Alex Kane on CFTC Approval, Market Makers, Handle Taxes & Market Needs | Prediction Market Movers

(upbeat music) Welcome to Prediction Market Movers. I'm Chris Gerlocker with Prediction News, and we've got sport trade founder and CEO, Alex Cain here with us. He just applied for a DCM and a DCO license from the CFTC to get out of the state sports betting web of legislations. We're gonna talk about that. And what he can offer the Prediction Market industry coming from state sports betting as an exchange, really interesting layers there. Give us some support and like this video, subscribe to our YouTube channel at Prediction News and follow us on X, at Prediction News. Now let me tell you about Prediction Edge. The 2026 elections are going to be a wild ride. More than 450 house and senate seats are up for grabs for incumbents and a new wave of rise in candidates. Prediction Edge is a new election platform that brings together real time market prices, candidate profiles, fund raising, polling and endorsements. Prediction Edge is the smarter way to follow the elections this year. Now Alex, I wanna get into what you face as a state regulated exchange. How have regulators been constrained and how they can work with you by some of the sports betting bills at different states of past? - Chris, thanks so much for having me. Congrats on all the success of the podcast and the publications been really great to see. I'm really happy for you, man. - Thank you. - I think the phrasing of your question is exactly correct and it's the right way to think about it is regulators do not create the laws of how sports betting happens in all these states. And in fact, in a lot of ways, yes, they create the rules. They enact the regulation, but the regulation is so often almost every single state case has 38 states plus DC and Puerto Rico that have legalized some form of sports betting is that the legislators actually go and create those rules. It's almost as if the CEA would have been created in the federal sense and the CFTC regulations part 39 and 40 are just a mimic of what the CEA says. And of course, that's not how it works, cetera, right? The CEA is not as prescriptive as to how the CFTC, the agency that the CEA sort of has authority over is supposed to create rules and regulations. And that's really one of the problems. I wrote an open letter actually to the gaming legislators regulators about a year ago would love for you to repost that as part of this podcast. People can actually see it. Where I talked about that being a huge problem and the reason why it's a problem is that there was only one form of betting on sports or sports betting where everyone would call it. That was ever contemplated by these states, these 38 states plus DC and Puerto Rico that passed online sports betting. And the problem with that is that it only ever contemplated the sort of player versus house model, the booking model. And that's in large part because it was actually the industry, the American Gaming Association, members and others, casinos that created those rules, created those laws. And so fast forward to sports trade trying to bring this totally different model into these states, we've done it in five states. It's a very watered down version of what we actually have built and what our technology can support because there are just very hard and fast rules as to what you can and can't do. And let me give you three examples. For example, in New Jersey, it is illegal for corporation to bet or to trade. Now, exchanges require a ton of participation by market makers. And market makers are often not individuals with their entities that sort of get together, build a model, find the right feeds and begin supplying liquidity to these sort of venues. So that's out. In New Jersey, it's illegal to use a bot to trade or an API. There goes algorithmic trading. Right, there goes algorithmic trading, which if you take a step back and said to basically the Nasdaq Stock Exchange, tomorrow you're going to open, but you can't have any entities trade and you can't have any algorithmic trading. Everyone's 401k with collapse. Because stock markets don't connect to natural buyers and sellers directly. Market makers come on these exchanges and provide that synthetic connecting of natural buyers. You might want to buy IBM five shares. And 10 seconds later, I'm going to sell two shares of IBM. And market makers provide that critical service of connecting us and charging some sort of fee. And the more market makers there are, the more they have to compete and the more those fees come down. And that's better for the consumer. The third example is that brokers are required, right? You need to have intermediation. Brokers are the ones that gather customer assets and gather customers and then route those customer orders to these exchanges. If you once again said to Nasdaq tomorrow morning, you can't have broker or intermediation, there would literally be zero volume. Because you cannot trade directly on Nasdaq. You have to do it through some sort of intermediary as a broker or as an end user. And so that would basically kill the stock market tomorrow, right? And look, prediction markets are not the stock market. They're different. There is a lot of risk taking and speculation, considerably more that happens on prediction markets and stock markets and that's fair to say. But our argument has always been, we still want what's best for the consumer. And without being able to do those three things, spread their wire, customer protection goes down, the cost trade goes up. It's less liquid. You can't invent these liquefair and liquid markets. You can't have any of these things as ultimately power all those things. And so that's been our gripe, is that it's not a matter of us calling up New Jersey. It's saying, hey, here's what we're kind of thinking. Can we do it? It's a company like ours would have to go and register as lobbyists and somehow change the existing laws, which there's not any appetite to do. Because ultimately what we're talking about is a model that reduces the hold. It reduces the advantage that the operator has over the customer. And we