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

Episode Date: November 19, 2025

In the second episode of DEX in the City, hosts Jessi Brooks of Ribbit Capital, Katherine Kirkpatrick Bos of StarkWare and Vy Le of Veda discuss the recent spat between former Securities and Exchange Commission Chief of Staff Amanda Fischer and the cryptocurrency community over changes to Uniswap's model. They also delve into the return of Initial Coin Offerings now branded as “public token sales.” At the same time, they dissect the legal uncertainties plaguing prediction markets and discuss the state of mainstream crypto adoption despite recent market volatility. Hosts: Jessi Brooks, Ribbit Capital Katherine Kirkpatrick Bos, General Counsel at StarkWare TuongVy Le, General Counsel at Veda Links: Unchained: Uniswap Fee Switch Proposal Sparks 50% UNI Rally The Chopping Block: Tokenomics Reset — ICOs Rise, UNI Turns On Fees, MEV Goes to Court MegaETH Just Had Its Public Sale. Can It Succeed in Building a Web2-Like Experience? Coinbase Launches Digital Token Sales Platform UFC Partners With Polymarket to Launch Real-Time Fan Prediction Scoreboard in Live Fight Broadcasts Crypto Liquidations Top $500 Million as Bitcoin Dips to $93,000 Timestamps: 🚀 00:00 Introduction ⚔️ 2:00 CT v. Amanda Fischer 💥 13:41 The return of ICOs 🧱 21:34 How the SEC botched crypto and lost oversight to the CFTC 🤔 26:43 Are prediction markets gambling? 📈 41:04 Crypto market sentiment heading into the holidays Learn more about your ad choices. Visit megaphone.fm/adchoices

We spend so much time putting on suits, going to the hill, spending time with regulars. A lot of the people on crypto Twitter do this and put so much time into this. And we think about what we're going to say. We go on these panels and we talk about these issues and we spend so much time to be like, we are a responsible industry. We care about the same things you care about. And then the regulators just have to open their Twitter X app and see all this like really inappropriate conversation. Hi all and welcome to the second episode of Dex in the City where the wallets are cold and the takes are hot.

There are a lot of boss women in crypto and we want to make sure you hear from some of them. Before we get going, remember, we're lawyers, but we're not your lawyers. So nothing you hear on Dex 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. First, we have Jesse, Web3 prosecutor turned Web3 protect. over at Ribbett Capital. Next, we have V from the SEC to Web3. And I'm your host, Catherine, or KK,

fluent in tradfi and conversant in deep tech over it starkware. We have a lot to cover today, so we are going to jump right in. So first, I want to start somewhere that we've all been gossiping about through the week, not on air. This week's Twitter fight,

this week's crypto Twitter fight, I should say. This was something that was super disorienting to me when I went full time into crypto, the realization that pretty much every major GC policy thought leader was on Twitter or X, apologies, kind of talking all day and fighting with each other. And this has also been a source of frustration for some of us in seeing, you know, kind of major thought leaders in the space occasionally get into fights with each other. Now, this is a little different because what we observed this week is basically crypto critic number one. There's a few others that have popped up here and there over the years. But this week's critic, it is actually Amanda Fisher, who's the policy director and chief operating officer for this organization called Better Markets. And I'll just know that Nick Carter calls Better Markets bitter Muppets. I don't call them that.

I'm just stating a fact. So Amanda Fisher hates crypto. She's kind of made in her mission to criticize crypto very vocally. she spent the past four years, I believe she was Chief of Staff and Senior Counselor to Chair Gensler. And what has really happened is she's been fighting with everyone on crypto Twitter about the Uniswap changes that we haven't talked about yet, but we probably will at some point. One of the material changes in addition to the fact that Uni effectively proposed to turn on their fee switch last week was there was a certain consolidation. of work between the Devco and the foundation. So, of course, Amanda was drawing parallels to centralization

and as usual, kind of calling everything and anything in crypto a security. So I want to pause there and pass this off to V, because V, you were ex-SCC, you understand how the agency worked. Why don't you tell us a little bit more about the dynamics here? Yeah, sure. So I was at the SEC from 2016 to 21st, The first five years there, I was an attorney in the enforcement division under Chair Jay Clayton. But for the last nine months there, I was Chief Counsel of the Legislative Affairs Office.

