Today's guest is Tarek Mansour, the 30-year-old billionaire co-founder and CEO of Kalshi, the prediction market platform where users can trade on the outcomes of everything from elections and economic forecasts to sporting events and the weather. As prediction markets surge in popularity, Kalshi is facing legal challenges from states that argue it's operating an illegal gambling business. But Mansour insists that prediction markets are fundamentally different from casinos and sportsbooks and that efforts to restrict them threaten a powerful new source of information about the future.
Nick Gillespie talks with Mansour about Kalshi's battles with state regulators, why he believes the gambling industry is trying to stifle competition, and how prediction markets can help businesses manage risk. Mansour explains why ordinary people can sometimes forecast economic trends more accurately than Wall Street professionals. They also discuss Mansour's journey from growing up in Lebanon to building a multibillion-dollar American company and his concerns about rising inequality and the declining enthusiasm for entrepreneurship. Mansour argues that capitalism needs to give more Americans a stake in its success without sacrificing the innovation that makes it possible.
0:00—How prediction markets differ from casinos
4:55—Do prediction markets serve a public good?
8:18—Markets, price discovery, and the economy
11:36—Why does Kalshi ban insider trading?
14:06—CFTC and federal regulation
17:26—How Kalshi differs from Polymarket
22:30—Do prediction markets have a corrosive effect?
25:03—Kalshi's ban on athlete harassment
26:49—Arizona and New York lawsuits
31:30—State versus federal regulation
33:45—Why is Kalshi exploding in popularity?
35:57—Mansour's background and the American Dream
39:55—Wealth gap narratives and an inclusive economy
42:39—Will a Democratic Congress hurt Kalshi?
45:17—Mansour's prediction for Kalshi
47:48—Will state lawsuits require a Supreme Court decision?
This is an AI-generated transcript. Check all quotes against the audio for accuracy.
Nick Gillespie: This is The Reason Interview With Nick Gillespie. I'm talking today with Tarek Mansour. He's the co-founder of Kalshi, the prediction market platform that allows people to win or lose money, or invest or not money, on everything from election results to weather outcomes to who will win Dancing With the Stars and, of course, all sorts of sports. Thank you so much, Tarek.
Tarek Mansour: I'm excited.
You're 30 years old, you're a billionaire, and you are a big believer in prediction markets as truth machines. I want to talk about that in a minute. But first, Kalshi gives money to a lot of nonprofits, including Reason Foundation, the nonprofit that publishes this podcast. There are no conditions on this interview.
Tell me first, what is a prediction market, in the simplest terms possible, and why is it different than a sportsbook?
I think a prediction market, in the simplest terms possible, it really is like the stock market. We're matching buyers and sellers in an open marketplace that is competitive. The thing that they're trading is not a small, specific subset that Johnny Wall Street cares about, whether it's a stock or a bond or a credit default swap or all these kinds of sophisticated things. It's simple questions about the future.
Right. So everything is yes or no?
And some things are actually more like, is it going to go up or down? And there are more structures now. But I think a prediction market is just a generalization of the stock market. One way to think about the stock market is actually a prediction market on the prices of stocks on companies.
And you make money not on whether or not you bet right or wrong. You're not the house. You run the platform, so it's like you own the casino. And you're not staking anything…
No, it's exactly the opposite. We're exactly like owning the stock market. We're like the New York Stock Exchange, right? The New York Stock Exchange is not in the business of pricing a stock or setting the prices. They're in the business of matching buyers and sellers.
And so you may have an opinion that something's going to happen, and somebody else may think that something is not going to happen. And we match the two of you to settle that disagreement of opinion via trade.
Historically, that's about stocks. Someone thinks Apple stock is going to be worth more than the current price, more than $100 per share, and someone thinks it's not actually going to be, that it's overpriced. They make a trade as a way to settle that difference of opinion.
The difference in a prediction market is you're doing it on whether Brexit is going to happen or not. And you may think that it's very likely that Brexit happens, and someone else, your counterparty, may think that it's not very likely it's going to happen.
And let's say the market right now is trading at a 40 percent chance, 40 cents on the dollar. You may want to buy, and the other person wants to sell, and we match the two of you. And I take 0.7 percent. So if you put in $100, the other person puts in $100, I take 70 cents.
And now, very quickly, explain why that's different from a sportsbook, like why you're not Fanduel….
Here's how I'll explain it, and I'll get back to exactly the sportsbook analogy.
So when the first version of financial markets came around, and very few people know this, people think that the first financial market was the stock market, but actually it wasn't. It was the commodities market.
The first real example of a financial market was the rice futures exchange in Japan. And then in the U.S., it's really become very popular at the end of the 19th century. It was farmers, they were trading on the price of grain using grain futures, and then over time, it evolved to oil futures, etc.
And at the time, it was really interesting because when I tell you about grain futures right now, you don't think gambling. You think boring, mainstream financial markets.
But at the time, the states were suing the Chicago Board of Trade, saying this is gambling. And what was the claim? It was saying, "Well, farmers are betting on the price of grain. They're speculating, and so it looks and feels like gambling. What's the difference?"
And at the time, they didn't have sportsbooks or casinos. They had the bucket shops, which were different from the Chicago Board of Trade.
So what were the bucket shops? A bucket shop was a place where the shop, which was functioning like a casino, set the prices. They would say, here's the price of grain, and here's what I'll let you buy, and here's what I'll let you sell.
And then the purpose was basically, it was a casino. Farmers would come in, bet against the bucket shop, and then they would lose money. And if you made a little bit, if you were a smart, sophisticated trader, they would ban you. You know, the card counters get banned from the casinos.
It continues to happen on sports betting.
In sportsbetting or casinos, right? Like, if you're a smart, sharp trader, you get limited. And if you maybe have some addiction issues or you lose consistently, you get promos, and you keep coming back. That is the gambling business model. That is the end.
And when people were claiming that the exchange was gambling, at the time, the Supreme Court ruled in favor of the Chicago Board of Trade.
And the basis was very simple. It's like, yes, some people are speculating, which looks and feels like betting, sure. But the mechanism is different, and there's a public good that comes out of it.
The mechanism is a free, neutral platform that lets people trade against each other. And what it needs and incentivizes, it incentivizes the card counters, the smart traders, because the public good that it brings is the informational knowledge that it gives to people.
Talk a bit about this, because this is key to your argument, and we'll get into the regulatory structures and the cases against you, but that prediction markets serve a public good because they give more information about what is likely to happen or how actors are going about their business. How does that happen?
In particular, at a place like Kalshi, you can bet on whether it's going to rain tomorrow or how much. How does that in any way create information that is useful?
Yep. So our weather forecast, so when people are trading on whether it's going to rain tomorrow or not, what happens is you get price discovery.
Some people think the odds of rain are a little bit higher than the market, so they buy it, which moves it a little up. And then some people think it's lower, and it moves it a little down. And that continuous thing is how a stock moves. That's why we call it price discovery.
Price discovery is essentially, there's a quote from a Supreme Court decision in 1905. It's really neat. It's like this idea that speculation is the self-adjustment of society to the probable.
Which is like it's the self-adjustment of the market, the wisdom of the crowds, to what we think is going to happen.
There were papers actually a week or two ago that compared our weather forecast, like the forecast from the prediction markets on the weather, to the most accurate national blended average of weather station forecasts, and we were 10 percent more accurate.
I mean, just very quickly, how does that happen? Because Joe Schmo betting on the weather, he doesn't have satellite information.
So let me give you a little bit of history.
Prediction markets, I think the founder of prediction markets is Friedrich Hayek, the economist. He used to call them information markets, not prediction markets.
And what was the sort of central thesis? At the time, he was saying we have a knowledge problem. The knowledge problem is that our decisions in society, whether it's D.C., whether it's executives, are centralized.
It's you and I sitting in a room and making a very critical decision about the future of the country. But the information that's relevant to that decision is actually very decentralized. It's sitting with a bunch of different people, hundreds of thousands, millions of people distributed across the board.
So we need a magnet. We need the mechanism to bring that information from everyone so we can make better decisions over time.
That's what markets do.
That's exactly what markets do. Market prices are a very good aggregator of information.
Ok, so then the idea is that somehow the people who are betting on the weather have some kind of meaningful knowledge that otherwise would not be—
And by the way, people are not even usually, for example, for the Senate race right now, they don't buy Democrat or Republican and then hold it till maturity. They buy if they think the price is underpriced, and they sell if it's overpriced. They're constantly trading these things.
But the key thing here, when I started the company in 2018, a few years before that, Philip Tetlock did…
At the University of Pennsylvania.
He's actually at MIT.
Oh, I'm sorry. Ok.
And it's about superforecasters. And the whole thing, he was trying to figure out the science of forecasting. What are these people who are good at forecasting?
And he pitted a bunch of elites on geopolitics, the big pundits, and he pit them against a bunch of random dudes, basically, and had them predict geopolitical events. And guess which group did better? The random dudes.
And it was amazing because it tells you a little bit that actually there is a lot of wisdom in this idea of the wisdom of the crowds. The average people, if you add them all up, and all their bits and pieces of information, you end up getting a way better solution and result than the small group of elites.
And this gets reflected, I mean, the way Hayek talks about it in "The Use of Knowledge in Society" and throughout all Austrian school of economics, is markets and prices are discovery systems that transmit information.
That's exactly what it is.
And prediction markets are like transmitting information about a much broader… We used to care about— farmers used to care about what the price of grain is going to be. Why?
And I go back to the farmer. Imagine we had banned grain futures as gambling at the time. There's a very clear net impact on society today, which would be what? Why would it be important?
That price discovery that was happening was giving the farmer predictability on what the price is going to be of grain in September. So now I'm in March, I know how much I can invest, how much I can plant.
