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Billions of dollars are bet each week on prediction markets, and one of the largest is Polymarket, where people bet crypto on sports, politics, even war. In fact, in recent weeks, a few well-timed military bets have been raising fears of insider trading. Another recent development, Polymarket has opened a pop-up bar in the heart of D.C.'s lobbying district. NPR's Luke Garrett checked it out.
LUKE GARRETT, BYLINE: Eighty-some TVs covered the walls of the Polymarket bar just a few blocks away from the White House. In attendance, a grab bag of the self-described terminally online, a lot of journalists, some congressional staffers and a handful of influencers. Nick O'Neill is a cryptocurrency personality who trades on Polymarket. He flew up from Miami for the event.
NICK O'NEILL: I was kind of wondering why D.C. right now, and I'm like, is this part of some, like, lobbying initiative? I don't know. I don't actually have the answer for what motivated them, but that was kind of my presumption.
GARRETT: That presumption was confirmed by Neil Kumar, the company's chief legal officer. He called the three-day pop-up event a, quote, "coming-out party in D.C."
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NEAL KUMAR: We want to be a part of the conversations in D.C., and where best to have a conversation than in a bar?
GARRETT: Bets on UFC matches, the midterm elections and cryptocurrency prices flashed at bar-goers from all sides. But one screen stood out. It showed an active market where people were betting on whether or not the new Iranian supreme leader, Mojtaba Khamenei, would make it past April 30. An anonymous Polymarket trader made more than half a million dollars on a similar bet about the survival of the last supreme leader, Mojtaba Khamenei's father, who was assassinated on the first day of the war. Trades like this are raising alarm in Washington, where new bills are trying to ban certain kinds of prediction market bets and who can place them. Speaking to reporters just outside the bar, Polymarket's Kumar brushed off concerns about the supreme leader trades.
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KUMAR: Are we concerned? Look, we cooperate with the authorities. We look into information all the time that's surfaced.
GARRETT: Kumar is part of D.C.'s revolving-door system. He used to work at the Commodity Futures Trading Commission, the government agency that now regulates prediction markets. Under President Biden, the CFTC banned Polymarket from the U.S. But once Trump retook the White House, the CFTC cleared the way for Polymarket and its rival Kalshi. At the pop-up bar, which sat just a block away from the CFTC headquarters, Kumar celebrated the shift.
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KUMAR: We spent much of our livelihood at Polymarket fighting to stay alive, being super scrappy. We've proven that the concept of prediction markets exists, and we've proven that the concept is here to stay.
GARRETT: While betting on wars and assassination is illegal in the U.S., most of Polymarket's bets are technically taking place outside of the country. Users are anonymous, use cryptocurrency and often hide their location by logging in with virtual private networks. This new financial technology has run ahead of government ethics rules. While the law prohibits insider trading, financial disclosure rules make no mention of prediction market bets, also known as event contracts. Oregon's Democratic Senator Jeff Merkley says that's a problem.
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JEFF MERKLEY: It is a massive blind spot - understandable in that these event contracts didn't exist in this form at the time that we created disclosure on stock trading, but unforgivable if we don't fill in that blank now.
GARRETT: The morning after the pop-up Polymarket bar closed, the company announced new rules on insider trading, barring bets on illegal tips and trading by those who can influence the outcome of an event. In a statement, Kumar said, quote, "markets thrive on clarity." That doesn't go far enough for some in Congress.
NIKKI BUDZINSKI: We don't want to see senior level staff or, again, elected officials monetizing sensitive information that only we would have access to because of the nature of our roles and our jobs.
GARRETT: That's Representative Nikki Budzinski, a Democrat from Illinois. She's the latest member to introduce a bill banning D.C. insiders from betting on policy and politics. When she heard about the Polymarket bar, she called it, quote, "wild and inappropriate."
Luke Garrett, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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