[0:00] - You've probably seen the ads,
[0:01] Kalshi Polymarket.
[0:03] The pitch is that you can bet on anything,
[0:06] the election, the Super Bowl,
[0:07] whether or not aliens will land in 2026.
[0:10] Well, I put $1,000 of my
own money in to find out,
[0:13] are prediction markets a scam?
[0:15] (upbeat music)
So let's start
[0:16] with Polymarket.
[0:17] Let's see what we got.
[0:18] So there's $21 million in bets
[0:20] on what will happen before GTA VI.
[0:22] 55% that there'll be a
Russia-Ukraine ceasefire.
[0:25] We live in a world where
you're betting on whether
[0:26] or not a war will have a
ceasefire before a game comes out?
[0:31] Actually, I'm kind on board with this.
[0:32] I feel like some stuff is dumb,
[0:33] but that's kind of funny.
[0:34] How it works.
[0:35] Buy yes or no shares
depending on your prediction.
[0:37] Odds shift in real time.
[0:39] Place a trade, fund your
account with crypto,
[0:41] debit card, or bank transfer.
[0:42] Oh, they don't take credit cards?
[0:44] I mean, that's probably
[0:44] for the best.
- Makes sense.
[0:45] - But, okay.
[0:46] Oh, "By trading you
agree to the terms of use
[0:49] "and attest that you are not a US person,
[0:51] "you are not located in the US,
[0:52] "and are not the resident of
[0:53] "or located in a restricted jurisdiction."
[0:55] Wait, I thought you could do this in US.
[0:57] - [Alex] Well, remember how
we said something about
[1:00] different platforms being
various levels of legal?
[1:03] - Polymarket aren't legal yet, are they?
[1:05] - [Alex] Not in the US.
[1:05] No, not really.
[1:06] - I am not gonna be doing
any crimes on camera.
[1:08] I am a good, law abiding citizen.
[1:12] Let's go to Kalshi. (coughs)
[1:13] Okay, so quick context,
[1:14] because while they're
both prediction markets,
[1:16] Kalshi and Polymarket aren't
actually the same thing.
[1:20] Polymarket's the one
you've probably heard of,
[1:22] and they're also the slightly more,
[1:23] shall we say, problematic
player in the space.
[1:26] - How do you feel about war?
[1:28] - And as we've just seen,
[1:29] they're technically illegal
in the United States.
[1:32] Now Polymarket US, which is its own thing,
[1:34] is coming, if you wanna
sign up for the wait list.
[1:36] But for right now, if you're an American,
[1:38] and you keep hearing about Polymarket,
[1:40] well, you've been hearing about a website
[1:41] that you're not supposed
to put money into.
[1:44] Kalshi is the one I can use.
[1:46] It is an actual CFTC regulated exchange,
[1:49] meaning it's approved by
the same federal agency
[1:51] that oversees other futures trading.
[1:54] Now how betting on aliens is
[1:55] considered the same kind of futures option
[1:58] as farmers hedging against a dry season is
[2:00] a whole other question.
[2:02] But that's besides the point.
[2:03] So there were definitely a
few steps I had to go through.
[2:06] So they needed email,
[2:08] a phone number,
[2:09] my name,
[2:10] my address.
[2:11] They wanted to scan my
ID and take a selfie.
[2:14] And I also did have to give
them the last four of my social.
[2:16] But after doing Rent-A-Center,
[2:18] I guess I'll just give that
out to anybody at this point.
[2:21] So why don't we take a closer look?
[2:23] I do have, as you can see here,
[2:25] $1,000 in my portfolio,
[2:27] which they apparently pay...
[2:29] "Please check the information
you introduced is correct
[2:31] "and try again."
[2:32] What?
[2:33] They take my money?
[2:33] What do you mean information?
[2:34] I gave you it all.
[2:35] Give me some options.
[2:37] What are we gonna bet on?
[2:38] - Pokemon.
- I mean, sorry.
[2:39] Where are we going
[2:40] to financially make
questionable decisions on?
[2:43] - [Ken] Pokemon.
[2:44] - I don't think...