If you take that away from them, what would they do? They would plant less. They would just, because with less predictability, you can invest less. And so actually, our food supply would go down. That's how critical grain futures are.
So that makes total sense. And then just to press on this a little bit, as a libertarian, I like markets and everything. I like prediction markets, etc. But what is the positive social externality, other than people being able to express themselves or entertain themselves, with like betting on Dancing With the Stars?
Well, I think to me, some people may disagree on the lines, but a lot of people care about that. And I'll give you a lot of examples.
At a high level, it seems like we agree with the premise that getting smarter, even if it's a little smarter, about what's going to happen will enable us to make better decisions and allocate resources more effectively and manage risk more effectively, right?
Now, what's interesting is actually I always think of this as like, you want more markets on more things because like—
It's more information.
It's more information. It's just that simple.
And I'll give you an example. This was the same argument that was made. So there were two types of commodity derivatives that were banned. Onion futures, which I can tell you the story, there was a wild story.
The second one is box office futures. Box office futures, in 2010, there was an exchange that was trying to bring them to light, which is an idea to do price discovery on how successful a movie is going to be beforehand.
Guess who killed it?
I'm assuming the movie companies.
The big ones. Why? Because they wanted less information. And the argument was at the time, well, it's frivolous. What is the purpose of knowing if a movie is going to be successful? It's a frivolous thing…
And this is called a Keynesian beauty contest or something, where you're betting on what you think other people will say is going to happen or something.
Yeah, I mean, but in this specific one, it's more like they were saying, "Look, knowing if this movie is going to be successful or not, that seems frivolous. It's not like grain futures. We should ban it."
But they actually had an ulterior motive, and there's a reason they did not want price discovery, for two reasons.
Because one, if the market can predict ahead of time how successful a movie is going to be, it'll be harder for them to juice the three or four weeks of box office they get in a bad movie before the word gets out. And there was a second reason. If you have a market that will tell you upfront, actually, "This team is doing a good job, even though it's a small team with a smaller brand," you may attract more investment to the smaller studios, which was going to bring more competition to the space. You will get more efficient….
I mean, markets are democratizing, ultimately, or they push against centralization.
More information is always better, and oftentimes monopolies and incumbents want less information because, you know, the markets usually reduce…
Well now let me… I want to get to the regulatory structure you're currently under, plus what various states are trying to fit you into, a different kind of regulatory structure. But just on this moment, let's stop for a second.
If more information is always better, why do you ban insider trading? Because there is an argument that insider trading is absolutely the best information, and it changes prices very quickly and makes markets clear more—
And libertarians, that's the argument, and the free market side of me always tells you that you want more. You want as much as possible.
And you want, like, when Practical Magic 2 is coming out, you want people in the studio who have seen it, who know it sucks, to change, you know, to…
I would argue yes, in theory. I'll say where in practice.
But maybe right before, I want to just make, because you asked me about the gambling distinction, which we'll get to with insider trading.
The gambling business model is one where the thing they incentivize for their customers is fun and entertainment and to keep losing. That's why they give you the suites and the drinks, and they keep you losing.
Prediction markets, what they incentivize is going out there, like markets, seek knowledge, seek truth, and then come to get rewarded for it in the open market. That is why there is a fundamental difference.
And it doesn't matter what the topic is. It could be grain futures. It could be weather. It could be economics. It could be sports. It doesn't really matter. The structure, the former structure, is what really matters.
Now, on the other argument, I agree with you. It's like, well, the insiders, should they be allowed to trade? And the way I always answer the question is, why is insider trading banned in the stock market? Because in theory, we would get more accurate prices in the stock market.
And there's a very practical reason, and this is how markets should be regulated. And I strongly believe that. That's why we took a pro-regulatory-first approach to this.
Because markets can only exist if there are fair rules of the road and the competition is fair and equitable across all the participants. So I think actually…
And people need to believe that the market are not…
Otherwise, they stop trading.
Free markets, in my view, if you take the opposite of free markets, it's this idea that there's a privileged, closed circle that has access to specialized information. Right? And the key thing in the line I was drawing is, if the information is something you can access by doing research and work and putting in the effort, no matter who you are, then it's fair game.
But if it's information that you only will have privileged access to because, I don't know, you work in government or you're an executive at a team, then it's unfair. Then it creates an unfair dynamic that over time dries up liquidity and makes actually the market less efficient because nobody will trade. People won't trade.
So this helps explain, you noted you co-founded Kalshi in 2018. You went to the Commodity Futures Trading Commission to get licensed and regulated at the federal level. So when people say, "Oh, you guys are completely unregulated," that isn't accurate. But you're…
It's completely inaccurate.
Yeah. How does the CFTC regulate what you do? And then we'll get into how and why states might be trying to change that.
Yeah, I mean, I think they're two entirely different… There's a reason why the states are trying to change that, and we'll talk about that. It's fundamental protectionism.
So the beauty of the Commodity Exchange Act, why did it come? It actually got created after this whole fight that the Chicago Board of Trade was having with the states. And Congress, in '74, enacted the Commodity Exchange Act to actually preempt two types of laws: state insurance laws and state gaming laws.
And there's a reason why. Because on an open exchange, in grain futures or on Kalshi, there are two types of activity: speculation, which looks and feels like gambling, or hedging, which looks and feels like insurance.
The difference between those two is they're being done on an open market.
And why do you need the federal statute? Why didn't they let the Chicago Board of Trade be done state by state? It's because it didn't work. And here's the easiest way to explain it. Imagine we siloed the New York Stock Exchange, the stock market, state by state, where in New York, you can only buy Apple stock from New Yorkers.
Imagine we had 50 different New York stock exchanges, different prices, different rules, fragmented liquidity.
What would happen? Worse prices, a bunch of deadweight loss, lower liquidity. You probably won't be able to, if you're in Kansas, you won't be able to buy as much stock as you want.
It is a completely anti-market kind of structure.
What you want is a federal, uniform set of rules that apply across all 50 states that promote and foster this sort of multilateral, peer-to-peer idea. Someone in California is trading with someone in Texas, and you want as much information as possible. You don't want to silo information. That's the anti-market view.
And what does regulation mean, and why is it important for us, first, for us to really get regulated as commodities? It's because the rules that apply to trading on oil futures or interest rate swaps or politics on Kalshi are largely the same.
So what do you want to prevent against? You want to prevent against insider trading, prevent against market manipulation, so doing things that move the market price unnaturally for profit. You want to add sensible guardrails around knowing who your customers are and money laundering and that sort of thing.
And I believe in this, and I think this is where the regulation is very important. It's like all these products, whether it's grain futures or sports betting or prediction markets or trading options on Robinhood, most of the use is fine.
And it's not about people winning or losing. I think the competition, some people are going to win, some people lose.
But there's some degree of irresponsible use. I do believe in that. And I believe in individual freedom. People should be able to choose, but I think there should be some regulations on irresponsible use so that companies are not targeting those types of behavior.
The sportsbooks constantly target those types of…
Yeah, so let's just, real quickly, how do you guard against insider trading? I mean, you ban it, but how do you know whether insider trading is happening? How do you know whether or not somebody who has a problem is continuing to use Kalshi? How do you find out?
Yeah, so insider trading, I mean, it's the ever question for a stock market. How do you know? And it's largely a very similar mechanism.
So one, you have to verify all customers. It's like onboarding onto Schwab, opening a brokerage account. You have to…
Are you covered by know-your-customer rules?
Yeah, yeah, yeah. As a regulator.
And that is distinct from something like Polymarket, which is based offshore, and they're struggling with the idea that there may have been a member of the U.S. military who bet on Maduro being removed because he was part of the operation, which is kind of a classic case of insider trading.
It certainly is insider trading, for sure.
Because insider trading is like, are you trading on material nonpublic information? So do you have a piece of information that you're not supposed to disclose legally? And trading is a form of disclosure. You can't go say it, so you…
Ok, so you follow KYC, but then, yeah, and then how? So how do you…?
And then you have the same systems as the New York Stock Exchange, which basically flag suspicious patterns.
I mean, insider trading or market manipulation, the patterns are always weird. You always have an account that is trading hundreds of dollars, and now they're trading thousands of dollars all of a sudden on an asymmetric shot. What's happening, right?
And the last piece is you enforce. So when you find someone, we have, as a self-regulatory organization, we can impose fines all the way to referrals for criminal prosecution.
And the last piece that's so interesting about the prediction market, so I think it's even unique compared to some of the financial markets, all of our trades are public. It's all fully transparent.
So our customers, because why is insider trading bad? There's someone who gets harmed when someone commits insider trading. It's the person on the other side. That person is extremely incentivized to whistleblow, usually.
And so, George Santos basically tried to commit insider trading on Kalshi a few months ago. We had 100 whistleblower complaints within a few minutes because traders immediately tell us, "Oh, this is weird," and they can all see it publicly.
And that's actually kind of a curse because the press talks about insider trading cases on prediction markets all day because they're so easy to flag.
That's actually a blessing, if you really think about it, because it's so obvious. It's so clear.
So let's talk about…
You're committing a crime in broad daylight, right?
Yeah. So the state of Arizona, I mean, there's about 20 jurisdictions, I guess states, also some Indian tribes and things like that, that are bringing suits against Kalshi.
Arizona, earlier this year, launched a criminal indictment that you're running an illegal gambling operation. New York state, we're talking in New York, and you guys are headquartered in New York, right? It's saying that you are basically, I guess it's not a criminal indictment, but they think you owe them billions of dollars because you're essentially a gambling operation.
What do they get wrong? And what do they get wrong about your structure?
I mean, let me read to you something that I've sort of been looking at recently that I've been sort of really into.