think that's a great thing. But that doesn't exactly line up with why states legalize this in the first place, which is if they had their brothers, they want customers to lose as much possible because they get, you know, that's just fact because they can't want the tax revenue. They want the tax revenue. And so that's always been a really difficult thing for our model. And I think the way you phrase the question is so important. And there is no animosity that we have towards any individual state regulator or even state legislature for that matter. It's more the system has created a set of rules that are so prescriptive that simply do not allow this model at all. Whereas the CFTC and the CEA have contemplated trading and markets and exchanges and brokers and market makers and intermediation and order books and all the things that are required to create this model that at the end of the day for the types of consumers that do want to trade at very low cost is much better. And how does something like a handle tax make it financially impossible for you to launch in a certain state with that tax game? - So, yeah, most if not all the states without the exception of Tennessee, charge you on your, on your what's called your revenue. And the thing that's really difficult about that is that, you know, this model, you're seeing all these state tax revenue tax rates go up as a percentage of someone's grossly in revenue in Arizona just the other day, proposed increasing the top rate from 10% of your revenue. And we're not to talk about income tax. The gambling and sports betting, you pay tax on your revenue, which is not something any other business does, raising that rate from 10% to 45%. Illinois has passed, has raised the rate from a 15% flat to a graduate rate that tops out at 35%. Illinois has passed a per major regardless of the amount tax missing and is considered mimicking that same sort of tax. And I think the reality is is if you start back with the, you know, the original understanding that the only model that was ever contemplated when these states did all this was the player versus house model, the player versus house model can absorb a 10, 15, 20, 25% tax on revenue because it is not an exchange. It is the only supply side. It's the only market maker. It's the only counter party to all these trades. And so what they can do is they can do all sorts of things to see if you see would never allow. They can ban certain players. They can limit certain players. They can throw in some players and not others. They can offer different prices and different limits to different players. And that allows you to manufacture a margin that's actually much, much higher. And it's exactly what we've seen. Since 2019, the historical hold rate of these online sportsbooks has risen from roughly 6% to almost double that near 12%. And if you listen to some of the Amy Howves, the chair and CEO of a fan duel, she says that they ultimately want to get to a hold rate of 16%. That's not possible in a federal prediction market because there are multiple counter parties that compete to drive those spreads down. Right, think about the stock market analogy. And so I think the thing that's really difficult about the way that the tax system has come about is that more of these larger operators that operate this player versus Houseball, they can absorb those greater taxes by just increasing their pricing and making it more and more, less and less advantageous to the player. Getting more discriminatory, I say, that in a literal sense of removing players that are lower margin, which we're seeing on time. Massachusetts is in tackling that issue. And Massachusetts is a great example, is that is a natural output of creating license fees [BLANK_AUDIO] or someone to pay $5 million for a license and 20% of the tax and unable to carry forward losses. The all these sort of things that don't really need the service layer that effectively ban or outlaw this sort of model that not everyone's going to do. Not everyone's going to switch to sports trading in the Commonwealth and Cal State because it is very attractive for certain retail recreational bettors to say, "Hey, I only bet when I get these huge deposit bonuses and the boost." Those are things that can only ever happen in the state market because the state market is a piece of paper. It gives you a license and that piece of paper says, "You can discriminate based on customers. You can limit customers. You can have these really aggressive VIP movements. You can charge whatever market margin you want. You don't have to add any competition in the supply side." So my point is, there's no saying all this is it's even some of the guests that go on your show, as some of the guests throw on your show often. Lack of the new wants and the understanding that this is such a different model. It's not apples and apples. They did literally apples and oranges and both models are great and both models are very viable. Each model requires a completely different regulatory understanding. The state champion regime of online sports betting is never going away. It allows operators to offer such high margin products a ton of bigger menu, more exciting products for recreational players, more bonuses, more incentives, more loss back, more insurance, all this sort of stuff that we see in the marketing and none of that stuff's ever coming to the federal market because it's a totally different model. So that's by overall points, your audience is like both models are great for completely different customers. They're completely different. They require completely different understandings of how they should be regulated and we're kind of in that middle zone sort of compromise zone right now. The states are going to take that very high margin house back model and the federal government is going to take these exchanges that can exist under what the states have contemplated. And sports rates, your point is that your profit margin is lower than a sports boat. They can offer a lot of parlays and offer these high-hold products. You're not going to be able to absorb even a 1% handle tax or even a 35% tax rate on just