My guest this week made more than $3

million from trading on Poly Market.

I've invited the number one prediction

markets trader in the world to Odds on

Open. Meet Goomer. In 2024, he correctly

bet $4,000 that Donald Trump would pick

JD Vance as his running mate and won

over 100K. His work was previously

covered by Bloomberg and CBS. On the

podcast, we talk about how top

prediction markets traders [music] find

edge.

Domer, thanks so much for doing this.

>> Yeah, hey, thanks for having me.

>> How does edge present itself in

prediction markets?

>> Uh, yeah, I mean that's a great

question. So, I mean, prediction markets

are a little bit different than, you

know, other types of investing or other

types of betting because the news can

happen at literally any moment in time.

So, you kind of have to be ready for it

and you have to you have to kind of fall

into a a pattern where you can

anticipate when things are are likely to

happen or you know when news may drop.

So, for instance, if you're if you're

betting on something that's political,

you kind of want to be in the in the

groove in in terms of politics and maybe

it things tend to show up early in the

morning or late at night if people are

trying to bury it. So, it it really

depends on on what you're betting on,

but you you have to kind of get into the

groove of of of what you're doing and

and be able to research it.

>> What I guess makes a good process for

evaluating a good bet. So, I I'll give

you an example, right? So, that to make

things more specific and I think this is

the example everyone asks, right? 2024

election, you have Trump and Kla running

or maybe Trump Biden. Um, how do you

analyze something like that and

synthesize all the news to make, let's

say, a plus EV bet?

Yeah. So, I mean it. So, that is a very

longterm bet because there's a lot of

things that are happening in that bet.

Like, let's say you start betting on it

in January of 2024. Well, there's going

to be primaries. There's going to be

primary debates. There's going to be

debates between Biden and Trump or Biden

and Camala or whatever. There's going to

be polling. There's going to be

conventions. There's going to be VP

picks. So, it's a very protracted

process and it depends, you know, and

and within that large event, that large

very very very important event where the

main market may have billions of dollars

traded. There's a bunch of submarkets

like within these markets um like within

the the overarching event in terms of

what's going to happen in the short

term. So that there's a lot of things to

analyze and I guess it depends exactly

what you're trying to do and and I think

that's one thing that's important to

know about prediction markets is like

you don't necessarily have to be

predicting the exact election results.

There can be multiple things that you're

trying to find your space in or like

your exact specialty within prediction

markets and you can pick and choose what

you want to bet on. So, for instance,

you can focus on who's who's Trump going

to pick as his VP or who is Camala going

to pick as her VP or you can just focus

on what they're going to say during the

debates. You can study like, you know,

Trump's stump speech and be like, okay,

he talks about these things, he tends to

not talk about these things. There's so

there's multiple facets within it. And,

you know, one thing about prediction

markets is you can just kind of go

through the available markets. Like

right now there's probably 2,000

available markets and you can just

scroll through and you can be like,

"Well, I don't know anything about this.

I don't know anything about this." So

you you're not forced to try and predict

things or bet things that you're not

comfortable with or that you don't know

anything about. And you you can kind of

find your your niche within the within

the space.

>> And do you find that most successful

prediction market better or political

betters focus on those micro events and

is there more opportunity and edge

there?

Um yeah, I I would say most people focus

on the big level events, right? So it it

really depends because there are some

micro events that you know may have

10,000 in volume. There are some events

that may have, you know, tens of

millions in volume. So it really depends

on on what you're trying to do and what

time span you're trying to do it. But

generally speaking, people try and

predict the high-profile things, the

things that people care about, the

things that are on TV, that are in the

news, that your parents are asking you

about. So it it it really kind of jives

with like reality, what is important and

what's not super important.

And so when you're looking at those

highle events, as you said,

how do you determine what's priced in by

the market? like you know given the

current odds how do you figure out

directionally whether something is cheap

or expensive.

>> Yeah that so that's really hard and

maybe even impossible because you know a

lot of these events are very unique.

they've never happened before, right?

Trump verse Camala that has never

happened before in the history of

mankind, right? So, you're trying to

price something that is totally and

completely unique. And so, there's a

degree to which the pricing is kind of a

little bit made up. Not in the sense

that people are just kind of just, you

know, BSing or whatever, but you know,

there there's a lot of unknown things

and you there are things that are you

don't even know what you don't know,

right? So, so there's a lot of

uncertainty within these numbers. And so

I I guess what you would really want to

first approximate is not necessarily

whether the prices are totally correct,

although that's something you can

definitely do. What you would probably

want to do is focus on day-to-day

changes within the market. So for

instance, you see a news story that some

scandal is about to hit, right? So you

would want to short the candidate and

maybe they go from 50 to 45 or you know

30 to 38 whatever whatever the news

impact is. So you can trade these within

the short term without necessarily being

an expert on what the ultimate answer is

if that makes sense.

>> I see. And

would you say that that is

where most prediction markets traders

tend to find their edges like and tend

to trade the markets. Um, taking that

example, that same example, the 2024

elections, they kind of have a

short-term forecast of where the odds

are going to move and then they bet on

that direction and then close their

positions out. And I I guess my real

question is how much of prediction

markets trading tends to be um those

shortterm

price forecasts versus holding events to

maturity and kind of just treating it as

okay, I'm going to be paid based on the

outcome.

>> Yeah. So, I would say like someone like

me who does this all the time, you know,

as a living, I would be more inclined or

someone like me would be more inclined

to trade short-term swings and not

necessarily, you know, be just betting

on it and then turning my computer off

and checking again two months from now

whether I won or not. But, you know, a

lot of casual players, they really only

care about what the final outcome is.

So, there could be some Trump super

supporter who's going to be like, "Okay,

I'm going to deposit 10,000. I'm going

to bet on the candidate that I love and

he's going to win, right? So, I mean, it

it really depends on the perspective,

but someone like me is doing probably a

lot of swing trading, a lot of like,

okay, I'm getting in, I'm getting out,

I'm reacting to the latest news. Um, and

you don't really want your positions to

be like super stale. You don't want to

fall in love with your positions. You

don't want to be like, "Okay, I bought

this at 30 and now it's at 40. I'm going

to ride it to 100." Right? So, you need

to analyze things all the time. So, if

you think it's worth 39 and it's at 40

right now, you probably should be

starting to sell some of it and not

necessarily just trying to hold on and

try and hit a big win or whatever. So,

you have to kind of be very um numerical

about it and like, you know, not just

fall in love with your positions and and

and let them either go to zero or go to

100.

