PodcastFrom Establish The Run
How Sports Sharps Are Using Prediction Markets Right Now (Episode 982 with Adam Levitan, Nigel Eccles, Henry Kerins, Sports_Projections)
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1 hr 14 min
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May 21, 2026
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Thu, May 21, 2026
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Episode Transcript
0:00Hello and welcome to Episode 982 of the official EstablishTheRun.com podcast.
0:03My name is Adam Levitan. I am one of the co-founders here at ETR.
0:08And prediction markets have officially taken over the sports gambling world.
0:11So we thought it was time, frankly past time, to learn as much as we can about prediction markets.
0:17To do this, I am joined by three distinguished guests.
0:21First up, Nigel Eccles founded FanDuel in 2009. Changed my life in the process personally.
0:25But anyways, Nigel left FD in 2017, has since founded Betdex and BetHog.
0:30Appreciate you being here today, Nigel. How's it going?
0:32That's great. Thank you. Thanks for having me on the show.
0:36Also here, Henry Kerins, VP of Trading at Novig, which just raised $75 million.
0:40Hashtag how rich. Could tell very quickly, Henry, one of the sharpest people in the space.
0:45Henry, how's it going today? I'm super excited to be here.
0:49Long time listener, first time caller. And I also wanted to have hashtag one of us on here.
0:55He goes by sports underscore predictions, sports underscore projections.
0:57We'll call him SP. He needs to remain anonymous because he has a real life job.
1:03But I, you know, when I say one of us, because SP was a DFS player, listen to the DFS edge, has shifted his attention to prediction markets.
1:11And from what I can tell is one of the biggest winners amongst individuals on prediction markets out there.
1:18SP, how's it going today? It's good. I'm glad to be on.
1:21I am honored that I can represent the common man today on this show.
1:26Perfect. All right. Common man is winning a lot of money according to the marketing.
1:31I just, you know, so it's good to be a common man.
1:34Exactly. We're going to get into that for sure here, Nigel.
1:38I want to start with this. If I go on Kalshi or Novig or Polly, it just looks like a sports book, right?
1:45I can see prices. I can bet the Pistons minus three and a half.
1:50I can bet series prices. I can bet futures.
1:52I'm not sure it's clear to the casual better what is actually going on behind the scenes when they go on a prediction market.
2:00So, Henry, maybe you can explain exactly what's really happening under the curtain when you go to make a prediction or a bet on a prediction market.
2:09Sure. There are basically two stages to a trade on the prediction market, which we call the make and the take.
2:15And so I'll start with sports books as a point of reference.
2:19So if DraftKings posts a bunch of lines for an upcoming game, let's say the Cavs-Pistons game that's coming up, you know,
2:26they might post over under 24 and a half points for James Harden.
2:30And they also offer a price on both sides.
2:33They're going to have minus 115 on both sides.
2:36They set the line in the price. On a prediction market, a Kalshi, a Polly market, and Novig, we're only going to
2:43open up James Harden over under 24.5 points. That's the market.
2:46But the exchange has no part in setting the price.
2:50So then market makers come on and start making offers to say, oh, I would sell this at minus 115, no problem.
2:57Somebody else says, I'd sell 100 bucks at minus 112 or minus 110.
3:01I'd sell just the under, just the over. This collaborative process of offering better and better pricing and trying to beat other
3:08market makers so that you're at the front of the queue and offering the best price to the user is price discovery.
3:15And this is what pushes those spreads to be tighter on prediction markets than it would be on a sports book.
3:21But this is kind of the platonic ideal of the whole thing, right?
3:26And the aggregate of all of this is what we call the order book, where you click on a market and you
3:33can see the total liquidity available at every price on both sides of the market.
3:37So that offering period, which is available to every single user, I say market maker because a market maker is just what
3:44we call somebody who participates in that process, either programmatically or manually on an app or a desktop site.
3:50That's completely novel compared to a sports book. Now, the second half of the trade is taking, and this is what people
3:57are a lot more familiar with, right? You might just call this bedic.
4:01It's you open up the app, you see those prices, you pick the side you like, you type in an amount you want, you submit, right?
4:10And that process is not really any different between a sports book and a prediction market for the recreational to even moderately sophisticated trader.
4:17The process by which that liquidity was available to them is very different.
4:21But they're simply just seeing a price and taking what's there.
4:25However, if you're a serious professional sports better trader, there are a lot of meaningful differences.
4:30For instance, the fact that you can see exactly how much liquidity is available to you and know that once you take it, it is gone.
4:38And then see the next action that is taken.
4:41Does a market maker automatically reload more at that quantity?
4:44Do they move their prices aggressively? You're not identified.
4:47The person on the other side of the trade has no idea that you're their counterparty.
4:52You're never going to get limited for this activity.
4:55So I think it's one of these things that's deceptively similar.
4:59But the more you dig into it, there's a lot of like metagame to it.
5:03Like, for instance, all of these executions are public, right?
5:07You could just be subscribing to a feed and seeing the activity on these markets.
5:11DraftKings doesn't publish a public ledger of every trade that happens in all these markets.
5:16So, yeah, I think it's one of these things that the more you dig, the more you find these layers of complexity
5:23that really expand what a prediction market is in comparison to a sports book.
5:28I mean, it's fair to say this is effectively how the stock market or financial markets work.
5:33If I want to go buy shares of NVIDIA, I go on and I find the most accurate price because there are
5:40market makers competing to get my action, to get my bid on NVIDIA, right?
5:44Yeah, you never worry about getting screwed over buying a few shares of NVIDIA for this exact reason.
5:50Right. Okay. So Henry highlighted some things why this might be better for takers.
5:55The easiest one, the most obvious one, and I do want to get Nigel's take on this, is the whole limiting aspect around sports books.
6:02The obvious one, so many people that listen to this show can only bet a dollar on DraftKings.
6:08Or they can only bet 10% of what they should be able to on Fandle.
6:13And this is very frustrating to a lot of rec plus or people trying really hard or sharp people.
6:19Is that enough, Nigel? And I know for people, I just want to be clear to people, Nigel actually left Fandle before Passport was repealed.
6:27So Nigel was running Fandle as a DFS site, which obviously is near and dear to my heart.
6:33But I'm just, I'm curious, Nigel, if you think that that alone is enough to convince the market that prediction markets are indeed better for consumers.
6:41Yeah. Well, actually, like I've been involved in prediction markets since 2000.
6:45So before Flutter was a parent company, it was actually a person-to-person betting exchange.
6:49I merged with Betfair in 2001, and I was actually part of that transaction.
6:54I also launched BetDAC in 2003, which was a betting exchange based out of Dublin.
6:58So I've been a huge fan of what we used to call betting exchanges.
7:03We now call them prediction markets for about 25 years.
7:06Let's say what my experience has been with them is for a certain end of the market, betting exchanges are better.
7:13And so those are going to be your really price-sensitive customer and certainly your professional, semi-professional.
7:18And should we call them aspiring professional? Because aspiring professional is a good name for it because a lot of these people are not.
7:25They're not profitable even, but they sort of aspire to be.
7:29For the mass market, though, we've seen, and we've seen this in a lot of markets, the UK, for example, betting exchanges.
7:36So Betfair dominated that market from early, sure, 2000s.
7:39I would say Betfair today is probably less than 5% of the UK market.
7:43And there really was no limitation on it. Part of it was definitely execution.
7:48Betfair was not, honestly, I kind of laugh at it when I see the interface.
7:52We redesigned the interface, I think it was in 2004, and it's still pretty much the same interface today.
7:58And, you know, when you look at it, and I joke with my friends, I say we did such an amazing job
8:05that they just couldn't better it in 20, 20, what, 22 years.
8:09But, you know, that's not, they just really have underinvested in it.
8:13And so they definitely made a lot of mistakes, and they basically underinvested in it, and it became a little like eBay.
8:20At the same time, though, I think even with the best execution, it probably wasn't going to get to more than, say, 20, 25% of the market.
8:29Because retail, and by this I mean recreational players, people that, you know, hey, they want to win, but that's not, long-term
8:36winning being aspirational profitable, like being a trader, is not why they play.
8:40And so what we found in the UK is that a lot of these people didn't, you know, the things they didn't
8:47like about exchanges, they didn't like the complexity. Like, they just found it confusing.