So most of that was actually under Gary Gensler and Amanda was Gary's right-hand woman. I've heard during that time. So I'm limited in what I can say. But what I will say is I think, you know, Gary came in there with a really strong vision. and agenda for what he wanted to do. And the way that he staffed and structured his office, I think, kind of reflected that. Right. So he structured his team a little differently than most chairs and commissioners do. Typically, chairs have an attorney to cover each of like the main divisions at the FCC. So enforcement, corporation finance, exams, trading in markets,

I am and so on. And then a chief of staff. So these people are almost always, lawyers and typically they're even plucked from like the staff of the SEC itself right so Gary did something really different which is that he's he set up kind of a little policy shop within his office and Amanda and a few other people were a part of that so like Gary Amanda is not a lawyer and also like Gary she does not have a specialized background in securities law and then he had another policy director she was a lawyer but she also had no background in securities law. So she, I believe, came from the AFL-CIO,

which is like a Federation of Labor Unions. So I thought that was really interesting. And I think what this showed us in hindsight was that Gary had a policy agenda that he was going to carry out and that was going to be his priority. And I think looking back at it, this is probably dangerous for a few reasons, right? So just under basic separation of powers and how the administrative state works, like, agencies are not supposed to, quote, unquote, make policy. They're supposed to carry out Congress's mandates. And, you know, you can say that's naive because agencies can do things like prioritize certain things, deemphasize other things, and that has a policy-like effect.

But I think to elevate policy above all else is really dangerous because it risks really politicizing an agency as well. work. And then the other thing I'll say is I believe now more than ever, just given how things played out, is that SEC chairs and commissioners and their top staff should not only be lawyers, but people who actually have a background in the securities. A hundred percent. I mean, it sounds obvious, but this is complicated. Yeah, I think we saw what happened when that was not the case, right? I mean, like the SEC's mandate is to enforce the securities laws. And one of the most powerful tools they have to do that is to bring enforcement actions, right? And I would say, you know, the other big thing they do, of course, is

rulemaking, which is also very legal in nature. So, you know, you're taking legislative mandates and figuring out how they should be implemented in practice. So, you know, like, why do I think being a lawyer and having just like a profound respect for the law and the power that you wield to bring the law to bear down on like a person or a company. Why do I think that's important? And why do I think it is misguided to let like your policy preferences be the driving force? With crypto, you know, I think we saw the SEC take all kinds of positions in different cases that conflicted with each other. They got reprimanded by judges in multiple cases for inconsistent and misleading representations. And then like if you guys remember in the famous debt box case, debt box case out of the Salt Lake

office, the judge actually found that they lied. That was shocking. Yeah, that actually. And that office was ultimately closed. Yeah. Which, right. So, I mean, pretty, pretty shocking, right? So for me, this showed just a lack of appreciation for the law and how to apply the law.

And I also think it showed a lack of understanding of how the individual cases that you bring can impact your longer-term litigation strategy and really affect your reputation as an agency and your credibility long after, like, the chair has vacated that seat. Absolutely. And, you know, just to interject, because before I turn to Jesse, I think the interesting thing about this dynamic and about Amanda's comments in particular is there's a sense amongst the crypto GC bar that we need better critics. And look, I welcome critics because we all need to get out of our bubble. And I love speaking to crypto skeptics because it really hones my ability to advocate. And you need to understand all perspectives to essentially factor that into your advocacy,

your education. Crypto is really, really bad about that. But I think the problem arises is when certain individuals go on Twitter and then make factual misstatements. or they've misstate things based on a lack of understanding of the law itself. And I'm not saying that always happens, but it has happened and it probably will continue to happen. And then they're effectively spreading misinformation, which is not productive. Okay, I'm going to push back here a little bit because I could listen to V talk about this all day. Like, that was a very nuanced take that I really, really appreciate.

But I'm very torn here because I disagree with everything that Amanda Fisher said in her tweets, although I'm not one of the GCs on crypto Twitter, so I do miss out on a lot of it. So no part of me is like standing up for that rhetoric in any way. It's a dark place, Jesse. It's a very dark place. I just think crypto Twitter is where nuance is going to die. Like, it is incredible to me that we talk, spend so much time talking about it and that people are going to argue about like the precise meaning of these very complicated cases and

securities laws that V has spent much of her career getting such expertise on and trying to fit it into a few words or characters. I don't even know what the limit is somewhere in the 200 range or whatever because I just don't think that gets us anywhere. And to me, like, we talk about wanting better critics, but like there's, and I agree with you. However, I don't feel like we've ever embraced any criticism at this, as this industry, even internally, like what we were talking about last week, like when we don't all agree there's criticism and it's like an attack of each other because for me, like so much of this dialogue is on crypto Twitter right now, which is all about fighting and not about persuading. And I just think we need to get back to persuading because