revenue from fees even if they can offer that for you. Is that what I'm getting? Right. I think to make it a simple example, if a fandal hopes to achieve a 16% hold rate over time, sports rate hopes to achieve a, let's call it a 30 basis point hold or commission over time. 150th, right. That sort of gives you the idea of the way that this market's going to go. It's going to be about fees collapsing, spreads collapsing because it's driven by market dynamics that sit on top of a regulatory understanding that is market-based in nature versus the state-regulated regimes is not, doesn't have any of those dynamics at all. We're actually going to see the opposite. The cost of sort of place bets is going to go up because of the way the states have created this completely separate playground or race track, like a NASCAR Daytona 500 track versus the Monaco F1 track. I mean, there's totally different race, totally different tracks, totally different cars, totally different engineers, totally different fans that engage with those products, right. And that's like a really good analogy of just how different these are. I think too much of the national spotlight is this federal thing is stealing from state coffers. It's taking handle away and the new ones' reality is you can't do what people are doing on Calshane Plumber and crypto.com on fandal draftings, MGM, Cezars, that's through six times. You just can't do it. So, you know, that's like saying, well, you're taking race cars away from the NASCAR track to go racing the F1. I'll tell you right now, F1 driver can't compete in NASCAR. And a NASCAR driver can't compete in F1. It's just it's just a totally totally different product. And the people that want to say that it's in any way conflationary or competitive or stealing from state coffers either don't understand this at all or they're very intellectually dishonest and they don't care to sort of peel back the layers of that new ones and say, well, wait a minute, you can't put in your own price on bet three six five. So, anyone that's doing that in Calshane, they're not taking away from the states. And you can't have brokers route to bet three six five. So, anyone that's doing that's not taking away from states. And you can't trade as an entity on any of these venues. So, anyone that's doing that's not taking away from the states. And you can't trade algorithmically if you're in bot on bet three six five. So, anyone that's doing, and then you realize that that's actually 95% plus of the volume and activity that's happening on these fairly regulated venues. And that's just like that's just the fact. Let me pull you into the DCM and DCO applications sports betting license applications, ask you for financial disclosures, background checks. How does the CFTC application process or these both these applications? How are they different from the state license applications? They are extremely different. They they cut to the heart of what the business is actually doing. And, you know, from a DCO application, which is the clearing, it's how do you handle risk? And how do you ensure everything is pre-funded? That's how we've submitted our application. It's pre-funded fully collateralized. How does the algorithm work? Where's the software? Where's the hardware? What happens in the case that there are errors and issues? And how do you effectively ensure that customer funds remain segregated and fully collateralized? And what is what is the mechanic that you use to update software that might change how you calculate someone's balance? And it's, you know, somewhat regimented in that way. And from the exchange of DCM perspective, which is regulated by the DMO at the CFTC division market oversight, it's how does the matching algorithm work? And what would you do in these circumstances? And what are the controls and processes you have in place for market surveillance? And is very prescriptive and regimented in that way? I think that differs a lot from the way states operate, which is, you know, you need to get this certification from this group that says your platform worked exactly like this. And again, it starts with this pre-meditated predisposition understanding of how your model is supposed to work in the first place. And that's a real challenging sports trade perspective. Like even in a state like Iowa, we're not even allowed to have customers enter their own quotes. So if you're in the state of Iowa and you're in the export trade, you can only use market orders. I know 11 orders in Iowa. No limit orders are allowed at all in the state of Iowa. And so, you know, it's to the state regulated thing. It's like it's born out of the way in 1976 is the first year that the referendum has passed in the Atlantic City to allow, in New Jersey to allow casinos to operate. And it was all about keeping the mob, the Philadelphia mob being linked, Joe Brennan, what's the story at Newark, out of the Atlantic City. And so the questions that sort of were asked in the sort of regulatory process and all the paperwork was born out of that 1976 pre-disposition. No, it's changed. Literally none of that. So the same paperwork and the fingerprinting and all this sort of stuff and the background investigations are the exact same, regardless of whether operating something that looks like a lot of their stock market like export trade, then it would let me know that you have a hard rocker, better to expire, or whatever. And I think the difficulty with that is it misses the point in what we're offering and misses the point on what we're trying to do. This is the point on the type of people we are in the disposition that we have and why we're coming to the market, what we want to offer. And it it's just overly prescriptive in all the wrong areas because it's sort of meant for people are opening up a physical casino to physical place, you know. And I think a lot of the technical requirements, you know, New Jersey is very advanced in this, they have their own performance labs, some states do, some states outsource it to UGLI or BMM test labs. And it's just very prescriptive. It's like exactly at 15 minutes, you have that this pop-up message