8:51Why is there two prices? Why is there like six prices, right?
8:55The other thing that we discovered users like is that users actually prefer bonuses to good prices.
9:00And so just to very simply, good price, when a user doesn't even so often read the price, and they don't compare prices, they don't really see price.
9:09But they do know when they get, here's $100.
9:12And so the problem for exchanges, certainly in the UK, was that if your margin is like 1%, you can't be out
9:19giving like loss back and feeding money back into it.
9:22So for the massive retail, I think, as we see the US play out, I think they'll still be on sportsbooks.
9:29If everything being equal, like in, you know, if sportsbooks are available in every state, but for the price sensitive, the professional,
9:36aspiring professional, that market largely just moves to exchanges.
9:39Okay. Yeah. And I totally agree. And I actually had some, a question more specific on that later, which we'll get to.
9:46SP though, is there stuff beyond not getting limited that would be an advantage for people playing on prediction rights?
9:52Because this is the number one question that I get.
9:55And we got a bunch of questions. I asked for questions for this show.
10:00And a lot of people were like, I don't get it.
10:03Why should I play on prediction market versus a sportsbook?
10:06What makes it better? Obviously the limiting thing, I think it's clear to everyone beyond that SP.
10:12Any other takes on why people would be interested in playing on prediction markets?
10:16Yeah. I mean, you hit the big thing. I think it's limiting.
10:20I think there's a couple other things that, you know, at least popped to mind for me.
10:26I mean, on most of these prediction markets, there's way more uptime, if not 100% uptime, which is meaning odds are live basically like all the time.
10:34So for like even just a recreational customer, that is a better betting experience, you know, for most people than the constant grayed out odds boxes.
10:42So that's, you know, one point for people who are trying to win or just recreational, that has been interesting because, you
10:49know, in the prediction markets right now, so much of the action is actually live because this is like a huge leg up.
10:57I think they have over, you know, the traditional sportsbooks right now.
11:00The other thing that I think that is worth highlighting, and it's sort of related to limiting and it's sort of related
11:07to a point Henry made, is it really, I think there's a subset of people who like aspire to make this more
11:14than just, you know, betting for fun. And it's like a hobby to them, something they take seriously.
11:20And this is an outlet for that, where they don't see like a roadblock where it's just going to end when they get limited.
11:28And so I think it, you know, like Nigel was saying, I think it attracts like a different type of people who
11:35want to take it, you know, more seriously, like other types of hobbies, like running or anything, who just get like really
11:42into their hobby and aren't just, you know, betting after work to get a little bit of entertainment.
11:47Yeah. I've seen a lot of people say, you always get the best price.
11:52You always get the best price. You always get the best price.
11:56Sometimes if I, and I haven't done this that much, but sometimes if I go on Calci or something, it looks like it's the best price.
12:04And then after the fees, the price on Sportsbook is actually better.
12:08So like, do you have a take on that, Henry?
12:11Like, are we actually getting the best price after the fees that you get when you take?
12:16I mean, are you going to bait me into shilling my own product?
12:21The Calci fees are heinous. The, I think, you know, we're, we're not in equilibrium at all for this, right?
12:27We're talking about a year ago, nobody had ever even heard of these products.
12:31And now you've had just one player that's really had extended time with an actual CFTC license in the United States, which is Kalshi.
12:39And they've been ever able to charge whatever they want because of that advantage.
12:43I think you're naturally going to see fees get pushed down everywhere.
12:47And on low fee platforms, I mean, the prices are insanely good.
12:51We, we every night are offering NFL NBA games that are one cent wide, like just the most insane bid-ass spread you're ever seeing in your life.
13:00But to Nidl's point, I think there will be a kind of user preference discovery period as well, which is, do users
13:07prefer paying higher fees, which then are rebated to them in, in the form of bonuses?
13:12You know, bonuses probably aren't, strictly speaking, directly legal on federally regulated exchanges, but there are variants of that, right?
13:18Like for instance, the, the broker that is pointing you into a prediction market is not the same business as the market itself, right?
13:26So when you, when you trade PM contracts on Robinhood, they're actually executing on Calci.
13:30So do people start building, you know, consumer centric, um, business layers on top of these things, right?
13:36And, and what are the financial arrangements between these companies look like?
13:40A lot of this kind of sounds like boring details, but I think what I'm saying is, um, we've, we've seen exchanges before.
13:47We've seen bed firm, whatever. We've never seen American venture capital back to the tune of $2 billion, uh, exchanges before.
13:54And that's a different beast. And that's when you start seeing like, uh, an entire economy of, of major players building an ecosystem around these things.
14:02And a lot of the, the downsides of the product that you guys are describing, I think are really UI UX stuff that is solvable.
14:10I totally agree on that. Like actually, you know, already, you know, bed fairs is a 25 year head start.
14:16And when found you all said, Hey, we're going to go and launch an exchange.
14:21What do they do? You're surely they go to their season proven product.
14:25They don't go near it. Um, already we're seeing where the front ends with like Novig and Calci in particular, it's better.
14:32It's better than that fair has had in, you know, forever.
14:36Um, and I just think there might have money going in here.
14:40We're going to see a lot of innovation. That's going to end in a different result than what we saw in the UK.
14:47Okay. One thing that you guys didn't bring up that I thought was a benefit at for taker, like someone like me,
14:54I like to bet markets that often on the sports are not two way.
14:58So I'm trying to bet stuff like who will lead the game in receiving yards.
15:03That is not a two way market on, uh, draft Kings or Fandle.
15:07Correct me if I'm wrong. I believe all the markets on prediction markets are two way.
15:12Is that, is that not true? SB. They're all, they're all technically two way, right?
15:17Cause someone's on, on both sides of it, uh, on certain sites and certain prediction markets, it's easier to, um, to actually access one side of that.
15:26Um, you know, for example, like on, on Calci, it's actually, you have to go through, for example, like the API to
15:33actually get on the, the no sides of certain trades.
15:36Um, we'll talk about RFQs probably in a little bit.
15:39That's not something you can just take the opposite side of very easily.
15:43But, um, the short answer to your question is, is yes, there's, there's sort of both sides of every trade.
15:50So in theory, assuming the order book is open, um, yeah, there's, there's a way to get on, on both sides of each trade.
15:57Okay. Um, Nigel hit on something that I, that I wanted to just discuss the state.
16:02There are big states in America that do not have legal sports books right now.
16:07Florida, Texas, California, Georgia, among them. I have no insight into the data whatsoever.
16:11My assumption is that most of the action on these prediction markets right now is coming from those states because those people can't be on draft Kings.
16:20And like Nigel said, if given the choice, maybe they, maybe they go on a prediction market or maybe the people in
16:27California will say, Hey, I want the bonuses and you know, whatever else that comes on, on fan deal and draft Kings and Caesars, et cetera.
16:35So Nigel, how do you think this plays out in states like that?
16:39If they ever get, I don't know if you have a take on if California, it's like say New York, where you
16:46have both or states, I'm talking about states like California, Texas, Georgia, Florida.
16:51Do you think those will ever get sports legal sports betting, I guess.
16:55And what do you think happens when they go head to head there?
16:59Like, so I think we have legal sports betting and something like 40 or 60% of the country by population.
17:05And California, Florida does, but it's just hard rock.
17:08It's monopoly. It's a seminal tribe. The only way I see that opening up is if the seminal tribe, they decide to open it up.
17:16Texas is kind of feels like a when, but is it two years?
17:20Is it four years? Is it six years? Don't know.
17:23Nick, California is like, who knows? No one knows, but not anytime soon.
17:27And so it's a huge problem. Like Texas and California are two of your biggest states.
17:32And that's the timeline there are both really unpredictable.
17:35I, California could be a never, like it, you know, it just doesn't through the, you know, state regulated route.
17:42I also would say that as a, as a, you know, a regulated operator, if you had a choice between doing it
17:49via, you know, CFTC license or going in and paying the massive rate that the state's going to ask, the tribes are
17:56going to ask for, you're going to much rather go in by the CFTC.
18:00And that's what you're seeing. Like California found it was not in California via the CFTC.
18:05That would be their preferred option. And so they're, they may not even be lobbying anymore in California because they're like, look,
18:12we're here, you know, we don't need to go down the state route.