And and so when you're looking at those

bets and you're trading them, how do you

go about synthesizing the news for

events that really have never happened

before? I imagine that's hard.

>> Yeah. No, it's it's very hard because,

you know, a lot of profits can be made

when people overreact to the latest

news. Like for instance, there are all

sorts of scandals that have plagued

Trump since he arrived on the scene in

2016. And you know how many because this

is a an easy and cheap example but you

know how many times did you hear oh it's

over you know oh this is this [laughter]

right it's just like it's one of the

most common stories in politics. So it,

you know, if you overreact to the news

and you're like, "Okay, he's at 80 right

now. He's headed to zero." Like, you're

going to lose that. And so you really

have to figure out, okay, this actually

is a big scandal. He was at 80 before. I

think I think the news is going to hit

and he's going to go to 70 or something

like that. And you can't get too caught

up in the exact moment. You really have

to be disciplined about it and be like,

"Okay, he's down to 60. I think that's

an overreaction." uh you know, even in

the face of this scandal, I'm actually

gonna start betting on him at 60 even

though like all the news is negative

right now because you know there there

has to be a a low point at some point.

So it it it's very nuanced and it and

it's hard to do because usually your

instinct is to go with the crowd, right?

So sometimes you're kind of betting

against the conventional wisdom that XYZ

is you because people often overreact to

the latest news whether it's a political

scandal or something totally unrelated

to politics. Um people tend to overreact

to the latest piece of news or

information and think that like

overweing the latest like a recency bias

type of thing.

>> Let's take something like that as an

example.

Would you say because I'm right now when

we're talking about pricing in the news

and you're saying people tend to

overreact I'm seeing that as an analog

to let's say m let's say mean reversion

in price right um and then I would say

that the the opposite of that would be

momentum let's say that a big news story

kind of cascades and it's this catalyst

for a greater trend And how do you

identify one versus the other? Because I

imagine it's, you know, like as you've

said, um, one scandal is not going to

hurt Trump's, um, is not going to hurt

Trump's odds really. I mean, people have

have thought that plenty times before,

everyone says it's over, but then lo and

behold, two weeks later, everyone's

forgotten. Um, versus something like say

Trump almost getting assassinated,

right? and everyone's saying, "Okay,

this is a great shift." Um, yeah. How do

you how do you think about those things?

>> Yeah. So, I I I guess the ultimate

counter example or the one recently that

that was a very profitable uh was peace

uh between Israel and uh Palestine or

Hamas or however you define that. But

because they were close for so long and

there were so many near misses and it

was like, you know, XYZ is going to

happen. Oh, it's going to happen in May.

Oh, it's going to happen in you know,

June. Oh, it's going to happen in July.

So, there were a lot of near misses. And

so, by the time it finally came around,

which I think was in um October, I want

to say, um maybe late September, early

October if I'm remembering correctly.

Anyway, so it was like some Trump tweet

where he's like, "Okay, Israel, stop

bombing Gaza." Like, you know, get your

act together or whatever. And I remember

seeing that and I was like, "Okay,

[clears throat] the market is not

reacting enough, right?" So I think you

know peace between them let's say by the

end of November was trading at let's say

25 cents. I'm I'm just making up. It was

probably something like that. And I was

like well given this Trump tweet where

he's basically telling Israel what to

do. He's kind of acting like the

president of Israel. I think this is

probably worth like way above 50 right

now. Right. So I mean that's a huge

shift in a very very important and

well-traded event. But, you know, all

these people that were like, you know,

burned all these times, they're like,

"Oh, I think it's going to happen. Oh, I

think it's going to happen." They're

very reticent to move the price that

much. And so, it's this goes back to how

hard it is to do it because, you know, I

could have easily been like, "Oh, you

know, this is this is just another, you

know, empty near miss that's going to

happen and I don't think the price

should change that much." But, you know,

I I happened to analyze it correctly and

I'm like, "Okay, this is actually sounds

like it's going to happen." And so, I I

made all these big bets on on peace in

the Middle East happening and I ended up

winning that one. But, yeah, I mean,

it's it's very hard cuz it's very, you

know, qualitative. It's not necessarily

quantitative. There's a lot of context

involved. There's a lot of research

involved. I remember the weekend that

Trump tweeted that and or truth day,

whatever this nomenclature is now, and I

was chatting with a bunch of people, you

know, I was like, well, what's going to

happen, you know, and and I was chatting

with people that were on the other side

of the bet that I was on cuz I was just

trying to get to the bottom of it. And,

you know, I I figured out that their

main the reason that they were holding

the opposite position as me is because

of all these other times it has failed.

And I'm thinking to myself like, okay, I

mean that's a compelling reason, but

like it seems like things are a lot

different now. And so after talking with

all my counterparties or at least people

that were on the other side of the bet,

like I became even more confident in my

bet and I actually increased uh my

betting. So that that's just an example

of like reacting correctly to the news,

right? Uh, and I'm not some, you know,

superstar robot that reacts perfectly

every single time, but, you know, o over

time you want to react better than

worse, you know, over the course of, you

know, all these repeatable events or

whatever.

>> Is that something you do often? Just

talking to people on the other side of

your bed and truly trying to think,

okay, why why are they on the other

side? And then synthesizing what do you

know that that they don't?

>> Yeah. No, I that's super important

because it's so easy to just look at you

know confirmation bias is a really I

mean there are all these biases I think

I've already mentioned too recency bias

and confirmation bi there are all these

biases that are basically trying to

screw with your brain they're basically

trying to you know mess with you and and

and prove to you that what you're seeing

is correct and your view of the world is

is totally right. So, it's very easy to

look at your position and look at the

facts and conform the facts that you're

seeing to the position and the bias that

you already have that you're correct.

So, it's very important to expose

yourself to the idea that you're wrong

and be very open-minded about it and be

like, okay, maybe I'm wrong. Like, in in

the world where I am wrong, what does

that look like? Like, what are they what

are their arguments? Because if you

think about the other side of the

equation, like I'm I love my position,

but they also love their position and

they love their position for a reason.

