Scalding Black Coffee: Never Tell Me The Odds

Hello!

I have actually been terribly busy, but a small part on the side of the current news cycle activated a couple of spare neurons and I found myself squeezing this newsletter out late last night. So here's me rambling about whether the latest trend in young finance bros throwing their money away is actually going to trigger the next geopolitical quagmire.

Here's your tea!

Gambling Is Going To Start World War 3

I'm beginning to think that the best argument we can make in the present day as to why people should give up gambling is that modern-day gambling may have just opened the hellmouth that will lead us to full scale geopolitical catastrophe.

I am not exaggerating. In the wake of digital fantasy betting services like DraftKings and FanDuel dominating the online zeitgeist and destroying the tender brain-meat of young men for nearly a decade, an entirely new cottage industry has emerged. And it is not only taking advantage of the average person's acceptance of risk and aversion to statistics, but presenting itself not as a gambling space, but as a combination of an independent polling organisation and a theoretical commodity trading space.

How, one may ask, does the run-of-the-mill sports betting have the potential to doom the free world? By being about more than sports. Outside of typical sportsbook services, those sites also made room for the occasional novelty bet—DraftKings still currently keeps it in the realm of sports, with such weird and inconsequential bets as 'what colour of Gatorade will be poured on the winning team's head coach?' or 'what will the halftime show performer's first song be?', but eventually started opening up a Predictions space for bets beyond the realm of bats and balls, including which movie would win the Best Picture Oscar Award. This made room for new competitors to their gambling space—sites that wanted to capitalise on the novelty of those kinds of bets while being so removed from ordinary betting that they could possibly occupy a less regulated ecosystem.

Enter Polymarket, a 'prediction market' launched in 2020 to leverage the 'blockchain' (yuck) to encourage people to bet on the out comes of not just sports, but awards shows, weather patterns, and even economic indicators. Kalshi soon followed as a competitor the year after, and they have been dominating the news media as of recent, for absolutely terrible and frightening reasons.

People are betting on whether a sports team will be invited to the White House, or what the price of crude oil will be at the end of the month. They're betting on whether Hilary Clinton will say the word 'island' during her next Epstein hearing, and how many tweets Elon Musk will make in the span of a week. On Polymarket right now there's high odds that George R.R. Martin will not release The Winds of Winter before year's end, so if you're a cynic with a hundred bucks burning a hole in your pocket, you can make some decent money. They're even betting on—wait, no, they say 'predicting'—whether Bitcoin will go up or down by the end of the day, instead of actually trading in Bitcoin.

But they're also betting on who will be the next Supreme Leader of Iran, how soon regime change in the country can be expected to end, and how much carnage will take place in the surrounding region in the interim.

Now, it's easy to assume this is all morbid but harmless fun. People have been making all manner of strange bets for longer than I have been alive. To be even more accurate, prediction markets have existed for far longer than just a half-decade—the University of Iowa's Tippie College of Business ran Iowa Electronic Markets as a research tool in the late nineties, and even produced a paper that argued that market movement predicted election outcomes more accurately than traditional polling did. Surely no matter how silly a dark a novelty bet gets, they should be allowed to waste their money doing it, right?

One problem is that this space is taking advantage of limited transparency and the obvious consumer gray area between what service they actually provide. The luxury of being called a 'prediction market' is that they are attempting to skirt the same regulatory strictures that would govern a gaming operation. It attempts to obfuscate the space between gambling and other transactions as much as possible: on Kalshi, you're not betting, you're 'trading' on 'event contracts'. The logic of 'buying' and 'selling' 'shares' on Polymarket implies that you're not merely wagering on the probability of an event, but literally transacting with other users based on the movement of other people's intuitions—once it gets too rich for your blood, you can hopefully sell high and still make a profit on your guess without losing out. That puts their process closer to the regulatory space of the Commodity Futures Trading Commission, the same space that oversees derivatives markets. So it must be on the up-and-up, right?

But there are obvious trade-offs from framing it as simply trading on events. These brands also market themselves as independent polling on reality. Polymarket's help page says that "research shows prediction markets are often more accurate than experts, polls, and pundits", which, again, Berg et al. seems to bear out. Last year their CEO Shayne Coplan even called the platform "the most accurate thing we have as mankind right now, until someone else creates some sort of a super crystal ball". This is the logic they're framing behind when Kalshi puts out AI ads and Polymarket results air as polls on evening news broadcasts. They're even running real news headlines under their largest international-news 'events': under Polymarket's current big-ticket item—whether the Iranian regime will fall by the end of June—is a slow scroll of news from The Washington Post, Reuters, and the BBC.

Well, at least they're being accurate.
Or are they?

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Because while the site is linking to reputable news sources, Polymarket's outward-facing relationship to news is anything but honest or accurate. In November of last year, the outlet—which, sorry to bury the lede, has Donald Trump Jr. among its advisors, who has an advisory interest in Kalshi as well—ran troll tweets about Minnesota representative Ilhan Omar, and made a joke tweet about Zohran Mamdani specifically to court outrage from exactly the kinds of people who don't know what Arabic numerals are. It isn't the first time that Polymarket has played fast and loose with news facts, and that coupled with their branding attachment to being a source of accuracy can't reasonably be squared. If the intent is to be a reliable, no-bullshit space where the wisdom of the crowds meets cold, hard reality, you'd reckon they would be above puerile behaviour like this.