18:16Yeah. From, you know, working at Novig Henry, do you guys have any concern that if the states ever got sports betting,
18:23that prediction market volume would go down significantly. If those big states ever got sports betting, well, before we had a little
18:30legal hiccup in New York, New York was always our number one or number two highest volume state.
18:36Um, and has like fully legalized OSB. Um, and I think a major reason is there's a lot of very sophisticated sports traders in New York.
18:44And it's, it's just simply a completely different experience and product for people like that.
18:49Yeah. Um, I also think, you know, product Perry parody is very achievable.
18:53Um, a lot of the, the built in advantage of draft Kings and fan duel is from brand recognition, which if you're
19:00talking about states that don't have legal sports betting, like the, you know, people see the ads, but they don't have the apps installed on their phone.
19:09Right. The stickiness factor is really not there. Um, and then, you know, as Nigel talked about, like the, I think you
19:16are really, the ability to exist as a rapper around PMs, um, is just beginning to be explored.
19:21Like the fan duel and DK predicts products kind of work that way.
19:26Uh, but it, they're not sophisticated yet. They, they haven't attracted customers for obvious reasons, but that path is very doable.
19:32And there are a lot of tax advantages to it.
19:35There are a lot of regulatory advantages to it.
19:38So there are a bunch of these factors. That kind of combine to make prediction markets, actually a, a really attractive new
19:45product category, even in spite of the entrenched players, in my opinion.
19:49Okay. I want to move to market making, and this is what Henry started with how this all works behind the scenes.
19:56Now there's some marketing on this. And Nigel kind of alluded to at the beginning, a lot of these sites, they market
20:03it like, Hey, you know, the sports books are screwing you, the witch whatever.
20:07Okay. I might agree. Come bet against your peers on prediction markets.
20:11Cool. Sounds great in theory, except what's really going on is some of the sharpest financial institutions in the world, like Susquehanna
20:18or jump trading are your counterparty or Rufus Peabody, uh, is your counterpart party or Henry and his team or Cal, she's internal training.
20:26You get my point. The counterparty isn't some random on the street.
20:30It's quite possibly someone more sophisticated than DraftKings or Fandle.
20:33I'm not sure that matters that much though. SP doesn't matter.
20:36Like who your counterparty is. If I want to bet Nick's minus seven and DraftKings is offering minus one 10 and a
20:43market maker's minus offering minus one Oh two. Do I really care who my counterparty is SP?
20:49So I think we need to, when we have this conversation, we need to split it up into betters who like want
20:56to win and are taking this seriously and the recreational customers.
20:59So if we think of just like the recreational customers, first and foremost, like they should not be scared at all.
21:06In my opinion of betting against, you know, SIG or any of these companies at better prices than they could get at,
21:13uh, you know, the equivalent OSB book. Um, the idea that, you know, you're betting into someone sharp, so you don't want
21:20to bet a better price is just like unfounded and not, that doesn't really make sense.
21:25Um, so that's, you know, the first part, I think the part you're, you're getting at and like the, the discourse around
21:32this, I see on Twitter is when you have competition for price and you don't have, you know, like, you know, the
21:39DraftKings and FanDuel and whatnot, having a monopoly on the price.
21:42The idea is that the competition is going to get you a, a sharper price over time.
21:48Right. And so where it's harder to win. So the idea is that a minus one Oh two on Cal, she isn't,
21:55is not better than, you know, minus one 10 on, on DraftKings.
21:59The idea is that over time, we're going to be very certain that the price is between, you know, the bounds, the spread of what's on Cal shoe.
22:08So I think from that lens, like if you are, you know, trying to win and take this seriously, like that's a
22:15serious consideration of like, we have many smart people competing now.
22:18If there's, you know, a million, a million shares on each side, they're probably pretty confident that the price is in between these two.
22:26And maybe we shouldn't bet this anywhere is, is sort of the dichotomy I would think through.
22:31Yeah. Well, and my thought was like, let's say I find some amazing golf line on cash.
22:36I'm like, Oh my God, this is off market.
22:39This is the best line in the world. And then I come to find out that's Rufus's line.
22:45Do I really want to be on the other side of, of roof of what Rufus's lean is against the market in the longterm?
22:53That sounds like a losing proposition for me. Right.
22:56And that's where, what's going to be interesting to see how this plays out is, you know, like I think the whole,
23:03you know, sports betting discourse on sharp, there's like this idea of what sharp books are.
23:08Right. And, you know, it's the classic like pinnacle type of type of deal.
23:12Those are like the, the truth, the, the points of truth.
23:16Well, there's more money on these prediction markets than like anywhere right now.
23:20And so, you know, there's, there's going to be this, this point where it flips, where, you know, the sharpest point is,
23:27you know, the prediction markets and there's games being played about, you know, exactly that like leans.
23:32And like people know they use part pinnacle as a source of truth.
23:36So I can shade and I can get like lots of liquidity.
23:40Cause I have all these people thinking it's the sharp side and all this is going to sort of evolve over time.
23:47It's not like a static thing, but yeah, that's, that's sort of the, the point we're at right now.
23:53Yeah. Well, well, yeah, I mean, it's, it feels that the marketing side of it, Nigel, you brought up where it doesn't feel great.
24:01However, you are, if you're consistently getting the best price, you are more likely to win.
24:06You will have less losers in the ecosystem if they are all consistently getting a better price than they are elsewhere.
24:12We've been down this path though, Nigel, with marketing around these kinds of products.
24:17I mean, I'm sure you remember, uh, you know, DFS coming up at the presidential debate.
24:22They were like, yes, they asked Chris Christie at the Republican presidential debate.
24:26Like, what do you think about playing fantasy on FanDuel and drafting?
24:30Cause I was like, Oh my God, they're talking about this.
24:33Like it's gotten so out of control. They're talking about this in a presidential debate.
24:38So would you have any advice to Cal, or anyone else marketing this stuff?
24:43I understand the marketing that it's not gambling. Uh, cause look, you want to, you know, positions of financial product that would sit naturally under the CFTC.
24:51There's going to be rulings on this. It doesn't help.
24:54If you then market your product as sports betting and then say in a court that it's not judges see that.
25:01Um, and they do sometimes call bullshit on it.
25:04Um, my issue with it is, um, like I love gambling and, uh, like I've always loved gambling and I've worked in
25:11the gambling industry for 25 years, but every product, like I've never marketed a product that was gambling as, you know, a
25:18way to get ahead as something that was like a financial instrument that, you know, that you should be sitting beside your
25:25stocks and shares and, uh, you know, something for your kids college fund.
25:29I fundamentally find that I find that unethical. I think it's, uh, it's deeply wrong.
25:34I think people are going to get absolutely destroyed and not just their, you know, this is just their, you know, their spending money.
25:41Like gambling should be an expenditure that, well, if you're a professional, sure.
25:46Right. You're going to, you're going to bet on yourself, go for it.
25:50But I find the marketing from some entities and not Novik.
25:53So present company, uh, but you know, like Cal sheet, the stuff I think is outrageous and I think it's unethical.
26:00And I think their investors should be taking them aside and saying, look, you're making loads of money, but this is going to come and bite you.
26:08Not just, it's not just wrong. It's coming up in court and it's, it's, it's going to, it's going to change perception.
26:15You cannot pass off loads and loads and loads of people.
26:19Like, yes, you may have Trump in the white house now.
26:22And it's a very laissez fire approach, but there'll be another president to be another administration.
26:27And if you create a product that bankrupts people and you've been marketing it as something that, you know, that people are
26:34going to get ahead with, it's going to have bad repercussions.
26:38And so that's, that's kind of my big issue with it.
26:41I love these products. And I, you know, I'm a fan and, but it's just when you market in that way, I
26:48just find that I just find it deeply wrong.
26:51Yeah. And I think it'll backfire on those companies really badly.
26:55Well, it's also ubiquitous, right? And just like DFS commercials were in, in late 2014, early 2015, you know, everything that.
27:01Ubiquitous part is hard to challenge. Cause like everyone's in a race, you know, we're all going to like, we want, and
27:08you know, like even I remember when we talked about our ads being ubiquitous, we weren't nearly as ubiquitous as like personal
27:15injury or like auto insurance or something. No one complained about it.