Amanda Fisher is not going to convince any of us with her tweets. I don't know her personally. I don't want to speak to that at all. But you know who else is not convincing Amanda Fisher or anyone who disagrees with us, any of the tweets that are in response because it just becomes like a fight rather than a let's just try and accomplish something and move things forward. And I live in this like idealistic world where it's something that I want and I fully appreciate that that's not how everyone lives and some people like to fight and that's just not always how you move things ahead. But I just think if we keep talking about crypto Twitter, we keep moving our dialogues onto crypto Twitter and it being the basis of how we convince the world that crypto is the best way forward.

Like that's going to be a problem. And V, I think you said to me offline some time like last week about how much people on the Hill actually look at Twitter and how they like think through what the crypto industry thinks and probably many other industries. And regulators. Regulators look on Twitter. And so I'm like, like we spend so much time putting on suits going to the hill, spending time with regulars. A lot of the people on crypto Twitter do this and put so much time into this.

And we think about what we're going to say. We go on these panels and we talk about these issues and we spend so much time to be like, we are responsible industry. We care about the same things you care about. And then the regulators just have to open their Twitter X app and see all this like really inappropriate conversation. And it's not all just about crypto, but it's a lot of it is just really angry rhetoric that I don't know. if it serves us. And I know that's a bit of a spicy take as someone that isn't prevalent on crypto Twitter, but I just don't really know how we got here. Well, also, your point, like, I hate the mud slinging and name calling on Twitter. I think it's really sad to see these highly intelligent professionals

call each other names. And we even saw that with the Amanda Fisher debate. It really made me sad, because I'm like, you're so much more effective without the mud slinging. And they're all. Also a lot of emotional people in crypto. Maybe that's a hot take. Most of the emotional people are actually men. I'm just going to put that out there. And you can see them emotionally melting down in real time. And I want to be like, okay, everybody, calm down.

Go write this in a letter and then throw it away. Like, take a beat. So I think your point is spot on. It's a dark place. So one of the things I think is really important to pivot from the crypto Twitter is a wasteland conversation because we could spend all hours. talking about this, I'm with you, is this whole conversation, the Amanda Fisher conversation, has also raised just a broader conversation of the securities risk and regulatory environment

more generally in the United States right now. Okay. And some people have observed that there is a little bit of what I'll call a yolo mentality in crypto, which is somewhat disturbing because we all need to continue to build responsibly. But of course, the SEC has lowered the temperature materially in the past year. And so there's certain projects taking on more risk and being more aggressive with their regulatory strategy. And I think some of the best examples are arising real time in the ICO environment. So just as background, we had absolutely massive oversubscribed mega-eath ICO. They did block U.S. investors. In the past, we also recently, I want to say something like six months ago, had a Venice token ICO where U.S. individuals were permitted to participate. We had the Monad ICO, which I understand Monad is taking a position that it was not an ICO, but it was a public token sale via Coinbase yesterday that was somewhat disappointing, as reported by Unchained, a lot of the early momentum had fizzled.

And I believe they only raised something around 100 million against the 187 million worth of USC the King was looking to raise. But all of this conversation is big question, V, are we back to ICO season? Oh, my gosh. It's just a bad thing. Like, what the hell is going on? Okay, so I'll just start by saying that this, like, gives me massive PTSD because this is literally like, I worked on, like, I worked on, like,

different kinds of securities cases when I was in enforcement, but a lot of what I did was like during the ICU boom, right? We investigated and like went after all of these ICOs, not all of which were scams, but you were seeing people raise like gobs of money without really disclosing, you know, like the right kind of information to buyers. Oh, and sorry to interrupt you. I should obviously stop and define what I'm talking about with an ICO. We're going to try to avoid using acronyms, initial coin offering, which was a massive fundraising mechanism for crypto projects where the company sells usually newly created tokens to investors in exchange for funding. And there was a huge ICO boom years ago, which after that, there was a regulatory reckoning.