that says this and the font size has to be this and has to be banner in the top corner and it has to do this. And they sort of test all these edge cases of things that we really care about the responsible gaming, responsible interaction, but it's so overly prescriptive. And sort of this is the point of like the intent of it. It's like, you know, at this time, we had a customer that did this and, you know, set a certain limit and then set a different limit. And then the email they got was didn't happen at the right time, an email didn't contain its own RG message. And it's like, I get the intent. The really tricky thing about it is that New Jersey has its own set of rules. In fact, they've come up and passed in their legislation and in their regulation, a new set of responsible gaming tools and initiatives and a new set and a new set. And you realize you're 38 of these that all want to reinvent the wheel. And so I like it into a game of Twister, we all play with Nurgent, right? Right arm on purple dot. New Jersey has this symbol left arm on red dot. Okay, Iowa has this set of rules. Okay, great. Right leg on blue dot. Okay, Arizona. And what you've realized is the only companies that will ever be successful. Again, in this state regulatory regime, which I championed in my support, I think it's great. Our companies that are multi-billion dollar, multi-national, massive, massive compliant department. So I'm talking 10, 25, 50, 100 people, where you have individual teams, say, well, I'm other responsible gaming team of Iowa and Illinois and Michigan versus I'm on the licensing renewal team at Arizona and Colorado. You know what I mean? Like you need these such massive teams because if 38 sets of regulators who will all type the same thing. I don't care what other states are doing. These are my laws. These are my rules. And there's almost no uniformity. This is less about the whole exchange versus player versus house thing. And more, just the type of company you have to be successful in that model is you need billions of dollars and you need massive, massive compliance departments. And you need a product that can have the margin that can support those additional accretive costs because those regulations are only increasing. You have 38 sets of unique independent legislators that are all coming up with, forget the fact that they've all reinvented the wheel. So you have 38 wheels. They're all now adding their own specifications and enhancements, tweaks and then two those 38 wheels. And so the only companies that are going to be successful are these massive, massive, massive tractor trailers that can sit there and have their own team sort of perfect each of those wheels. Exactly what calcium polymarket want to avoid having to grapple with. I think we've really tried to do this, you know, we looked at the CFTC back in 2019 and just it wasn't. For all these reasons that people know about it just wasn't possible at the time. And now it is possible. And, you know, we set aside how it came to be. We set aside the political reality of, you know, there's a lot of people that look at the politics of it and are sort of turned off, which I think is a very fair viewpoint. And we focus on customer. Okay, which of these regulatory models allows us to provide the most amount of consumer protection, the lowest cost, the highest transparency, the most efficiency. And it's a no-brainer. I mean, it's funny even some of the state regulators we've talked to in person about this, you know, you put some truths here and then and they're like, I have something to do the same thing you're doing. You know, it's not, we never really designed this for an exchange and we don't really, you know, and I mean, like, I think that's our focus. And what ever happens in the next five years, where the, you know, federal government takes in the Supreme Court solidifies that or there's an amendment to the CEA for a legislative perspective or the state's way and there's an amendment from the CEA perspective, federal perspective that make goes back to the states. Our focus is the consumer. It's not politics. It's not on choosing one set of regulators as people that we think are smarter or better. It's none of that. It's what allows us to to provide the lowest cost, highest efficiency to the consumer. And right now, we are saying that a federal regulator, one regulator that has a predisposition and understanding of how exchanges work and how all the market structure needs to be sort of regulated to allow this sort of very low cost model is better than a set of 38 unique regulatory bodies that each have their own very prescriptive yet different set of rules that never contemplated this sort of activity, which is better for the consumer that we care about. Like, you know, adding a set of five product developers and compliance managers for us to go and have their full-time job be on top of the 38 sets of rules and regulations that are changing, not to mention each of those states require yearly technical, cybersecurity, geolocation audits. So now you're talking about a set of over 100 sets of yearly audits. You're now spending tens if not mid eight figures of millions per year just keeping the status quo. And that does include all the new requirements that come in to say, hey, we're going to change it. So instead of, you know, after every 20 minutes, one and half to every 10 minutes, and oh, by the way, it's not one eight hundred gamma anymore. It's one eight hundred with this. Each state has their own, you know, it's in Arizona. I think it's one hundred next step in Colorado. It's one eight hundred gamma. Oh, the different gangling helpline numbers that cross wires and make it harder to connect people with the same resources. Yeah. And so you think about all the work that you have sport trades actually power. It had packs an incredibly powerful punch like when people see this UI, I think it in my opinion, it's a trading app that rivals that of Calshire Polymer, in terms of the features it has for customers to view markets and see charting and see positions. But there's also the 85% of the work that the customer never sees of. If the