Better Offline - Prediction Markets with Rebecca Ungarino and Nick Devor

Episode Date: March 18, 2026

In this week’s Better Offline, Ed is joined by Rebecca Ungarino and Nick Devor of Barron’s to talk about the legalities of prediction markets, their effect on society, and how everyone is operating on the bleeding edge of financial regulations.Nick Devor: https://www.barrons.com/authors/nick-devor https://x.com/nickdevor_ Rebecca Ungarino:https://www.barrons.com/authors/rebecca-ungarino Story (from both of them!): JPMorgan Is Considering New Prediction Market Guidance for Employeeshttps://www.barrons.com/articles/jpmorgan-kalshi-polymarket-prediction-markets-rules-9f871a65 Save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 - I’d be so grateful! YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. Buy our new “FUCK DATA CENTERS” shirts today! --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/  Discord: chat.wheresyoured.at Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [e-mail] omnystudio.com/listener for privacy information.

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Now we're back in the studio in beautiful New York City, New York State. You need to check out the show notes. Of course, we have these beautiful Fuck Data Center T-shirts, subscribe to my newsletter and so on and so forth. But today, joining me at Swaggage Claim, are two of Barron's finest reporters, the legendary Nick Devere who handles the gambling industry and the Wall Street reporting legend, Rebecca Ungarino.

Thank you so much for joining us. Now, Nick. Yes. We have had so many people emailing about prediction markets, and you cover the gambling industry as well. How are they different? How are they not the same thing? Because they very much seem similar. Yeah, I think from a consumer point of view, there's very little difference between these products. You put money on the line. If your team wins, you get paid out. So from like a layman's point of view, I think there's very little difference.

However, there is a difference. In gambling, you're betting against. the house. So the betting firm sets the odds that you're betting against, right? Whereas in a prediction market, your counterparty is another trader. So prediction markets are just essentially brokers that are putting two traders together on one contract. And I can explain that in a little more detail if you like. So prediction markets sell what are called event contracts. So event contracts are futures contracts. They're also called binary options. And they're built around yes or no questions. So each contract is worth $1 and it has two traders. There's a trader on the yes side and there's a trader on the no side.

Right. So like will this podcast go well? We can make that a prediction market. I hope it goes well. Let's get this. I'm just going to set that up right now. Yeah, yeah, yeah, yeah. Yeah.

So if person A thinks there's a 75% chance that it will go well and person B thinks there's a 25% chance that it will not go well, person A pays 75 cents and person B pays 20% percent. 25 cents. Right. So if it turns out yes, the yes trader gets the 25 cents put up by the no trader and makes and now has a dollar contract. Now, let's say on a second contract, person C thinks there's a 25% chance of yes. Person D thinks there's a 75% chance of no. Yeah. So these two contracts where the odds are flipped average out and there's a 50-50 chance that this podcast goes well. Right. Right. So the price of the contract is the predict. predictions and prediction markets are just brokers. The businesses themselves are just connecting to traders. So where's the crypto side as well? Because I remember when Polymarkets started, it was a weird crypto thing, but is it still that? Yeah, I would say it's still a weird crypto thing. They, most of their business is still their international side where they just take, I think it's USDT or it's some stable coin. One of the stable coins. All of the contracts

are traded on that. That's Polymarket. they're an offshore run company. Cool. Yeah, offshore meaning. Great. I love this. Yeah, yeah, yeah. Meaning not regulated in the U.S., not a U.S.-based company.

Contrast that with Kalshi. Kalshi was the first registered designated contract market by the CFTC. That's the Commodity Futures Trading Commission. They regulate all of this stuff. And so Kalshi was the first firm to actually do this in what we would call like the legal way, whereas Polymarket does not have to abide by the U.S. regulations because they are not a U.S. firm. And they're trying to become, they've gotten permission to operate in the U.S., but they're like slowly rolling that out. A lot of people in the U.S. don't have Polymarket U.S. accounts yet.

If you want to trade on polymarket in the U.S., you're mostly using a VPN to do so. But you need crypto to do it. Yes, yeah. For the international site. This feels like it would be rife with manipulation, though. Yeah, yeah, definitely. I think that because Polly Market operates, you know, on the blockchain, it's generally all anonymous,

and it's very easy to get any kind of market you want created. There's a lot of concern around manipulation. I think a helpful example is there was some football game or some sporting event, and there was a market for, will someone streak at this event, you know, run onto the field naked. And someone did end up streaking. And the person that ended up streaking was someone who was trading on the market, you know, betting yes, that someone would end up streaking.

And then they went and did it. And so they made, you know, hundreds of thousands of dollars, paid a small fine relative to the sporting people. And, you know, now we have. So you get into this question. I think a helpful metaphor is like our prediction markets, a thermostat or a thermometer. Are they accurately pricing the potential outcome?

Are they saying that something is going to happen? Or by their very existence, do they make something more likely to happen? Right. Rebecca, how are the bankers dealing with this? How's Wall Street looking at this? Because it's tough to really grasp whether this is gambling or a futures contract, like betting on the chance of stock will go up or go down. And there's such a big difference right now.