So that background is important. Please, V, go ahead. Yeah. So ICO is basically just a play on like IPO, the word IPO, right? So back then, we were seeing all of these. teams raising tons of money, most of them had not built anything. It was sort of unclear whether they would ever build anything. And like, you know, not to not to defend like Amanda or the SEC or anything, but but like I mean, I think like I sympathize with what the SEC was going through

at the time, right? Like I was a part of that. Like one of the one of the first crypto cases I brought, I kid you not, these guys raised $4 billion. And what happened to that money? to this day, I have no idea. What I do know is that one of the founders just bought a $170 million mansion in Sardinia. So that's cool, right? Do I regret bringing that case? No, I do not. Hopefully you're coming part of it and inviting all the investors. Yeah. I mean, I take issue with the way that the SEC pursued it programmatically, right? So instead of trying to come up with like, hey, here's how we could get these token issuers to come to register, make sure that they're disclosing the right kinds of information, which might be different than what, like, a traditional IPO would

require, right? Instead of doing that, they brought, like, over 150 enforcement actions over, like, four years or something. So I think, you know, we all agree that was not the right approach to regulating the industry. So it is interesting, right? Because their crackdown on ICOs during those years worked. You basically did not see them anymore in the U.S. And so it is interesting to see. I've been told that they're not calling them ICOs. They're calling them public token sales. So I'll use that term. It's interesting to see projects now, again, raising money directly from the public and doing it on both centralized platforms and decentralized ones, right? I think we saw two big ones, including the ones you mentioned. Can I ask you a question, V in particular, but I'm sure Catherine, you have a

perspective here. Like, I think there's one argument here that this is like a much, much more mature, compliant, transparent, potentially, version of the former ICOs. So, like, we are learning. Like, I know that Coinbase was publishing its market makers for the Monad non-ICO. You know, there was, like, a lot of rules about how much you could hold it for, what kind of users could get, how much allocation, et cetera. There's a lot more transparency than there was in the past with like the million dollar Serdenia purchase and the decentralization part is, is interesting. But on the other side, like, are we just not learning from our mistakes of the past either? It seems to me, like, I don't want to be the one that's saying, like, oh, that's

not a good solution. This is another bad thing and just like throwing mud and sludge at ideas. Because there's something here and there's something about growth here in the industry that I don't really want to ignore. There, so, you know, what I'll say to that is there was never a problem with ICOs, right? Like, they're actually a very efficient and some would say like fairer mechanism like for fundraising. As long as there was never like. There's never anything inherently wrong with it. So I think what you're seeing now, right, to your point, Jesse, is that the platforms and the teams that are doing this now, they actually are putting out all of the kinds of disclosures that like the SEC probably should have created a tailored regime for, right? And

potentially what Congress is going to tell the SEC to do if and when it passes legislation. You guys think it's too late though? Like I know there's been a lot of reporting about Monad, not like only having fewer subscriptions than they thought, but it's still in the open window. But obviously people always like to criticize. Like, do you think we're too late? Do you think it's a market issue? Do you think it's nobody wants to be, you know, in the centralized place? platform with all these rules. Like, how do you think it's going to play out? And it could just be that like Bitcoin is down a lot.

Well, that's the chatter is that it was the decision to list on Coinbase. I don't know if that's true, though, because comparing the two, you look, Monad has a great team. There's a lot of buzz around Monad. But speaking from the Ethereum perspective, the buzz for Mega-Eath had been percolating for years. So it's hard to compare the two projects and everyone is comparing the two projects. So I think it's really difficult to just say, oh, it's that it was on Coinbase.

Nobody wants to deal with Coinbase. I think that may have added friction. But maybe that's triggering me a little bit because I also hate crypto's response to like, oh, we're not doing KYC. Like everybody hates KYC. And it's like I get everyone hates KYC. But sorry, you can't deal with Bank X unless you have KYC. So this whole UX friction, we need to acknowledge it.

Of course, a lot of people would, for example, do things like, sacrifice privacy for ease of UX and maybe not participate. What if you really wanted to buy Monad tokens, you would put some money on Coinbase to do it. On that note, okay, one of the other things I wanted to say to Jesse's point before we move topics, I always think about the paternalistic aspect of ICOs and our regulators in that one of the biggest criticisms consistently levied at crypto has been crypto is risky. Crypto is volatile. People lose money in crypto.

And I completely understand and acknowledge that. I'd love to hear your thoughts on this too. But I have to tell you, I spent like a chunk of years as a junior associate working with FX. And if you want to talk risky, like let's talk about FX trading. Okay. So and let's talk about gambling and let's talk about buying cannabis and all these other things that are legal in America that people can lose money. and, I mean, smoking. I could keep going on and on and on.