So why have they fallen in love with

this, right? So it it is very important

to be analyzing it at all times,

especially if you have a big position. I

mean, if you're just betting small, then

you know, you don't really need to like

analyze it or talk to your

counterparties. But but if you're making

like a big position and this is a very

serious endeavor, like it's really

important to to figure out what's going

on on the other side of the ledger.

what you've spoken about there about

confirmation bias. One of the things I

find so interesting about it is that,

you know, it can hit anyone, you know,

rich, poor, even if you've been in the

game for for a long time. I mean, I'm

thinking about top traders or hedge fund

managers who've been at their game for

the longest time, they can still, you

know, they can fall prey to it and end

up losing a lot of money. Um, I guess my

question for you is

you're hailed as sort of this this um

prediction markets genius who who

understands these things. Um, how do you

consistently and constantly put yourself

in the position so that you won't get

burnt by by confirmation bias?

Uh I mean so I think the very important

thing and this is a very simple answer

but I think it's like kind of the key is

to be thinking about it all the time

right it it's to have top of mind that

you're being tricked by your brain and

that you you know you can look at your

position and be like oh my god this is a

great bet like you can you know you're

telling your wife or your spouse or your

friends like oh I just made a great bet

like it's very easy to fall in love with

everything that you're doing and think

that you're I'm a super genius. So, you

have to really be humble. You have to be

thinking about um the fact that you know

the information that you're getting is

not necessarily the whole truth. Um so,

yeah, I I I do think it's very very

important and it's just something from

experience that you have to have in mind

because you know the other thing about

experience is I've been doing this for

so long that I've been in the position

where it's like oh like I was just

blinded by the by my love for this like

I should have sold like two weeks before

I before I actually did. So, you know,

the one thing that experience teaches

you is, as I've repeated these number

and, you know, an large number of times

is that you really just have to be very

on your toes and aware of all these

things that are trying to like, you

know, lose you money, I guess.

>> Can you tell me about a time where

you fell prey to confirmation bias and

really got burned?

You know, I would say it it's funny

because I feel like it's the same exact

thing that happened twice, although it

was it was slightly different. So, I I

would say losing on Trump in 2016 and in

2024 were very similar and and in fact,

uh it was also true a little bit in 2020

because it ended up being a lot closer

than people thought. Um like Trump kind

of easily lost but not like people

thought it would be a blowout and it was

definitely not that. So, uh, you know,

in 2016, a lot of the people that I was

surrounded with were all betting the

same way. And it's, you know, if you're

chatting with a lot of smart people and

a lot of traders, but everyone is

already thinking along the same lines,

like you're you're only going to be

telling each other information that is

helpful, right? And like information

that goes against your position is kind

of like, well, I'm not sure that's

important. And then another person's

like, I'm not sure that's important. And

then all of a sudden, it's an echo

chamber, right? you put yourself inside

of an echo chamber where everyone has

just amplified what you already think.

And so that was, you know, 2016 I lost a

pretty significant amount of money. Um,

I was actually able to live trade Trump

at like 10%. After results started to

come in, um, so that was like that kind

of saved my bacon or else I might have

been out of the game. Um but yeah, so so

2016 was was a humbling experience

because it was like everyone was like on

the same page and you know, but then

2024 came around and I feel like it was

a little bit of the same scenario. But

I, you know, having lived through 2016,

I kept telling myself, okay, you want to

be at 50, you you want to be at like

zero going into election night, right?

You don't want to have a position. You

don't want to have a position. But

everyone that and and there were two

factors at play. Number one, I was again

surrounded by people who were very like

who were also on the same page as me,

but I I I was a little bit more cautious

about this, but you know, it was it was

definitely a factor. And then the second

thing is that this French guy had come

in and was betting so much money on

Trump that, you know, it it almost felt

like one person was distorting the odds.

And I and I still think that was the

case a little bit. You know, it it's

hard to go back and look and figure out

whether the odds were correct or not,

even even knowing all the information.

But, you know, those two things kind of

clouded my vision and this, you know,

this mantra that I had, go into election

night having zero, go into election

night having zero position, you know,

kind of faded into the backdrop. I I

kind of ignored ignored my own advice to

myself. Uh so it's it's very easy to get

to get lost in these type of things and

I took a bigger loss on Kamal than I

than probably I should you know even

thinking that she was going to win which

I think you know it's it was wrong but

it's a fine position to have. I bet I

bet more than I should have. Um I I I

should have been more cautious about it.

Um, I shouldn't have been, you know,

blinded to what I was going to do and I

should have stuck with my mantra and and

what I was trying to do or at least hued

closer to it of having no position going

into election night.

That was a

very interesting time. Um, I guess

looking back I'm no expert on prediction

markets and um I remember talking to my

brother on the on election day and and I

was you know I thought Trump was going

to win but I didn't know if my

confidence was higher than the odds. So

I think on the day it was maybe like 63

37. I don't know if I'm correct there.

And so I thought that, yeah, I thought

Trump was going to win. Um, and then

looking at the odds, that kind of gave

me confidence in in predicting that for

myself. But I guess I wasn't sure if I

would have had any edge in that trade if

I had placed that bet. How do you think

about that? And how do you evaluate when

a bet was good in hindsight?

um if you're predict if you're

forecasting a particular outcome when

you don't there's I mean there's no real

way to do it I guess

>> yeah I so the the way that I think about

the elections is right so 2016 the

polling was just very off right if you

were betting on the polling you got

blown out right that Trump vastly

outperformed his polling and and I think

we kind of figured it out that the Trump

voters were harder to find they didn't

trust pollsters, you know, they they

were they didn't answer pollsters as

much. So, there was a degree to which,

okay, yeah, the polls were all wrong,

but we kind of figured out why they were

wrong. And then 2020 was a little bit of

the same phenomenon to a lesser degree,

but it was also a little clouded by CO.