27:19And so I'm like, and these are terrible ads.
27:22So I'm always, I do ubiquity doesn't bother me as much as the, what is the content?
27:27So yeah, I don't, I don't worry about as much as that.
27:31All right. I want to get deeper into the market making stuff, Henry.
27:35I'm sure there are some people listening to this and we have a lot of very sharp listeners.
27:41I'm sure they are thinking, man, I'd love to be a market maker.
27:45And believe me, I have had that exact same thought.
27:48It's kind of consumed me ever since SP's risk taker podcast talked about ETR highly, highly recommend episode one 40 of the risk takers podcast with SP.
27:57But anyway, like becoming a market maker feels so daunting to me.
28:01Like I think slash no, we have the best numbers on player props and SGPs for NFL and NBA.
28:07I think slash no, we have the best numbers for parlays across other sports as well.
28:12We've spent an outrageous amount of money developing this stuff.
28:15We have a huge team dialing in the inputs, but we're not traders.
28:19And so like, for a lot of people that listen to this, we're like sports people.
28:24The idea of running a financial institution seemingly behind the scenes is like so daunting.
28:29So Henry, what would you say to like regular people like me who might have some numbers or opinions and no sports,
28:36but have no experience whatsoever in the financial markets market making?
28:40Yeah. Well, I will say that, uh, the risk takers podcast is great for conversations about this.
28:45And then I also do a podcast with my partner, Chris Dierkes called inside prediction markets, where we talk to a lot
28:52of what we call garage band market makers who are, um, you know, individuals or small teams doing this and, and a
28:59lot having success and, and targeting different areas. Um, there's a clumsy metaphor I've been using recently that probably isn't serving me,
29:06but I'm going to drag it up one more time, which is that, uh, in market making you have almost like the,
29:13the Walter White and Gus Fring split. And for those who haven't seen breaking bad, Walter White's job is to make the best meth in the world.
29:22That's all he knows how to do. He has no other business skills.
29:26He's if anything, a tremendous liability to the operation.
29:29Um, and Gus Fring is the ruthless businessman who understands the entire criminal underworld and all the key players.
29:35And if he simply has great meth, he can make the whole business happen.
29:39Um, and market making is a lot like that where, uh, seriously, if you're, if you're somebody like Adam who has great numbers, right?
29:47If you're cooking the best meth in the world, you know, you have something valuable.
29:51Um, but it's very dangerous to just, you know, go out there with it and not understand what you're getting involved in.
29:58Um, and then there are players, people like me who really, truly understand every single little detail of, of how these ecosystems
30:05have formed and who is active in them and where is the risk and where is the opportunity and how do we manage all of that?
30:14Um, and so I think partnerships that are foreign between your proverbial Walter White's and Gus Fring's are often the strongest approach to doing this.
30:22And so I would say the first thing is to decide, you know, am I, am I going to consume a bunch
30:29of inside prediction markets and risk takers content and kind of learn the entire ecosystem?
30:33Or am I going to buy every single ETR products and reverse engineer all the numbers and become like a modeler par excellence?
30:41And then how do I collaborate with others to kind of put this all together into a system that really works for me?
30:48Um, because you know, your competition is working that hard.
30:51So you, you can't cut corners. You have to similarly bring a complete holistic approach to doing this if you want to have success, but it is possible.
31:00Okay. So correct me if I'm wrong, but some of the biggest market makers right now are not sports people.
31:06They are financial institutions, Susquehanna jump trading, whatever. They might not even have their own numbers from what I understand.
31:13I could be wrong. Maybe they don't even have their own numbers.
31:17They're just winning based on their knowledge of trading and the ecosystem.
31:20And how this all works. Is that fair to say, do you think SP or yeah, what's your take on the whole
31:27aspect of people winning right now and how, how they're winning right now as market makers and how long that can last?
31:34I was trying to think of a number beforehand and I'm curious what, what Henry's number would be or Nigel's, but my
31:41guess is probably 98 plus percent of volume traded on these big sites.
31:45The person doesn't, isn't like building up their own number from scratch would be my guess.
31:51So like a very, very high percent. I think it's part, like, like I said, like a billion dollar industry propped up
31:58on, you know, five K pinnacle limits to an extent right now.
32:01Um, and trading off of that. I think there are also, um, you know, sophisticated.
32:06Cause I think the way Henry broke it up is exactly right.
32:10There's sort of like build up a price. And then there's people who are just what I would call good at trading.
32:17And those, you know, those people are in finance and everything.
32:20I mean, like what, what jump in SIG and all these companies are good at is not necessarily like knowing everything about everything.
32:28They're good at like trading and seeing, you know, orders and reacting to that and all of that stuff.
32:34And so that's, that's like a separate scale. Um, so I, I mean, like I, I'm curious, like Henry's perspective on, I,
32:41to me right now, the more valuable skill is the trading just, just right now.
32:45I don't know if that's like a forever thing.
32:48Um, I think in my, just my head sort of logicking through, there'll be more importance of like having the right price.
32:55And that's another, you know, allure of prediction markets is in theory, your, your, competing on like who can come up with the best price in theory.
33:04So right now I would say emphasis on trading, but yeah, more on, that would be quite different.
33:10So the international, so bat decks operates in international market.
33:13So it's socket, soccer, cricket, tennis, golf. Um, and the international market, I would say, cause I don't know as much about
33:20the U S market, but the market makers on bat decks are much more specialized.
33:25So there'll be tennis market makers. There'll be cricket market makers.
33:28And they, soccer, they will really only focus on their sports and they generally will have a pretty strong view.
33:34I'm not saying they're still traders, but all of them will come in with a view and then they'll trade around that.
33:41Um, and I do know that some of them have now crossed over to the U S.
33:47Um, so like that, that's certainly the international market and maybe the U S ends up there where you get more professionalized
33:54or more dedicated market makers that go by, by sport.
33:57Yeah. I mean, before you go, Henry, I just want to kind of explain to people what I think is going on.
34:04People are getting a quote unquote fair number to trade off of, and you don't have, you could just be a financial
34:11bro and you could go on whatever you think is sharp, pinnacle or bookmaker circa, or you could find the SGP price on FanDuel or whatever.
34:19And they're taking that number, essentially copying someone else's work and just trade it and just trading off of that.
34:26Is that fair to say, Henry and how sustainable is that for market makers?
34:30There's a lot of that happening. And because of a tragedy of the commons effect, even if, um, each individual is only
34:37putting up a little bit of cash to do that and trying to be responsible cumulatively, it can add up to enormous
34:44amounts of money kind of being copy traded. And if you watch the ticker tape closely, you will notice certain times of
34:51day that markets drift one direction and then the order book on the prediction market explodes.
34:56And then the markets come right back to where they were before.
35:00Um, so, so certainly people have started taking advantage of these things.
35:04Um, there's some legal issues around that, you know, I, but I will say in a, in a traditional market making sense,
35:11like we almost don't even really have a concept of fair internally.
35:14We have an opener. We have a mid price.
35:17Um, we, we get a fill, we move our number.
35:21Do we think the new number is more accurate than the last one?
35:25Maybe let's see what the next fill is, right?
35:27It, it, we're never really fully beholden to a view of what the, the true probability of something is.
35:34It's more that we have a system that we think is minimally exploitable, that, that, um, dances around action.
35:40Um, so it, I don't think you need to build every number from the ground up because the number you built from
35:47the ground up is, is really just your opener.
35:49Um, that being said, you know, one of the key differences between the more traditional European and maybe even South American markets
35:56versus American markets is in Europe, you have a, a long tail of leagues and sports, right?
36:02There's a ton of soccer leagues, a lot of tennis, cricket, whatever.
36:06Um, and a relatively limited number of markets within them.
36:09Like the, the, uh, money line spreads and totals are doing a ton of the volume where in America, people are really
36:16just betting the biggest six to eight leagues or so, but there's hundreds and hundreds of markets in each game, all of these like long tail, um, props.
36:25And then if you start actually counting discrete combinations of scam game parlays, it's, it's like literally an uncapped number of unique
36:32markets that trade on a daily basis. So, uh, the, the opportunities for having kind of niche origination that is then folded
36:39in with market numbers are endless in American sports, right?