So I'm always very sensitive to that particular criticism because as long as there's appropriate disclosures and information that is available to the individual investor, they should have every right to engage and spend their hard-earned money in something where they might lose it all. The disclosures is, of course, the missing point. This actually segues right into our next topic very well

into prediction markets. But before I move on, Jesse, V, anything else you want to add to that. I think that's correct. I just also think that saying disclosures as like a broad term just lets people get away with things a little bit because I think the disclosures have to be like pretty easy to read, very understandable because we just have to remember like public markets are turning into private markets, not just in crypto. And it's something that in many ways I support and a lot of the companies that Ribbitt invested in its support.

So like I'm a fan of the idea of giving more access, but we have to appreciate that it can't be the same kinds of disclosures that, you know, a sophisticated investor would have time to look through. I mean, like, nobody reads terms and services, like, except for me because I have to for my job. But like, it's like a complete cluster fuck, if I can say that, to try and get through some of these. So disclosures need to hone in on what that means.

Yeah, I think, but you know, the securities laws and what the SEC does, it's, it's a very disclosure based regime, right? So they are really important, but I agree. Like they need to be like relevant and material and specific enough so that like investors can actually make an informed decision. So I just, I wanted to close this out just with one more point, which is, um, Jesse, you and I were on a panel recently about what other tech lawyers can learn from crypto's experience. And so, you know, we both made points to the audience about that. But I think one sort of

underappreciated lesson that I think like we should all take away from this and that I hope the regulators take away from it is that when it comes to emerging tech, the first mover advantage doesn't just belong to the startup, right? It belongs. to the regulator that can demonstrate that it's able to constructively regulate something new. And if they can't, guess what? They risk losing not just their credibility, but like their power over that industry or whatever. And like, I know this is a total counterfactual, but I firmly believe that had the SEC shown over the last five years that it could regulate crypto in a way that actually worked

and wasn't a de facto ban, that literally Congress. would never have gotten involved. I know that's controversial, but I really don't think Congress ever would have gotten involved. Because it's like when you're at work, right? If you do a good job, you'll be given more responsibility and maybe a raise. And if you don't, you'll get fired. And maybe they'll give your job to the CFTC.

And then maybe they'll even throw your party out of office. Okay, so maybe I'm going to that. That's a hot take. I do it. I love that take. I just think that they might have only had. to get involved on the AML side and cybersecurity side. Because obviously the SEC and CFDC don't ever see that.

That's more like all the tracks that are coming through. And now they're doing everything. Yeah. And this is sort of like a speculative like game. So I'm not sure how useful it is. But like I wonder if we would have gotten something there that really wouldn't work because they would have felt like they need to get something out to control this space. But I'm not really sure.

I mean, like, I'm not, I'm watching what's happening on the Hill and with regulators with AI. And they're not, no one's learning their lessons right now. Well, I also always laugh when I talk about crypto in the world of tech. Because I think of that movie. If you recall, like, thank you for smoking with Nick Naylor. It's probably like 20 years old or 10 years old at this point. And there's that scene where he speak, he's sitting with like the spokesperson for tobacco and alcohol and firearms. and they're in the corner together, and they're like, you're our only friends.

Sometimes I feel that way with crypto and Tornibis. Like, there's always like, shun. Do you think we talk about pot twice on this podcast? I mean, yeah, I don't know the theme of today is cannabis. Who knows? Okay. But, you know, if there's something to be learned from emerging tech and volatile industries that are not always universally embraced from day one, okay?

And it's certainly not all bad. So one of the things that we're talking about, like, volatility, what's good for individual investors, obviously also raises questions vis-a-vis gambling. Because look, if we're sitting in the corner with cannabis, gambling is probably not sitting that far away from us, right? And that's also a criticism that is consistently levied, annoyingly at crypto. It's gambling. It's gambling. And it's like, well, not exactly. Gambling. Prediction markets.

Are they related? And just to give some background here, obviously prediction markets are exploding. You know, my former company CBO just announced this week that it's launching its own prediction market. The Calci and Polly Market valuations are truly eye-popping. It really seems like this is Wall Street's latest kind of fomo. How do I get there? A lot of long-term sustainability, theoretically, with prediction markets. but there's always a question that people that are not lawyers do not understand is how are

prediction markets functioning in the United States. How are they okay? How are they not gambling? How are they not licensed on the state level by state regulators as gambling? And why is this making the gambling companies so furious? So, Jesse, tell us about the legal environment that has led to the status quo. Well, the ultimate metric for me that like prediction markets are so hot right now is, is I turned on the news this morning, that Sunday morning and CBS morning this Sunday, which is like the ultimate boomer show had its first segment on prediction markets, which wasn't very deep or that thoughtful. But I was pretty amazed.

