The WSJ On Polymarket's Questionable Ads

0:02 Also media, Hello and welcome to Better Offline. I am, of course your host ed zetron. Also today, I am joined by two incredible reports from the Wall Street Journal, Katherine Long and Kaitlyn Ostrov, who just published an incredible and truly horrible story about poly Market and they're extremely questionable influence marketing campaigns. Katheryne Caitlyn, thanks for joining me.

0:35 So happy with me here, thanks for having us said.

0:38 Okay, so walk me through exactly what poly market was doing with these influencers and social media. What were they paying for? What was then end result?

0:48 So the end result was an onslaught of videos that appeared to show college age social media creators betting and winning large amounts of money online. But what we found is that all of those bets were actually fake. They were placed on a dummy platform that Polymarket built to almost exactly, but not precisely, resemble the website, and some of the wins that the influencers showed themselves having were faked as well. The creators were using things like outdated footage or altered headlines to suggest that they won really lucrative vets, when in fact they would have lost.

1:29 Right so just to be cleared, So the bets were fake, the website was fake. But also the bets would have lost a.

1:38 Lot of them, would have not every single one, but the majority of the videos where bets were placed would have actually lost in real life, but they were depicted as winning.

1:49 That's truly awful. I thought Polymarket was illegal in America as well.

1:54 You would be right about that.

1:55 Polymarket entered a settlement with federal regulators back in twenty twenty two in which they agreed to stop offering their platform to US traders. But as anybody who's used a VPN knows, it's pretty trivial to get around things like that kind of geofencing. Anybody with a VPN has been able to access poly Market, even if they're based in the US or other countries where poly Market is banned.

2:21 And so these influences, they're American based, right.

2:24 So it's a mix. Some are based in Canada, some are based in the US, and then you know they's likely creators and other jurisdictions as well. But that was one of the mixed that we looked at in our corpus.

2:37 And so it looks like he was about eleven hundred videos. You went over so that's truly it's truly a massive scale operation. But do you think it's bigger than the ones you saw or is it just it? Like? Did you get any idea of the total scale?

2:52 Yeah, So we reviewed eleven hundred videos that had been posted between late December correct Primaron Kaitlyn was a little it's never late November, late last year, late twenty twenty five by all accounts, late twenty twenty five and mid May of this year. So eleven hundred videos, ten creators. My impression and belief for my reporting and Caitlin's reporting and the reporting of our other colleagues is that this is just the tip of the iceberg as far as poly markets marketing operation. We identified dozens of other creators who were posting videos in similar formats. We didn't scrape their videos, but we thought our sample size was sufficient.

3:31 That's crazy, So walk me through the exact stage. So you have a video of a guy based guessing whether Trump will say in shah a Lah. I think was one of probably not in your but like Trump will say burger or something, and then they're staring at the TV and then they go always said burger, but the website they were making the bet home was just completely fake.

3:54 Yes, so yeah, so yeah. So in these videos, when you watch them, you will often see a college age student kind of go in with like this hook phrase, but they'll say throw what or wait what, and then they will be like, oh, I can, like I can bet on this market, and they'll depict the market, and then sometimes it will show essentially what the outcome is of that market. They'll cut to video of Trump saying a certain word or phrase, and then they'll jump up and down and sort of give the impression that they've won.

4:30 And this is targeting children, So college age kids like that, it's explicitly targeting young people.

4:37 Well, I wouldn't go that far as to say it's explicitly targeting on people. But what we do know about who it's targeting is that it is targeting Americans. We looked at Polymarkets instructions to people who were paid to boost the reach of this campaign online. A third party contractor that Polymarket worked with to help manage the camp said we'll only pay you if at least sixty percent of your audience is based in the United States. And then two you know, as to the point you alluded to, yes, the creators who are making these videos, they are colleged aged college students, people in their early to mid twenties.

5:15 Certainly, Jesus, it feels like introducing children to gambling on some level. I mean, maybe you can't say that, but I'm sent. I mean it seems like showing young people doing something and saying you can get bread, which is a young person's way of referring to money. For the old heads listening, I knew that one. I'm not that all, but it just it feels quite dystopian, is kind of what I'm getting at.