I'll read you one of the court opinions, and here's how it sort of goes:
"We are clearly of opinion that dealing in these markets is void by the common law, for, among other reasons, that it is contrary to public policy. It is not only contrary to public policy, but it is a crime. A crime against the state, a crime against the general welfare and happiness of the people, a crime of religion and morality, and a crime against all legitimate trade and business. This species of gambling has become emphatically and pre-eminently the national sin. In its proportion and extent, it is immeasurable."
And they go on and on about how horrible this activity is.
This is the Illinois Supreme Court. It is from actually 1888. And it's about grain futures, not prediction markets.
And I think the same thing is playing out.
And is this simply, I mean…
It really is as simple because we have the same structure.
And the topic never mattered under the federal law. But states misunderstood it, and they just looked at grain futures at the time as like… Because people don't understand markets. Markets have always been something that people…
They're counterintuitive.
And I always think, imagine we had banned grain futures back in the day. We would have ruinous consequences. It's today one of the bedrocks of the U.S. economy. We would not be able to function without grain futures.
And everybody benefits. I mean, there are individual winners and losers, but you get a more stable supply of food, better planting, better forecasting.
I think about 100 years from now, when there's going to be the next generation of entrepreneurs coming around and expanding the universe, they're going to be looking at this and thinking, "Imagine we didn't have a good gauge on where elections are going to land, on where geopolitics are going, the weather, the climate, the hurricanes."
And you're starting to see today, our fastest-growing segment is actually businesses hedging on Kalshi.
How do they do that?
You can take a position because you want to make money, speculate, but a lot of people take positions because they want to reduce their risk toward an event.
So the same way that grain farmers would short the price of grain so that if the price of grain goes down in six months, they would offset their revenue loss, we see a lot of businesses do the same.
So one example, we have now hundreds of businesses that do the same, it's like sports bars hedge against their home team losing every game.
Why? Because if the team wins tonight, I will make $2,000 in revenue. If it loses, I'll make $800 in sales. And my cost is the same because I have to stock up on inventory. So it's $1,200, $1,200 no matter what.
So when the Knicks win tonight, I make $800. The Knicks lose tonight, I lose $400.
Unpredictability like that is very bad for small businesses. So they buy no on the Knicks. So they short the Knicks winning in a way that essentially compensates their P&L so they're up $300 no matter what.
And why is that important? Because predictability, it's a bit like how the airlines hedge their price fluctuations, predictability helps with investment, helps them make their decisions.
Quick question before we get to why the states are bringing these suits the way they are. Does the financialization, or does the prediction marketizing of everything, does that have a corrosive effect, say, on sports?
In leagues, and this goes back to the 1919 World Series in Chicago, the Chicago White Sox famously had some players who threw it. But when everything is being bet on, everything is being speculated, does that end up undermining something fundamental?
So one, it shouldn't be everything. Two, I just want to be clear, we are not adding anything to sports. Sportsbooks have existed, like DraftKings and FanDuel, and if you see all the cases of players doing bad things, they're actually on the sportsbooks.
Can I ask what percentage of your revenue, or…?
I mean, it's like 65, 70 percent now, but it's going down. So it was 96 percent nine months ago. So it's going down very quickly because sports is a great way to educate people about probability. They get it. It'sMoneyball. Our customer is the Moneyball type.
And then over time, they do politics and economics, and everything else is growing.
But I want to make a key point about this, which is very important. The notion that prediction markets all of a sudden now allow people to bet or trade on sports, it exists already. The question is, do you prefer it in an open and fair marketplace where everything is transparent, or do you prefer it in a closed marketplace where everything is opaque? That is the question.
And then I'm a pro-regulation guy, so I think there's war, terrorism, assassination, violence, wildfires, things that create moral hazards, that should not be traded on. We should not have markets on those things because the incentive is, it's too easy to go and create a fire.
But we also, as a market, we don't go… Most of the issues that you see is things…So we have standards that are more strict than the states' gambling rules around things not being very easily manipulated in the Commodity Exchange Act.
So we don't, for example, do markets on whether the next play is going to be a ball or a strike. The sportsbooks do these, and that's actually the vast majority of cheating cases, etc.
And that's also why we believe that regulation is very important, because when you set the right guardrails on what markets should be in, what markets should not be in, and how do you police those types of activities, and when you find someone that does it, how do you punish them very heavily? The last thing I'll say is we actually ban athletes from trading on anything that relates to their leagues.
I'm sorry, anything at all, or just on…?
Anything in their leagues. Yeah, the same way we ban politicians or members of Congress from trading on things that relate to Congress.
Yeah.
All of that goes into our…
That's like the only place where Congressmen can't bet on what they're about to legislate.
They can do it on the stock market, but not on Kalshi.
Kalshi was a sponsor of the U.S. Open, which is kind of interesting, and there's a growing acceptability.
And the NHL and MLB, and you're going to see a lot of other leagues.
But you've also recently you said that you are going to limit people who are abusive toward sports figures.
Yes.
Explain that, because now are you saying, as a condition of entering contracts on Kalshi, you're going to limit the speech of people? Or how does that work?
That's a great question. I mean, look, I think there are certain bad cases where, and by the way, it's not just about sports. It exists in really anything.
But I think the idea that someone… We always want to be careful about regulating the bad behaviors out of the system. And I believe that. I'm a very free markets guy, but I do believe in sensible guardrails. I do. And we may disagree on that point.
My view is the highway should be wide enough for people to compete and thrive and do all the great things you're going to do. You have to have a fence at the end of the highway to make sure people are not driving themselves off the cliff.
And I think it needs to be very delicate and needs to be very careful. You don't want to make the highway one car at a time because that's terrible. And so in this specific case, you have issues sometimes where people get over their skis and they go and harass…
Yeah, I mean, if you lose $2,000 or $10,000 or $200 because somebody dumps the fifth set at the U.S. Open, you're probably going to yell at the person who lost.
Yeah, yelling is one thing. Harassing and following them online and doing all the weird stuff that sometimes… And by the way, we haven't seen any evidence of that happening on Kalshi. That has historically happened on the online sportsbooks and some of the other mechanisms. I just want to be ahead of it. I don't like that idea.
Ok, so then here, is there any… When the state of Arizona says, "Ok, you're like a gambling operation, you're like the Mafia coming in and you're running this billions of dollars," New York is doing something similar.
In New York state, I think on a typical sportsbook, they take 51 percent of gross revenue. They make a lot of money by taxing and regulating this, and obviously they want money from you. Is there any other reason that they're doing this?
The casino lobby. I mean, the casino lobby is… The foundational thing is a few things.
So when an incumbent gets threatened competitively from a challenger, what does the incumbent usually do?
Go to the government.
It's litigate, then legislate, and then finally, when you realize that this is here to stay, you innovate, right? That's the basic 101. It's always been par for the course.
And why? Because incumbents, inevitably, when you get big enough, you want less competition. That's what you really want. And that's what's been playing out here.
And by the way, it's not just about sports. We launched perpetual futures recently, and CME, the Chicago Mercantile Exchange, the Board of Trade, sued us over it.
And usually the policy argument is never, "I'm losing some revenue due to competition." It's like you come up with a bunch of reasons, like, "Oh, it's too risky. It's too whatever," so they can get policymakers riled up.
And they usually have very orchestrated lobbies and comms functions that do these sorts of things.
But if we look at it foundationally, first, it's interesting. We have zero evidence of cannibalization between what we are doing and the gaming companies, but also the sportsbooks. Why? Because my core customer is a trader. It's the guy who has 17 monitors and like is doing math and stats, and that's 70, 80 percent of my volume. That person is banned in the sports world.
Ok, yeah.
Right? Because they're making money.
I mean, so do you think people are using Kalshi to make money, or is it a form of entertainment? Because casinos and sports betting is really entertainment…
Do you think some people use options in the stock market as a form of entertainment, like on Robinhood?
But there's a great, actually from Illinois, that was more recent actually, like a week or two ago, which is saying that just because something— financial, these prediction markets are swaps, they're financial instruments, they just happen to be fun.
And that's not… Fun is not a problem because when you look at the grain futures market, I always go back because the parallels are so clear, 95 percent of the transactions are speculative.
Sometimes I get farmers having fun. They're gambling, speculating on something.
But the key thing here is that you can win on Kalshi. The bulk is people who are doing sophisticated things, and it's a more sophisticated market.
What is the percentage overall of winners versus losers?
It's a zero-sum game. It's like the stock market or active trading in the stock market.
I'll ask you this question this way: How many hedge funds outperform the S&P every year?
Yeah, I mean, in a given year, I don't know how many.
What do you think is a number, roughly?
Uh, 50 percent?
50? It's like 20.
Ok.
It's amazing. Like 20 percent of hedge funds win. Yeah, like 20 to 30 percent—
And then over time, none of them do.
No, there are, I mean, there are big winners like Citadel and Renaissance. That are like really big winners.
Why? Because competition. Competitions are hard, right? Imagine that number was 50. What should that tell us? If it was 50-50, 50 percent win, 50 percent lose, it would just be a game of chance. There's no skill in this thing.
Anything that has skill, like how many people win the NBA Finals in their careers? It's a very small subset because competitive environments require skill, and when that happens, you're going to have…
So how are you…?
So the answer is actually, if 80 percent of hedge funds lose on the stock market, our numbers are closer to 60, 65 percent of people losing, which is actually more of an equalizer.
Because the one thing we see on Kalshi is actually a much larger diversity of people end up being winners. If you look at our top performers, 79 percent of them went to public school. Our top traders, they're 2x more likely to have worked in retail than worked on Wall Street.
It's kind of amazing if you think about it.
Our best inflation forecaster is a random guy in Kansas who's never traded in the financial markets, just likes…
How does he do it, then? Do you know?
He's read about the economy for 20 years, loves reading about it, very, very calibrated. He's been thinking about it a lot.
And this goes back to Hayek and Tetlock. It's the idea that information and knowledge sits anywhere. They're not sitting with the elites.