Like, I don't know anyone except like my Bubby and Zadie that used to watch that. Like the cartoon sons on the logo? Oh, yes. Yes. My grandfather. I was going to watch them. But then I was like, I learned nothing. But anyway, I really.

I really am fascinated by this topic because I think people talk about the valuations a lot and how exciting it is and what the future prediction markets can be. But like there's this underlying bubbling problem and showdown that's happening right now over what these markets are and how they should be regulated. So it's like states versus the federal government. It's Indian tribal gaming associations versus the CFTC. Sometimes it's like prediction market companies versus like games. gambling companies, as you said, although yesterday, two gambling companies said that they're leaving the Gaming Association to join prediction markets. So that's sort of interesting. But it's all playing out like across the country, like case by case, cease and desist order by season

to cyst order, competing rules coming out. And like even this week, one judge sort of went against a ruling that he had given before to a different prediction market, sort of showing how further it's unclear even in one district. And it's all about the argument of our prediction markets futures under the CEA, the Commodity Exchange Act, or is it just sports betting, especially the sports part of it in particular? And why this is so important is that federally, the CFDC would regulate these event contracts. But on the state level, states get a lot of revenue and have a lot of control over sports betting. And Indian tribal associations that run the gaming groups,

they get so much of their revenue from that in order to be able to sustain themselves. So the fight has really, really broken out. And so what's the answer? And it all really comes down to this very wonky concept called preemption, which I'm going to dive into because I think it's important. And also it is a foundational concept of American jurisprudence for anyone who thought about going to law school or went to law school.

So it essentially means like if federal and state laws conflict, the federal law is going to override or preempt the state law. So only the federal rule will apply. And this was like a very, this is going to get to my history nerd dumb. But like this was a really important compromise that was written into the constitution. But it's created a turf battle between states and federal. We've seen it with lots of things. Let's mention cannabis again, obviously. But how the Constitution keeps states from regulating things that Congress has already decided to govern nationally. So in the prediction market world, platforms like Kauci and Polly Market, they're arguing we're regulated by the CFTC. Look at the rules associated with event contracts in the CEA.

But the states are saying, hey, this is like our turf. This is just sports betting. And it's really interesting to think about how we got here because about a year and a half, or so ago, the CFTC sued Kalshi saying, like, you can't offer these without our approval. It wasn't to do with sports betting, but it's a similar concept. And then earlier this year, the CFTC dropped an appeal after they lost that case. And so after that point, states and Indian tribes, they all filed lawsuits or sent cease and desist orders saying that these prediction markets are encroaching on sports betting, like, you need to be regulated by us. And so the real

question here is like as every company in the trading world is like seemingly melding into something that's like prediction markets sports betting crypto conglomerate and all the lines between speculation and hedging and gambling are sort of seemingly going away like is this the right path forward and there is this vision for prediction markets that like it is a lot more than sports betting it's a lot more than like betting on taylor swift's wedding or what you know what people people, what politicians are going to wear to different meetings. Like there is a lot more to that in the future. But right now, if you look at what's actually happening in the space, it's a lot of sports and a lot of politics. So seeing how this all plays out is going to be really interesting. And also like,

you don't really know. And I, my guess is it goes to the Supreme Court. And I have thoughts about what that is going to look like based on how the Supreme Court's currently made up. But we can talk about that in a second. So one of the other things to note, actually, if you recall, Cal She attempted to offer political event contracts in 23, and the CFTC blocked saying they were illegal gambling, and then Kalshi actually sued. So the CFTC didn't sue. And, you know, as you noted, the CFTC ultimately dropped the appeal. So that kind of opened the floodgates. It's akin to the Grayscale suit in the ETF context where Grayskill was the one who spearheaded litigation to actually, you know, create a path for others to follow. The one thing I want to note just from an educational

perspective before we turned to be. So my, I was formerly chief legal officer of a DCM or designated contract market, a CFTC registered basically exchange for derivatives for crypto futures. And people are always confused about what is a future. And this is so important with prediction markets because you're allowed to be a DCM, a designated contract market, trading futures with preemption if the contracts itself are futures. But the Commodities Exchange Act actually does not define what a future is. It defines a swap, but it doesn't define a future. And so that means that all we have now is U.S. courts precedent, the CFTC treating a futures contract as something with certain characteristics like standardization, you know, trading on futures exchange