So, it it it's really hard to

disentangle exactly what happened. But I

I I think there's a degree to which

again the same phenomenon kind of

presented itself where uh Trump did

better with people that were very hard

to pull than Biden did and and probably

a bit better than people expected him to

do. And then so but what I think was

influencing me quite a lot was 2022

rolled around and that was a midterm

election and that was one where kind of

Republicans were really trumpeting

themselves and being like, "Okay, we're

going to do really well. Oh, this is

going to be a red wave. And the polls

were a little bit backing them up, but

not really. The the polls were closer to

like a 50/50 type of election, but

people were like, well, the polls were

wrong in 20 2016. The polls were wrong

in 2020, so they're going to be wrong

again. There's something about

Republicans that, you know, their people

are hard to find. And, you know, I I the

prices reflected that, right? So they

were very they were huge favorites to

take the house and they were big

favorites in a lot of individual um

Senate races where they were more like

MAGA candidates um like slightly riskier

candidates for Republicans to run than

some like you know normal accountant or

something. You know it was a little bit

they were a little bit out there in

terms of their Senate races. But so what

happened in 2022 is that Democrats did a

lot better than people thought they

would. uh they kept the Senate which was

like a big win and so people became more

confident in the polling. They were like

well you know all these Republicans got

high on their own supply. They lost a

bunch of money in 2020 polls were all

wrong. And so the latest meta on polling

was that they had kind of you know not

necessarily that they had solved it or

fixed it or it was 100% accurate but

that you know they they had kind of

figured out a way to to at least

somewhat reflect the electorate. But

what 2024 showed, I think the ultimate

lesson here is that Trump is kind of

like a unicorn, right? It's not that

Republican underpolling. It's that the

specific this one specific person is

like very very very hard to pull. So, I

think, you know, in in 2024,

people like me were like, "Okay, 20 the

lesson from 2022 is that Republicans

aren't some mythical beast." But what

ended up happening is that Trump himself

is a little bit of a mythical beast, I

guess. And and and I think that was also

reflected in the results of the election

because Trump outperformed his own

Senate candidates. He outperformed House

candidates. So there was a degree to

which it kind of you know proved itself

that that Trump is like a singular

figure that is that is very hard to

predict, very hard to pull and and all

those things. So if that makes sense.

>> No, absolutely. But we know that in

hindsight like I mean there's that

Brazilian saying or at least I don't

think it's known but I remember my I

have a Brazilian friend and and he says

this thing all the time like everyone's

a general after the war, right? um

we know those things to be true in

hindsight, but when you're in that

moment, election day, a week before

election day, um you look back to 2022

and it's like

they've kind of patched the polling

issue sort of, right? Like was it a bad

bet to bet Kamla? You know, I mean,

there obviously there's things going for

Trump and we can evaluate things in

hindsight and I I I guess my question

here is how do you evaluate the quality

of a bet in hindsight?

>> Yeah. I mean, so it's it's really hard.

So I I I think on election day, my take

was that Camala was like 55% to win

something like that and I think the

market was at 6040 for Trump or

somewhere around there. So, I mean, I I

don't think in hindsight that that was

that bad of a take because if you factor

in that the French whale was distorting

prices a bit. So maybe Trump's true

price was like 55 or even 50 and I think

Camala is worth 55 like you know it it

it's hard to to micro you know analyze

that or you know what to criticize

myself too much where where I think I

made personally a mistake is that I bet

too much on that edge right because the

here here's the reason that I bet so

much on that because I thought the

initial result would be a little slower

and a little bit more Camala friendly.

So, it was also kind of like, okay, you

know, as I'm starting to get the results

in, I can quickly move the ship around.

Well, the the odds were always ahead of

where I had the market. So, as the

results were coming in, I was like,

well, I think Camala is maybe like 45

and now we're 40. Like, by that point,

she was already at 30. So, it's like if

if the market's always 10 steps lower

than where you are, it's very [laughter]

it's very hard to to get out of your

bet. But, yeah. So, I mean, it it's hard

to analyze things in in hindsight, but I

do think, you know, it it was pro Camala

at 55 was probably a little bit too

high, but I'm not sure the degree to

which it was too high, whether she was

actually worth 45 or 20. You know, it

it's really hard to disentangle that and

figure that out even knowing the the

results because you can only go off of

what you have at the moment, right? And

it's hard to like, you know, criticize

yourself too much like, oh, you should

have known that Trump was like some

unicorn that really outperforms this

bold in the fog of war. It's it's hard

to analyze things like that.

>> So, you mentioned there that the issue

with the mistake you made really was in

sizing. How do you go about thinking

about position size in a prediction

markets portfolio context?

Yeah. I mean, so you really just want to

go by the Kelly sizing, which is a very,

very, very simple concept, and it's not

necessarily something that I'm like

breaking down mathematically. It's more

just a philosophy, which is basically,

you know, you should increase your bet

relative to your edge. So, if a market

is trading at 60 and you think it's

worth 70, you bet X number. But if you

think it's worth 80, you bet a lot more

than X. So, you really just size your

bet according to what you think your

edge is and then you stick with that.

>> Now, I'm I guess partially skeptical.

Um, how do you how can you size that if

I guess you can't fully be sure what

your edge is? You know, it's your own

forecasted edge, right? How does that

how do you think about that?

>> Yeah. Well, I I think that's another

dimension to it, right? So it's not just

what you think the market is like let's

say to use the same exact example. So

let's say uh a market is trading at 60

and you think it's worth 70 or the other

example is you think it's worth 80. Well

the the example where you think it's

worth 80 maybe your error bars are very

high. Maybe it's like well I think it's

worth 80 but I'm not too sure about

this. This is a little bit of unclear

ground. You know maybe my error bars are

plus or minus 30 cents right or you know

whatever. So it could be anywhere from

50 to 95. So you would probably factor

that into as far as what you're sizing.

Whereas if you think it's definitely

worth 70 and you're like, "Oh, plus or

minus one cent. Like I've really like,

you know, I've analyzed this. I've bet

this same event so many times. Like I

really have a good feel for this." Maybe

you end up betting more on the one where

you're really certain about the price

versus the one where you're kind of

estimating it, but the error bars are

high. So yeah, it's it it's really a

dynamic process where you're not only

creating your own prices or at least

some direction of where you think the

market is worth and then also your

confidence level in in that prediction.

So, you know, you could stumble across a

market where it's like, oh, this is at

20. I think it's worth 80. But you're

only betting like 50 bucks because it's

like, oh, well, I don't know anything

about music in like Brazil or something.

So, so it it it really depends on on

exactly the topic that you're betting on

along with along with where you think

the market is and market is worth like

numerically.

>> Does that make sense?

>> Yeah. Yeah. Yeah. For sure. And I think

it's a it's not a it's not a solved

problem. Like I don't think there's any

one answer that's

>> No, it's not not a solved problem. And

also, you know, the pricing is not not a

solved problem by any means, right? So,

a lot of, you know, if if you're

scrolling through a prediction market

and let's say there's a thousand

markets, like if if you were a god,

right? So, if you're an an omnipotent

being looking down on this market, you

would probably look at this market and

be like 95% of these prices are wrong.