36:42Like you could just simply have a unique view on the relationship between Jalen Brown's assist and Jason Tatum's threes, right?
36:49That like, Oh, they they're more or less correlated than usually is the case.
36:53And, and then everything else is market numbers, but all of a sudden I kind of have this unique view about the
37:00specific combo and these guys play, you know, 80 games a season.
37:04And so over the course of the season, that's a big opinion to have.
37:08Um, and so I think we're like really just in the like first inning of people finding ways to inject those kinds
37:15of opinions into all the different products that trade on these markets.
37:19I mean, speaking of being in the first innings, my thought on this is right now being a market maker, you can
37:26win without having an opinion, without knowing what the fair is as it gets more and more competitive.
37:32And I expect this fall to be way, way, way more competitive amongst market makers, having a number that you think you
37:39can trade to, or you can undercut this, or, you know, I don't know anything about trading, but I would think that
37:46being able to get closer and closer to the fair without going past it, or what you think is the fair without
37:53going past, it would be a huge, uh, advantage for market maker.
37:56And like, maybe it's not that important right now, but like Henry saying in the future, when it's super competitive around market
38:03makers, I assume that it will, obviously I'm talking my own book here because I think we have great numbers, but is what it is.
38:11Um, okay. I want to go to taking. So, um, it seems like all of those sharpest people institutions are making markets, right?
38:19They're not, they're not going around taking bets, uh, from what I can tell, which makes sense to me, right?
38:25Like it reminds me SP a little bit of the DFS head to head lobby.
38:30And, you know, Nigel obviously started the DFS head to head lobby with a chat, which for anyone who was early on
38:37Fandor, I, Nigel had to take it down, but there was a chat on Fandor where you're playing head to head.
38:43And it was meant to just like, talk to each other, but people were out of control.
38:49It was so fun. They had to kill it.
38:52Nigel had to kill it, but then he had, it was, you know, we would get support tickets and, Oh, so me, uh, I don't know.
39:00LeBron, I was told LeBron was out and he's playing.
39:03And I'm like, who told you LeBron was out?
39:06It was like in chat. Yeah. Exactly. Exactly. But anyways, it reminds me like a little bit of the DFS head to
39:13head lobby where I, I still do this to this day.
39:17I will only post games in the head to head lobby for people to take.
39:21I'll take my chances against any random, anyone who wants to play me, but I rarely scoop someone's head to head in DFS.
39:29That's already posted. Cause I assume if they're, if they're posting there, they're probably pretty sharp.
39:34They're willing to take on all comers. They're probably pretty sharp.
39:37So what is the merits in taking here? SP with that in mind?
39:41Yeah, I think, so there's two parts to this.
39:44Maybe I think the, the obvious thing on some of the, in general, every site, you know, that has fees, who's charging
39:51some type of fees in general, the taker fee is going to be higher than the maker fee.
39:57Um, in general reason that is, is from the site's perspective, if you're Cali, poly market, whatever, like it's more valuable to
40:04have people make markets and provide liquidity and get, you know, like have it be a good user experience.
40:10So that's, that's generally the direction. So there's just a fee portion of it, but I think the DFS example is a good one.
40:18Cause really it's like an adverse selection problem. And if you just like got a gambling, if, if, if, you know, I'm
40:25laying down a challenge, an open challenge saying I can run a six minute mile.
40:29People would, it would probably be pretty stupid to come challenge me to that, but in the reverse, it doesn't necessarily work that way.
40:37So I think there's just like a, an adverse selection problem of like, you know, someone is posting this price for a reason.
40:44Um, it, I'm not saying it's always right. It's certainly not.
40:48There's certainly good opportunities to take, but the idea is like most makers are trying.
40:52And do you really want to be going against someone who's trying?
40:56Whereas a good portion of takers aren't really trying.
40:59I have an example of something that, that I thought was a good place to take.
41:04I had someone tell me that, uh, Matt Nagy was going to be the next coach of the Tennessee Titans.
41:11And I thought it was a pretty good source.
41:13So I went on to Cal sheet and I blasted a bunch on, and like, it was unlimited.
41:19I mean, there was a ton of liquidity. I could take like a ton on Matt Nagy to be the next Titans coach.
41:26I paid the fees, but I thought I had this like information with that.
41:31I couldn't really use on any other place. And this market was up, turned out that the source was wrong.
41:37And, you know, I got it, I got it wrong and I lost the money.
41:42But my point was like, that was, I thought a really good place to be a taker where the only place in
41:49the world where I could get how much I wanted on this was on Cal sheet or, or, you know, some other prediction markets.
41:57So. I'm not, I'm not sure that analogy with Fondale, it is quite as tight because, you know, with Fondale, like our skill players were like highly skilled.
42:06The difference between the top and the average was, was very significant.
42:09Whereas here you can actually even just quantify the difference.
42:13You know, it's not, I don't, I'm not sure it's as sharp.
42:16Like the, so I wouldn't be as concerned about taking, um, there are certainly cases we see of people sniping and they're very good at it.
42:25They're spotting that things are out of whack. They're very disciplined.
42:28I don't, I kind of see on bad decks.
42:31I seen people more, you know, they'll trade both, you know, make and they'll take, uh, the, you know, the profitable players.
42:38So it's not as distinct as with Fondale. There's like, yeah, there's guys you don't want to go up against.
42:44Sure. For sure. Yes. Um, we got a question from Herzig Henry.
42:48He said, what should retail slash casual traders be doing to have a chance against the market makers?
42:54I'm not sure that there's like advice. I guess for this beyond what you would tell people to do on a sports
43:01book, but do you see any differences for retail slash casuals when trying to win as takers on PMs versus sports books?
43:08Yeah. Well, there's a, there's a general framework. Obviously I can't give specific advice.
43:12Like, you know, there's no, I can't help you handicap.
43:15Um, but it's, it's pretty comparable to poker, right?
43:18If you're like, how do I get good at poker?
43:21It's like, well, you start at one cent, two cent.
43:25And when you're winning, you move up like there's stakes.
43:28Um, the same thing exists in prediction markets, right?
43:31If you're, if you're trying to get started, low liquidity markets or low liquidity regimes of markets, right?
43:36So when they open or, you know, ball in air, right?
43:40Like live that nobody really wants to quote. Those are areas where, um, you can tell from the fact that the market
43:47is very wide and liquidity is very low, that nobody really feels confident about what they're doing.
43:52And so either as a taker, you know, well, this must be a very vulnerable service area of attack or other people
43:59would feel comfortable putting more size up. Or if you're interested in becoming a maker, you could say, look, nobody's competing here.
44:06Maybe it's because there's just not enough order flow.
44:09This isn't popular enough. I won't get rich doing this.
44:12It's like playing one cent, two cent poker, but I can at least learn the ropes.
44:17And, and if I put up 50 bucks, I'm going to be top of book and actually get fills because nobody else is even trying this day.
44:26Right. So it could be, you know, CS go challenger level tennis, um, you know, player props at traditionally at sports books
44:33don't really get posted to like Thursday. Um, prediction markets opened them all way earlier in the week.
44:39Like you can, if you're making numbers, you can come in on Monday with props for Sunday and say, look, nobody wants
44:46to post this except for like DFS pick them sites.
44:49I have an opinion here. It is, you know?
44:52And I think just kind of doing that process of like, I'm going to play at the level where I'm, I'm winning.
44:59And as soon as my bankroll gets bigger, I, I take that shot at something a little harder is, is the general framework you want to follow.
45:07Yeah. And I think that's great. It's great advice for sure.
45:11And I've certainly thought about doing that as well.
45:14All right. I want to get the listener question.
45:16You know, I think I'm just add on that is specialization really matters.
45:21Like being able to like, you know, pick a sport and get really, really sharp on it.
45:26Um, and the other one is like, you know, don't be limiting yourself to like one exchange.
45:31It's there's, you know, like this is a trader's paradise.
45:35You know, you should be looking, you should be looking across exchanges and books.
45:39Um, it shouldn't be limited. There's just so much opportunity here that, you know, when you see somebody who's like sort of
45:46stuck in one exchange, you're like, you, you're not going to get profitable that way.
45:51You really got to look across the market. Okay.