and clearing through a clearinghouse and an intent not to deliver. So, you know, most futures contracts are closed out before expiration. That's a whole other discussion on purpose, which we'll have. I need to say that all again. Oh, my God. Okay. So. So anyway, TLDR, there's some characteristics that make something a futures contract, but there's no clear definition. So parties have an incentive to go argue in front of a court and take precedent that supports their position creatively. And that's what these prediction markets have done fairly effectively. But this all hinges on the Commodities Exchange Act not providing a specific definition and allowing for kind of some broad interpretation around the definition of these products. So V, you look like you want to say something.

I want you to chime it. Okay, so that, like, between the two of you guys, that was, like, the best overview I've ever heard of prediction markets and, like, the different legal issues that it implicates. So thank you because, like, it's been, like, very confusing to me for a long time, although that hasn't stopped me from sharing my hot takes with you guys over the weeks. I will complicate it just a little bit more, which is to say that there are some situations where, like,

a prediction market could mimic a security and then potentially fall under SEC jurisdiction, right? And that's when the prediction has to do with earnings outcomes or like if you're betting on a company's future financial performance because that's basically what options and swaps and other securities based derivatives that the SEC has jurisdiction over. That's basically what they are. Right. So like even if the platform calls it an event contract, if the economic reality is that like it's functionally a derivative based on a security the SEC could like potentially get involved too. So not to not to complicate it even more, but I think suffice to say like they implicate a lot of potential legal issues. And you know, it's really interesting like I have

noted so polymarkets chief legal officer Neil Kumar is really really sharp. So these projects are investing in legal and regulatory strategy appropriately so because you're right v there's clearly a turf war amongst a number of regulators like so many aspects of crypto like i remember years ago explaining to people well the fTC the irs the doj the cfdc and the cc and the cc all take a different position on what this actually is but okay it's fine it's going to be fine so there's a turf war here a lot remains but the outcome of all of this is the theoretically existential for the growth of prediction markets. And what is also a very interesting dynamic is now you have the legacy trad players effectively

all in on these markets. Like we are seeing new prediction markets from legacy players. We're seeing really serious partnerships. Obviously, the big ice intercontinental exchange investment into polymarket. That was huge headline news. like a very significant investment. So obviously that makes it, in my opinion, somewhat cynically, far more likely that the prediction markets are going to win in the end.

But stepping back from the law a little bit, I mean, just to think about it in like the economic reality, you know, of this all. So let's say that Polymarket has an event contract platform and then being built on top of it, which there are startups like this, are, is a plight. platform that looks exactly like sports betting. It is the same sort of look so that somebody who engages in sports betting on the state level wants to use that. But they're leveraging. So it looks the same for the user. It pretty much feels the same. But they're leveraging the event contract platform. And arguably, you could say I wouldn't speak necessarily to the different platforms,

with a lot of them are non-custodial, right? And they don't have the centralized entity that these like gaming associations that actually sort of are a bit predatory in certain ways and why states regulate them so much. Like, is it the fact that people can engage in sports gambling in the way that we know about it? Or is it much more about like we have the event contract underneath? And so the platform is less controlled by a centralized entity. Yeah. It's a great point.

And look, you raise another interesting issue, Jesse, like at the crux of this, is this really sports betting or is this actual futures? Or is there a reason for there to be a futures market in this? And that's been a debate I've had with other kind of derivatives lawyers where the Taylor Swift wedding one is a great example. So arguably, it kind of makes sense to have a futures contract where people bet bet on where Taylor Swift is going to get married. because if Taylor Swift publicly announces that she's going to get married in Austin, that will probably contribute like $5 billion to the Austin economy, given the upswing in tourism to Austin around the time of Taylor Swift's wedding. So there's real economic impact, and it actually is appropriate,

and market participants will want to hedge the dynamics of how that affects Austin. However, if you look on a micro level where it's like, well, what color are Taylor Swift's earrings at her wedding? it makes no sense for there to be a futures contract there because if we go back to history 101, futures were originally created to solve the very practical and reasonable problem of price uncertainty in agriculture. So farmers had a major problem like they would plant a bunch of corn in the spring, and then they had no idea what the price would be in the full when they went to harvest. So they needed to create a contract to effectively buy or sell commodities at a fixed price for future delivery. And this also benefited the intermediaries or the sellers that bought the corn from the farmers.