5:41 It certainly is marketed to give the impression that this is a way to make money off of what you know. So the majority of the bets that we looked at, you know, they showed a trade being placed. Most didn't show an outcome, but for those that did, you know, almost all of them it was someone winning. I think there was like what four or five Catherine and the group that we looked at where someone was depicted as losing their bet. So the overarching message was you can make money.

6:11 I kind of find it fascinating that there's one way they lost anyway, keep.

6:14 Going, Yeah, I was just going to chime in and add that, you know, in addition to the creators showing themselves appearing to win money, they also implied that they were wealthy in other ways, including by showing account balances on this dummy website, where again no real money was being traded. These balances were fictitious, but the videos showed their account balances on poly market and the tens of thousands of dollars. Some even had balances over one hundred thousand dollars. And one of the creators whose videos we reviewed, she shows herself placing bets from San Francisco bedroom, and then she'll have a video where she's showing herself dancing on a beach in front of the Golden gate Bridge

7:01 and she says poly Market funds my life, and there's a Hello Kitty sticker in the corner that.

7:05 Says I am unemployed.

7:07 So the impression is certainly that, you know, these people are are making enough money off of polymarket to support themselves and support themselves in fairly high style.

7:18 And it sounds like kind of like a real operation here, like in the sense that there is like they're building functional dummy websites because looking I'm as we speak I have the the anime gifts from the Peace up and it's these seem quite intricate. These perhaps their vibe code and it doesn't really matter because no payment rails are in there, but these seem like they are built to look identical.

7:41 They are extremely convincing. Catherine and I and our colleagues were looking at these for about two weeks before our colleague Neil meta Or realized that like, this is not poly market. Like we started off firmly believing that this was poly market.

7:57 Right, Well, when you say that, so this is the p oh iy market website. When you say it, believe you believed it was polymarket, What did you think the purpose was when you found it?

8:09 We thought these were just videos that you know, people were making, showing themselves placing actual trades on poly market. I don't think we had a theory at the onset as to why they were doing this, but we came across a bunch of these videos and we were curious to understand, you know, what was happening, like who these people were, how they were making money. And so we have this database of all of the polymarket trades that we had been building over the past several months, and we started off trying to trace these trades. We wanted to understand, you know, what bets were happening, who was making these, and we want to go about finding those because all of Polymarket's data is public, and we very

8:51 quickly realized that we could not figure out like we couldn't place these trades, we could not find the actual trades shown in the video, and it took us and minute to realize that this was not actually happening on polymarket. And the red flag for that ended up being that website poi y Market, which our colleague Neil Metta saw and flagged to us.

9:15 Hell yeah, good work, Neil.

9:19 Yeah, major shout out to Neil.

9:21 Here's the thing though, so wait, maybe I'm misunderstanding this. So the not only did the trades, did some of the trades never exist, like it was never possible to bet on that particular outcome.

9:34 All of the markets that we saw did exist. And that's one of the reasons why it took us so long to understand that we were looking at a fake website. I mean, we were cambing through this database. Caitlin has been painstakingly building over months of every single trade on polly Market, which you know is accessible to us because Polymarket is a is a blockchain based system, so everything is public. And you know, we were looking for these trades that appeared to have taken place, right we saw a video of it taking place, and it just didn't seem to exist in this database. And at that point we you know, thanks to Neil's eagle eyes showing that you know, one of these creators had seemingly made a mistake and accidentally left the URL of this fake site

10:19 poi Market, poi y Market. Yeah, that poly market had built in his video, And it was only because of that clue that we started being able to unravel that all of these videos that we were looking at were actually being placed on fake websites, which, as we've mentioned, the fake websites were almost identical to the real poly market.

10:42 But you know, once we started looking for some more of these clues, once we knew that the website was fake, we were able to distinguish various ways in which to tell the fake website from the real website.

11:06 So was was it just poimarket or whether like multiple other fake websites as well.

11:12 I mean, we like, once we started looking for other like simulated polymarket websites. We did find a couple of others, but the I think all of the ones that like we were able to identify specifically what the website was was Poimarket. There was one other where it was like this developer link that appeared in a handful of videos where it was like one of the like polymarket developers dot like their name dot dev dot polymarket, dot dev.