[2:45] Is there Pokemon?
[2:46] Whoa.
[2:47] Okay, so you can bet
on the price of packs.
[2:51] - [Ken] This is right up your alley, dude.
[2:53] Go. Go for it.
[2:54] You don't even have to buy packs anymore.
[2:56] - Who wants to buy
Pokemon cards to own them?
[2:58] Why don't you just bet on
value of Pokemon cards?
[2:59] - [Ken] Exactly.
[3:00] - My goal for this video is
[3:01] not to just say, "These are dumb and bad."
[3:03] Like, I wanna understand
how these things work.
[3:06] I wanna understand how legal
things like Kalshi are,
[3:10] how they've worked
through these loopholes,
[3:12] and ultimately what it's
actually like to really put time,
[3:18] and money, and effort into,
[3:20] can you win,
[3:21] how does it work,
[3:22] and what are the downsides?
[3:23] Because I'm pretty skeptical.
[3:26] But you can understand the pitch.
[3:28] No house, no bookie.
[3:30] You're not betting against Kalshi,
[3:31] you're betting against other people.
[3:33] Kalshi just takes a cut of every trade.
[3:35] To learn more,
[3:36] I spoke with Dr. Robin Hanson,
[3:38] the father of modern prediction markets.
[3:40] - I worked with this group called Xanadu,
[3:42] trying to invent the World Wide Web.
[3:43] And their vision, in part,
[3:45] was that the web would make
it easier to find criticism
[3:47] and that would make public
conversation healthy.
[3:50] And I started to have doubts.
[3:51] And so I wondered, what
else could we do instead?
[3:54] You know, those of us
on the project believe
[3:55] that many public consensus were stupid,
[3:58] and misinformed, and misdirected.
[4:01] The idea was accessible to me that,
[4:03] why not have betting markets?
[4:04] And couldn't the betting
markets be a better,
[4:06] healthier context in which
we would come together
[4:09] to form a consensus.
[4:11] That was my initial
concept in the late 1980s.
[4:14] - So that's the theory at least.
[4:15] Now, Kalshi and Polymarket aren't
[4:17] really what Dr. Hanson had in mind,
[4:19] but the core concept is here.
[4:21] In a market where people put their money
[4:23] where their mouth is,
[4:24] the prices are likely to reflect
[4:25] what the crowd actually believes,
[4:27] not what they say they do.
[4:29] - And of course,
[4:29] I started to read more about
[4:30] the state of literature
on financial markets,
[4:32] and I learned that the standard story
[4:34] on financial markets is that,
[4:35] in fact, it's hard to find
information they don't embody.
[4:38] And then when we've had
head-to-head comparisons
[4:40] of financial markets to other institutions
[4:42] at the same time, same
topic, similar resources,
[4:45] the markets just consistently do better.
[4:46] - Look, I'm not a huge fan of gambling.
[4:49] I personally believe
[4:50] that some friction in
gambling is a good thing.
[4:52] A trip to Vegas is a very
different proposition than
[4:55] casually tapping a few
buttons on your phone.
[4:57] But let's do this.
[4:58] $1,000 to see how this actually works.
[5:01] (screen whooshing)
Look,
[5:02] I don't know if this is for me.
[5:03] (Austin laughing)
[5:05] So I've been using Kalshi
for a little over a week now,
[5:09] and I just don't know what
I'm supposed to be doing,
[5:13] because look, I think what
most people do with Kalshi is
[5:17] they take bets on things
[5:19] that they're really passionate about.
[5:20] But not only am I trying to
not get Martha Stewarted,
[5:24] but even the things that
I am passionate about,
[5:26] I feel like are really boring, right?
[5:28] Like, so I've made some bets.
[5:29] I'll actually show you
my portfolio right now,
[5:31] which I am exclusively down
on basically at this point.
[5:34] So I bet on some F1 stuff.
[5:36] But the problem is, there's
no F1 races right now,
[5:39] and most of the bets
that are there are like,
[5:40] you know, what's gonna happen
at the end of the year?
[5:42] So they're not really exciting.