If you look at the current contracts, the futures contracts on all of these prediction markets, you have to ask yourself, like, is this really solving a practical problem? Like most of it is absolutely not. like undisputably. Okay. So on that note, I think it's really important to shift to, I think, what will be our last brief topic for the day. Let's take a temperature on generally the environment with crypto at the moment.

It's the elephant in the room. I've been watching a lot of really funny memes about Bitcoin prices. My personal favorite is taking this place from the Wolf of Wall Street where they're on the yacht and they're all partying. And it's like Bitcoin in October. And then the yacht is in a storm. And it's like Bitcoin in November. People are freaking out.

We are not here to talk about price activity. We are lawyers. But I do want to share an anecdote. I am not worried about the price of crypto because I have to say, I was at a ladies who lunch lunch at my nice suburb the other day with five other moms, including several of these moms were stay-at-home moms. And one of them asked me how work was. And I just said something about work.

And no joke, the waiter actually swung back to our table and said, I'm so sorry to interrupt, ladies, but did I hear one of you say crypto? Because I just really wanted to encourage all of you to check it out. It's been something I've been really exploring lately. And it's really fascinating. There's a lot more to it than meets the eye. I was absolutely dying. All of the mom friends were kind of shocked. And then one of them, who I love her, said, oh, she's in the industry. she has a podcast and i would like to you know basically say that this waiter is now my first and maybe only fan because he got so excited he wrote down the name of the podcast he was literally like fan whirling around yeah thought he was going to offer me a free dessert so point is i loved this i love that we're now at the point where we're literally in the suburbs and the waiter

feels passionately enough about to interrupt like a mom's lunch. So I hope to put that on. My family's Thanksgiving is like our Christmas because we're Jewish. And we invite between 60 and 70 people over to my parents' house. It's pretty extreme. But every year, people want to talk about crypto, unless the price is really low or it doesn't seem that exciting. So, I mean, I think my Thanksgiving will change a lot depending on what the price

fluctuation is the next week. But I just think the three of us have lived through this so many times, right? The ups and downs of it. Like, is this too low? Is this too high? What's happening? Why is this happening? And none of us would survive if we overanalyzed each of them. And there's still waiters in suburbs of Chicago asking about it. There will still be very uncomfortable conversations on my Thanksgiving when I have to sit my assigned seat. So like I feel like we're still moving forward and trucking along. Do you have to like a, Jesse, though, do you have like a drunkle or an aunt that makes fun of you when the prices are low?

Like, is that a problem? Like, are you going to be walking into that? I don't think their knowledge has quite reached that ability. But it's much more like, are they going to ask me all about Bitcoin? Are they going to ask me whether they should buy Ethereum? Or are they going to talk about Coinbase? Like, it just sort of depends on what's happening on the front of the Wall Street Journal. No, it's XRP.

all of the boomers only want to talk about XRP. So I don't know why that is. Like, hey, give it a lot of excitement from mind share, but you're right. It's like that's, that is the number one token that like Uber drivers ask me about. I don't understand that. So interesting. Yeah, I don't know why that is. Like, I guess they're doing something right in terms of, you know, kind of brand and mind marketing.

Yeah. Okay, V, any thoughts to close us out before we round things out? Not really other than like I'm actually really excited for the holidays because like last Thanksgiving and Christmas when I was going to like holiday parties with friends and family. I taught so many people how to onboard like onto the Coinbase app and like even uniswap. So I think there's going to be more requests this holiday and I'm excited for that. I think it's always a cool sign of. I love that. how far we've come.

Live what we preach. I mean, I give my niece's crypto for pretty much every holiday. And I gave my brother and my sister a hardware wallet, a ledger wallet, which I just add to on the holidays. And so you have not lived until you walk through operating a ledger wallet on a decks with your siblings. Oh, my God. No, this is the worst thing.

I set my parents up with a centralized exchange account. And I'd say at least once a week, I have to help them get back into it. Oh my God. KK. How long did it take you to set up your account on mirror? Like way too long. It took me like three hours. And like episode three. Crypto has a UX problem. We need to work on the U.S. Yes. You need to work on the U.X. Okay. That's like a point of growth for the ecosystem. Well, thank you everybody. That's it for this episode of Dex in the City. If you like the show, make sure to follow us on your favorite podcast app or on X. formerly noticed Twitter for live streams, updates, and clips, assuming Cloudflare is working.

And thanks for listening and we will see you next week.