Well, it's really interesting because the banks themselves, and this is separate from like the market makers or like, you know, high frequency trading firms. Yeah. The banks themselves are very highly regulated by like three main agencies, the OCC, the office of the controller of the currency, the Federal Reserve and the FDIC. So they're very highly regulated and then they have a bunch of like state agencies that regulate them too. So far, the biggest banks have stayed pretty quiet on how they're thinking about these. and they're, you know, kind of waiting for this regulatory, you know, clarity. It reminds me a little bit of, you know, Bitcoin and crypto going mainstream, you know, 10, 11 years ago. We're waiting for regulators. We're waiting for regulators.

And banks are, they're really complex. They have a bunch of different businesses where they could come in and, you know, for example, on the banking side, the investment bankers, you know, have an interest in, well, do we want to help them raise money? Do we want to help them raise capital or take them public? Oh, are they not even touching any of the fundraising? They could. My understanding, you would know better than me on CaliC and Polymarket who their investors are. Is it VC? Is it P.E? Yeah, I think it's mostly VCs right now. But they're both targeting, there was recent reporting in the Wall Street Journal that they're both Polymarket and CaliChi are targeting 20 billion dollar valuations. Now, it's crazy. Totally. Totally. Totally.

Business though. Yeah, that's, that's kind of the thing is there's not like the, there's not a lot of difference between trading on polymarket and trading on Cali. Like you're trading the same kind of the same contract in effect. Like it's the same kind of product that's being traded. So you kind of get into a similar thing that the sports betting businesses had to deal with where Fanduil and Draft Kings are essentially identical products selling, you know, identical products and trying to differentiate themselves. And so we'll see in the coming months how that ends up working. Rebecca, on the, actually go ahead.

Well, I'll be able to say. Well, I mean, and on the trading side, it's a whole other, like on the other side of the house, right? That's actually kind of where I was getting to you. Yeah. And like at the bank, so like, you know, these massive trading businesses, it's, so some of the reporting that we have so far and we're, you know, working on this now. And again, the banks are being very tight-lipped on what they're saying about what they're getting involved in or not getting involved in. This is something that, so the investment banks, they're like the bankers, the trading desks and then the research. And that's totally separate. And there's like this firewall, right? So research analysts are definitely like looking at these things, just like any other input, any other source of information.

Of course, it's, yes, there are differences. But it's like, okay, well, what is Kalshi saying about this? When, you know, maybe a commodities analyst who's looking at metal. And it might be kind of a sentiment analysis. Exactly, exactly. And just another input to look at. So that's all well and good. You can look at that.

On the trading side, though, it's more complicated because, again, the CFTC, like Nick brought up, the Commodity Futures and Trading Commission, that, you know, regulates crypto and, you know, is now regulating some of these prediction market activities. They have to weigh in, and they have, you know, to some extent, but they're waiting for kind of a more complete look at, okay, Golden Sacks, you know, traders or enter any other, like, big bank traders. Like, what are we able to trade? Now, that is still kind of out there, right? There are event contracts, like political elections and, you know, things like that, quote, event contracts, right? And then there are other markets where on securities where it's like that culture or polymarket. Polymarket, you can do like will Nvidia stock end the day up or down?

Right. Like this is something that is happening every day, right? Exactly. And that's a little more complicated because then you are dealing with securities rather than just like some amorphous like event contract. So it's like complicated. But legally speaking, I'm sure someone will argue, well, this isn't a security because I'm betting on an outcome rather than security itself. Totally. Totally. Totally.

Totally. Totally. Doesn't this also set us up for something kind of dystopian though if these, if banks or traders start trading on these markets where you have some of the bank interest and whether, I don't know, a guy streaks. Yeah. Or whether a place gets blown up. Like, this is where I think the fringes of insanity begin.

Definitely. Completely. And I just, like, I'll want you to weigh in more here a bit. But, like, it just opens a whole new for banks that are so tightly regulated. Yeah. It opens up. a whole new source of potential liability and like you've done more reporting on that. Yeah, yeah. We've, from what we've heard, the banks are not as interested in those kinds of

markets just because there's no like, you know, they don't have an election every single day and like these desks need to make money. Right. So there needs to be like a sustainable, constant kind of liquidity and like enough events for them to actually, you know, participate in the markets. And the kind of like securities related markets that maybe these banks would be more interested in, that they would have a better edge on, whatever. Those are still mostly on polymarket. And I really doubt that, you know, a tightly regulated, like, U.S.-based bank is going to want to be trading, like, in stable coin, like, on polymarket against, you know, potential insiders,

all of this stuff. That just doesn't sound, like, appealing, I would imagine. But what about asset, like, the aries of the world or, like, private equity firms or private credit firms? aren't they different and might they be dumb? Like might they get themselves involved in? I just like, when I see the data center stuff when I hear on this private credit, the private credit stuff with like trickula and first brands and possegen

and I forget what was it. There was the one, there's now one in Europe. MFS. Yeah, yeah. The random ones where it's just like, yeah, you know when we said, we promised you this collateral, we also promised it to 17 other people.