They compared the Wall Street forecasts, the Bloomberg, on inflation, economy, GDP growth, unemployment, against the Kalshi forecasts for those things, which is Main Street—- Wall Street vs. Main Street.
And the result was actually Main Street was more accurate than Wall Street, and it's also real time. We move in real time.
So is your strategy, obviously you're fighting lawsuits, but is it ultimately like you're going to come up with a number that you say to New York state and Arizona, and you say, "We're not going to give you 51 percent of gross revenue," but do you keep working until you get to a point where they're like, "Ok, we'll live with it"?
I mean, I like to take the optimistic view of things, which is I think there are some people who just don't understand it. So part of it is we're just sitting down and explaining what I just explained.
Right, right.
Because the superficial view on prediction markets, like any markets, it's always the same. Society has always had an affect reaction to prediction markets. It comes around, and they're like, "That feels like gambling. It feels wrong.
It's either random or it's rigged," right?
Exactly. It's either random or it's rigged, and it's financialization of stuff.
Not because they're bad or good, just because they are hard to understand. And when you explain it more and it gets a little bit more normalized, people, "Oh, that's actually pretty cool."
And you always see it. When I start with a meeting and I end with a meeting, the opinions on this go, "Oh, actually, it can make us think about the future a little bit better. It could depolarize us because now people are thinking more instead of saying stupid things on Twitter."
Clearly, you're not describing any meetings that you've had with the New York State Department.
Well, I mean, look, I can't speak about specific meetings, but my point is, over time, it requires education. There are parts that don't understand, parts that, yeah, there are lobby groups and casinos that are pushing really hard to protect their turf. Or I don't even think they're protecting it. They're not getting cannibalized. I think their view is like, "Oh, it's a big industry. We should have it, too." It's a little bit that sort of thing.
The thing that they're misunderstanding is that this cannot exist state by state.
Why not?
Because, you know…
Ok, because gambling does. And I know you make a big distinction.
With gambling, you go against the house, and you bet against the house. It's localized. That's fine.
But I'm a peer-to-peer market. You don't want the Californians to trade only against Californians, and Texas…
Again, why is New York… Do you prefer a national New York Stock Exchange or 50 different…?
I'm a citizen of the world. So, yeah.
But the point is, exchanges are peer-to-peer, and they require liquidity. They require a large diversity.
It's like Marketplace, Airbnb. Imagine eBay. You can only buy the bag that you want from people in the same state. That doesn't make any sense. You want diversity. The more diverse the participation, the more information, the more it works.
Why do you think prediction markets, and obviously there have been prediction markets probably for as long as humans have had language…
You know what the first one was, right?
I don't.
Pope elections.
Oh, ok.
In the 1400s.
Ok. Yeah, and well, Intrade, which was a predecessor, which was another business, or got run out of business in 2013, was very good at predicting who was going to be pope.
But why does it seem to be exploding now in popularity? Is it that the tech got better? Is it that people have more money?
I think it's two things. One, we approached it from a regulatory-first approach. I always wanted to create a financial market and broaden it into more things.
Prediction markets are just the financial markets. They're just on a different topic. That's it. People are complexifying this.
But the second thing is, when I started in 2018, I think the demand is because, I think it's the polarization that's happening in the country.
And we feel like there's more information than ever, but less truth than ever. Because the filters, the things that are filtering our information, are biased. They're partisan, they're extreme, they're polarized.
The social media algorithms, and you see, you look at two different Twitter feeds and they look entirely different. People have different conceptions of the truth, of what's happening on the ground.
Because if you write seven paragraphs of thoughtful analysis on Twitter, you get two likes. If you write something crazy, like something racist or something ludicrous, just straight-up stupid, you get 10,000 likes.
Because it's clickbaity. It's like the 10-second Reel on Instagram.
I was like, there will need to be, there was going to be a lot of demand for a source of information where the filtering mechanism is very transparent and it's very aligned with truth.
And that's markets.
We used to always joke, when I did my master's at MIT, and I was doing a Ph.D. or working on Wall Street are mostly the same thing, except that you have to be right on Wall Street. You have to do analysis in both.
But my point here is about the incentive structure of the prediction market. It's very, very simple. The seven-paragraph thoughtful analysis probably makes money, and the stupid, extreme takes probably lose money. And all you have to trust is that people like making money and they dislike losing money. That's it.
It's interesting to me that, Kalshi, you were born in California, but you grew up in Lebanon. Your co-founder was born and raised in Brazil.
Can we read anything into that, that these are the two founders, people from countries that are peripheral to, in a way, certainly to America, but kind of to the global economy?
I just think it's naive. It's like the American dream.
I mean, my mom, when we… So I was born in California, moved back to Lebanon. My mom, I grew up with a single mom, and she's kind of a tiger mom. Not kind of. She was very much a tiger.
It would be a lion, right, in Lebanon?
In Lebanon, it would be a lion.
But the whole thing was, like, "You have to go back to the U.S. because that's a country that will, if you have good ideas and you're smart and you work hard," and she knew I was always, like, a math nerd…"You're going to make it, it will reward you for doing that."
And she was right.
She was a ballerina, but also a lot of similar sort of thinking in our household.
And we showed up here, and we're so excited. There are so many different things you can build, and you can challenge the status quo. It's a country that lets you challenge the status quo in a way that no other country lets you.
And that's amazing. That's something we should really cherish, and like keep….
Do you worry about that? I mean, again, we're in New York, which elected a democratic socialist as mayor. You have Donald Trump Jr. as a special adviser. Who you hired, or you announced, a week before the inauguration of Donald Trump Sr. in a second term…
That's not right. That's actually what happened.
Ok. Well, I mean, the press release went out, I think
I don't know, but we actually had done it before the elections. It was not a political decision.
Well, what I'm getting at, though, is that MAGA, Donald Trump has nationalized the economy or socialized it in ways that were unthinkable since FDR.
So on both sides of the aisle, we seem to be pulling away from free market ideology or belief in free markets or belief that America is a place where you can define yourself.
But the people on the left say, "No, you're defined by who your parents were, what race you belong to, what gender or sexual minority." People on the right want to kick out people like you, right? I mean, they don't want Middle Easterners coming to America, even if you're an American citizen.
So, I mean, look, I…
So are you worried about the America that you've moved back to?
Yes, I am worried. I don't think it's necessarily a political thing. I just think it is a structural thing that's happening in the economy that we have to kind of contend with.
I'm 30, so I was going through school like 10 years ago, and when I was going through school, there was still this energy. People were excited. They were pumped. They wanted to build, they wanted to do things, they wanted to start companies.
And my cousin now is going to Columbia, and you don't feel that energy anymore. That, to me, is the most concerning part.
Where did it go?
I think part of it is there is structural changes happening that society is battling, where there's AI, there is wealth disparity that's being created that is extreme.
And then that is also not… When I think about free markets, I always say the foundation of free markets is everybody needs to have a shot in the competition, right? Everybody needs the same rules, the same rights, and the same obligations.
And if people stop believing that, the competition is tilted. The competition is not a level playing field. I think that's kind of an opposite view to fair markets.
And I'm not here to say, look, the solution is simple. But I think we would argue that capitalism is a good thing, but what we need to contend with and be aware of is that a lot of people are not part of it. They don't feel like they're part of it.
And that's a reality. That's a truth on the ground that we cannot just…
Is it that they're not part of it, or is it that they don't feel they're part of it?
It's equivalent, though.
Yeah. I mean, because one of the arguments about social media, which clearly has a lot to do with this type of stuff, is that the median household income, the median individual income in America, is at all-time highs. It keeps going up, despite the financial crisis, despite COVID, despite geopolitical Sturm und Drang.
But people feel like, "I'm not getting as much as Donald Trump Jr. has, so I feel ripped off," even if they're doing better. I mean, is it important to know what the narrative is and what the facts on the ground are?
And frankly, I do think, because I don't want this to sound partisan, I do think it's bipartisan. I think people on both sides…
Yeah, no, I agree with you completely.
And we engage. Kalshi has engaged. People have talked about Don. We have advisers on the other side of the aisle, Democrats, across the board. And I frankly talk equally to Republicans and Democrats. And there is a lot of thought on both sides about how do we deal with this?
And my view is we may be being a little bit too ideological about capitalism versus socialism.
And to me, it's more like, I think most people would agree that we want a free, competitive economy. We want people to have a shot. We want people to feel part of the system.
And my view is a little bit more practical. It's like, "Look, if the wealth inequality is too out of whack, we need a little bit of a dampening mechanism. Just bring it back."
Is that mechanism, is it heavy taxation? Is it regulation that prevents the formation of new businesses? Is it…?
I don't think we should ever prevent or slow down innovation or prevent the formation of new businesses. My view is more that we need to think about ways to bring the people who feel they're out of the system into the system.
There are simple, kind of naive ways to think of it. I always think, could you have the most successful companies in America, or the rising top 200 tech companies, take a small 1 or 2 percent of their stock, voluntarily?
And I do believe, actually, you sit down with a big enough group of founders and give it to, let's call it whatever, you can define a set of households in America and put it in their children's accounts.
And the thing I love about that idea is all of a sudden people feel, they understand, actually, ok, AI, space, tech, fintech, all these different things that feel completely distant and far removed from you right now, they're tangible.
And it's actually, oh, it moves up over time. And as we're creating value as a society, we're doing the thing that America does: innovate, push the boundaries, take risks. There's tangible value that basically accrues over time.
And to me, it's like we don't need to… Capitalism, it's too much ideology versus, how about the middle ground? Let's make sure we bring people along. And it's not going to hurt the very top that much to do a little bit on the margin.
So you're facing a huge amount of regulatory uncertainty. There's also a huge amount of political uncertainty that's kind of bigger than that.
My view is all companies, tech companies, are facing a lot of that. AI as well…
Well, and technological uncertainty, all of this kind of stuff. But for the midterms, is there an outcome that is better for Kalshi or worse?