customer passes this border, we get this different message to geolocation provider. We're changing the UI because it's a different logo in the top and the font has to be different. Make the different manners and the different cool off numbers and all the different New Jersey is this self-exclusion process that we built the mobile app for this versus Arizona has this versus Colorado doesn't have that for the amount of work that we have done is any credible amount of work. In fact, you know, five times the amount of work that we've put into the stuff that we really think makes better products for consumers of like how do we lower spreads and make this more efficient because of the prescription. So it goes up early in five as you imagine multiplying that by a factor of seven. We've only really done 12.5% of work and that doesn't include the other 12 states that my ultimately legalize and have their own meal. And so the point is it's one thing to say it's impractical and I think that's what Calshire Polymer is. It's quite another to say we've lived it and we can prove it and I think the portrait's voice is very valuable in this case of, you know, we hear that argument of like it's all the same thing. It all should be regulated by the states whether from the political perspective of how these laws get passed or the regulatory perspective of how the exchange model has never been contemplated or the reality of how much product work and compliance work and audit work and financial work and regulatory reporting report that goes into each of those 38 states. We can prove that it's impossible. And so I think that's that's what's so important. If you're approved as a DCM and a DCO who are some of your new customers that open up beyond just sports raiders? Yeah I think that's the most exciting thing. It's like we have applied not just for a disintermediated DCM license which is sort of the easiest thing to do that, you know, we've went and said no we're actually apply for hybrid which means disintermediated direct to consumer and intermediate where we can accept introducing brokers and futures commission merchants to introduce flow to the platform which is incredibly exciting because it's actually how we've set the software up four or five years ago. It's very easy for us to provision a set of ports for a new broker to say here's the order entry port market data port ref data sort of drop copy whatever and that allows us to focus on where we're really passionate which is less how do we create that really catchy billboard or how do we get out there and raise $500 million and try to acquire customers and like focus on what we really care about which is like how do we construct a market microstructure such that market makers are staying competitive quoting tight spreads at the end of the third period of hockey game that's where sport trade is so good that's where our expertise is and I my feeling on the way this market's going to mature is it's going to be very similar to traditional electronic trading products and in ecosystems where brokers are going to sort of gravitate toward the highest quality of execution is going to be so sport trade gets to be really focused on that one thing quality of execution for all types of participants not just directs for trade users but also for brokers and intermediaries and market leaders and so that's one thing of like we set off the software that way or we built that sort of have what a car we're forced out of the NASCAR track like we never really got to do those fancy twists and turns and you know change the real rear diff well yeah that one cars could do that NASCAR cars basically just turn left all time and I'm saying that I actually like NASCAR I don't think it's amazing to swear about all time and if Joe it's the loss he's listening that is not a dig at all you know I actually watch more NASCAR than that one and ultimately it ends up just being a really good metaphor but the point is we built all this in a way that could support a larger ecosystem in this intermediation see other thing we've applied for as a DCO which is declaring out so it allows us to hold all the funds and makes that integration very easy for brokers and I think that's where we want to focus and I think we're going to have you know an incredibly competitive product set and ultimately our goals to set to have the best quality of execution we feel that the customers are already using Robinhood and Coinbase and Draftings and Fandall and Sleeper and Underdog and Flip and chalkboard and price picks and you know there's hundreds of those sort of brands we want to service those companies and we think that we have Titus Frez the best liquidity and the best market structure and that's what we focus on and then the federal construct allows us to do that in a way that stakes never contemplated. Explain the status quo that you're improving for brokers like Robinhood for example. So I'd say you know it's a lot of things the first thing is like listening to them like what works what doesn't work with existing venues that you're out to. I think the big advantage the biggest advantage is very simple and it's not that's for trade smarter or better or faster or the people that work here are superhuman. It's like the reality that's in 2020 we raised money from Nasdaq. I think a lot of people know this and I got a chance to speak with Adina who's a CEO and I never forget that pitch you know so nervous and I gave the pitch and her first question was you know she want Robinhood to route to the venue and I said of course you know that the idea is it to just create a standalone brand it's to sort of be a lot like Nasdaq and that you're the sort of the structural underpinning of the entire Sire ecosystem and so I think we we've built this four sports four intermediation for the last four years whereas other potential competitors didn't build it for sports may not have built it for intermediation and there are so many downstream impacts of that, whether it's the speed of connectivity that the consistent if it's the saturation of how many messages per second can this thing support? The integration of the ref data, and