Sorry. Yeah. I worry that. They are going to start. Like, are they allowed to? It's a great question. And my reporting, and it's a great story. It's a great question.

I'm not entirely sure, like, where, if and how they're coming into these things. In other words, I wouldn't be surprised. I don't know, but I wouldn't be surprised if one of the big private credit players, which is, again, like, some of these things are, they are just very lightly regulated banks, like, to be clear, right? Like, they are lending money. Like, and private credit, yes. It's a huge point. So cool. It's so good. I love that. It's a huge debate right now. Like is private credit means a lot of different things, whatever. But at the end of the day, it is lending outside of the banking system. Okay. That is safe to say. So I don't know, but I wouldn't be surprised if there's, you know, like a Cali she, like a polymarket. If there is, you know, kind of lending from these firms, I don't know. But they are becoming the private credit, you know, players are becoming so much more active in the private sector. And, and, and. just all these private, privately held companies where there's a whole matrix of like areas where they could become involved. I don't know that. And I would be curious. But it's probably

an input that they're looking at too. Like just a research, you know, input, right? Like, you know, we look at, oh, what is it saying about that? We take it with a grain of salt. But like, you know, it's still something we're going to look at. But it's an interesting question about the private The predictions, sorry, they are quite accurate. There's, you know, there can be arguments made about whether or not they are like good for society, whether it's like an okay thing that we can bet on, you know, every single kind of, I think the Kauci CEO, Turek, Mansour, his quote is that, you know, we want to make a monetizable asset out of every difference in opinion. Jesus Christ.

Which is like, that's like, yeah. To paraphrase Will Manaker of Chapo when he was seeing. a video of a new sport where two guys run into each other. This is the kind of thing you do in like Robocop. Yeah, this is like a robo-cop thing. That's what it's giving. Yeah, it's like, yeah, we can... It feels very like near future dystopia.

It is dystopian. Well, as someone who spends a lot of time lives in Vegas, I just want to say this is an insult to my beautiful gambling. The beautiful, honest odds of a dice roll. Even our crapsless craps are not this crappy. Yeah, for real. It's very strange. And as I think we've discussed this...

That's the new state motto, by the way. I really like that. Our craps are not this crappy. Exactly. I love that. I love that. I'm going to run... You should look into that.

I'm going to put it on a t-shirt. I love that. No, it's really scary, though. I feel like someone's going to die from this. Like, it's going to be this person dies by December 31st, and they're going to get hunted, like running men. Yes. Yeah, that's...

Okay, so we're almost there. Yay! So, recently, actually, there was a bit of controversy over, like, I guess, what we would call death markets on Kalshi. So when the U.S. attacked Iran, there were lots of markets on both Polly Market and Kalshi related to military action in Iran, whether it would happen or not, by when it would happen. Usually these are formatted and like, you know, military strikes in Iran by X date. Yeah.

So one of the contracts that both Kalshi and Pali market had was Khomeini-Apros. by X date. Right. So this is the supreme leader of Iran. Will he be out as supreme leader by this date? So the like layman's interpretation of that would mean if he dies, he's out, right? You know, that's probably how you would. Oh, is he in office anymore?

He can't come back in. He's dead. He's probably out, right? So when on that Saturday, Trump announced that he had been killed on Polly Market, Polymarket resolved their contract. Yes, he is out, right? But Kalshi did not do this. They froze, well, they paused the market for like eight hours to like figure out how to handle this.

And what is the consequence of pausing the market? Just told him clear. Oh, it's just that there's no more trading happening. Right. Does the price move at all? So it's just frozen. It's just frozen. Got it.

And what they did is they reset, when they made their decision, they refunded everyone their stakes the value of their contracts at last traded price before death. So if there was like a 74% chance that he would be out at 1259 and he died at 1, then they would pay the yes contract would pay out 74 cents, right? Right. So they did that in order to isolate the death component, right? Because Kalshi, in what they have told me, they don't want to allow people to profit on death. That's just not something they're interested in doing. However, there was very large controversy around

this because all of the Kalshi traders who hopped onto Kalshi and were like, oh, cool, yeah, he's probably going to be out. I'll bet on this. They were suddenly, they did not get the money that they expected to. Right. And Kalshi had like in its rules, in its

rule book that was laid out, there was like some fine print. But yeah, we get into this like weird question of like... Why didn't they pay? because he was out. Like, what was the day? They don't want people. Death was a carve out.

There was a death carve out. So out by any other means but death. Now, the Khomeini was like in his mid-80s, so it's kind of hard to imagine that he was going to resign or like, you know, they don't hold snap elections in Iran. So I don't really know. So it was just resignation? I guess that, you know, or like kidnapping like we saw in Venezuela.