I'm frankly, not sure. The idiom is like, "Well, what are you going to do when the Democrats take over?"
And I don't know. Frankly, the internal view is, to me, we've built relationships on both sides. I found actually there's a big group of people on both sides that actually are largely are where we are, which raises my second point.
Who are some of the Democrats? I mean, I think I know some of the Republicans, but many of them are anti-prediction market. But who are some of the…?
I know, it's many. I mean, I think there are some on both sides of the aisle, but I think there's a big group on both sides that is actually pro.
But without naming names, to me, the thing that we're really focused on is what we've been focused on from day one.
We're a company that spent the first four years of our company getting regulated upfront, which is very unusual for Silicon Valley. It's very, very unusual.
And I always say I'm pro-sensible regulation. Banning something is not a form of regulation. It's actually the ultimate deregulation because you're moving it offshore, and you're just closing your eyes and letting it go crazy. And that's what happened with crypto. We banned a bunch of stuff onshore, it went offshore, and people lost their money.
To me, it's always be sound on policy, truly. Try to actually, let's put the ideology aside. Let's actually get it right and communicate that over and over and educate what is right.
And I always say there are certain types of markets that shouldn't exist because those are moral hazards that could create issues. Like the military strike market should not have existed. And we never did it because we're regulated in the U.S., but no one should be able to do it.
Number two is ban insider trading. We have to, because if there's a privileged set that has access that the rest of America does not have, that ruins the markets over time. It destroys trust in the system. We don't want that.
And three, sensible guardrails. There's going to be irresponsible use for any of these products, whether you're trading options on Robinhood or crypto on Coinbase.
Or you're going to the neighborhood bar. You want somebody to send you home when you've had too much.
That's right. Most people who drink alcohol, it's fine. It's great, actually. It is a social lubricant. I mean, there's a small percentage, sub-1 percent, that end up destroying their lives. You want to regulate that out of the system. I believe in that.
And it's like any technology. You have upsides, the steam engine, and then you have your carbon dioxide emissions. Regulation reduces the emissions and optimizes the upside.
And it's always delicate. It has to be delicate and balanced. But it's usually not the best thing for getting a bunch of clicks on social media, right? That's the…Policymaking is boring.
So about 15 years ago, or I think it was 2013, Intrade, an Irish-based prediction market, was regulated out of existence in the U.S.
They were unregulated.
Ok. Well, they were, but they had a CFTC license.
No, they didn't.
Oh, ok.
So we're the first to have gotten the CFTC…That's the difference.
That's the difference. Thank you.
But what would you put the odds on of you, in five years, Kalshi being bigger than ever and in a clear regulatory market, or…?
I think they're very high. They're very, very high. I mean, we have 30 million customers in the market, right? I mean, it's very big.
And again, the choice is, if you were to ask me whether prediction markets exist in five years, that's 100 percent.
Yeah, of course.
Because it's not a question of whether they're going to exist or not. It's just whether we're going to regulate them the right way.
You think they will be legal and public and transparent.
Certainly, yes. I mean, I think it's because they're here. I think the question is now, do we regulate it? Do we add the sensible guardrails? Do we just drive it offshore and close our eyes?
But I think usually, again, time is with us because even if you compare it today versus six months ago, way more people understand it. There's much less energy than before.
And the one thing I'll say, the media, you know this, the media just loves the scandals. When the insider trade happened on Maduro, that was like a three-month cycle. It was never-ending, right?
That's what all people would hear about it. And they wouldn't say Polymarket, they'd say prediction markets. They would lump us in.
But it's going to take some time for people to understand that actually, that was a one-off. There are like 30 million customers who are using these things. And yes, there's some bad in any system, and we're going to have to regulate it, but the positives are exciting.
Because to me, you're seeing now, we have thousands of businesses that rely on this.
I mean, people in the Keys around hurricane season start calling in and buying yes on hurricanes in their town because insurance companies don't insure their homes anymore. We have so many insurance use cases that are proliferating right now on sports, on weather, on esoteric things.
Like, there's this bill. I don't know if you saw the story about the goat herder in California. There's a bill in the legislature that was being passed that was going to move. He has 3,000 goats, move goat-herding wages from $70,000 to $40,000, which is going to drive him out of business.
He started calling insurance companies to underwrite this risk. They're like, "We're not going to. I mean, this is crazy."
And so he came to us, and we set up a market. Within two or three hours, the market said there's a 10 percent chance of it happening. Then he bought a $50,000 hedge that would pay out $500,000 if the bad thing happens, and it happened.
So now he has the war chest to go and diversify his business and stay afloat and all that. More of that is basically going to happen.
I guess a final question is, are the lawsuits against you at the state level or at the nonfederal level, is that going to require a Supreme Court decision, do you think?
You know, I just think, for us…
Because the Supreme Court has, I mean, some of these suits are proceeding, so you have a legal argument, which strikes me as pretty solid, but I'm not a lawyer. But is it going to take a Supreme Court decision? I don't know what this is all…
I think maybe. I mean, I think that we'll see. I think there are a lot of things that are in flux because some of the courts where we lost, it was based on a rule that has been changed now.
There are a number of new rules that are regulated that the federal agency, the CFTC, has put forth now. So that's kind of changed. It invalidates a lot of these opinions for good reason.
So it's a bit of a reset that's going to happen.
How important is the actual head of the CFTC to your future?
It's very important, but these things, it's like a push and pull, and some people may disagree with this regulator, right?
My point is that Congress explicitly gave the authority to the CFTC to regulate market structure this way, no matter what the topic is. That's really the law.
And they even say if something is gaming, which you can say the sports game is a game, the CFTC can decide what to do with it. That's the law, and they can decide to allow it and regulate it in a certain way.
You may disagree with the regulations. Some people tell me, well, maybe they're not stiff enough on this or not stiff enough on that.
But that's why you have the separation of powers. Congress delegated their authority to the agency. If you're unhappy with the agency, there may be a shift in two years. There'll be another agency that might be more strict or more loose.
And that's the natural, it's par for the course, natural course of history.
But to me, it's like, as we learn and as data surfaces, as we understand these things better, the better for us. Because the truth and the data is on our side. The best way to tell a good story is to have a good one, and I think we have a good one.
All right. We're going to leave it there. Tarek Mansour of Kalshi, thanks so much.
Nick Gillespie appears on the left. Kalshi CEO Tarek Mansour appears on the right. An image of a roulette wheel appears in the center square. Bold text across the top of the screen reads "Why Kalshi is NOT a Casino."
On Monday, a group of students from the University of Chicago stood outside the Chicago Mercantile Exchange—one of the world's largest and most diverse derivatives marketplaces—and called for the repeal of an obscure 1958 law that bans onions as futures products traded on U.S. exchanges.
Attracting an audience with a humorous jingle and amusing signs that included "Onions Deserve a Future," "Honk If You Want Free Onions," "Hot Girls Hedge Onions," and "Free Markets Feed Families," the student group, named For Our Futures, has a simple platform: a repeal of the 1958 Onion Futures Act, which prohibits anyone from trading in onion futures on commodity exchanges. (The law was amended in 2010 to ban motion picture box office receipts from being traded on commodity exchanges.) The viral campaign drew enough attention that Mike Selig—chairman of the Commodity Futures Trading Commission and a proponent of expanding the list of commodities traded on futures markets—was asked about the law in a media appearance.
American farmers produce about 6.75 billion pounds of onions a year, according to the National Onion Association, an industry trade group. While peers who grow cotton, wheat, corn, and soybeans can hedge against price swings by trading futures contracts, onion farmers have no such recourse under federal law. But, as the Agriculture Department's daily National Potato and Onion Report shows, onion prices are highly volatile and subject to wild swings, making them an ideal market for futures trading.
In its latest report, released Monday, the agency shows that onion prices have roughly doubled since this time last year. If onion futures contracts were legal, farmers could rely on market expectations instead of planting crops based on last year's prices. It would also let buyers potentially cut costs by locking in lower prices to protect against spikes. Trading onion futures contracts would give the industry a useful price-discovery tool, one that the student group aptly notes is "crucial for price stability and for hedging risks associated with weather and market fluctuations."
It's not For Our Futures' first time trying this gambit. The student group staged similar protests at college campuses in April and May, armed with bags of raw onions to entice passersby into signing their petition to legalize onion futures. The students' crusade might be comical, but after a recent Gallup poll found that 57 percent of Americans age 18–34 have a positive image of socialism, it's encouraging to see college-age students stand up for free markets.
A protest over onions sounds absurd, but it's a viral reminder to others in that age cohort of how far governments can go when given the slightest leeway to regulate an industry.
Instead of relying on outdated price points when planning future harvests, American onion producers could use resources like futures contracts that offer real-time market signals. All that would require—as the college kids state—is for federal lawmakers to "let the free market reign supreme."
Hello and welcome to another edition of Free Agent! Be careful when you're behind the wheel this week.
College football is great! Surely you want even more of it, right? We'll get into the problems with a 24-team College Football Playoff (CFP), then talk about the NBA's new betting restrictions, and close with thoughts about President Donald Trump's new government golf course plans. And just in case you don't make it to the end, here's a shortcut to our survey on who you're rooting for in the World Series.
But first, many congratulations to "Gary's 1st Entry" on outlasting everyone else in our NFL Survivor group. There's no prize other than this shoutout, so be sure to print out today's newsletter, highlight this paragraph, and frame it in gold. Perhaps Gary can keep going and challenge Primetime Paulie Rothrock's 13-game winning streak from last season.
Locker Room Links
Both teams in the WNBA Finals left the court for the National Anthem—unclear if this was a protest or just part of the pregame routine. WNBA policy doesn't require teams to be on the court for the anthem, but does require a "dignified posture" if they are.