you can read our ref data and see there's documentation that's available in the public area. And I was like, how we sort of name these tickers and how contracts map to markets map to contests map to leagues. And it's sold a very easy readable thing because we spend a lot of time and optimize it really for. It's more to the fact, it's more to the fact that we have a heck of a challenge mapping it to political contracts and other things we ultimately must. But the advantage is a lot of this sort of, a lot of where the sort of business and the action is in sports, and we've really optimized for this. In terms of answering your question literally, it's easier on activity. It's faster throughput. It's more determination in terms of the sequencing of messaging and understanding. Nothing gets dropped. It's the how fast things settle. It's the liquidity of liquidity that they're going to see in the venue. And that's a function of the market microstructure that we've spent years sort of tweaking so that we can get to these really tight votes and really high quality of markets. I think that, you know, we've been somewhat successful. I think Earl of Doors, speaking to this whole slew of brokers and say, here's, we're coming to the market. And here's what we want to do. We want to focus just on you. You're not going to compete against us. We're not going to compete with you on customers.org about that. We really want to be like the NASDAQ or the near ground appreciator, the CBO or the CME or whatever it is for this ecosystem. So I think that's one thing. The second thing we're starting to find is that there's a lot of demand from this potential market of people that want to leverage maybe our broker-back-in tech that we've already built, maybe even a broker-front-in tech. And we're in this really unique position that we're not marrying to the idea that everyone needs to know about support trade and that it's a direct consumer brand. We might have a lot of this tech that we've developed and mentioned over the last four or five years that could be very valuable to people to say, you know, I haven't built a broker-back-in. I haven't built an order rather. I'd love to use your tech to do that. And so think about us really becoming something that's powering the whole ecosystem from a market technology perspective as well from an execution perspective more than just a, hey, we're going to take this portrait thing and try our luck trying to get customers in the other 45 states. That is not the strategy. - Okay, you mentioned the improved quality of liquidity through sport trades back in. What sets high quality liquidity apart from low quality? What's that feature or what is the quality that you're improving on? - So I think it's really like how many contracts are available at the bid? How many contracts are available at the offer? And what is the spread between those two prices? And what sort of treatment do incoming orders get treated with when they want to remove that liquidity? What sort of treatment do incoming orders that want to add liquidity to both get treated with? What do you do when there's a goal in hockey game? What do you do when there's a court citer at the baseball game in order to advance as fair and liquid as a market as possible? - You think that's where those. - So you're prepared for those really dramatic price wings that happen in real time in sports that are more predictable, even in political markets, for example. - Right, and I think we're the only reason we have all that is that again, we started four or five years ago, and a lot of the people that built our venue will subpass or CTO, John Ross helped build our matching engine came from like, hey, these problems were solved in traditional electronic markets 20 years ago of what do you do when someone has a faster feed? Like we're just students and nerds of like, what did the IEX do? Right, they created this coil so that there's a delay so that they're able to see the stale quote before any of their market makers and actually price the chest of stale quotes before market makers can pick them off and thereby improve the quality of execution for those submitters of those tell orders. I think for us, it's like, how do you marry that knowledge and expertise with a knowledge and expertise of like, how long does it take sport rate or get the feed from the field of play to a market maker reliability and accurately? How does that differ sport by sport? How does that differ product by product within the same sport? How does that differ provider by provider betchiness to sport rate are really thinking about? Well, how do we construct this market structure so that like, it doesn't become a total dagger knife fight the ninth inning of a baseball game where there's 19 people in the arena trying to jam the second video to crack the bat. And that doesn't create a good market structure for anybody and ultimately what we're trying to do is create the tightest spreads for brokers and they're not interested in participating in an ecosystem where market makers have to quote very defensively to contemplate the reality of, hey, I can't be aggressive with my quoting here because if I am, I'm just gonna get hit before I read the sport rate or message because somebody's hit me from inside the stadium and how do you price those trades fairly? I'm getting weight details here, but maybe I'll back up and say, we didn't really know how to do that so that we could service brokers who just want, hey, I just want to trade into water to wet market flow game. That's what my customers want and I want my customers to pay the lowest overall spread overall, lowest overall commission and that's what's gonna create this amazing quality of execution for the end customer. It's like, you know, Jeff has 17 interview, like I have what I'm saying this out loud, but he said, like customers don't really care, they buy a car like why the car is safer and why the Toyota Corolla has like JD powered associates, like 10 years in a row in the State Department of Road. Car manufacturers actually really care about that and the end user is the beneficiary of that air at that sort of