Maybe, I don't know. That was its own episode. Yeah, that was its own thing. you know, was what happened in Venezuela? Does that count as like a war or just like an encouragement? So we get into all these really weird questions when the quote unquote oracle of these prediction markets is only resolving based on very specific outcomes. And so at a certain point, the entire point of these prediction markets is that they provide ways to hedge outcomes that you can't find in other markets. There's no way to like hedge against that happens.

happening in the stock market in like a clean way, right? Yeah. But if like, like, okay, so let's say that I'm a business owner and I want to hedge against the possibility that Trump does not finish this term in office. Right. Okay. From my point of view as a business owner, if he dies or resigns or is impeached, none of all of those three things fulfill the same thing for me.

And I need to hedge against all of those outcomes. But if we don't allow these markets to resolve on death and you know, we can argue whether or not we could, we should. They, by definition, become less valuable hedging tools. Right. And so you kind of get into this point spot where you're like, what are these actually for? Like, who is the person that's hedging against Kameney resigning?

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At the end of the day, when people are at home, they want entertainment. To hear this and more, listen to Reality with the King on the IHard Radio app, Apple Podcasts, or wherever you get your podcast. It feels like, I don't know, I have a weird view of this, and that I think prediction markets are scary and vile, and they enable something. But I also think they're a condition created by the stock market. Galaxy Brain Take, but I think that. The stock market has stopped being logical in any way, shape, or form, and regular people do. Despite, I would say, what, it's like three or four years ago when Robin Hood went really nuts on options. Yeah.

I think that regular people do not have access to a logical or rational way of investing. Like, you can't just invest in a company for being good. You can't invest in a clean outcome because you're going up against hedge funds and whoever fast trading and such that you couldn't possibly keep up. They have information you don't have. There's no way you could possibly keep up. I'm not saying prediction markets are good. I think they're terrifying. They are robocop shit.

But it feels like something that could only occur in a world where there is not enough other ways to accumulate wealth. I could not agree more. And I think that one thing, like to this point, it was a few weeks ago. And I might have even said it to you, but there was an ad. And I don't want to say for certain it was either Calshare or Polymarket, but it came up on TikTok or Instagram. And it was an ad or like a user-generated content type thing where a woman was holding a coffee. And the, did we talk about this? And the tagline, again, it was for one of them, I don't want to misspeak, but it said, you know, like, my bet will pay for my coffee.

You know, like my, you know, da-da-da. And I was like, oh, my God, that is so bleak because it really speaks to this broad, like, and again, financialization of everything. You know, that's a big conversation right now. it's talking about a world in which it is hard to accumulate wealth. I mean, to state the most obvious thing, you know, and like, you know, just broad inequality. My bet will help me pay for my, like, again, and I get it. Like, I get that on, I get why that would be an advertisement. And, like, I understand.

But that is so, you know, it's like a young woman, a young person. And it's like, oh, my God, that is what that is a symptom of, you know, sort of like the world we're living in. And I'm not saying that's good or bad. I mean, it's bleak. It's like very bleak to me. It's the same thing with sports gambling. And sports gambling seems for now like a lot more exploitative because they have the account managers who come and are like,

hey, you've lost three grand. Why don't we give you two grand worth of credit? Yes, yes. And all of these ways that you could leverage that, it is exploiting the fact that because if you think about the stock market is these days, what the fuck you meant to do? If you invest in a company based on its fundamentals, you're going to lose money probably. Yeah.

It's like Oracle is 12% up right now, I think. We're just going out in a week, so who knows where it will be. Even though they had like negative $24 billion cash flow, they're obviously misleading people when it comes to how like their CAPEX because they're going to spend only $50 billion this year and they've already spent over 40. Yeah. I'm not sure that work. But if you, if you, because the market and the hedge fund,

funds have decided there's something else they'd like to do. You cannot join that. So what are your other options? You've got, I don't know, betting on the slap fights, a literal slap competition, you've got sports gambling, and you've got this big, impenetrable thing of the stock market. But then you've got these seemingly honest, easy bets of, oh, I can just bet on an outcome. That's fair, unless the outcome is full of asterisks. Yes, correct. Yeah, yeah, yeah. I think there was some, there was. was some research recently, I don't know how I should, I saw this on Twitter disclaimer. Right.

That like only 32 and a half percent of prediction market customers are profitable. Right. So two thirds of players are losers. I mean, that's gambling. Right. That's gambling. You know, so yeah, I think, yeah, when we get into this, I think Gen Z, especially, there's a certain amount of financial nihilism, just general like dreads.

vis-a-vis the future and how am I ever going to have a house and etc., etc. And, oh, here's Polymarket, they let me bet on whether Trump will say China in his speech. And how many times he'll say it. Yeah, yeah, yeah. This could be

a fun thing that I could make money on. They can't make money, you can pay for your coffee with it. Yes, yes. I will admit, my favorite Kouchi story is the one that I'm sure both of you have read where it's they tried to hire a 15-year-old streamer. And I quote, your brother, legal team confirm that we can't work with minors RN.