In the thick of a playoff race, three Zambian women's soccer players are separated from their National Women's Soccer League teams because they played in Uganda, and the Centers for Disease Control and Prevention has a three-week restriction on reentry due to Ebola. (There are zero active Ebola cases in Uganda and Zambia.)
This is the kind of excessively nerdy fantasy football content I live for. (Yahoo remains the best fantasy sports system. ESPN's is trash, relying on name recognition to get by.)
I figured out how ESPN calculates fantasy football win percentage, it's bad!
ESPN made a stats 101 error when calculating their win percentage which leads to horribly miscalibrated numbers. ( thread) pic.twitter.com/bDypgjelKj
Saturday was one of the best days of college football ever—or perhaps it could have been, if we thought any of the five top-10 teams who took a loss were now certainly out of playoff contention. Instead, Georgia, Notre Dame, Indiana, Alabama, and Texas are all still very much alive in the championship hunt.
Today was one of the craziest days in college football history:
- First time ever five teams ranked in the top 7 lose in a single week - First time the No. 1-ranked team loses to an unranked team in consecutive weeks since 1990 - First time Texas, Alabama, and Georgia all lose… pic.twitter.com/psVRoM5s5b
With two losses, Alabama and Texas are at least on the edge of the playoff bubble with perhaps no more room for error. But that's only true under this year's CFP format. Next year, the playoff is almost officially set to balloon to 24 teams, making the chaos of a day like Saturday matter even less.
Fans will always celebrate a huge upset or major rivalry win, of course—Tennessee fans don't need playoff stakes as an excuse to get drunk when they beat Alabama. But the joy of a rivalry win in the past was always bigger because of the off-field stakes, too—the first loss for your rival meant they probably wouldn't be national champions, the second meant they'd be out of the Rose Bowl, a third meant you could be proud your team sent them packing for the Alamo Bowl. Winning is great; ruining your rival's season is even better.
With 24 teams in the playoff, the joy is a bit diminished because it will take four or possibly five losses to knock a powerhouse program out of the CFP (Iowa, at 8–4, was ranked 23rd by the committee before last year's playoffs). It'll be a bit like a rivalry win in college basketball—we win, you suck, congrats on getting a slightly worse NCAA Tournament seed.
In the business of sports, more inventory for TV is king, and the powers that be think more teams playing more playoff games will make more money. At Free Agent, we don't begrudge institutions for trying to make more money—we all do the same every day. But it's not clear abandoning conference championship games will be the answer, especially when the Big Ten and SEC championships apparently outdraw many playoff games.
ESPN and the power conferences know fans aren't happy about it—just look at allthechatteronline, and how the crowd at BYU reacted when College GameDay discussed expansion on Saturday (especially when BYU would probably benefit from expansion!). They're betting enough people will watch to make the expansion profitable anyway. The last hope is that fans get loud enough to bully them into abandoning expansion—which only occasionally works, sometimes on things small (putting the trophy logo on the court for the NBA Finals) and large (soccer's European Super League). If any powerhouse considers going independent, that might shock leaders into a rethink too.
Almost every sport I know is adding more: more teams, bigger playoffs, more for TV. As fans, we still eat it up, of course—much to the excitement of the TV executives who are selling commercial time to the people trying to reach us, the viewing public. (The only counterexample is the MLB proposal to cut eight games from the regular season—I'd love to see each sport I follow cut its season by about 25 percent to make regular season games matter more, so I'm interested to see how this goes.)
Perhaps I'm biased because my favorite team, Michigan State, is a dumpster fire—they could expand the playoff to 64 teams and the Spartans still wouldn't deserve a bid. I personally don't have a whole lot at stake in the playoff format now or anytime soon. But as a neutral, the chaos of Saturday might have been viewed with my full attention in the past—instead, this year I just had it on in the background while I played video games.
Sports Are Regulating Bets Without Politicians, Part 3
After last year's major betting scandal, the NBA asked sportsbooks late last week to stop offering certain types of potentially problematic bets. The sportsbooks, which the NBA says handle roughly 99 percent of the U.S. betting market, agreed. No politician or regulation was necessary to solve the problem.
No longer can bettors bet on unders for a bit player who likely won't get more than 12 minutes of playtime. Bettors also can't wager on the opening tip or on players to miss specific shots. Parlays that string together under bets on the same player's statistics are also out (this one seems a bit harsh—if you just want to bet on a certain major player to have an off night, you can bet on stats separately, but not in a big multiplier parlay). Bets on players who have two-way contracts between the NBA and G League were already banned.
This all comes on the heels of similar developments last year in the NFL and MLB. While some people want to ban prop bets altogether, the NFL asked sportsbooks to eliminate bets in four different categories. Sportsbooks largely agreed or weren't offering those bets anyway. MLB, in light of some pitching-related scandals, asked for a $200 limit on pitch-specific bets and to keep them out of parlays—sportsbooks agreed to that too.
As I wrote last year, "Ideally, this is how the regulation of the sports betting industry should go….These approaches are catching the nuances of what works for both the leagues and for sportsbooks without the heavy-handed approaches of politicians who would use an axe to ban all prop bets instead of a scalpel to limit problematic bets."
It's important to note leagues are able to do this because they have commercial partnerships with the sportsbooks. Otherwise, the leagues would have no direct leverage over a sportsbook offering a bet the league doesn't like. Keep that in mind the next time you see people bemoaning a league partnership with a sportsbook or a prediction market.
Trump's Golf Course Plans Have People Teed Off
President Donald Trump has new plans for the National Park Service golf course at East Potomac—again. Last time new plans were announced, the site plan still had its historic miniature golf course, a par-3 course, and the existing road still ringing the property for bicycling, running, etc. Much of the public didn't like that plan anyway—now, none of that remains in the latest plans, just 18 holes of golf and a driving range.
What's really going on here seems quite clear to me: Like so many other things going on in the second Trump administration, this is a scheme to enrich the Trump family. The plan?
Step 2: Use taxpayer dollars to pay for renovation of the course into, allegedly, a championship-level course capable of hosting major golf tournaments (no matter that the area has next to zero parking, is a mile from the nearest Metro station, and only accessible by narrow roads not meant to handle tens of thousands of spectators).
Step 3: Have the federal government sign a sweetheart deal with, who else, the golf division of the Trump Organization to operate the course on extremely favorable and profitable terms.
If you're wondering why the Trump administration is doing something, corruption is usually a good guess.
The arguments for the course don't make much sense. There are plenty of adequate, competitively priced golf courses in the broader Washington, D.C., area. Several of them are already capable of hosting professional golf tournaments. Between LIV Golf and the PGA Tour, there were three tournaments at three different courses in the last couple years. The 2030 PGA Championship and 2037 Ryder Cup will happen just over the D.C. line in Bethesda, Maryland.
East Potomac is not the nicest course around, no thanks to the legal limbo it's been in for the past year. But if the National Park Service is going to, for some reason, be in the business of running a golf course, it should be a course that emphasizes and teaches its history instead of the pipe dream of a corrupt madman.
Who Ya Got? 2026 World Series Edition
For the first time in 46 years, we've got a World Series contested by two teams that have never won it before. Brewers against Rays is also a rare instance of the top seeds from each league outlasting the randomness of the MLB playoffs to make the World Series. And before you trot out the tired line that "TV executives must be seething about the small market teams" remember that they care much more about getting a playoff series that goes seven games with close results in each game (What did I say above? Inventory rules all!).
European Union governments have agreed a negotiating position on new agricultural market rules intended to take effect under the bloc’s 2028–2034 budget, advancing reforms to support arrangements for farmers while leaving the most contentious financial questions unresolved.
The Council approved its partial negotiating mandate on Monday, 19 October, covering changes to the Common Market Organisation regulation, which governs agricultural markets across the European Union.
The proposals include new arrangements for wine producers, protein crops and oilseeds, revised marketing standards, changes to the EU school food programme and provisions intended to improve preparedness for agricultural market disruptions.
However, the agreement does not settle future funding allocations or the broader structure of agricultural subsidies, which remain under negotiation as EU governments attempt to reconcile farming expenditure with competing demands for defence, industrial investment and regional development.
Agricultural markets under review
The Council’s negotiating position retains much of the European Commission’s original proposal while introducing amendments intended to accommodate national differences in agricultural production.
Under the proposed arrangements, sector-specific interventions would become mandatory in several areas, including beekeeping, fruit and vegetables and, under certain circumstances, wine production.
The Council has also proposed flexibility for countries where particular sectors are absent or relatively undeveloped.
For the wine industry, governments would be able to seek exemptions from certain obligations where national circumstances justify different arrangements.
This would allow the framework to retain common European rules while avoiding requirements that would be inappropriate for member states with little or no domestic wine production.
Sectoral interventions form part of the mechanisms through which the EU supports agricultural markets and producer organisations. They can cover measures intended to improve competitiveness, manage production and strengthen farmers’ commercial position.
New provisions for protein crops
The Council has endorsed the establishment of a separate sector for protein crops and oilseeds, replacing existing provisions covering dried fodder.
The objective is to encourage domestic production and reduce dependence on imported agricultural inputs, particularly crops used in animal feed and food production.
European livestock producers rely on protein-rich feed ingredients, including soyabeans, that are often sourced internationally.
Greater domestic production could reduce exposure to fluctuations in global commodity prices, transport costs and disruptions to international supply chains.
Under the Council’s proposal, member states would be encouraged to recognise producer organisations specialising in protein crops and oilseeds.
Such organisations can help farmers coordinate production, marketing and investment, although the effectiveness of the proposed measures will depend on how they are implemented nationally.
The proposals follow broader EU efforts to improve supply security in sectors extending from agricultural inputs to critical industrial materials.
School food and product labelling
The negotiating mandate also preserves the EU school scheme, which provides support for the distribution of fruit, vegetables and milk to schoolchildren.