45:54Yeah. Agreed. Before we get to listen to questions, Nigel, I'd be remiss if I didn't ask you about the regulatory outlook
46:01here, just because I know you went for years, state by state, you went live for DFS.
46:06It was really shaky at times. I mean, I, I've known I've told this story a million times, but I was up
46:13at like three in the morning, wedding, a New York state assembly.
46:17Yes. situation. And like, if that had not gone our way and I say our, like I was part of Nigel's team,
46:24but I, if it had not gone our way, uh, you know, DFS, no DFS.
46:29Right. And I wouldn't be here talking to you guys, uh, right here, right now.
46:33So Nigel has been through the wars of regulatory.
46:36I know that I am a turbo knit, but my God, the valuation on Cal, she was 22 billion.
46:42Polly was 15 billion. I could never write a check at those numbers, knowing that the legal standing to me, it seems shaky.
46:50Like there's going to be a Supreme court case.
46:52I assume we could get a new CFTC chair, a new administration, whatever.
46:57So as someone who's kind of been through this, Nigel, how do you see the regulatory process playing out?
47:03So it's, it's very different from DFS is the first thing to say.
47:07It is very different. DFS was a state issue.
47:10It wasn't a federal issue. Um, and sort of when, what we had to do was to get either neutralize the AG.
47:17So the AG was like, I don't care. And there was lots of States, maybe 20 odd States.
47:22The AG didn't really care. There wasn't really an issue.
47:25Or we had to get proactive legislation in those States.
47:29And a lot of people don't remember, but actually we got laws.
47:32Clarified in 22 States. We passed 22 laws in the space of two or three years, which is faster than any company has ever done.
47:40It was just incredible, including New York. Um, you know, California, for example, we neutralize them.
47:45Uh, but so we had a sort of on the ground.
47:49We had lobbyists in every state and that's what kind of saved the, the DFS industry.
47:54This industry and the pathway is going to be completely different.
47:58The first thing is that all the States hit, uh, prediction markets, like, like you almost universally.
48:03Um, and the path here, you know, CFTC is on side.
48:06The question is just going to be the court.
48:09Uh, and so there's going to be, there's already been split decisions in the courts.
48:14Um, that's going to go through the appellate process.
48:17And that, and it will end up the Supreme court.
48:20There's, there's absolutely no doubt in my mind that it's going to be at Supreme court.
48:25Um, and then the Supreme court is going to make a decision.
48:29I will say, and I'm not going to talk about that there.
48:33I will say there's certain things that don't really matter.
48:36Public perception doesn't really matter. Supreme court's job is not to like, you know, see what are people thinking?
48:42The other thing is, I don't think the president matters as much as people think.
48:47Like this Supreme court has already rough, knocked down tariffs.
48:50Trump's marquee, you know, this is a big thing and his justices have knocked it down.
48:55So I don't put any weight on that. What I put weight on is, you know, what does it say in the CEA?
49:02And how does that map to what's happening today?
49:05And that's what I think that the court will look at.
49:09Um, so the other thing is just the time.
49:12I think it's probably two years. Um, so, you know, I guess we're, you know, I kind of run through split decisions
49:19early next year, gets briefed end of, uh, end of next year, early 20, 20, 20, eight.
49:24And then there's a ruling by the summer of 20, 20, that's, that's kind of, and that's kind of a fast timeline,
49:31but I think that's the one we're on. All right.
49:34It's super interesting. Let's get to the listener questions here.
49:37We'll go through five or six of these. She'll says, how would you guys regulate the insider trading that can occur when
49:44there are markets, you know, and I don't want to get into the governments and what humans will do in the future.
49:51I I'm more interested in the sports aspect of it.
49:54I E let's say there's non-public injury, but let's say I know the janitor for the commanders.
50:00And he tells me that he was walking by the x-ray room and he saw Jaden Daniels in the x-ray room, uh, crying after the game.
50:08And I go trade on that. Henry, is that insider trading?
50:12Is that illegal? Should, should that be illegal? Because I don't like, I don't really care about this stuff.
50:18I think everybody's on their own. It's a war out there, but I could see why for public perception, this is bad.
50:25So what's your take on the insider trading in sports?
50:28You should consult your own attorney about what constitutes insider trading.
50:31I am not about to tell you what is and is illegal.
50:35Um, it is, yeah, I think in sports, it's, it's not a moral issue, right?
50:40I, I don't like the world. Isn't it going to end if you are ahead of the market on, um, injury news?
50:47I do think that it is something that hardly anyone has thought about who is involved in this and, and that you
50:54honestly should, um, if a big part of your process is insiders.
50:58Like I know for college, uh, sports people, oftentimes they have networks of trainers and whatnot, just because the stakes are low in college sports.
51:06It's kind of not a big deal to leak information.
51:09There's not a, um, well-maintained injury report system like there is in professional sports.
51:13Um, so if you are one of those people, like you should, uh, consult an attorney about whether or not what you're doing is legal, honestly.
51:21Um, it, but you know, it's not like something, you know, with the Maduro rate for it, since somebody goes and has,
51:28has that information early and bets on it, that could materially have impacted an American, uh, security operation in a way that could have cost lives, right?
51:37Like that's a big problem. And, and I think honestly, you know, at the, the beginning of the controversy around prediction markets,
51:44mostly centered around whether or not sports really constituted gaming or these really, um, event contracts, which is something that a lot of people are still concerned about.
51:53But I think what has been added into that mix is, is this concern about, you know, war markets, politics markets where,
52:00you know, MNPI can actually have damage on human beings.
52:03Um, and I think a lot of public officials attention with regard to regulating prediction markets has shifted to those questions because they really are more important.
52:12Uh, and if anything, that may have the effect of kind of clearing the road for sports, uh, markets in the medium term.
52:19Um, but you know, I'm, I'm just kind of hypothesizing here.
52:22Yeah. I mean, if you're a maker in sports and you have a lot out there, you could get hit for all of it.
52:30Right. I mean, I assume there's some risk controls in place, but if I know Jaden Dale is going to be out
52:37and no one else does, and I can go bet 200,000 contracts or dollars or whatever, like you have to take it, right.
52:44There's no recourse or anything like that from the, there's, there's no voids.
52:49That's your job is to understand, you know, what those risks are and, and what, what price signals mean and, and all of that.
52:56Exactly. Right. Okay. If you complain to Henry enough, he'll void it.
53:00It's definitely insider trading is interesting in sports. Like there's even massive issue outside of sports, but inside of sports, if you
53:07actually think about it, the primary victim of insider trading tip, historically there was the sports book, you know, so they had
53:14this situation where they were the ones getting hit.
53:17Now there's a secondary victim, which is sort of the, um, the integrity of the sport.
53:22Like my view is the sports books and the sports league are so tightly coupled now that they have both have an
53:29incentive to find the right balance that I don't really worry about it that much.
53:34Um, like not that I don't think it happens.
53:36I think it does, but I don't think, I think in any proper regulated sports, they're going to do enough to protect themselves and their partners.
53:45Yeah. Super interesting. I can see there's gonna be controversy about this, you know, but not, you know, to me, it's like
53:52all in the game in sports stuff. Obviously I agree with Henry on the, on the politics.
53:57I will say if you're talking about situations like this is a little different, but like Jonte Porter, for instance, um, that's a great example, right?
54:05Where if, if the, if, for those who don't know, Jonte Porter was, um, checking out of games early so that all
54:12of his unders hit and, and users on his behalf or who are connected to him on, on DraftKings and other sports
54:19books were betting, you know, big correlated under parlays on every Jonte Porter player prop.
54:24And it's a big scandal that still hasn't resolved.
54:27Um, if those trades had executed on prediction markets, first game, people would have flagged it.
54:32I mean, that's the value of having public feeds, right?
54:35If all of a sudden there's unusual activity on relatively exotic combinations right away, somebody is going to say, well, this is atypical who was doing this.
54:44Why was this happening? You know? So I, there's a degree to which, um, we can bring a, a lot more transparency.
54:51to sports. Um, and it can really benefit everybody who cares about the integrity of sports for all of this activity to
54:58be, you know, federally reported open APIs, et cetera, et cetera.
55:01Um, so it's not all doom and gloom on that front.