11:44 And so it was like this internal development site that appeared in a couple of the videos that also seemed like it was being used. So we weren't always certain like which simulated platform the trade was happening on, in part because we heard from creating part of the instruction that they got in making these videos was to not make it obvious that it was on a simulated website.

12:07 So if you were on a poiy market, you might uppercase the I to make it appear like polly Market. And so you know, we came across a handful of these, but I don't think we are exactly certain of how much each one was used.

12:24 That's it's so strange. How is this not illegal? I mean, I guess if the website itself is illegal then illegally advertising the illegal website is kind of just a just kind of doubling down at that point, doesn't really matter. Like, has the government shown I saw that there was some sort of federal inquiry into Pollymarket. Was it related to this story?

12:44 We are not sure if the precise parameters or subject of the federal inquiry you're referring I assume to CFTC investigation that we reported on last week. Yeah, the contours of that investigation are as yet unclear. You know, I know that it is ongoing and extensive, according to a person familiar with the investigation. You know, I should add as well that the CFTC, the Commodity Futures Trading Commission, the agency conducting this investigation. A spokesperson for that agency declined to comment on the existence of an investigation, citing HC policy.

13:20 Yeah. That is just so strange because I've I don't think I've seen anything like this in tech outside of crypto, which I know is I know that crypto is kind of the is I think polymarket is a crypto product, right, it's a blockchain one, Yeah, it is. They moved on from that crap, that crap referring to a comment that I'm making, not the journalist in.

13:40 Questions, No, it is a is a crypto, is a crypto, it's it's on it's on crypto rails, as they would say, Yes.

13:48 That's so strange. What differentiates this from calshe because I basically consider them the same website at this point, but I guess they're different somehow.

13:58 So we like again, our social media feeds are just full with videos for different platforms. You know, we we came across the poly Market videos of them placing these trades. We've certainly come across a lot of videos of you know, people promoting call She, but we haven't come across anything similar in the sense of you know, poly Market was you know, telling people use to simulate it website, create these bets and do not disclose that you have any affiliation.

14:34 We are always looking to see what we might be missing in coverage of this piece, but you know, call She is. I guess one difference between it in Polymarket is also that it is regulated by CFTC. Polymarket has a new US product launched late last year that is CFTC regulated, but the broader platform is still offshore. So you know, we we try to look to see what we might be miss sing in this phase. But the poly market videos kind of stuck out to us as we were going through our own social media feeds just trying to understand, you know, why we were getting so many of these what was behind that? And we did not expect it to lead to these simulated bets.

15:15 So are your algorithms? But so did you do this on your own phones or like a journal approof one, because I'm wondering all your algorithms ruined now? Oh yeah, cooked, just like in like eighteen year olds in kids telling you to gamble on the future.

15:33 Always the arm prediction markets. I like, I see no other content at this point?

15:39 Yes, yeah, that must be awful.

15:42 We're keeping track of things.

15:44 It's yeah, this is why you've just got to look at like lifting videos and palace cats. That's how I get around this, just like you just need to cleanse your feed every so often. But on a on a legal level, just like on a think what differentiates Like you said the poly market has a US approved product, is like, is that a prediction market? Is it something different?

16:08 Why is Calshi able to operate legally but not poly market?

16:12 Yeah?

16:12 So taking a zooming out here a bit right. So Calshi poly Market's biggest competitor, Calci and poly market, they're both prediction markets.

16:22 The biggest distinction between the two is that Calshi.

16:27 Calshi made a huge bet that it could successfully achieve US regulated status, and poly Market conversely decided that it was okay operating offshore as an unregistered crypto entity that you know, people can access if they have a VPN, but you know they're not technically supposed to. So Calshi has not necessarily played nice with regulators. You know, it had a pretty significant legal battle early in its career over whether election markets would be allowed on the platform, but it did have success. It won that battle, and now Calshi is a US regulated prediction market, which it says is legally available in all fifty states, although there's currently some commotion over Nevada.