So, it's just a matter of figuring out

what market is wrong, what market is the

most wrong, you know, things along those

lines.

Domer, in the 30 minutes we've been

speaking, um, we've talked a bit about

prediction markets as a whole, about

process. It seems to me that this game

is is super complex. As in, if I'm

comparing it even to something like

equities, I think prediction markets are

extremely difficult to price because

there's so much information and and I

think it's it's it's very very difficult

to synthesize. Uh I guess what was your

background in getting into them for for

starters?

>> Yeah. Well, so I I agree with that. I

think they are they are very hard to

price and you have to kind of be

comfortable with the fact that all this

is very hard. So yeah, so I my

background um so I uh I went to college.

Um I graduated from college and I got a

regular job. But what I was doing on the

side is uh that's this is when poker got

really popular with uh ESPN. It was

called the Chris Money Maker effect. And

a lot of people my age, like young

males, were getting into online poker.

And so along with my regular job at

night, I was kind of playing poker on

the side. And I ended up making more

playing poker than I was at my job. So I

was like, well, you know, I'll quit. I

had a college degree, so I was

comfortable quitting my job, trying to

play poker. Worst case scenario, it

doesn't work out and I get a new job

again. So I mean, that's not that big of

a deal. So So I quit my job. I put in my

two weeks notice and then I started

playing poker and then that pretty

quickly transitioned to betting on event

contracts because the thing about poker

is there's a lot of downtime as you're

watching other people in the hands,

right? So, let's say you you have some

crap hand you folded, you know, your

options are you can sit there for two

minutes watching the rest of the players

finish the hand or you can do something

else with your time, whether it's watch

TV or whatever, you know. So I I would

be scrolling around on the on the sports

books and stuff and you know maybe I put

two bucks on the Knicks to win and I was

as I was scrolling around I saw that um

like you could bet on other things like

there were like this other events area

of the site and I was like what's going

on here and I clicked on it and it was

like the who's going to win the Oscars

and I'm very into movies. I'm not like

you know like a super diehard Oscars fan

or anything but I but I was into movies.

I watch a lot of movies. So I was like,

"Okay, let me click on this." And I and

it was the year of Crash versus

Brokeback Mountain. And and Crash was

like 8 to1. And so I put 10 bucks on

Crash and I won 80 bucks. And I was

like, "Holy [ __ ] I'm a genius." Like

this [laughter]

this like oh not I found my calling. So

yeah. So it started as just an $80 win,

which at the time was huge. In

hindsight, obviously it's nothing, but

um yeah. So then I started researching

it. I found out that there was a whole

website devoted to it. And back then it

was is not nearly as big as it was now.

So it was kind of like, you know, people

betting in the millions rather than the

billions. Um so yeah, it was it was it

was a lot of fun. Um I I kind of as I

discovered it like back then the two big

markets were the Oscars and um the

presidential elections. Now if you look

at prediction markets, there's a big

event like every single day pretty much

that is that is unique. So that's one

thing that has really changed about

prediction markets is just how many

markets are encompassed by it. So yeah,

it's been a it's been a journey.

>> And what skills that you learned playing

poker do you think transitioned best to

prediction markets or what skills in

general that you had prior were the

skills that really transitioned

amazingly to to to actually betting on

events?

Yeah, I mean I I think just the idea of

being comfortable, you know, this is

this is a very simple concept, but being

comfortable researching something and

then putting money behind it because a

lot of people are uncomfortable with

that idea just as a concept, right? So

it's like right away they're it's too

daunting,

>> right? It's too intimidating. So just

just that idea, the idea that you're

going to do that and maybe you know you

start with like 10 bucks or whatever and

you just go for it. And I I think one

thing that you figure out pretty quickly

is like

especially as a smart person, someone

that like follows the news, it seems

very easy from the outside. And a lot of

people are so influenced by hindsight

bias that they're like, "Oh, you know,

Trump was only 60% to win. That was a

lock. like I could have made. No, Bill.

People people interpret it as as

sometimes easier than it is. So, so one

thing that is I would say the first

thing is being comfortable risking money

based on your own research. Number one,

which I think poker kind of instills in

you that you're comfortable risking

money. You know, you have some edge.

You're you're comfortable doing that.

And then the second thing is you really

have to be able to be humbled and not be

super arrogant and not think that you

have all the answers because very

quickly you're going to lose a bet

whether it's your first bet or your

third bet like you're going to you're

going to lose on something and you're

going to think you're an idiot and then

it's a it's a matter of navigating

around that being like okay that was

okay I lost that like let me analyze

where I went wrong and then let's let's

figure it out for the sec for the second

one. So there's a lot of like learning

and self-improvement over time as you're

navigating these wins and losses because

if if you think about poker a lot

something that really impacts players is

the is the swinginess of it, right? So

you can be the best poker player in the

world and you can have a whole month

where you're losing money. Now that can

be like it's very easy to look at your

life in the abstract and be like okay

well this is a down month. Well, you

know, in the midst of a down month, that

is psychologically very, very, very

hard. There's a lot of self-doubt.

You're wondering if you're doing the

totally wrong thing. And so, it's a

matter of navigating that in real time,

which is really, really, really hard.

And, you know, the the repeatable nature

of all of this, especially in poker or

in prediction markets, because I'm, you

know, I have a thousand bets right now

in prediction markets. You know, at

inter you're playing a thousand hands a

day or whatever it is. So, it's a lot of

repetition and being comfortable with

the fact that, okay, maybe you're only

going to win 60% of the time and you

have to be comfortable with losing, you

know, x percentage of the time. So, I I

think those two things are are were

really instilled in me uh from a poker

background.

One of the things that I think is more

difficult about prediction markets

versus say trading the markets let's say

prediction markets versus going long

equities right with equities um I think

the daily and this is an

oversimplification but I think the S&P

and the NASDAQ are up 52 or 53 to 53% of

days and equities you know trading them

isn't a zero sum game as in everyone can

make money. Whereas in prediction

markets, um, someone is always taking

the other side of your bet. The house,

call it poly market or koshi, is taking

their cut. Um, and so you really do have

to have edge. It's not like the markets

where you can not have edge and still

make money by, you know, shooting at 100

different stocks and the general market

going up. And so we have a lot of people

now who are interested in in getting

into these markets. Um, a lot of smart

people, a lot of not so smart people.