Kind of sad, DBH. The RN and the TBH are really the cherry on top. It really just brings it all together. It really brings it together. But also, you need to watch running, man, because all of this just reminds me of that move. Just like I get your slop in a bowl and bet on whether Trump will say a different, it's called nuclear, the N-word.

Like, how many times will he do that? And he's done that many times, by the way. I'm not joking, which is yet another dystopian thing. Yes. It just, it feels like the actual solution here would be more regulation of banks and also getting rid of all of this. I think sports gambling, I know you probably can't come out on this directly, but I think sports gambling is like one of the most noxious things. Because living in Vegas, gambling is everywhere, but it's also very, very regulated. Yes, indeed.

If you look anything close to 21, they will come and card you. And they will chase you a wreck, like they will follow you up. I'm coming up on 40 and they still ID me sometimes. I'm beautiful enough. But, you look, you don't look a day over 20 and 364 days. But nevertheless, it's you, it's because they know that gambling is scary and that it's addictive and that a win can make you think every other one will happen. Except now it's just you can do it anywhere.

You can just do it everything. Every phone you've got. Every device you can gamble. There are Instagram accounts. Yes. There's this one with a guy who just dresses up like an old man and has a beer full of bush, a fridge full of bush light. And it's just him being like, and he's on a gambling site.

Yeah, yeah. See, that is extremely, extremely bleak. And I think it's, yeah. And I think that like it is prompting like in the more traditional, like so in banking and kind of like, I think it is prompting these bigger questions and kind of existential questions about like, yeah, what is the difference? you know, in what we're doing and kind of like what is, like, what are we doing here? I mean, you know, again, it's like it is going back to the regulation, that is playing out right now

and that is why it's such an interesting conversation where you do have the Trump administration rolling back so many aspects of banking regulation separate from prediction, you know, forget prediction markets for money. Like what kind of things? Different. So one example is, you know, for years, banks have tried to get regulators to go a little bit, make the stress testing process. You know, again, super important post-

What is the stress testing process? Where regulators every year will kind of simulate different, like, disaster scenarios. You know, again, like totally hypothetical. Employment shoots up, stock market crashes, you know, these hypothetical scenarios. And they test the banks. And they test the banks. Currently, like with the amount of capital that a Wells Fargo or JP Morgan has, can you weather this?

Can you withstand? They always do very, they always do very well. with caveats, obviously. But, you know, they come and say, oh, okay, you know, that could be a weakness. That could be a weakness. Private credit has also introduced an interesting, you know, kind of wrinkle here because it is, by definition, there is, you know, kind of this hidden leverage. And regulators have talked about that. But they're not banks, so they don't get stressed tested.

Correct. And so that's a whole other fascinating, you know, kind of ecosystem where it's like, okay, you are a bank, I'm going to stress test you. You are Lend, you, Bank, our Ed Bank, okay, incorporated. you are going to lend to private credit lender. Okay, but when you lend to there, there's not as much tracking what your borrower is lending to. So you can see it is hard to track where that money is going. And I read the other day, I think it was middle of last year, the Boston Fed, I think it was, said that 14% of large banks loans went to private credit and private equity. It's a massive chunk and of loan growth over.

And I think that like when you go to, so when you take prediction markets and you kind of take like the current regulatory backdrop, it's like an adds an interesting wrinkle because it's like, okay, by and large, a lot of the financial regulators are like, yes, we want to be like the bottom line is they are rolling back like traditional guardrails, you know, like around the banks. But now prediction markets like, okay. And that is currently being like, you know, kind of that is being sorted out right now. So we'll see. And like the CFTC, I want to say. is like the only regulator. Again, it's like the most relevant one here that's like come out with like some guidance. But it remains to be seen. So, you know, we'll see kind of how the administration handles that. I just, I feel like right now, this personal opinion not held by my guess, I think that there is a massive regulatory problem with lying. Because right now, my favorite example is open AI. So open AI signed a deal with AMD, except they didn't.

It was just an agreement without any formal contract. AMD is not increased guidance. Oracle, $300 billion deal with Open AI. Can't afford to serve it. Don't have the, has the raised debt. Data centers aren't built. SK. Hynix and OpenAI. Samsung and Open AI signed a big deal to take 40% of RAM.

Except they didn't. It was a letter of intent. All of these stocks have popped off of these deals. Nothing happened. It's very obvious there was never anything official. there should be regulated because people in the audience might hear this and say that's not stock manipulation but what is yeah yeah yeah if that isn't if that isn't and people could say oh it's marketing oh we use the wiser words but it's like it feels like things like this will lead to

outcomes that lose a lot of money there's a lot of people a lot of money and unless we do something soon it's only going to get worse because every time someone like this is not stopped. Someone else doesn't. It's just like, fuck it. Why would we bother? And that will lead into the prediction markets as well, because you could just start saying whatever.

Yeah. But that's actually, that is the biggest thing with prediction, but you can just say stuff now. There's like an over the, the extent to which the stock market is reliant on like increasingly complicated bits of semantics. Yes.