Under the proposed framework, the programme would move from a school-year financing cycle to a calendar-year system, with transitional provisions intended to prevent disruption during implementation.
The Council has maintained the Commission’s objective of encouraging healthier eating habits by limiting products containing high levels of free sugars and fats.
The proposal also opens the possibility of additional marketing standards for several agricultural products, including protein crops, beef, pork, sheepmeat, goatmeat and rice.
These standards could provide consumers with more detailed information about product origins, subject to the final legislation.
Such measures would also have implications for producers and food businesses, which would need to comply with any new requirements concerning classification, marketing and labelling.
The Council additionally supports the harmonisation of rules covering industrial hemp, while retaining safeguards concerning seed certification and the permitted level of tetrahydrocannabinol.
Farming subsidies remain contested
The agricultural market agreement forms part of negotiations over the next Common Agricultural Policy, which will operate within the EU’s new seven-year financial framework.
Under the Commission’s proposed budget structure, several funding streams, including agricultural and cohesion programmes, would be brought together within national and regional partnership plans.
The restructuring has encountered opposition from governments and agricultural interests concerned that farming could lose protected access to EU funding.
As EU Today previously reported, 17 member states have called for agricultural and regional development expenditure to be protected against further reductions.
The Council’s latest position addresses how agricultural markets should operate rather than determining the size of the financial support available to them.
A separate debate concerns the conditions for receiving direct farm payments, including the definition of an active farmer and the degree of discretion granted to national governments.
Those questions remain central to the continuing CAP negotiations, which are due to return to the Agriculture and Fisheries Council on 26–27 October.
Negotiations move to Parliament
The Council’s partial mandate now provides a basis for negotiations with the European Parliament on the agricultural market provisions.
The legislation will still require agreement between the institutions, while its financing will depend on the eventual settlement of the 2028–2034 budget.
Governments must also complete negotiations on the wider CAP framework, including direct income support and the distribution of responsibility between Brussels and national administrations.
The market agreement reached on 19 October therefore establishes important elements of the proposed agricultural rules, but leaves unresolved the level of financial support available to European farmers after 2027.
Dutch-Belgian supermarket group Ahold Delhaize has confirmed that malicious activity was responsible for the cybersecurity incident that disrupted its operations across Europe and the United States, forcing the company to take websites, applications and other computer systems offline.
In an official statement issued on Monday, 19 October, the company announced that it had filed a formal complaint with Dutch police and was cooperating with national cybersecurity authorities. Although physical supermarkets have remained open, the disruption has affected online shopping, deliveries and some distribution operations.
The company said investigators had so far found no evidence that sensitive information belonging to customers, employees or business partners had been taken. However, its investigation remains open, and the identity and objectives of those responsible have not been publicly established.
Online services interrupted across several countries
The disruption began on 12 October, when Ahold Delhaize detected suspicious activity within its information technology infrastructure.
The group responded by taking a number of systems offline as a precaution, affecting most of its retail brands in Europe and the United States. The consequences varied considerably between businesses, with some experiencing prolonged interruption to digital services while others were able to restore operations more quickly.
Albert Heijn, the Netherlands’ largest supermarket chain, has been particularly affected. Its website and mobile application have returned online, but home grocery deliveries are not expected to resume until Friday, 23 October.
Orders scheduled before that date have been cancelled, while the company continues preparations for a gradual restoration of its online delivery service.
The incident also interrupted some supply and distribution arrangements, resulting in shortages on supermarket shelves in parts of the Netherlands and Belgium.
In Belgium, Delhaize has restored its online shopping operations. Certain promotional and personalised services were still experiencing difficulties, although the parent company confirmed that its Belgian e-commerce business was operational again.
Dutch retailers Etos and Gall & Gall have also restored their websites. Meanwhile, several American supermarket brands owned by Ahold Delhaize have continued to experience service interruptions.
The group said it expected additional online services in the United States to become available over the coming days.
Dutch authorities investigate
Ahold Delhaize said it notified the Netherlands’ National Cyber Security Centre within 24 hours of detecting the malicious activity.
The company has subsequently provided updates to the authorities and, on Monday, confirmed that a formal police report had been submitted.
Chief executive Frans Muller defended the decision to shut down digital systems, arguing that the investigation had demonstrated the necessity of taking preventive action.
The company has not identified the perpetrators, confirmed whether ransomware was involved or disclosed the technical method used to gain access to its infrastructure.
These distinctions are important because malicious activity does not necessarily establish that information was stolen or that attackers obtained control over every system subsequently taken offline.
The retailer has instead described a controlled restoration process intended to ensure that affected systems can be brought back into operation without exposing the business to further risks.
Ahold Delhaize operates thousands of supermarkets and related retail businesses, including Albert Heijn, Delhaize, Food Lion, Giant Food, Hannaford and Stop & Shop.
Its geographical reach means that a disruption originating within shared corporate infrastructure can affect several national markets, even where individual retail chains maintain separate commercial operations.
Cybersecurity becomes a supply-chain concern
The attack comes amid increasing scrutiny of the vulnerability of European food retailers to digital disruption.
Earlier this month, investigators in France began examining cyberattacks against refrigeration control systems used by hundreds of supermarkets.
Those incidents reportedly affected equipment at chains including Carrefour, Intermarché and Monoprix, with some retailers forced to discard products after refrigeration systems malfunctioned.
There is no established connection between the French incidents and the attack affecting Ahold Delhaize.
Nevertheless, both episodes illustrate the dependence of modern retail operations on interconnected digital systems supporting stock management, refrigeration, logistics, payments and customer services.
The consequences of a serious cyber incident can extend beyond the loss of access to websites. Interruptions to inventory systems, warehouse operations or communications with suppliers can affect the availability of physical products.
This creates particular difficulties for food retailers, where delays in transport and storage can result in the loss of perishable goods.
European regulatory implications
The incident also draws attention to the European Union’s NIS2 cybersecurity framework, which establishes stricter risk-management and incident-reporting obligations for organisations operating in designated sectors.
Food production, processing and distribution are among the activities covered by the directive, although its application to particular companies and operations depends on the relevant legal definitions and national implementing arrangements.
The legislation requires organisations within its scope to establish appropriate cybersecurity protections, address supply-chain risks and notify competent authorities of significant incidents.
Separately, the General Data Protection Regulation establishes notification requirements where personal-data breaches meet the relevant reporting threshold.
Ahold Delhaize’s statement that it has found no evidence of sensitive data being taken does not conclude the technical investigation, but it means that a confirmed theft of personal information should not presently be presented as a fact.
For the company, the immediate challenge remains restoring online services while maintaining normal supermarket operations. The wider commercial consequences, including the cost of the interruption and its effect on sales, have not yet been quantified publicly.
A cyberattack affecting approximately 700 supermarkets in France has exposed serious weaknesses in the digital systems used to control commercial refrigeration, raising concerns about the vulnerability of European food distribution networks and other essential infrastructure.
The attack began overnight on 11–12th October, when intruders gained access to remotely managed refrigeration equipment and altered operating settings, causing refrigerators and freezers to overheat.
Stores belonging to several major supermarket chains were affected, including Intermarché, Netto, Coopérative U, Carrefour and Monoprix. Some were forced to discard substantial quantities of fresh and frozen food.
French Finance Minister Roland Lescure confirmed that approximately 700 of the country’s 10,000 supermarkets had been affected, although the severity of the disruption varied between locations.
The Paris prosecutor’s office has opened an investigation into the attack, including the damage caused by destroyed merchandise and reported fires.
The incident has drawn attention to industrial control systems that are routinely connected to the internet but may receive less cybersecurity protection than corporate networks and customer databases.
Refrigeration systems remotely manipulated
Investigators have established that refrigeration equipment was targeted through vulnerabilities associated with remote monitoring and control systems.
Some of the affected systems used older equipment that no longer received regular security updates.
According to information released by the companies and cybersecurity specialists, certain industrial controllers had been accessible through public internet connections, creating opportunities for unauthorised access.
Hackers reportedly manipulated defrost cycles and increased temperature settings, preventing equipment from maintaining the cold conditions required to preserve food.
The attack affected approximately 300 Intermarché and Netto stores, while Coopérative U reported disruption at around 80 outlets.
Several retailers managed to contain the damage, but others lost substantial quantities of stock.
The consequences extended beyond malfunctioning equipment. Businesses faced the cost of replacing spoiled food, repairing refrigeration systems and restoring normal operations.
The precise financial damage is still being assessed, although estimates from the retail sector indicate that losses across France could amount to tens of millions of euros.
Vulnerabilities in connected equipment
The incident illustrates the security problems created by the growing use of internet-connected industrial equipment.
Modern refrigeration installations allow contractors and maintenance specialists to monitor temperatures, adjust settings and diagnose faults remotely.
These arrangements can reduce operating costs and improve efficiency, but they also create additional access points that attackers may exploit.
Cybersecurity specialists have identified vulnerabilities in commercial refrigeration platforms manufactured by Danfoss and Copeland.
The manufacturers subsequently addressed identified flaws, although older or unsupported equipment remained a concern.
A critical problem for businesses is that industrial machinery often remains operational for many years after its original software has become obsolete.
Replacing entire refrigeration installations can involve substantial expense and operational disruption, encouraging operators to retain equipment that may no longer meet contemporary cybersecurity standards.
The risks are particularly difficult to manage when responsibility for maintenance, software updates and network security is divided between retailers, equipment suppliers and external contractors.
France’s delayed cybersecurity legislation
The attack has renewed scrutiny of France’s implementation of the European Union’s NIS2 Directive, which is intended to strengthen cybersecurity across sectors providing important economic and public services.
Its scope extends beyond traditional critical infrastructure such as energy, telecommunications and transport to include certain businesses involved in food production, processing and distribution.