supply side of that level further up into the distribution chain. The same things can happen. We're talking about something way less important than the safety of cars to be fair. We're talking about quality execution and prediction market but these end consumers are gonna be beneficiaries of going for these brokers of quality execution 'cause ultimately these brokers that are really advanced are gonna say, okay, I've got this end customer Chris and he wants to buy, you know, 10 contracts of the Eagles of 52% live. They're gonna receive your order and they might be pulled into five or six different venues and say, where should I route this based on how long is it gonna take to execute? What's the liquidity of the bid, the price of the bid and the offer, what's the depth of the bid and the offer, what's the slippage gonna be like? In order to determine where to send that. And so now all the exchanges like sports rate have to compete on market structure to be first in line because you may not care about getting the best price but the broker certainly cares about getting the most price 'cause they want the most amount of your liquidity to say in its ecosystem. And so by virtue of setting up this intermediate and market structure, you actually introduce an insane amount of consumer protection that would never exist in a state like they'd always be. Those platforms and I allow to respect for all of them. They want you to pay the most for every single bet. Versus brokers want you to pay the least and that's gonna create this again, massive diversion. And it's for different customers, right? Some customers don't want that. Some customers just want the same game, parlay insurance and whatever it is because that's why they bet and that's fine. But there's gonna be a lot of customers that wanna do it from the ease of their brokerage account or from an improvement app that also has these other products that they wanna use outside of sports prediction markets and I think that sort of sports rate is gonna fit in the overall ecosystem is like, how do we have the best price at every possible time in relation to our competition, which is all these other exchanges that accept these brokers? How are the benefits that you can offer Robinhood different from what Calshire Polymarket could offer in partnerships with these brokers? I think it's that same market microstructure answer. I think in addition, like zooming out something more like business focus as opposed to like quality and execution focus is like, this market's gonna be so big, there's gonna be so many types of intermediaries. And you sort of have to choose, like are you gonna be in exchange that supports other brokers in a B2B capacity and be really focused on that? Or are you gonna be a B2C venue that Calshire Polymarket have been really successful and so far in also trying to get customers? And as this market matures, those things are gonna be in direct conflict with each other. As interesting as the proof of that, I can't prove it to be true. But NASDAQ doesn't have our direct-to-consumer brand for its stock trading. And CBOE does not have a direct-consumer product or pipe for its options trading. And CME does not, CME actually interestingly did launch some sort of direct-to-consumer thing. But the counterbalance for that is like, you depend on these brokers. And the brokers don't exactly want to route to a venue where they feel that they're maybe funding a competitor from a customer acquisition perspective. And so there's this really sort of no-go zone traditionally of like against this vertical integration that can happen because brokers are saying, I want to support venues that are totally committed to me or maybe feel a little more like a partner, as opposed to a venue that I'm really feeling more like a customer, and not only that, the money I'm paying as a customer is going, it's ultimately fine to customer acquisition, which is driving at my cost in the back end is now the CPAs are higher. And that's just a virtue of like sports trade. That's just a product of where we're passionate about as a company, which is quality of execution. Like to be a Calche, you can't be solely focused and obsessed with going to execution or to be a polymarket. You have to be totally obsessed with how do you become and remain the cultural zeitgeist. I'm not a society, which is what they're really good at and what they're doing. I also have a lot of respect for their market structure, as well. an incredible job and we'll see on Paul and Mark and I think they still have to sort of get to market and get out there and start supporting intermediaries but what Kalash has been able to do is like so impressive. Over the course of a year there's actually not much bad I can say about it but I think where it gets tricky for brokers is to say well if I'm someone and I'm you know if I'm Robinhood and I all my stock trading orders to NASDAQ and then NASDAQ tomorrow starts a direct consumer competitor do I do I want to continue to support that and what are the implications of that and what are the implications being so successful that that company may even have their thumb on the scale for how successful it can be and does that create some sort of artificial ceiling for me so there's just the things to you know that I'm sure everybody's thoughtful about and where sports trade sort of falls on that side of the you know discussion. To wrap up what are some of the other gaps that are there for companies or traders to fill in this and support backend be to be corner of the prediction market industry. You're saying we're where do traders fill into that or what kinds of what kind of market needs are still there or what kind of opportunities are there for companies to jump in and improve things for traders on this backend space. Oh I think there's so many things I mean I think there's an opera there's there's like you know there's a couple of companies I've heard about you know there's this company called Dome I think there's a couple of companies are coming out of Y Combinator and you know these sort of accelerators that are brokers design for sharp traders and I think that's