Um,

and I would imagine most will get

burned. Um, yeah. I guess where do you

see the future of prediction markets

from

as as a as a tradable market when a lot

of people are going to go in and just

get burned, lose money, leave? How how

do you think about that?

Yeah, I mean to me it's a little bit

similar to the meme stocks in terms of

people getting in and burning money and

then losing. But, you know, if if if I

think about this in the abstract, like,

you know, there there's passive

investing, which is basically just

putting money and then letting it go.

And maybe you pick stocks to a certain

degree, and then there's active

investing where you're really trying to

like, you know, maybe you're doing it

dayto-day or maybe quarterto quarter,

like you have a very specific thesis and

you're doing it, but prediction markets

is like extremely active investing,

right? So, you have to be like on top of

it at all moments. not necessarily at

all modes, but you you have to be on top

of it like you have to be really

tracking it and you have to be, you

know, very you have to be researching

it. So, I think I think it's kind of

like if you think about it in terms of

stock investing, it's basically super

super active investing because there was

a time when um no prediction market

existed or at least it was it was very

hard to get on them. And I went I did

stock trading and I did it very I did it

very similar to prediction market

trading where I had a thesis and I was

you know it was X and Y and Z and I was

very investing in very disperate

companies and you know it was like a

chicken company and then there was like

an oil tank company and there was uh you

know I was investing in Yahoo and

Alibaba there was like a arbitrage

opportunity. So, so there were all these

different like very specific

thesisminded things and I ended up

making a pretty good amount of money.

But the one thing that really bothered

me and it's the same thing that bothered

me in poker is like, you know, there's a

lot of random walks. There's a lot of

like randomness. Like stocks are down 3%

for not a very good reason and then

stocks are up for not a very good

reason. And it's it can be very annoying

if you're trying to do it on like very

actively and like with a thesis and it's

like well you know I I have this very

clear didactic like thesis but the stock

is just doing this random crap all the

time like it it it's kind of annoying

and that's not really the case in

prediction markets right it's not going

to be like oh Trump is up 5 cents today

because we feel like it or because you

know inflation doubt like it it's not as

momentum It's not really like, you know,

the crowd or like a vibe. You know, if

Trump is at five points today, some poll

has come out or some scandal has hit his

opponent or something like that. So, so

it's very uh information-based and very

news-based. So, in that sense, it's kind

of like I I would describe it as like

super active invested based way.

>> Interesting. Um

that's something I've never heard

before. Um, so would you say that in

some regards prediction markets trading

has less

noise, less random variance than trading

equities as an example?

>> Yeah. No, for sure. Less less random

variance. It price moves are almost

always because of some event. Now, once

in a while, especially as prediction

markets are still kind of like growing,

there can be basically if you have one

person coming in, like the French whale

is a great example, like if you have one

person coming in with a ton of money,

like that's way bigger than the market

is, they can distort prices. But that

aside, yeah, the the prices are almost

always like nonfair, not rand

non-random, like you know, something

very specific has happened. Yeah.

>> Yeah. You me you talked a little bit

there about the French whale and I think

we spoke a little bit about it

throughout the conversation but just for

our audience can you tell us a bit about

that. What was the French whale in the

2024 election?

>> Yeah. So it was actually a guy so crypto

markets like anyone can trade on these

crypto markets like all you have to do

is deposit money and then you know you

can kind of kind of offiscate yourself

as well. So, it was not clear that there

was some French guy that was betting a

bunch of Trump, but what was clear is

that there was a new account that had

showed up and was betting quite a lot on

Trump. And then and he was pushing the

prices of Trump to a place where he had

not gone before. So, so this account was

not only buying a ton of one directional

bets, but he was also moving the prices

in order to get even more shares of it.

And this happened over the course of

let's say uh I don't remember exactly

but let's say it was like eight weeks

right and what would happen is uh a new

account would show up buy a ton of Trump

shares move the price and then a

different new account would show up and

then after this started happening over

the course of a few weeks like it ended

up being that there was like let's say

four or five new accounts that had bet

millions sometimes tens of millions on

the same outcome and it's like well this

can't be a win. And so people were

trying to like figure it out like, okay,

they were looking at the the times that

the person deposited. They were looking

at the times the person traded. They

were the person that started posting a

couple comments. And people were kind

of, you know, let's let's try and figure

out what's happening here. And I worked

with this guy who kind of tracked where

all the transactions were coming from.

And we figured out that all of these,

let's say it's five new accounts were

all funded from kind of the same uh

wallet. And so it was likely that the

five accounts were connected. And then

the the timing on which these five

accounts traded all seemed to align to

the point where it was likely that this

was one single entity, one single

person, whatever it was. you know, in in

in the fog of war, you know, my first

thought is that this is someone like

doing something, you know, not good,

right? They're like like it's like some

operative that is like, okay, we're

going to push the price of Trump up,

like it's a little nefarious or

whatever. So, so it's it's a matter of

trying to figure out who it was. So, so

we narrowed it down to it's one person

or entity and then we looked at their

comments and I was putting their

comments through cuz it was like kind of

garbled English and I was putting their

comments through like chat GPT and and

kind of working with chat GPT and it was

like I think this person is French.

Okay. And so I I made this big post on

on Twitter. I was like okay I think it's

one account. I think it's French. And I

ended up chatting with the person very

briefly. They were kind of rude and and

super into Trump and [laughter]

Yeah. Yeah. Yeah. And so what what they

had done was they had this guy this one

guy who had amassed I think 50 million

in bets on Trump. Yeah. Right. Yeah.

Through through five different accounts

like he was number one it was not

nefarious. He was a true believer. And

then number two he had spent I think

probably upwards of a million dollars

like doing his own polling. So he had

contacted a US polling company and he

had told them exactly what type of

polling he wanted to do. And he did a

different type of polling. What he did

was neighbor polling. So basically he

had the polling company call let's say

me and they're like okay uh we don't

care who you're voting for. Who do you

think your neighbors are voting for?

Right? And so through that type of

polling he got the result that Trump was

outperforming the quote unquote regular

type of polling. Now, it's a little bit

controversial whether this was actually

an edge or whether it was a little bit

of confirmation bias, but he looked at

these polls that he had commissioned and

he was like, "Okay, this is I'm

correct." And that gave him even more

confidence. And so, he increased his his

betting to like $50 million cuz I think

he started off with like low millions

and then over 10 million. So, so as he

was increasing his bet, he was also

doing this polling. He was doing this

research. So, uh very interesting story.