55:05Yeah. Okay. I actually want everyone's take on, on this next one is from Jake.
55:10He says, what are the pros and cons of prediction markets, market making on their own platform?
55:15So the optics on this, to people who don't really understand what's going on, I feel like have been bad for prediction markets.
55:22I don't, I, you know, I want to learn, learn more about it.
55:26My initial take was like, it's not that big a deal, but the optics seem bad.
55:31Nigel, do you have a take on, yeah. On market making on your own platform?
55:36I think it's an optics factor. In fact, like, and it's kind of lost.
55:41And, and my knowledge of some of the market making and some of the major platforms is that they're not actually even profit seeking.
55:48Um, like a lot of these mentioned markets are getting market made by the own platform because they like the PR.
55:55So they're willing to lose money, uh, in order to do their long game.
55:59And even a short term game is not to make money on these.
56:04So, but it's just kind of an optics problem that, Oh my God, they're fleecing their own customers, just like the books,
56:11but that's actually not, they're actually giving money away.
56:13Um, so I think as people kind of learn a bit about it, it's kind of not great, but they start to understand what's happening there.
56:22So I don't really worry about it much. Well, to me, it's like a liquidity issue, right?
56:27SP. Like if I go on to a, to a prediction market and they don't have a market for something that I
56:34want to bet, it's like, why would I ever go back there?
56:38I want to bet Justin Herbert under, under passing yards and it's not on Cal sheet.
56:43Well, well, why would I go back there? Right?
56:46So I can see why you would want to have an internal market making team to seed these markets.
56:52Now, are they going further and trying to win really hard and all this?
56:56I have no idea. Maybe, but yeah, SP, any thoughts on market making on your own platform?
57:02No, I think you nailed it. I mean, it's the same reason the prediction markets, you know, try and incentivize makers with,
57:09with lower fees is because that, that value, that action is valuable so that people get a good experience and can actually trade.
57:16It's just, so it's the same reason why you would have this.
57:20I think, you know, Nigel nailed it. At one point, there was a sort of a bug on, on Cal sheet a
57:27while back and they, they made their internal trading teams, you know, P and L public.
57:32And they were down like massively at that time.
57:35That was a while back. And it's because they're, they're trading all this, like these toxic markets, like mentions and all this
57:42garbage that nobody wanted to make at the time.
57:45So like, that's clearly the pro is more liquidity and you have, they're probably the only person in the exchange who is like happy to lose money.
57:53So that's like a good thing. I think where it gets a more interesting conversation is like the longer term, if they're
58:00around longer term, because for me, I view this as a very short term, like get enough liquidity, hopefully, and then let,
58:07you know, the participants run its course. And you, you have like, for example, mentions, you have good liquidity on both sides,
58:14I would say now, and like something like that.
58:17Cause it, it does beg into question, like incentives, certain decisions, structure of like, you know, fees and, and just how you're designing the ecosystem.
58:25If the business is primary way of making money is actually like trading and participating in the market.
58:31Yeah. Uh, Henry, obviously you have deep insight into this.
58:34Is the, are you worried about the optics of it or anything else with the, uh, making market make, making on your own platform?
58:41Yeah. I mean, in case it wasn't clear, um, we are in the process of forming a subsidiary of Novig whose purpose
58:48is to market make across all prediction markets, but in particular to be the primary liquidity provider on Novig.
58:54Um, and it's, it's, it's, it's what I joined the company to do and something I personally believe very strongly in.
59:01Um, look, you know, it gives, it gives the exchange, the highest degree of flexibility and servicing their customers.
59:07Because if you don't have a partnered market maker, you just end up giving the world away to a SIG or a
59:14jump trading, um, who ultimately end up having perhaps even more leverage than, than your partner market maker would, because they can
59:21walk away from it at any time. Um, now that being said, I think the main thing that is just a fundamental
59:28conflict of interest that, uh, every exchange needs to own up to is if you have a partnered market maker and there's a true settlement issue, right?
59:37Where it's, you know, a game ends early unexpectedly or some outcome that isn't accounted for you and your rules happens.
59:43And the exchange simply knows that, you know, making a decision one way is worth a million dollars to us versus another way.
59:51It's impossible to push that out of your head, right?
59:54No human being in the world isn't affected by that to some degree.
59:58And so what I, what I would love to see us do and every prediction market do is to put together some
60:05kind of independent board of, you know, people who come from sports and trading, you know, trusted figures, somebody like yourself, Adam
60:12or Spanky, or, you know, these big figures from sports and to say, we'd love to have you, on retainer as an
60:19advisor and an advocate for players, right? To, to deal with this.
60:23And to help us make these decisions in a way that are, that are positive for users, because, you know, ultimately these things do happen.
60:31I think, I think the best way to have internal market making that supports the user experience is to not bury your
60:38head in the sand about the inevitable conflicts of interest that can arise and be proactive about them instead of pretending they don't exist.
60:45Okay. Um, I think it's a good one for Nigel.
60:49Barracuda says, if the prediction market model survives, won't consolidation be inevitable or an order routing service at the very least?
60:55I'm not sure whatever happened in Europe to bet fair face competition and they just won or, or they were, they were
61:02early and just dominated the market from very early on.
61:05Uh, I was at bet deck. We launched 2003 and so it was really kind of three years late and it was underfunded.
61:13It wasn't a great product. And so it never really threatened, uh, bet fair bet fair merged with flutter, which was the
61:20company I was part of in 2001. So it was kind of a fan on draft Kings came together.
61:26Yeah. We'd have ended up dominating. That's what happened to the bet fair.
61:30Um, so I'm sorry, what was the, on, on prediction markets, do you think this will end in consolidation in the same
61:37way we've seen not, not fully with sports books, but DFS sites, really people only play on two now and, and et cetera.
61:44Yeah. Like it's certainly less than we're going to have.
61:47Like, you know, I don't think I'd want to be, certainly wouldn't want to be outside the top 10, but it's certainly top five.
61:55I think we're going to see, we may also see more, some more specialization, like the sports go one way.
62:01Uh, we really should have seen with sort of Calci and Polymarket, like Polymarket, I always think it was more international and more non-sports.
62:09Um, so I do, we will, we definitely will, but we are going to have, like we have, uh, at least five
62:16companies with at least a billion kind of committed sort of thing.
62:20If you include, uh, Robin Hood, FanDuel, DraftKings, Scalci, Polymarket.
62:23So, there's a lot of big players there spending a lot of money.
62:27So, I think it's going to be, yeah, I think it's going to be interesting for a while.
62:33Okay. Candyman, I think it's going for SP. Candyman says, what are some of the opportunities to build tools that support growth in the prediction market space?
62:41Specifically, opportunities not requiring direct CFTC regulation. I mean, there's a lot of people building a lot of stuff around prediction markets right now.
62:49Any advice for builders out there, SP? Yeah. I mean, I would, I would just look at the stuff that's, that's been
62:56popular in the adjacent industries, like, like sports betting.
62:59There's obviously been, you know, companies and tools and, you know, your site as one of them.
63:04That's, that's been very successful. Just sort of building off of, you know, content tools, you know, odds jam sold for like
63:11ton of money, like the versions of that, like stuff that's repeatable.
63:15I think the other thing that's interesting, which we, you know, this, this podcast has been entirely focused on sports, but like
63:22all these markets that are non-sports are also like new and untapped.
63:26And so I think some of those will grow.
63:29Some of those will not grow, but getting in early ish on something like that and sort of building like a sports
63:36lay, like the sports type of tools, which you might be familiar with into those other, you know, markets.
63:42I think there's, there's a lot of opportunity there if you're creative.
63:45I know it's good. I, every time I go on these sites, I look at like the non-sports one.
63:52It like blows my mind. Like what will the temperature be in Chicago on Wednesday at 3 PM and stuff like that?
63:59It's so wild. I mean, uh, yeah. Okay. Um, Dan, he has a question for Henry.
64:04He says, Henry, if you weren't at Novig, how would you be attacking the open field in PMs right now?
64:10I'm not sure exactly what he means by open field, but perhaps you do Henry.
64:15Uh, I think he means, how would you just be trying to win?
64:19Yeah. Um, but I would say, you know, that again, there's a million approaches you could take.
64:24And I've talked about it. It depends on your skillset and kind of where you want to optimize.