It's like we've just never, we're at like a semantic. The semantic indexes. The asterac and asterac and asterac. Like, totally. Letter of intent. agreement, consideration to.

They're all deals. They're deals, they're agreements, but we've not changed guidance, we've not put anybody, no one's actually doing anything. But, you know, it's just...

Less we forget a memorandum of understanding. Memorandum. MOUs are the best. I love a good MOU. They mean nothing, but they mean absolutely, everyone, love an MOU.

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But it's, and that's in an index, by the way, it's... Very responsible. Very responsible. And loves the 80-20 portfolio. We love diversification. Here's the thing. My worry is that it's very obvious how you manipulate these markets and without regulations to stop people,

it's only going to get more ridiculous. You're just going to get CEOs that say things to create a market, possibly creating them themselves, and if they're a private company, that's not illegal, I believe? Yeah, so when we talk about, like, mention markets are a good example of where I think a lot of the, like, manipulation concerns are.

So a mention market is like, okay, during this podcast, will Ed say fuckwit? Yeah. We're like, we're betting on that. Yeah, yeah. That's it. The odds are high. The odds are high.

Yeah. You just did it. Okay. I resolved the strike hit. I resolved the fuck wit, Ben. I won. Yeah, so, like, will Caroline Levitt at the next White House press conference say the word China? Right.

People, these are mentioned markets. So we're literally just betting on the words that will come out of someone's mouth. Right. So a very high profile example of this is Coinbase CEO Brian Armstrong. Yeah. You know, at the end of an earnings call, there was a polymarket, mention market for what will Brian Armstrong say on the earnings call. And at the end,

you know, literally like right before the like moderator was like, thanks for joining everyone. Like right before he's like, oh, someone just handed me the polling market for what I'm going to say. So I'll just get through all these, you know, Bitcoin, Web 3, just like went down the list and like paid all of them off. Right.

So he has come out and said that he was not trading on that market or involved in any way. But like we are opening ourselves up to like new ways that we can manipulate markets and insider trade. And like when we create

a market for everything and everything can become a bet, more people than ever can become insider traders because there's just so much more things to insider trade on. Well, here's a question. How much is necessary to create a market?

How much money does it require? This is a good question. So Polymarket PR has told me that the primary criteria for if a market can be created, because they field suggestions from their users. The primary criteria is if there's evidence of demand for the yes side and the no side. Right.

That's it. What is evidence in this case? You know, if there's activity on Twitter about it, if people in the Discord are like, please, I want to bet on this. It seems pretty ad hoc. I don't have much more detail. than that because they did not give me more detail than that.

I imagine they don't need to. Yeah. So it's not money. It's, I mean, it's just like evidence of trading demand, right? And then they'll open it and then people can start. Right. But you don't have to, they don't have to be. They don't have to be like, all right, you all right, you all have $500 ready to go on this.

Like, there's nothing like that. Like there's just as long as they can see that people will want to trade on it, they will make it. Makes sense. And that kind of goes to the question of just like thinly, like with banks like thin, thinly regulated versus not, or thinly traded, excuse me, versus not, right? It goes to the question of like, when banks look at something, they're like, we can't make a market out of like, you know, trading on this one sports game. This one thing that has like $200,000 in volume. Like, there's just no way that like a huge bank is ever going to like, yeah, you just open yourself up to so much.

So it goes back to that. Yeah. I mean, also I guess banks, I didn't even think of that, but yeah, banks wouldn't want to touch it because there's not enough money in it. I think it's when I think of like a thinly traded stock. Yeah, exactly. It just goes back to liquidity and like the volatility. And like if banks can find a way to make money on something legally, they will. Oh yeah, yeah.

They will. And so it's, you know, you could see a world in which and I'm not saying like there is no regulatory framework that would allow this. No, I'm not saying that because in the future, in the future, you could see it like, who knows what that could look like. And so the banks are just like, okay, we're going to like wait for the regulators to say something. But like it comes to a question of also like internal enforcement. Like banks all have like very, very clear, you know, kind of rules around insider trading. Someone has non-public information. If you trade on that, you will be fired.

Like, you know, that's very like well-worn, you know, kind of like. But now with prediction markets, how do you enforce that? It is hard. And so banks are like actively. And again, I'm just like talking about banks specifically. You could also talk about like tech companies, health care companies, whatever. But banks where like we have talked about this a lot, like being this nexus of the markets and they do have a lot of information that, you know, okay, that's different from someone in another sector. Like how does a compliance team enforce that?

That is an open like question right now that banks are like actively figuring out. And it's a really interesting question of compliance and enforcement, you know, internally. It's just, it feels like the walls are breaking down around everything. Because before we do the prep call for this, we talk about analysts, for example. And I named someone. I'm not going to name people on this just for professional reasons. But people know who I mean. We're very professional.

We're all very professional. I never say fuck. But there are these, I named someone, and you were like, that's not an analyst. Yeah. And it's becoming obvious that because they're on CNBC, they're on Bloomberg. It's like, you've got these people pretending to be analysts. You've got these entities like private credit pretending to be banks. You've got prediction markets pretending to be stocked.