Um yeah and so it was one guy he was

true believer had done his own polls and

and he won I think yeah he won tens of

millions of dollars easily

>> and what was his background before was

he a hedge fun manager a banker

>> he claimed yeah so he claimed to be a

trader who had used to work at a trading

firm in New York it was kept a little

bit nebulous he he did a few interviews

but like his face was covered and so

it's totally unclear whether I you know

whether it's believable or whether it's

a little bit of a story to put people on

the wrong track. But I do think given

cuz he he was using limit orders. Um

there was at least a small degree of

sophistication there where the person

didn't seem like they were just trying

to gamble money. So I think the story

does make sense that he had a little bit

of a finance background at least.

>> Interesting.

So he was doing

>> Sorry. Sorry if that was too long of an

answer. I

>> No, no, no. I think I I'm I'm I'm

super like intrigued now. U

and and a bit stumped because it's such

a ridiculous story.

>> It is.

>> 50 million is crazy.

>> Do you think there was actual edge in

something like that? like can we learn

from that or do you think it was just a

guy who wanted to bet big and was really

confident?

>> You know, I don't want to sound like

sour grapes or you know that I'm like

bitter about it, but I do think there

was a degree of pro probably a strong

degree of confirmation bias where he

wanted Trump to win. He had the the

thesis that Trump was going to win. He

did polling that told him that his

thesis was correct and he kind of went

all in on it.

>> Whether he bet 5% of his of what he's

worth or 90% of what he's worth, I have

no idea. So, it's hard to criticize the

bet sizing too much because I don't have

any context for what percentage of his

bankroll he bet. But I I I do think he

got a little bit lucky because I think

neighbor polling is a little bit

controversial and that it's it's unclear

if it actually provides any edge. So I I

think there is a universe where this guy

did all of this and Camala squeaks out

of land and then the story the story is

the story is completely different. But

no no more $50 million.

>> Yes. Yes. uh but we do not live in that

universe by any means and he was right

and he won a lot of money and kudos to

him. Um but yeah it's it's hard to

disentangle things you know in in

hindsight like that.

>> So how do you think about luck versus

skill?

>> Yeah I mean I I think there is some

degree of luck. There's a degree to

which things are out of your control.

And so when things are out of your

control and and it's unclear what's

going to happen, I think there's a

degree of quote unquote luck involved.

But I think you can control the the

uncertainty of it. I think you can have

knowledge that there is, you know, some

random variance and that you can kind of

factor that into your bet. So I think a

a lot of what we're doing is skill, but

you know, it comes down some things come

down to luck in the end.

You know, something popped in my head, a

thought popped in my head right now

about um betting on things happening in

the world that are objectively bad. um

call it war um suffering

um

outcomes for trials which

may be severely negative for people

involved and maybe for society. How do

you think about that? Do you evaluate

things and go maybe like are there bets

you won't touch out of call it like you

know just morals?

How do you think about that?

Yes. Well, I mean, I think my bias in

general is to bet on things not

happening. So, it it would be very rare

for me to bet on like just a naked bet

on like bad stuff happening. But I do

think you know if if you think about

prediction markets in the abstract and

you think about their usefulness and you

think about the alternatives. So, if you

let let's take the example of will there

be a war between uh Ukraine and Russia.

So if we rewind to when I think February

of 2022 or whenever it was um so if you

rewind to a month beforehand and they

put up a market on you know will Russia

and the Ukraine and it was controversial

and I think you know and and to me it

was also contro it was controversial to

me at the time because it's like uh

should we have this up this is a bit

unseammly etc. But you know if if you

think about number one this is a very

important question to answer right it

impacts so many people it impacts the

world. So I if it's important to have an

answer to this question then what's the

best way to get an answer to that and if

if you remove prediction markets from

the mix and you look at the best way to

get an answer. Well the best way to get

an answer is kind of like experts right

quote unquote experts. Sometimes people

are experts or sometimes people pretend

to be experts but you know they can

disagree with each other and which is

the first thing and so it's a very it's

kind of a hazy thing right so if you

listen to one guy you think it's super

likely if you listen to another guy you

think it's super unlikely so number one

it's not synthesized it can be hazy

depending on who you listen to and then

the second thing about it is like um

there's no accountability right so if

this guy is super entertaining like this

former general they keep bringing him on

TV maybe he makes all these bad

predictions, but he's he does it in a

very entertaining way. Like there's no

there's no account of it. Like there's

no scorecard like with let's say General

Joe Smith comes on TV. It's not like oh

he's 0 and5 in his previous predictions.

We're we're going to have him make

another prediction but like he's 0 and

five. So so there's no like scorecard or

anything like there's nobody keeping

track of any of this stuff. So in that

sense, I do think that prediction

markets are like a huge upgrade over

that because if you're just trying to

find out what's happening in the world,

like you can just go to polymerarket.com

or koshi or whatever you know the

competitors are and you just go to the

website and you're like, okay, this has

an 18% chance of happening. Now that may

be wrong. It may be 30. It may be 10,

but at least there there's some answer.

It has been arrived at through a lot of

research. that has been arrived at by

people who care about the answer, care

about being right and have

accountability. You know, they'll lose

money if they're right and they lose

money and they're wrong. But it's also a

huge upgrade over the alternative,

right? So, I think I think where I've

come to is yeah, we should not be

incentivizing people to bet money on bad

things and then bring bad things into

the world. Like that that definitely is

way too far. That should not happen

ever. But the degree to which prediction

markets exist about quote unquote bad

things and we're getting answers to the

question to like really important

question that impact a lot of people

like I'm tending to think that that's a

good thing. Now how we put these markets

up maybe there's limits or whatever like

that can be something that can be

navigated over time but I think my my

long answer to that to that important

question is that I do think it's

important. I do think these markets are

good. Um, me personally, like I would be

very very very careful about betting on

something bad that's happening because

first of all, bad stuff doesn't happen

all that often. Like people tend to like

the news hypes things up and you know

things aren't as dire as they appear to

be. But, you know, it it some sometimes

I do bet on like something not good

happening, but that's because of

research or because I've really like,

you know, done the work and and figured

out that I think, you know, it's

probably more likely than the odds

suggest or whatever.

>> Do you think that prediction markets are

ultimately good for society?

