---
title: 'The Biggest Legal Scam Ever.'
source: 'https://youtube.com/watch?v=xZPX0ix4vBA'
video_id: 'xZPX0ix4vBA'
date: 2026-06-13
duration_sec: 895
---

# The Biggest Legal Scam Ever.

> Source: [The Biggest Legal Scam Ever.](https://youtube.com/watch?v=xZPX0ix4vBA)

## Summary

A creator puts $1,000 into prediction markets Kalshi and Polymarket to test if they are a scam. The video explores how these platforms work, their legality, and the risks involved, ultimately concluding they resemble casinos more than legitimate financial tools.

### Key Points

- **Prediction market ads** [0:00] — Ads for Kalshi and Polymarket promise betting on anything from elections to aliens.
- **Polymarket overview** [0:17] — Polymarket shows $21 million in bets on events like a Russia-Ukraine ceasefire before GTA VI release.
- **How Polymarket works** [0:35] — Users buy yes/no shares with crypto, debit, or bank transfer; odds shift in real time.
- **Polymarket not US legal** [0:46] — Polymarket is not legal in the US; users must attest they are not US persons.
- **Kalshi vs Polymarket** [1:13] — Kalshi is CFTC-regulated and legal in the US, while Polymarket is not.
- **Kalshi signup process** [2:03] — Kalshi requires email, phone, name, address, ID scan, selfie, and last four of social security number.
- **Deposit issues** [2:23] — After depositing $1,000, the creator encounters an error message when trying to trade.
- **Betting on Pokemon cards** [2:47] — Kalshi allows betting on the price of Pokemon card packs.
- **Dr. Robin Hanson interview** [3:36] — Dr. Hanson, father of prediction markets, envisioned them as a tool for better public consensus, not gambling.
- **Markets vs other institutions** [4:29] — Dr. Hanson notes that financial markets consistently outperform other institutions in head-to-head comparisons.
- **Creator's experience** [5:05] — After a week, the creator is down on most bets, including F1, GTA VI, and aliens, but up on a Pikachu card.
- **Why prediction markets are everywhere** [6:22] — Kalshi and Polymarket combined did $50 billion in trades last year, with rapid growth driven by marketing.
- **Joon Lee interview** [6:53] — Sports journalist Joon Lee notes the explosion of prediction markets and their integration into politics.
- **Marketing vs reality** [7:52] — Despite claims of decentralization, major Wall Street firms set the odds, and 70% of users lose money.
- **Sports betting dominates** [9:06] — Sports betting accounts for about 90% of volume on prediction markets.
- **Live sports betting** [9:23] — The creator bets $200 on the Angels winning, with a 2.3x payout, and wins $468.
- **User losses** [10:33] — More than 70% of users lose money on average; 0.1% of accounts take two-thirds of profits.
- **Withdrawal issues** [11:26] — When cashing out, Kalshi flagged the account for suspicious activity, delaying withdrawal.
- **Explosive growth** [11:50] — Prediction markets grew from niche to $50 billion in volume, with ads everywhere.
- **Problematic cases** [12:22] — A soldier bet on the outcome of his own mission to capture Venezuela's president on Polymarket.
- **Regulatory issues** [12:45] — The CFTC, the regulator for prediction markets, is understaffed and weakened, with ties to the industry.
- **Donald Trump Jr. as advisor** [13:18] — Polymarket made Donald Trump Jr. a strategic advisor, raising concerns about political influence.
- **Are prediction markets a scam?** [13:49] — The platforms resolve bets fairly but are designed like casinos, not information tools, with weak regulation.

### Conclusion

Prediction markets like Kalshi and Polymarket are not technically scams but operate like casinos, exploiting weak regulation and marketing to grow rapidly, with most users losing money.

## Transcript

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