Yeah. It just feels like. The walls are being torn down. And I know that this is going to, people aren't going to like this. I don't think most people should have access to the stock market or gambling. I think that they are dangerous. And I think, or at least they should be regulated in such a way that it's less dangerous. Not just open season.

Yeah. And then every third guy on Twitter is like, I'm an analyst. Mate, you are a poster. Well, that's the interesting question. And I mean, like, I couldn't help but think in that moment of journalism. Yeah. I mean, like, obviously, okay, they're a journalist. and writers, and then there are, like, people who do not have the same, are not held to the same

standards, and that's a whole other conversation. But, like, with analysts, yeah, totally. I mean, like, it's, there are very clear kind of, like, you are regulated by FINRA, which is the self-regulated, you know, they're a regulator, and they regulate the brokerage industry and, like, any, quote, sell-side analyst. So, like, you know, an analyst who is, again, held to these standards, like, industry standards of disclosures and, like, conflict of interest and things like that. Like, that is, quote, an analyst. Yeah, you can be an, of course, there are like other ways, but like that you can be an analyst in, and that is legitimate in like another sector or like another like on the by side. Okay, fine, that's all legitimate.

But there are certain standards that you're held to if you're like, for example, you know, like a FINRA analyst. And like that's not always. A analyst. Capital A analyst. And that's not always clear to like a viewer of C&C. So this is actually a question. What is a saleside analyst? Because I have listeners who have asked this before and I realize I haven't really defined it myself very well.

you would know. For sure. You're at a brokerage, something like a brokerage inside a big bank, or you're just like a standalone kind of brokerage, a Morgan Stanley. Great example. They have their investment bank, and that's like, okay, they have their bankers over here and on the other side. And it's not this simple, but like on the other side, you have the sell side. And that is these analysts who are writing research reports. They are held to FINRA rule 2241, I think, section Nice. Six. Or less 2241.

Go Google it. That covers everything that, like, a cell side analyst must be held to. They are on the cell side versus the buy side. So they are selling, you know, like research and, you know, versus like they're not managing a fund, right? Like, they are giving information. They're issuing a buy, hold sell. They are giving price targets. They are looking at financial models.

They are in a different spot than, again, someone on the buy side that is, like, reading the cell. What does the cell side? What does the cell part mean? Selling research, selling knowledge and wisdom. I don't know how the SEC defines that. I'll be very clear. And it's kind of like, I mean, it's kind of outdated at this point. It's almost like an antiquated thing, cell side versus by how it just kind of how like a wirehouse.

Like that's a very antiquated way of saying like a big wealth manager. The big thing that's getting me at the moment, and I'm not naming anyone specific for professional reasons. But why is it that these analysts or. always set these massive targets and don't seem to be affected by reality. Because there is a non-specific, prominent data center analyst who quite literally went out on television yesterday and said the Oracle was a good buy. And it was that it's actually better when you look at the report. This is factually incorrect.

It's not even an opinion thing. These cell sign analysts always seem very positive. Even when reality isn't reflecting that, shouldn't they know better? Is there a reason they would be more positive in general? Not talking about this person. Yeah. I mean, it's like,

this is like one of my favorite issues. It's just, it's really fascinating because it kind of speaks to like this proliferation of like, anyone can put out research and like anyone can kind of like a lowercase A analyst versus capital A analyst. I think that the thing to always go back to is, you know, 2001,

I think 2002 new regulations were put in, you know, spearheaded by Elliott Spitzer, who was the New York AG at the time. after, you know, Merrill Lynch, Morgan Stanley put, you know, certain analysts had put out research that were like was super bullish and was total mismatch to how they were privately describing Amazon. You know, Henry Blodgett famously, you know, put out a report, ban from the industry. That's all well, you know, chronicled.

All new regulations were put in place around, from security regulators around like, okay, you are an analyst. Okay, you have to include all sorts of new. disclosures, which is great. I mean, you know, and again, it's a very high standard. A member of my household, I think the language is something like me or a member of my household owns a security and XYZ or something like that. And also, you know, kind of these charts you'll see at the bottom of a report where it shows the stock price, like Apple, for example, the stock price relative to like where their price target is to hold them accountable for like, you know, kind of what that's looking like and stop.

But that would require someone to hold them accountable. Yes, exactly. And analysts are like, by and large, I mean, there's plenty of data on this, but like they are a very, like, bullish group. I mean, the data, if you just look at buy, hold, sell, like, they continue to be that. And the whole industry has really evolved where, you know, and this is a whole other conversation, we talked about this a little bit, but, like, people should be aware that, like, corporate access is, you know, just a much bigger part of the analyst.

job and all that. When you say corporate access, what do you mean? Yeah, like you're an analyst at a, again, a Morgan Stanley or a UBS and just to call out two random ones. You, your clients, like a hedge fund investor, you know, like a big institutional investor, access to the management team of the company that I cover as an analyst. So I'm covering the, I'm covering the, you know, I'm a healthcare analyst and I'm covering Johnson and Johnson. And like, I can connect you know, like the investor who's reading my research with the CFO of Johnson and Johnson. I'm just calling out random companies. But it's that connection.