>> Yeah. No. No. I mean, undisput

indisputably, yes, I do think they're

good for society. Now the degree the we

can argue over whether we should have

questions on you know 10,000 different

topics or not but I think the degree to

which they kind of answer important

questions that we're trying to figure

out that's super important because like

let's say we think about um let's say

whether there'll be a war in the Middle

East uh to use a bad example or whether

you know who the next president will be

well people are already betting on these

in financial markets right sometimes

they're buying oil futures about the

Middle East or you know for presidential

elections maybe they're betting on

private prison stocks or oil stocks or

you know there are multiple ways in

which people are expressing an opinion

on these things in financial markets and

so the proxies or whatever. So if if you

clear away all the debris if you clear

away you like okay we don't need to use

a proxy like we're going to give you

what we think the answer is like you

don't need to bet on 10-year treasuries

to bet on what the Fed is going to do.

we're going to put up a market. Exactly.

What is the Fed going to do? So, I think

I think there's a degree to which yes,

these are super helpful. These are good

for society and that, you know, the

people that are betting on proxies for

what's going to happen in the world,

they can actually bet on the actual

thing whether it happens or not.

>> I hear both sides of the argument and

I've had two guys on the podcast who

didn't, you know, didn't talk about

prediction markets. One is Augustine

Lebron who used to trade at Jane Street

and one is Todd Simkin who's currently

um a director at Suscoana, you know, two

trading firms. And Todd on the podcast,

I asked him a little bit about

prediction markets actually. And he was

saying that it's a great source of

information. It's a great way to hedge.

And you look at what Augustine's been

saying on Twitter on X and he's been

saying that it creates

bad incentives. So um you know let's say

there's an 25% chance of something

happening. Now you add volume to that

and you add people who can bet on that

that can influence the outcome and

obviously that bad thing happening

generally has outsized returns and they

have a direct impact on whether or not

that happens. The incentive structure he

argues is is bad for the fabric of

society. How do you think about those

things?

>> Yeah. So, I mean, well, well, number

one, that should be criminalized like

regardless like we nobody should have

financial incentives to do bad things

whether it's through prediction markets

or through the stock market or whatever

because I mean if you think about like

right now there are very there are huge

incentives to do very bad things like

someone could do something very very

negative in the world, buy a bunch of

S&P puts, right, and make a lot of

money. So I I I think there's a degree

to which that exists right now. Now I I

do see the point that he has, right? So

sometimes these are like micro events,

not very important whether it happens or

not, and then you're giving them an

incentive to do something. Um yeah, that

that should obviously be limited. This

is something that prediction markets

like kind of have to figure out how to

navigate. Um which is people betting on

an event that they can then either make

happen or make not happen. um that's not

a that's not a good place for any market

to be in whether it's prediction markets

or the stock market. And then the the

the second thing that I would want to

say is is jumping off of um what the guy

at Suscoana said is, you know, like

think about Poly Market existing, right?

Like I'm a big trader. Other people I

know are traders, but a lot of the

people that are visiting the site,

they're never going to deposit any

money, right? They're not going to

they're not going to bet on anything.

They're just visiting the site because

they want to know what's going to

happen. like who's going to be the next

president of their country or who's

going to do XYZ or you know is Russia

going to actually invade Ukraine. So

there's a degree to which a lot of the

users of the a lot of the consumers of

Poly Markets or Koshi's information is

people that are never going to place a

bet and so the information itself is

very powerful and very useful to people

without being able to trade it at all.

So I I I think that's an important point

to make.

>> And I guess final question, where do you

see the regulatory aspect of prediction

marks of prediction markets evolving?

And then

two questions load into one. Where do

you see the regulatory environment of

prediction markets evolving towards? And

then where do you see prediction markets

in 5 10 years? Do you think what TK

Menour says this is going to be as big

as as the stock market, where do you see

those things going?

>> Um, well, I think they're not going to

be as big as the stock market, which I

which I think is is it's a little bit of

a silly prediction and it's too

unrealistic because the stock market is

so important, you know, and it's company

values and stuff and stuff like that.

So, it it's not going to be as big as

that. But I I do think it's going to be

a lot bigger because if you think about

how many or if you if you go to the

website right now and you scroll through

it like you know the prediction markets

have a lot of markets up but there's a

lot more markets that they can put up

there people can get a lot more granular

about things and there are degrees to

which you know things that we have on

the financial markets right now might be

better purposed for prediction markets

like overunder earnings and things like

that. So there there's a degree to which

kind of maybe financial markets and

prediction markets are going to merge a

little bit and maybe some things that

people do on financial markets are going

to be much better purposed for

prediction markets. So I do think

they're going to get bigger both in

terms of the volume of existing markets

but also so many larger markets. But uh

to going back to your first question

like the regulatory future of it, you

know, it's hard to think that 5 or 10

years from now you're going to be able

to bet an unlimited amount of money on

any event in the world, especially be,

you know, going back to the previous

question where we were talking about

being able to influence things, right?

And especially if you're using like a

crypto site or something where you can

kind of mask it. Like if if you give

people the opportunity to make money,

people will try to exploit that. People

will try to take advantage of that.

Maybe there's not many of those people.

Maybe a lot of them are already caught

or about to be caught or something like

that, but they exist, right? People will

try to exploit it. So I think there

needs to be some guard rails in place.

Maybe some of these not so important

markets have quote unquote limits. Maybe

they're not super high limits. And I

think because if if you think about

like, okay, why do we want these markets

to exist? What's the good part of them?

Like why why are we doing this? And it's

to price to price the future to figure

out what's going to happen. Yeah. And we

don't need unlimited limits on stuff

that is not super important to price.

Whereas stuff what that is very

important to price like who's the next

president going to be the limits can be

extremely high because there's so many

things going on. It impacts so many

things that there's a degree to which

you know like if you're betting 50

million this is this is a drop in the

bucket compared to the impacts of the

presidential election. As high as that

number is and as ridiculous as it is,

like he distorted the price probably

five to eight cents in 2024, but maybe

in 2028 if he bets 50 million, he moves

the price half a cent, right? So, so

there's a degree to which the markets

are so much big. Some of the questions

that we're asking are so much bigger

than the volume that is currently being

traded. So yeah, I I I I think maybe

limits for stuff that's not super

important and then the markets will be

so much bigger for stuff that is

actually really important.

>> Awesome. Thanks so much, Dr. I learned a

lot.

>> Yeah, that was awesome. Thanks for

having me.