[5:44] I bet on a Pikachu card going up,
[5:46] which I am making some money on.
[5:48] I've taken a massive hit
on betting on GTA VI,
[5:52] which at this point,
[5:53] at least as I'm recording right now,
[5:54] seems like they're about to,
[5:55] like, bring out a new
trailer and confirm stuff.
[5:58] So I'm way down on that.
[6:00] The one that I was doing
okay on for a minute is
[6:02] betting on aliens.
[6:04] That's also not exciting.
[6:05] Like, I understand there's
a fun factor here, 1,000%,
[6:10] but to me,
[6:13] it doesn't click on betting
real money on real world things.
[6:17] I'm trying to get it,
[6:19] but I'm not really getting it.
[6:21] (screen whooshing)
[6:22] Here's what I keep getting stuck on.
[6:24] It's not that I don't personally
[6:26] resonate with this stuff so much.
[6:27] I mean, I get it. Gambling is fun.
[6:29] The bigger question is,
[6:30] why are prediction markets
suddenly everywhere?
[6:33] The ads all over sports on TV.
[6:35] The integrations on cable news.
[6:37] I mean, somebody decided this needed to be
[6:39] in front of all of our faces all the time,
[6:42] and it's working.
[6:43] Kalshi and Polymarket combined did about
[6:44] $50 billion in trades last year.
[6:47] They did that much again in just March
[6:49] and April of this year.
[6:51] Something else was going on here.
[6:53] So I reached out to a good
friend of mine, Joon Lee,
[6:56] who is an independent sports journalist
[6:58] and who has done some great reporting
[6:59] on the rise of sports betting.
[7:01] - At the beginning it felt like the small,
[7:03] kind of niche thing.
[7:04] And then,
[7:05] especially over the course
of the last year and a half,
[7:06] it's really exploded in a way
[7:08] that I think it's been kind of surprising.
[7:10] I think that people within the industry,
[7:11] both on the sports gambling side
[7:13] and on the prediction market side,
[7:14] I think have been surprised
at how rapidly it's increased.
[7:16] And I think the breaking point moment
[7:18] for me was not even in sports.
[7:19] But I live in New York City
[7:21] and I was walking around during
[7:22] the Democratic primary of
the mayor's race last year
[7:25] between Andrew Cuomo and Zohran Mamdani.
[7:27] And you would see these massive billboards
[7:30] on the sides of the subway basically,
[7:32] being like, "Look at the live ads
[7:34] "for the race between Andrew
Cuomo and Zohran Mamdani."
[7:37] It felt like a kind of
brick wall hitting me,
[7:40] because it was like,
[7:41] "Oh, this is such a dangerous,
[7:42] "slippery slope when
you're taking sports logic
[7:46] "and applying it to
something like politics,
[7:48] "which affects all of our
lives on a day-to-day basis,
[7:50] "even if we don't want to think about it."
[7:51] - Yikes!
[7:52] The whole pitch is that these things are
[7:54] supposed to be different from
the shady, old sportsbooks.
[7:58] You know, it's more transparent
[7:59] when you're betting against people,
[8:00] and not the house.
[8:02] Dr. Hanson's whole vision
was about better information,
[8:05] not about late-stage capitalism.
[8:08] But it never quite works
out like that, does it?
[8:10] Polymarket and Kalshi aren't blowing up,
[8:12] 'cause people are finding so much value
[8:14] in the information they provide.
[8:16] It's because of a serious marketing push.
[8:19] - Well, the marketing
phrase that Kalshi uses is
[8:21] that the sportsbooks
are rigged against you.
[8:23] Kalshi is decentralized.
[8:25] You're betting against the people.
[8:26] The reality of that is
[8:27] that a lot of these kind of private equity
[8:30] and, like, venture capital,
[8:31] like, these major financial firms
[8:32] that control Wall Street are
[8:35] actually setting the markets for it.
[8:36] And so the odds on these
gambling markets in many ways
[8:39] aren't any different from
[8:41] what you would see on a sportsbook.