It's that like link and it's, well, it's access. It's just access. That feels like a bad thing. Like that doesn't feel like it benefits. It is definitely, you know, it's one of these things that analysts have to manage. And like these one of these, and I don't want to call it a conflict because it's not inherently a conflict, but it is another kind of piece of the job that frankly, and there are many fantastic analysts out there who do manage that well

and put out, you know, have great relationships, but put out critical research, you know, like substantive research and you just have to manage that. And there are many fantastic analysts who do, but I even said it's not unlike sometimes being a beat reporter where you have to maintain just like good working relationships with the people you cover, even if you're going to say an accurate but like critical fair thing.

and then you just have to move on. Again, very different from the role of an analyst, you know, but it is, there are similarities. I don't know if it's different. There are similarities. I just want to make sure I have it. Please, please. Right.

So a cell side analyst writes reports about companies in a certain sector. Yeah. And puts those reports out publicly and disseminates them to other banks, et cetera. And then hedge funds can go to the analyst and say, I want your specific research that you've done on these companies. and also can you introduce me to their management team? That's part of the offering, exactly. I see.

And therefore, to be able to connect clients to management and make money for your firm, you have to maybe you have to be a little more positive in your report on that firm than you normally would in order to be able to connect your clients with them. That's it? That would be the cynical take, absolutely, but the very fair criticism, I would say, yes. Absolutely. I don't think that should be legal. I do not think.

I don't think it should be legal. But it is, it's just like a feature that. And again, they're like excellent, excellent, excellent analysts who just like manage that. That's why we're being on specific. And who just managed that. And it's just like being again, and again, yes, okay, there are differences. But it is not unlike you write a tough story on a company. You are fair.

And then you got to move on. And then you got to like move on. You know what I mean? But the thing is, I don't know. I know. I think access journalism is bullshit And I think we're in the beginning of history As I wrote last week

It is It's no longer useful to do access Access journalism doesn't work It doesn't get you anything If a PR firm or a PR person At a company doesn't answer your question Because they're mad at you That's their fucking problem

This is not the opinion of my guest This is just me I just when you told me this For the first time on the prequel I was kind of I sat and thought about it a lot Because it's like You don't have to agree with me here

It feels antithetical to good analysis to be like, well, I can't be too mean, especially when your job is, hey, should I invest in this? And it's like, well, you maybe should because I've got to get you the company. I got to make sure the company.

Fuck that. I don't know. This is the thing, though. Gets back to my wider feeling about the stock market. It's like, that feels rigged. It feels like you've got analysts who go on CNBC, Bloomberg, and I'm sure people will say, oh, Bloomberg,

real traders use the terminal, whatever. But it's like the growth of retail investors is what makes this dangerous to me. The fact that it's the easiest time ever to invest in stocks. If I felt like buying a stock right now, I could do so in a few taps. If that's the case, having a or that should be the disclosure, here's a good centrist path. I think that they should have to write down every introduction they've made. They should say every time they've introduced a hedge fund, and they don't even need to name them, there's the say made introduction on this date.

that way we could see because oh I bet there'd be a lot of them also I'm getting all new ideas for FOIA requests Not that they would be Not that I many would actually fall into that at all Because it's all private sector But that's you know like But I'm just I'm just getting ideas

I'm just getting ideas again totally different But this is the thing Yeah yeah yeah yeah yeah This is what good journalism is Because it's like these messy little lines Between information That are not disclosed Exactly

And it wouldn't be as big a deal if they disclose this stuff. But also, the term analyst is used very vaguely these days. Totally. It's confusing to people. Citrini research, for example. Right. Yeah.

It's confusing to people. People who are, for example, again, get to the heart of people who are like held to an industry, you know, regulated industry standard that like is very like closely held, closely watched versus not. Yeah. That's a perfect example. Yeah, yeah. Perfect example.

All right. I think we're going to wrap it there. We've had a great time. Where can we find you, too? I'm on X at Nick Devere underscore, or you can check out my newly launched website, Nick Devere.com. And you vibe coded and it's beautiful.

Sorry, don't cancel me, Ed. I can't believe you outed me at the end. I'm going to vibe literally used. Fuck, fuck. Never mind. Or Barrens.com. Yes. You can find me on Barrens.com.

All right, everyone. You can find me, of course. Where's your ed. At betteroffline.com. This podcast that you're already listening to. You'll have a monologue later in the week. Thank you all. Thank you.

Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Rosowski. You can check out more of his music and audio projects at Mattisowski.com. M-A-T-T-O-S-O-S-K-I.com. You can email me at E-Z at Better Offline.com or visit Better Offline.com to find more podcast links and, of course, my newsletter. I also really recommend you go to chat. Where's your ed. dot at to visit the Discord and go to R-S-Betteroffline.

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