kind of interesting and I think you could see a brokerage you know algorithmic trading as a service where like you as an individual customer that may love kalshi and palm i market and trade on those venues algorithmically might find it easier to algorithmic plug it into an FCN or broker that actually does all the order routing or some of the order routing is for the optimization for you because you may be able to opt into the prefrontal feed treatment that that brokerage gets because in houses the you know the potential appetite of hundreds of thousands of customers for hundreds or thousands of customers each sending a sh*t on orders per day to all these venues and so I think like there's an opportunity there I think there's an opportunity to like build the alpaca of prediction markets and that might just be an alpaca. Those are brokers that effectively are you know a broker that sits between a broker and an exchange and so okay you know I'll go to all the like a you know the chalkboards and you know of the world as sleepers or those sort of brands may not be coming from algorithmic trading and say hey we have connectivity's all 10 sports DCMs and we have an order routing done so we're going to integrate with you and you just have to send us the order we'll do all the order routing you send us the business logic and we may even be able to help get the most possible fees with the DCMs and we'll be the piping across one single API that allows you to trade all these venues that's what an alpaca has done so well they just raised like I don't know two or three or four five hundred million dollars while they do that it's not trading but they can go to all these sort of individual sharp users and up and coming brokers and say we already have all this market infrastructure and usually the plug-in one of this amazing shiny simple API and we are your connectivity to all of capital markets or options markets or crypto markets being able to add prediction markets to that I think there's an opportunity there so there's like so many opportunities but I think the singular threat is like this federal understanding and underpinning and contemplation of how this type of market could evolve allows for all this innovation entrepreneurship ingenuity capital formation in a way that's going to drive lower costs for the end consumer and you juxtapose that with like how many startups have entered or even contemplated entering the Nevada gaining market like none like there's none there there's like no you have to buy a casino to be there and so like that's not a dig against Nevada in the way people think it is Nevada's got an incredibly robust amazing I love going to the casino as a Nevada I personally like circuit I've been to the Venetian I've been to Caesar's I've been and Jam I think they're all great and I think the sportsmen and products that they have are great but I think they're walling them off to all this other demand and ingenuity and entrepreneurship that they just simply never contemplated and really their law and the regulations just don't allow all and so going after that is kind of like you've got this great amazing NASCAR track and everything's great people come here races and there's a lot of a concert and then like F1 wants to start a track and you're seeing area and you're saying no well it's not like the cars are going to switch over not like the fans are going to switch over it's like totally crazy right and great it's like if you know there's actually to round out this metaphor you've got the Las Vegas F1 sort of track the Grand Prix that they just we did for 9 years and you also have the Las Vegas NASCAR race right the Las Vegas Motor Speedway coaster race I think every March every year and it's great and they drive amazing attendance and South Point is the sponsor of the Xfinity Race and South Point sponsors a couple cars and the F1 and it's like the creative and it's amazing and it's set up that both types of fans and cars and technology providers and people that produce the tires like Pirelli does the tires forward the F1 and Goodyear does the tires for NASCAR like it's all great like that's the point like there already is this amazing middle ground and it just makes no sense for you know F1 to go up for NASCAR for NASCAR to go up for F1 and like you see this amazing like it just rising tireless all boats and so that's what's so exciting that's the sort of the current I want to leave your listener with is that this new market structure allows so many particularly American entrepreneurs and capital sort of formation groups and VCs and builders and tinkers and people that want to make things better to enter this market in a way that's realistic that's reasonable that's cost you know makes common sense from cost and efficiency perspective and ultimately all of those things are going to reduce spreads for customers and like that's great and I champion that and who knows everything I just said in terms of where I think the market could go from a ingenuity perspective could go a totally different direction but I think I'm right that the single recurring theme that undercurrent of this all is that it's going to be things better for the end consumer and like who who could possibly stand in the way of that um Alex always a fascinating conversation to really get into the markets with you where can we follow you and sport trade uh sport trades on x at sport trade on the square app you can hit us up on sport trade dot com and see news about when we hope to be going live and some of the stuff we're unveiling over the next couple of months which would be exciting um and you can follow me if you're crazy enough to do so at act on x I think I'm a underscore keen 47 uh is my is my tag or whatever so yeah uh looking forward to jumping in and discussing all these things with your listeners and I I really appreciate the opportunity to come on and to speak with you always a fun conversation uh hey like this video for us and give us some support subscribe to our youtube channel at prediction news and follow us on x at prediction news for breaking news coverage Alex thanks again thank you so much Chris