64:30One thing we haven't even really touched yet. Um, SP made a glancing reference to it.
64:35RFQs. Um, which means request for quote. This is a, this is a non-order book system that exists on prediction markets whereby,
64:42uh, you put together, uh, you send out a signal to all the market makers.
64:47I'd like, I'd like you to make a number on this particular, uh, market or combination of markets.
64:53You get quotes back. You can choose whether or not to accept them.
64:57It's currently only being used for parlays. Really? It's, I think most people conceptualize it as a way to deliver parlays because
65:04parlays don't really work on order books. Um, my expectation is that it's going to become a more and more popular mechanism
65:11that, uh, the obscurity of it really suits some of the smaller markets.
65:15So we were talking about, you know, player props, you know, um, smaller leagues, et cetera.
65:20Um, and it also kind of conforms to a lot of classic sports book type UI UX.
65:25And so I think learning the ins and outs of how those systems work, those RFQ systems and what can be done with them.
65:33Um, there's a lot of green fields there and that's where I would start.
65:37Yeah. I totally meant to bring up RFQs because this is when we were talking about how can prediction markets ensure they compete with sports books in state.
65:46It's where there are both clearly recreational players want to make parlays.
65:50They want to make parlays during the game. They want to make SGPs.
65:54They want to try to turn 10 into a million.
65:57This system that Henry is talking about request for quote, it fascinates me because you guys have probably seen me.
66:04Like we run the numbers when Portnoy or whatever these other guys tweet their parlays.
66:08I mean, we're looking at negative 30. We expect the people to return negative 30, negative 40, sometimes negative 50 or more
66:15percent on these parlays and SGPs that these books are printing.
66:19And so there is so much room to undercut.
66:22I could give you a way better price on Portnoy's parlay than you're getting right now and still make a ton of
66:29money and still expect to win 10% or 15%.
66:32And that's why that market has been like so interesting to me.
66:35So yeah, I'm glad to hear you say that because I find that that market fascinating at all.
66:41Last question, I think is a joke, but EGZ says, how do prediction markets make the hot, hot dog stand business easier?
66:48I have to get an insider joke here for the risk takers podcast.
66:52SP, how does the, how do prediction markets make the hot dog stand business easier?
66:57SP. Well, I'll give the context on a joke, but you know, to lead into this, um, I am curious, like on
67:04the, the comment that Nigel made about public perception and, and not mattering to the Supreme court.
67:09I am curious, like what Nigel you'd be, you'd be thinking or like what you would be doing differently if you were
67:16in the leaders of Cal sheet poly markets, um, shoes, but maybe I'll, I'll give you a second to think about that.
67:23And I'll just give the context on the, the joke.
67:27So the, the joke is, is around, you know, like when these, but actually markets were coming out and they were arguing
67:34like, you know, these are financial instruments. These are hedging products.
67:37You know, they gave the, the example of like, you know, I think it was the actual example was something like a
67:44bar in green Bay, Wisconsin wants to hedge their financial risks to the game.
67:49Um, and so I've taken that to the, you know, the most extreme degree and, you know, pretended I'm a hot dog
67:55vendor, you know, who, who is hedging out of my, my 12 leg parlay.
68:00So that's, that's the joke. So they're, they're intertwined now with the introduction of prediction.
68:05Okay. Perfect. We're better off to end on your question to, to Nigel.
68:09If you were in charge of Kalshi or Polly, what would you be doing differently?
68:14If anything right now? Yeah. So like, first thing I say, I think they've done an amazing job.
68:19Like, uh, you know, there's some things they've done that are incredible.
68:23They have built, you know, you might quibble their evaluation, but these are companies worth tens of billions of dollars.
68:29And to do that from zero and a quite a short period of time, that's incredible.
68:35Like, and so they deserve all that success. I know how hard it is to build a business and what they've done is, is incredible.
68:43Um, I'd say the certain areas that, and, and the other thing that I don't criticize them for, they're very aggressive approach legally.
68:50I think they have to, right? I don't think that's not, you don't have a choice.
68:55You can't just let a state try and roll you over if you believe you're federally mandated.
69:00So that I don't criticize them for. Or I also think they need to be super aggressive.
69:06Like they, you know, this is a big market.
69:09You're going to have to go for it. You know, billions are going to be put into a competitor.
69:15So you don't really have the option of just sort of sitting back and going, no, we're just going to build a good business.
69:22You're going to become roadkill. So I don't criticize them for any of that.
69:27The two that I would criticize them for one is their marketing and much more calcium than poly market.
69:33But I just think it doesn't necessarily help like this, the sort of person who's going to come and bet you because
69:40they think you can make rent money from it is not a high value customer.
69:44Right. And so by not doing it, you're not really losing anything.
69:48This is a person that comes in. In fact, it reminds me of skills, skills around very similar advertising.
69:54You only have to look at skills, share price to know how well that work.
69:59And like it didn't, it's a terrible customer and it's, it's, it's unethical.
70:03I think they have corrected a lot of that, but you know, you still see it from time to time.
70:10And then the second thing is they need to work together.
70:13Like this is insane. Like they can compete like hell for market share, but on the regulatory side, they need to stop
70:20the kind of the sort of the sniping. What is it?
70:24The coalition for fun, you know, prediction markets that doesn't include poly markets.
70:28That is so childish and it probably makes them all feel good.
70:31And they beat their chess. And I'm like, yeah.
70:34And you will beat your chest the day that, you know, you know, the, the Supreme court shut you down because you
70:41as an industry just can't grow up. And so that would be my big one is like, look, you can hit them all you want.
70:49Like I worked at draft Kings. Like I worked with them for years.
70:53We were not friends, but like we knew we had a shared interest.
70:58So that, that's the big one. And, you know, and I think if we go back and you go, okay, where did we all go wrong?
71:06That could be a big factor in where this industry went.
71:09Yeah. I mean, for people who don't remember, it was, I don't want to say bitter and maybe I don't, I don't
71:16think it was bitter between Nigel and Jason, but it was bitter.
71:20I know like the draft Kings people were like considered fan to like arch rival.
71:25However, however, when shit hit the fan, they came together and Jason and Nigel went together.
71:30Yeah. State by state. We had joint lobbyists. We went, I went up to Albany with Jason and we lobbied.
71:36And when you see what's happening in this industry, where they've setting up institutions, which is everyone part from Polymark.
71:43It's just like, this is stupid. This is really, really stupid because what, what the other thing that we discovered was being
71:50trying to like, the industry doesn't think Polymarket and Calci.
71:53They, every time when it's reported, it'll be Polymarket was actually in Calci or they're not going to learn.
71:59And so whenever you, these were going to Calci tries to say, Oh, that's the stuff that goes on a Polymarket.
72:06It doesn't matter. No one cares. And so they have to kind of figure out how to work together.
72:12Otherwise I just think it's going to be bad for the entire industry.
72:16Oh, right. Right. Well, I really appreciate the time guys.
72:19I've learned a ton. Hopefully all you guys out there in the audience learned a ton as well.
72:25Henry, tell the people where they can find you, where they can bet against you, anything else you want to let the people know about.
72:33You can install the Novig app on your phone and you can find me on Twitter.
72:38I'm big buck hunter on everything. You can message me on Telegram, discord, whatever you want.
72:43And inside prediction markets every Wednesday, directly competing with SP's podcasts.
72:46You can only, it's like DraftKings Fandle. We're going to kill each other.
72:50All right, SP, I assume you don't want to be found, but if you do want to be found, tell the people where they can find you.
72:59Twitter handle sports underscore underscore P R O J.
73:02And then the risk takers podcast. I, I it's amicable.
73:05I'll be the Nigel and, and be amicable with the podcast.
73:08Perfect. That's how, you know, he's winning the fight, by the way.
73:12Perfect. And Nigel, tell the people what you're, what you're working on and where they can find it.
73:18Yes. I'm Nigel Eccles on Twitter. And then most relevant to here, check out batdex.com, which is a, an international sports batting exchange stroke prediction market.
73:26All right. Perfect. Really, really appreciate the time guys.
73:29Good luck with everything going forward for Henry, for Nigel, for SP, for everyone behind the scenes at ETR.
73:35I am Adam. Good luck. Everybody.