17:13 Which.

17:15 As a Vegas resident, you can't take up beautiful gambling away from Vegas residents exactly.

17:22 So, as one might suspect, the gambling industry is extremely worried about the rise of prediction markets. You know, unlike online sports books or in person gambling. Calshi and other US regulated prediction markets have successfully up till now made the argument that they are federally regulated. That means that states cannot restrict their operations, So state gambling commissions can't say, can't impose conditions on how they operate. They also can't levy taxes on prediction markets.

17:58 So Calshi has you.

18:00 Know, fairly successfully been playing within this federal regulatory structure. Poly market has been playing outside of it. And for a while the two platforms seemed to be growing sort of in lockstep, you know. Poly Market started out with a bit of a lead. It got a huge amount of traction after the twenty twenty four presidential election, which is successfully called for Donald Trump.

18:22 Cal She was a bit of a bit more.

18:27 It was.

18:27 It was a lesser known quantity at the time, I had less name recognition. But starting around late twenty twenty five, cal she actually started to eke ahead of poly market when it comes to a relative share of trading volume on prediction markets.

18:41 And as of last month, cal.

18:43 She was doing insanely more volume than poly market on poly markets offshore and US APP combined.

18:50 And do you know what those volumes might be? Roughly, I'll have to go back to.

18:58 Consult a chart in our.

19:01 It was for the month of May twice the amount of volume almost twice, sorry, the amount of volume on col C versus polymarket.

19:10 That's really worrying. I mean, I think so looking this up, it looks like seventeen billion dollars in the month of May alone. We live in a godless society. It's a statement I am saying, not the jeneralist in question. It's very worrying. I find this whole thing quite worrying, not just the gambling, but the financialization of everything. I don't think it's good to gamble on every outcome personally, and I worry. I worry about this spreading personally, and I don't like it. Feels like it needs regulation in an extreme way that basically doesn't exist yet.

19:46 I mean, I can I can talk a little bit about my own experiences here. You know, I started covering Keilan's been covering this space a lot longer than I have. I sort of jumped into it at the beginning of this year, and as part of the process of growing familiar with how prediction markets operate, I decided to watch the state of the Union through the lens of a prediction market live streamer who is live streaming the State of the Union and talking about the bets that he was placing on what President Trump would say during that speech.

20:20 And you know, I.

20:22 Think similar to watching live sports on which you've wagered, it was simultaneously more exciting and I think also slightly concerning the way that instead of sort of listening for the content of the speech, very rapidly for me, turned into something closer to a game of sort of wondering what the next word is, like what is he going to say? And will it hit? Like will the bet hit?

20:52 And so I understand where the concerns that you're describing emanate from. Certainly I would say also that you know, there's a lot of people who point to prediction markets as an extremely extremely legitimate financial tool and one that institutions can increasingly take advantage of.

21:24 I mean, the only people I think that are taking I think the only advantage being taken is off the customers, because I have to wonder how many people win, and probably isn't very much. And the fact that they have to resort to the fact they have to resort to this kind of marketing suggests that the wins are not quite as common as they want you to believe.

21:42 Well, and that's one of a previous story that Catherine and I worked on together basically analyzed just that how many people actually win on frediction markets, and what we found was that, you know, about seventy percent of people who had traded on polymarket lost money, and the losers to winners on Calci, you know, was about two point nine to one. And so you know, these while a lot of them marketing is centered around these are prediction markets where you can win money, in reality, most people do not win money.

22:15 Kind of feels like the DraftKings stuff as well, the sportscam claim where it's like, oh, yeah, of course it's really easy to and this is not a statement I align with it. It's easy, you just bet on what the winning team will be. But the existence of spreads and also the existence of the weird nomenclature that the prediction markets use is how they get you. Like I remember with a camp I was talking about with Nick Devoor and Rebecca and Garena from Baron's and it was just like, yeah, the wording around Camone's potential death and then they just pulled the entire thing screwed a bunch of people over and how they design, how they design and they say what a win is seems to also undermine people, right.

