, if someone hacks your wallet or you hear about something on the news, you're not going to be like, oh, that was just one project. Instead. Or that was, you know, look how great, how elegant the architecture is somewhere else. Instead, it's like, eff it. Like, I don't want to be a part of it. Let's figure out a way to stop this. Right? Because institutions can't fix this. They can't bring the legitimacy, really. They need to bring their customers with them. They need to bring our parents with them, really. Okay, so how do we change this and how do we address this? And I really love to get your thoughts, but I am also a history nerd, and I really dove into this issue and got a little obsessive about the history of people being terrified with tech. The examples from the past are endless. We have. I didn't know this until recently, but Socrates thought that writing would rot our memory and it would get rid of public discourse, but that obviously hasn't happened. Look how many podcasts there are. People feared that bicycles would make women too free and loose. That gave them freedom to leave their home. The radio, which sounds a little like social media, how people talked about it, although I'm torn on social media, but the radio would just distract our brains, invade our homes and our family units, and bring too much jazz into people's homes, which I do listen to a lot of jazz, so I'd like that one every time. Pretty much. The fear has Faded right. With time. But it's not just because, like, the public moved past it. It faded when the tech got familiar enough useful. Let's focus on that. And also someone credible showed that they were putting checks. So, like, flying is a good example 100 years ago. I mean, flying sucks right now. Let's all say that. But you don't feel really scared on it, but. Well, it's. I think it's pretty scary. It's, like, inherently terrifying. But 100 years ago, you were going to crash in an airplane. It was, I mean, not even 100 years ago. 1970s, when, like, lots of planes were hijacked to be used for terrorist attacks. Right. But it is largely one of the safest things you can do, even though it feels unsafe and horrible and they make you stand in, like, 20 lines on your way there. And the reason the fear wore off is because there are rules, right? There's oversight. Someone has the actual power to ground a plane if they see an issue. And then think about elevators. That was a freaking terrifying thing. I was stuck in an elevator last week, and that was scary. But once they had safety breaks, once they had an inspection regime that we still use, it got a lot safer. So what do we do? We stop trying to win the argument by being like, they don't understand this. Who cares? We start earning the trust that I think we talk about a lot on this podcast because we need to fix first the lived experiences for the people who aren't us and learning it and understanding the tech and appreciating it every day. And that's why every hack is something that we should be thinking about and talking about every person who lost their money. It's sad. It's sad. It's something we should fix, but also it impacts all of us and how the industry is seen, because it's all about proving to the public who then turns into the juries and the judges and the regulators and the news media and the next elect, like, elected parties that we have because they are all coming from the public, which seems like this homogenous space. But you could just look at what happened with AI and Fable, right? Like, people got scared and the government reacted. And you can look at many, many, like, cases around the country of people suing OpenAI because there was a shooting, because someone used a chatbot to, like, plan their shooting. So there's just so much of this happening right now, and we need to take the narrative back. And I think that this is the time to do
- [44:22]
B
is interesting, the kind of theme that People are afraid. This is actually making me feel better. Because the one thing that I don't like about AI is that there's been some preliminary data that says that the more reliant you are on AI, the more your mind deteriorates effectively. And that's always scared me a little bit. Especially because despite my interest in this sort of thing, I'm not like a crossword puzzle person. I don't like Sudoku, you know, and there's all this research that says when you're, when you get old, you need to be doing these puzzles, like exercise your mind. So I'm like, and I love AI. So I've always thought, well, does my reliance? And I don't think of it as reliance. I think of it as creating more efficiency for my day to day on AI. Is that going to like make my mind deteriorate faster? But assuming that historically there's been an assumption that that's going to happen with a lot of this, you know, these tools, theoretically society is going to develop something to counteract and counterbalance that effect. You know, much like exercise emerged as a counterbalance to the fact that nobody's doing physical labor anymore.
- [45:34]
A
It is interesting because I do think AI and crypto are making similar problematic choices about how they're responding to the anti tech narrative. Right. So crypto, I think historically has felt they don't get us angry when you don't quite understand why a regulator's going after you or a person is saying there's illicit finance here and this is unsafe or whatever. Like, and, and they probably are overstating it, right? And a lot of people in the policy space push back against that. But I do think we like when a Wall Street Journal article comes out. Not to pick up Wall Street Journal, but they've had a few lately that is against our narrative. It shouldn't just be like, oh, these biased, horrible people. None of this is true, right? Because that doesn't change anything. We're still just receding into our bubble and AI is doing the same thing in a lot of ways. Like, I listen to far too many AI podcasts, but a lot of the narrative right now is like, get on the wagon or you miss the whole thing and you're going to be out of a job, you're going to lose all your money. But like, think about the people day to day that can't afford a subscription to one of these AI tools are seeing everyone who works at Anthropic become bazillionaires. They can't afford to live in San Francisco or Seattle or whatever anymore. Data centers are coming into where they want to live. I mean, the narrative is so easy to follow if the people who are working in tech that really understand why it can be useful don't step in in the right moments.
- [47:00]
B
Yeah, yeah. It's so interesting. Jesse and I feel like we could talk about this a lot longer, but we have two minutes. We have to end a little bit early today. And I absolutely have to allow time for this week's good news because it's just so good. So take us home, Jesse, with this week's incredible good news.
- [47:19]
A
This is the only thing I want to talk about more than AI, but let me just say, I promise you guys, I don't only talk about AI and dogs. Like, I will talk about at some point, dinosaurs. Yes, the world has been hard lately, and social media and Twitter can sometimes make you feel like crap. But this was an example this week of like, the world coming together and just being so, so good and social media working for good. So essentially the Marlins, a baseball team, had a welcome bring your dog to the stadium day. And there was. There's a video of a dog eating a hot dog and a dog behind this dog staring at him longingly and being like, what's happening? Why don't I get a hot dog? And the memes were just total gold of like, when someone is living your life that you don't want or when someone is getting paid out for working at Anthropic and you're still at a startup. I mean, it was so good. It's like all corners of Twitter. So the Marlins see this and they put out a wanted poster to try and find the dog that was in the background. And this has gone viral because everyone is helping the Marlins find this dog to have a special day where it can run around the stadium. So the good news was going to be that they found the dog because that's what I had heard. But right before this, I don't know if that's actually true probably to dogs, all dogs don't look the same, but sometimes dogs look the same. So if you any, all our listeners, if you know this dog, make sure that it gets its special day in Florida.
- [48:59]
B
This is what crypto Twitter and Twitter should be used for. Guys like, come on, like, save Twitter for this use case.
- [49:08]
A
Agreed.
- [49:08]
B
That's it. Okay. And with, with that happy note, everybody, enjoy the rest of the day. And we'll see you next week at our regular time Tuesday on at noon, noon eastern for decks in the city.
- [49:29]
A
Sam.
- [49:55]
B
Sa.