[8:43] But the marketing campaign,
[8:45] because of kind of the less centralized,
[8:47] less regulated nature of
these prediction markets,
[8:51] it kind of pushes people towards this idea
[8:54] that you're just betting
against someone like me or you,
[8:56] when in actuality you're betting against
[8:58] these massive Wall Street firms.
[8:59] And so-
- Talking to Joon really
[9:01] opened my eyes to the biggest
use of prediction markets,
[9:04] sports betting.
[9:06] By some estimates,
[9:06] it's around 90% of the
volume on these markets,
[9:09] which is far above betting on,
[9:11] if the president's gonna say
a specific word in a speech
[9:13] or if those aliens are
actually gonna show up in 2026
[9:16] or not.
[9:17] So since I'm not having a lot
[9:18] of luck betting on the boring stuff,
[9:21] I have an idea.
[9:22] (screen whooshing)
So I'm here at an Angel game.
[9:24] Let's see how it works, shall we?
[9:26] So right now the Angels
have a 40% chance to win.
[9:30] So as always,
[9:32] especially when it comes to sports,
[9:33] there's 1,000,000 different
things you can do,
[9:35] the first five innings,
[9:36] a bunch of other stuff.
[9:37] I'm just gonna do something simple.
[9:39] So 2.3 times payout.
[9:41] So if I put $200 down,
[9:42] and the Angels win,
[9:43] I make $468.
[9:45] Sure.
[9:46] I guess with that,
[9:48] well, let's see how it goes.
[9:49] This is a lot of fun,
[9:50] but it helps it's a good game.
[9:52] Again. (laughs)
[9:54] (audience cheering)
[9:55] One inning left.
[9:56] Right now we're at 93%,
[9:59] so I'm feeling pretty good.
[10:00] I'm feeling pretty good.
[10:01] The score is five to seven.
[10:02] It got a lot closer than it was before.
[10:04] Okay, I'm gotta put my phone away,
[10:05] I've gotta put my phone away.
[10:05] I've gotta lock in here.
[10:06] I've gotta lock in.
[10:07] - [Announcer] On 13 is your agent.
[10:11] - That was a ton of fun honestly.
[10:13] I think it really
actually made a difference
[10:16] that I was a little bit
more motivated than normal.
[10:18] I still have somewhat
conflicted feelings about Kalshi
[10:20] and Polymarket,
[10:23] but it definitely did
give me a new appreciation
[10:25] for the way you can enjoy sports,
[10:27] if I'm honest with you.
[10:28] It was interesting for sure,
[10:29] but...
[10:31] I've gotta think on this a little bit.
[10:32] I don't know.
(screen whooshing)
[10:33] Look, the numbers don't lie.
[10:36] It's not just people against each other.
[10:38] Maybe Kalshi and Polymarket
aren't the house.
[10:40] I mean, that's the whole legal argument
[10:42] for why these things exist.
[10:44] But the people you are betting against are
[10:46] not just regular people.
[10:48] More than 70% of users
lose money on average
[10:51] and only 0.1% of accounts take
two-thirds of all profits.
[10:56] Just the same way you're probably
[10:57] not gonna pick better stocks than
[10:59] the big Wall Street firms
with huge amounts of data.
[11:01] The same thing goes
for prediction markets.
[11:04] - It's not just about kind
of the the technical way
[11:07] that things actually work in the world.
[11:09] It's how these systems are applied
[11:12] to kind of the existing
cultural narratives,
[11:14] and the emotions,
[11:15] and feelings that we have towards sports,
[11:17] and the romantic idea
we have towards sports.
[11:19] - Who could have guessed?
[11:21] The odds are stacked
against you the whole time.
[11:23] (upbeat music)
So at this point,
[11:24] I have definitely seen enough.
[11:26] I closed all of my positions,
[11:27] and cashed out of Kalshi yesterday.
[11:30] And wouldn't you know it,
[11:31] the second I went to withdraw the money,
[11:33] Kalshi flagged my account
for suspicious activity,
[11:37] 'cause of course they did.
[11:38] So I now need to contact customer service
[11:40] to get things withdrawn.