Even beyond that is the fact that prediction markets assume that all events are equally resistant to manipulation when they are not. An ordinary user can't game the system, but if you're already in the know of a particular event, the only thing stopping you from a large payday is CFTC enforcement. In the wake of the US-Israel strike on Iran, several 'traders' apparently struck it rich on attack-related bets despite being barely a month old on the platform. While that means this is surely being investigated, and despite the CFTC's assurance that they can accurately monitor whether the equivalent of an insider trade is taking place, there are too many conditions whereby it's possible to never be able to tell what potential conflict of interest exists that may inform someone of the state of a future event.

Worse still is imagining the future political outcomes when someone's engagement with these platforms isn't related to a big payday. If it is possible for someone with insider information to game the bet to win a large sum, it is equally—if not more—possible for someone to burn money on the platform in order to sway public opinion about an event. Given the insistence of evangelists like Coplan that this is a 'truth machine' that can possibly triumph over even expertise, there is an outsized incentive for a bad actor to tinker with a bet not in order to win its payout, but to win its real-life outcome in events where public perception and the active participation of citizens is at stake. If someone with deep pockets gets a group of people to place a large enough collective bet on an election, or a public referendum, the media buying into the narrative that this may be as good as polling may convince otherwise reasonable people that these are unmotivated statistics. Hell, even worse than this is the potential for a bad actor with enough resources to shift public perception regarding his potential result before the event happens—like running attack ads on the political rival of your favourite specifically to sway public opinion.

Does the CFTC consider this a reasonable material parallel to sportsbook match fixing? I have no idea, and neither do most other people. Is it possible that someone who isn't even looking for more money can use this to the advantage of a corrupt political campaign or a referendum in favour of empowering corporations or other politicians over people? I think very much so. Are there reasonable answers from the platforms themselves about how to avoid this dystopian possibility? Not at all.

But it's also worth noting that we're still all talking about 'events' that have the lives of real people wrapped up within their consequences. People are literally betting on the safety and dignity of entire communities of strangers—and in some cases, it would seem they're even potentially fixing or card-counting the very results of those events to the detriment of other people—in exchange for a check. I can think of nothing more dire for the way we imagine politics than this.

Imagine the very worst case scenario that can come to mind. For instance, imagine a troll farm is being raised up to flood Polymarket with bets whose stakes would have incredible international consequences—the outcome of the next election, the possibility of a public protest around the next future overreach of state law enforcement power, the very statistical likelihood that World War Three is at our doorstep.

Now, ask yourself: do you believe that there is absolutely no one currently operating in politics or popular culture, in the United States or abroad, who would materially benefit from playing this game? Not even for the money, but for the score? Can you imagine Russia or China doing it to destabilise your country? Can you imagine lackeys of the Trump regime doing it to ensure a presidential term for one of their own—or an illegal third term for their king? Can you imagine a corporation doing it to astroturf support for a capitalist political event that would shaft workers? Can you imagine a Christian nationalist lobbying group using this power to affect a future that makes women, queer people, and racial minorities unsafe?

I can imagine maybe a dozen dozen scenarios where the end result would be at least someone scoring big on suffering, and at most, would be someone causing the suffering in order to score, or benefiting from the fraud to actually do real harm on a national or even global scale.

I do not want to live in a world where a college sophomore can win a thousand dollars worth of crypto betting the under on another person's humanity. And I definitely don't want to live in a world where that bet is shown to your grandfather as 'independent polling data' arguing that a majority of people were right to deny that humanity in the first place, and deserve to be paid for it.

Not having more reasonable tools to rein in this potential downturn at least before the next US election comes around will potentially be the nail in the coffin of a state of international democracy that can reasonably survive this condition of financially incentivised propaganda and motivated insider policy manipulation. Sadly, I don't even think we can reasonably wait that long, because any time now these platforms may potentially be the thing that triggers a large-scale public interpretation of any event that may lean into international conflict between any two superpowers, or financial clashes between any number of factors determining your current standard of living. The consequences may in fact be so dire that, ironically, there are some we cannot predict at all.

I want to believe that institutions like the CFTC have some handle on what's to come. But I also happen to believe that the many countries that have banned these platforms in their borders have the right idea. I can see no positive end result to treating the public, observable trade of these 'events' as both different from gambling and similar to news polling. Prediction markets are bad for gamblers, bad for politics, and bad for the very state of truth. If we actually want to secure the future of our world, and not just trade in it, we need some greater checks on this kind of activity before the worst possible outcomes of them come to fruition.

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The Leaves

Thank you for reading!

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As for updates, I should be heading to PAX East soon! I will be running more demo sessions of Grayshade while I'm there, alongside Gregory A. Wilson himself, the author of the Gray Assassin Trilogy! I also plan on doing some other game-related observations while I'm there, so if you ever see me in the wild, feel free to say hi! (And if you see me and I look tired, I am. Just hand me a Monster Energy and send me on my way. But still say hi, though!)

My one question for today is: what's the most interesting dream you remember having?