22:57 And we've we've previously reported that, you know, the warding for pretty much all of these prediction markets really matters. And so there's you know, been a lot of people who have reached out to us as journalists and said, you know, I put money on this market understanding that this is how it was structured, and then the resolution was entirely unexpected or I don't think that it was a proper resolution. And so, you know, especially for some of these markets where it's not really a finite outcome, or the rules might be written in a way where there's potential for different interpretation, you know, there really is a risk of you know, the market not going how people who are betting understand it might.

23:38 Or maybe people can't even see the rules. The rules are difficult to access in the first place. That was the case of somebody we profiled for our last story who wagered everything he had earned so far on prediction markets and ended up losing it all and is now living in a homeless shelter.

23:55 Classic gambler stuff as well, I mean it's even in Vegas. I live in Vegas, and you walk around and even there in like the gambling hub of everywhere, the airport is full of the Hey, if you've got a gambling problem called this number. Hey, gambling problems are scary gambling problem, gambling problem next to a slot machine, of course, But it doesn't feel like, probably due to a lack of regulatory oversight, that there's the same alarm concern thought from the people making these markets. Do they seem Have you heard anything from them about concerns related to gambling addiction or anything like that.

24:31 So Kelsey fairly recently did add a some language related to gambling addiction on its home page. It gave people the option to exclude themselves from the website, which is another common feature that many gambling apps have.

24:49 What does it? What does that mean?

24:51 Self seclusion is if somebody feels that they have a gambling problem, they can ask to be banned from from the website, from the gambling app, from the casino of You know, it's not really a nuclear option, but it's a tool that people who are managing a gambling addiction can use if they feel like they're They're gambling has gotten out of hand. You know, I think that these platforms, they don't conceive of themselves as gambling. They conceive of themselves as trading. This is, you know, in their minds, more akin to day trading or you know, trading in currencies than it is to gambling.

25:24 Question, so this is hopefully this is a no. But I know what I had to Refasan and Caleb Wilson on talking about sports gambling a few months ago. Apparently DraftKings in the like, So that's last year DraftKings in the like they have like an account manager that will actually work with significant betters. Do you know if such thing exists with Calcium Polymarket? Do they have high rollers that they covet? Is that something I don't even mean influencers.

25:50 I don't know the answer to this.

25:53 I hope the answer is no.

25:55 That's that's not something that I have heard about. You know, what I can say from our own reporting is that both platforms seem intent on you know, recruiting college students, and poly Market in particular has set up relationships with college clubs fraternities, offering them you know, payments in exchange for signing their classmates up to the site, so I would I would.

26:18 Say, it's tell me more about that.

26:20 What This was a story that I reported with colleagues, including my colleague Kevin Dugan back in I believe it was March. It was about both platforms efforts to sign up college students. And you know, some great reporting that Kevin brought to the story was about Polymarket's efforts to recruit students at Columbia University. And they signed this partnership with a fraternity at Columbia, and in exchange for every student that members of that fraternity signed up, the fraternity got some money. And at the end of it there was a big sort of Polymarket funded party. The fraternity got a plaque that said, you know that they were the first member of the poly Market Pledge class. And you know, a lawsuit that was filed last week made

27:09 similar allegations pertaining to Polymarkers activities on other campuses.

27:15 Have you heard about anything else like that with Calshief perhaps or is it just is were those learning events.

27:22 CALCI had some much smaller, much less well funded partnerships with campus groups. I would say Polymarket is the prime mover in that space when it comes to recruiting college students.

27:36 Getting kids into gambling. That's my statement. This is all truly horrible. Have you So the one thing as we wrap up here, one thing that I keep coming back to is are there not guidelines around truth and advertising that these crossover with?

27:56 Yeah, so the Federal Trade Commission, which got advertising, does have rules that require that advertisements be truthful and accurate. And then the CFTC also requires that you know, marketing and that information not be this active. So there are laws from at least two federal regulators that you know, do touch on how prediction markets market themselves to the public.

28:27 That's but they don't appear to I just I keep thinking about these videos, and I've had the animated gift just in the corner as I talk to you, and I'm just I don't see how there's not anything being done about this, because even in a very conservative government, this is a kind of vice that could genuine in my opinion, could genuinely cause a form of financial crisis with young people, especially at a time when young people have trouble accumulating wealth.