[11:42] But regardless,
[11:43] I've already donated the $265
I made from the Angels game
[11:47] to the National Council
for Problem Gambling.
[11:50] Prediction markets didn't
just slowly build up
[11:52] to $50 billion in trading volume.
[11:55] They exploded.
[11:56] Two years ago,
[11:57] this is a niche thing.
[11:58] But today there's subway billboards,
[12:01] ads all over YouTube and TV.
[12:03] I mean, we are looking at
[12:04] two of the biggest platforms in the world
[12:06] with valuations in the tens of billions.
[12:09] The idea of a prediction market,
[12:11] it's not necessarily a bad one.
[12:13] Dr. Hanson had some of the right ideas,
[12:15] but what Kalshi and Polymarket are doing,
[12:18] allowing anyone to bet
on basically anything,
[12:20] it's just problematic.
[12:22] It enables truly wild stories like
[12:24] the soldier who bet on the
outcome of his own mission
[12:27] to capture the President
of Venezuela on Polymarket.
[12:30] I mean, sure he got caught
for being a dumbass,
[12:33] but I think it's a good snapshot
[12:35] of just how out of control things can get
[12:37] when there are no adults in the room.
[12:40] I am not gonna dance
around what happened here.
[12:42] The rules have essentially been abandoned.
[12:45] The Commodity Futures Trading
Commission, or the CFTC,
[12:49] is the federal agency that's
[12:51] supposed to regulate futures,
[12:53] which is where prediction
markets fall under.
[12:55] They're a small agency designed to ensure
[12:57] that nefarious behavior
is kept to a minimum.
[13:00] According to a New York
Times investigation,
[13:02] the CFTC really has been
flattened at this point.
[13:05] I mean, there's so much here.
[13:08] People being fired for speaking out.
[13:10] There's only a single commissioner left
[13:12] who used to be a lawyer for crypto
[13:14] and prediction market firms.
[13:15] And there's also this.
[13:18] - Why did you guys make Donald Trump Jr
[13:20] a strategic advisor?
[13:21] - (gulps) We have a lot of advisors.
[13:23] - Mm-hmm.
[13:24] What kind of advice does he give you?
[13:26] - So it really is again about
growing prediction markets.
[13:30] - What's his role?
[13:31] I mean, this is the son of the president.
[13:33] - Again, I mean, we
have a lot of advisors.
[13:34] The people-
- He's not just any advisor.
[13:36] He has a direct line to the White House.
[13:39] - We have a lot of advisors.
[13:40] (speaker booming)
[13:41] - Well, I think that kind of
speaks for itself, doesn't it?
[13:46] So, are prediction markets a scam?
[13:49] Honestly... (sighs)
[13:52] Kalshi will let you bet on aliens.
[13:54] Polymarket will let you bet on
[13:55] whether the president says
"bigly" in a press conference.
[13:58] And those bets will resolve fairly.
[14:01] I mean, the platforms aren't lying about
[14:03] what they're selling.
[14:04] But these are not designed
[14:06] to make information more freely available.
[14:08] They might as well be casinos
that live in your pocket,
[14:11] pretending to be a financial
product that really feel like
[14:14] they're just growing as fast as they can,
[14:17] because the regulator who is
supposed to be in charge is
[14:19] asleep at the wheel.
[14:21] What do you think is more likely,
[14:22] humanity benefits
[14:23] from the information on
Kalshi and Polymarket
[14:26] or it all turns into Biff
Tannen's Pleasure Palace?
[14:29] - Hello.
- Hey.
[14:30] - Hello. Anybody home?
[14:31] Huh? Think, McFly.
[14:33] Think
[14:33] - I know which one I'd bet on.
[14:35] If you enjoyed,
[14:36] make sure to subscribe to the channel,
[14:37] and ring-a-ling that ding-a-ling button.
[14:39] You can check out our deep dive
[14:40] on why AI has become such a huge problem.
[14:43] I probably need to go take a shower
[14:45] or something after this one.
[14:47] "Who?
[14:48] "The son of the president?
[14:50] "He's just an advisor.
[14:52] "Don't worry about it.
[14:54] "Meh."