28:56 Well, I mean, we don't know like entirely what's happening on a regulatory fund. Again, we've reported that the CFTC has some sort of investigation ongoing into Polymarket, although we don't know the scope or details of that, And just from you know, myself covering crypto for the last many years, you know, often federal inquiry is when they happen, can take many years. And so I think, you know, a lot of a lot of these platforms are very new, and so I don't think we necessarily know, you know, how, if and how from avacuatory perspective, things might unfold.

29:32 I should add here as well that you know, both Polymarket and its primary competitor, Calcy have ties to the White House in the form of involvement from Donald Trump Junior. So Donald Trump Junior is a strategic advisor to cal she he is, through an investment fund UH an investor in Polymarket. We don't have any reporting to suggest that that has played any kind of role in the regulator's willingness or unwillingness to take on prediction markets.

30:01 But I think that you know, that's important to mention here.

30:05 Yeah, I mean, I also I will say I would buy that they like doing this because it makes things easier for them. But I also think there's just no regulatory enforcement at the moment. It's just like it feels we're just in a regulatory vacuum where the damage is going to come not so much from what happens, but what doesn't happen. What there isn't an aggress Like we don't like the FTC could cut in here at some point.

30:31 I don't know, it feels that the SEC could do something, But to your point earlier around crypto, it feels that when Gary Gensler left the SEC, that was kind of the end of any serious crypto regulation anyway, which would have likely led to regulating this. Yeah.

30:47 I mean, we're obviously extremely interested in what, if any actions regulators will take on this, and we plan to continue reporting and try to find out more about what's going on behind the scenes here.

30:59 Yeah. Well, any closing thoughts, anything left off from the industry that I haven't gone over because this has been wonderful and also truly darkened my heart, Like I'm gonna need to take a walk around the floor.

31:10 Oh and I'm so sorry I hear that.

31:11 No, No, it's not your fault. It's been a very entertaining episode, but just this whole story is so grim.

31:17 It's it's it's a feeling I understand. I mean, I think what what really like stuck with me through all of this reporting was like just how good the videos were at reporting to be on CALLI market And yeah, I like it gave me a bunch of anxiety for you know, family members who are younger and even myself, but more than you know, like how hard this is to actually know is what you're watching, you know, truly something real or is it, you know, deceptive in some sort of manner. And so that's that's what that's been what's stuck with me.

31:51 Yeah, it does feel like social media is becoming increasingly fake in that way.

31:56 Go ahead, Yeah, I would, I would underscore what Caitlin said. That is also something that has really been resonating with me. And I would just add that, you know, if any of your listeners have experiences with prediction markets, we'd love to hear from them, and our contact information is on our author pages on WSJ dot com.

32:15 Well as we wrap up, when where can people find you?

32:17 Find us?

32:18 In the Wall Street Journal if you're if you're a print head, you know, we still publish in print, but otherwise it's it's WSJ dot com.

32:26 We live in on social media right now, so you can give.

32:29 Us two Yeah, where are you at? You on Twitter and Blue Skull just Twitter, Where can we find you?

32:35 I'm on Twitter at by k Long and on Blue sky at you know, I don't.

32:41 I don't remember.

32:42 My book.

32:44 Of my socials is Cetra, so I like should be about like Kaylin has.

32:49 Kaitlin has the best nominative determinism initials of all time. Her initials are CEO and she is our boss.

32:57 No, Neil is our boss.

32:59 Big shot to Neil for finding POI market, I am, of course said zechon. I'll be back with a monologue on Friday. You can of course bet on this on goot. Each goot is worth a thousand slubs, so make sure to invest your slubs based on the number of times I said THEE in this episode. That will of course funnel into a It's an account in the Cayman Islands I have. It's fully legal. I've checked with many lawyers, several of which haven't been disbarred. This has, of course been Better Offline. I am your host at Zetron. Thank you for listening. Thank you for listening to Better Offline The editor and composer of the Better Offline theme song is Mattosowski. You can check out more of his music and audio projects at Mattasowski dot com m A T

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