EU member states were required to incorporate the directive into national legislation by 17 October 2024.
French cybersecurity specialists have since warned that delays have complicated efforts to establish consistent obligations for organisations operating industrial and commercial systems.
However, NIS2 does not automatically cover every supermarket. Its application depends on the nature and size of an organisation and the provisions of national implementing legislation.
The incident therefore raises questions not only about the pace of legislative implementation but also about the practical protection of equipment already in use.
Wider implications for European infrastructure
The disruption demonstrates how a cyberattack can cause physical damage without directly targeting a conventional industrial facility.
Unlike breaches intended to steal customer information, the French incident interfered with machinery responsible for preserving essential products.
The distinction is important for European policymakers, who increasingly face threats to infrastructure that combines digital controls with physical operations.
The European Union’s cybersecurity agency ENISA has organised cross-border exercises to test how authorities and companies would respond to disruption affecting essential services.
The attack itself has been established, but responsibility for it has not been publicly attributed.
French authorities have said there is no immediate threat to national food supplies. Nevertheless, the destruction of merchandise and interruption of ordinary retail operations have demonstrated the potential economic consequences of weaknesses in relatively commonplace equipment.
The continuing investigation must establish how access was obtained, which systems were compromised and whether the vulnerabilities were known to operators before the attack.
For Brussels and national regulators, the case provides a practical test of whether European cybersecurity legislation can translate into effective protection for the connected equipment on which ordinary commercial activities increasingly depend.
With little more than two weeks to go until the midterm elections, it seems increasingly possible that the Democrats, already a big favorite to win control of the House of Representatives, will also take charge of the planet's most elite nursing home, the United States Senate, where the median age is 64 years old. RealClearPolitics' poll aggregator has moved control of "the world's greatest deliberative body" (as its members are grandiosely wont to call it) to "toss up," status and prediction markets are now breaking big toward a blue wave. As of this writing, Kalshi has its Senate odds at 63 percent for the Dems vs. 37 percent for the GOP; Polymarket is at 62 percent vs. 39 percent.
As gratifying as it might be to see unprincipled Trump enablers reduced to minority status after signing off on economy-wrecking tariffs, inhumane immigration detentions, and wars of choice, there's at least one good reason to dread a Democratic majority too: Sen. Elizabeth Warren, the Massachusetts progressive who is spending the run-up to the midterms freaking out over possible consolidation in the condiments business and accusing private equity firms of gutting such shopping-mall favorites as Claire's and Toys R Us. There's every reason to believe that a Senate run by Warren and other economic interventionists will waste time, money, and resources trying to prevent a world in which, per the X wag Iowahawkblog, "a panopticon conglomerate owns two brands of hot sauce."
On October 13, Warren posted this dire warning to X:
Hellmann's mayo McCormick spices Cholula hot sauce Frank's RedHot
What do these products have in common? One company could soon control them all.
I have concerns that McCormick and Unilever's $45 billion merger could increase YOUR grocery prices.
It's hard to think of a more competitive and varied market than the one for hot sauces, which is expected to more than double over the next decade. The barriers to entry are generally low, as are the key ingredients, and new entrants can easily market and sell online, avoiding the costs of buying shelf space in conventional supermarkets. Yet Warren is urging regulators at the Department of Justice and the Federal Trade Commission to halt mergers of both product makers like McCormick and Unilever and grocery stores like Kroger and Giant Eagle.
The latter complaint is particularly picayune. Kroger is one of the country's largest supermarket chains, operating around 2,800 stores under its own name as well as Harris Teeter, Ralph's, and others. Giant Eagle operates about 170 stores. This merger is no more the stuff of nightmares than a single company producing both Cholula and Frank's RedHot. If Warren gains more clout from being in the majority, expect her to butt in more and more on such mergers.
Making it harder for businesses to adapt is not a recipe for making goods and services more affordable. But Warren is keen to blame economic creative destruction not on "new forms of industrial organization that capitalist enterprise creates" (as Joseph Schumpeter would have it), but on pure greed. In a TikTok released earlier this month, she shows a poster board with corporate logos from once-thriving companies that she says have been "gutted" by "private equity" firms.
"Here's your local mall," she piously intones. "Now, private equity wants you to believe that Red Lobster went bankrupt because of their endless shrimp….They want you to believe that Claire's went bankrupt because teens stopped shopping at the mall." In Warren's telling, private equity firms magically take over thriving businesses and then strip them bare. The typical pattern is that private equity enters the picture after a business is failing.
Virtually all accounts of the decline of, for example, Red Lobster, note that the chain had been spiraling for several reasons before the private equity firm Golden Gate Capital got involved in 2014. As this CNN article notes, the chain, which started in 1968, had seen drops in sales as customer desires changed. Management compounded the difficulties with a series of bad decisions, including continuing various all-you-can-eat menu specials, before coming out of Chapter 11 bankruptcy last year.
Similarly, it's true that some teens still go to malls and get their ears pierced at Claire's. But anyone who has spent time in retail America over the past few decades knows that malls are no longer the destination that they once were. As CapitalOne Shopping Research documents, "in 1986, there were 25,000 malls, large and small, nationwide." By 2023, that number had shrunk to just 1,200. While some malls are coming back, most are not, and for reasons that have nothing to do with private equity. Online retails plays a role (though a smaller one than usually imagined, with e-commerce accounting for less than 20 percent of all retail sales). But mostly, it's that people today tend to want a different sort of retail environment. Anchor stores—think Macy's and J.C. Penney—are shadows of themselves, and younger people have less unstructured time in which to prowl food courts and arcades.
For politicians like Elizabeth Warren, though, there can be no financial gains or losses that aren't the result of shadowy, conspiratorial forces. If her party takes control of the Senate, her words will carry more weight. But it will be American consumers that ultimately shoulder the burden of an even-more-regulated economy. The market for hot sauces will almost certainly stay spicy, but many other parts will surely suffer.
Difference between French and German borrowing costs widens after public buildings burned and shops looted
France has been hit by a fresh wave of selling in its bond and stock markets after violent protests over the weekend led to thousands of arrests and left public buildings burned and hundreds of shops looted across the country.
The chaos has spooked investors as analysts worried that it would undermine Paris’s efforts to cut spending and reduce its debt.
Christine Lagarde says rising government borrowing costs are tightening financial conditions across the eurozone, complicating efforts to contain inflation without undermining economic growth.
European Central Bank President Christine Lagarde has warned that a sharp sell-off in government bonds is tightening financial conditions across the eurozone, threatening to weaken economic growth at a time when European governments are already struggling with mounting debt and higher energy prices.
Speaking during the International Monetary Fund’s annual meetings on Saturday, 17 October, Lagarde said rising bond yields were imposing additional pressure on the European economy, potentially reducing demand and helping to bring inflation down.
Her comments came as investors demanded higher returns on government debt across major developed economies, reflecting concerns about persistent inflation, widening budget deficits and the substantial borrowing requirements associated with investment in artificial intelligence.
The development presents a complicated situation for the ECB, which has already raised its key interest rate twice this year in response to renewed inflationary pressure following the conflict in the Middle East.
Higher government bond yields effectively tighten monetary conditions even without a further decision by the central bank to increase official interest rates.
Bond markets tighten financial conditions
The latest sell-off has pushed borrowing costs higher across Europe, although the pressure is particularly acute in countries with large public debts and persistent budget deficits.
When investors sell government bonds, their market prices fall and yields rise. Those higher yields eventually feed into the costs of borrowing for governments, businesses and households.
Lagarde indicated that financial conditions had become tighter than assumed in the ECB’s September economic forecasts.
According to her latest assessment of the bond market, the resulting slowdown in demand could help moderate inflation, but would also place additional pressure on an economy whose growth prospects remain limited.
The ECB’s September projections forecast eurozone economic growth of just 0.9 per cent in 2026, followed by 1.4 per cent in 2027 and 1.5 per cent in 2028.
Inflation was expected to average 3.0 per cent this year before declining to 2.5 per cent in 2027 and 2.1 per cent in 2028.
Those forecasts were based on assumptions about financial conditions and energy prices that may no longer fully reflect developments in international markets.
France faces particularly acute pressure
France has emerged as one of the most vulnerable major eurozone economies because of its high public debt, persistent deficits and political disagreements over fiscal consolidation.
French government bond yields have risen sharply as investors question whether Paris can deliver the spending reductions required to stabilise its finances.
As EU Today reported earlier this month, eurozone finance ministers have been pressing France to produce a credible budget that would restore confidence in the country’s fiscal position.
The borrowing premium demanded on French debt relative to German government bonds has also widened, reflecting investors’ concerns about the financial outlook and the political difficulties surrounding the 2027 budget.
The IMF has warned that continued increases in borrowing costs could eventually force the French government to undertake more substantial fiscal adjustments.
In its assessment of French bond yields, the Fund said the immediate pressures remained manageable, partly because France benefits from established debt markets and relatively long borrowing maturities.
Nevertheless, persistently elevated yields would increase the cost of refinancing government debt as existing bonds mature.
The wider concern is that higher borrowing costs could reduce the room available for public investment and other expenditure across several European economies simultaneously.
IMF warns governments over rising debt
Lagarde’s intervention coincided with renewed warnings from the IMF about the sustainability of European public finances.
In its latest European economic assessment, the Fund argued that governments must either accelerate economic growth or reduce borrowing to prevent debt burdens from becoming increasingly difficult to manage.
The IMF expects eurozone growth of approximately 1.1 per cent in 2026 and 1.2 per cent in 2027, with continuing pressure from energy costs, demographic changes and weak productivity.
The European Commission’s forecasts indicate that eurozone government debt could rise from 88.7 per cent of GDP in 2025 to 91.2 per cent in 2027.
The IMF has also identified structural weaknesses, including barriers within the European single market, which restrict investment and productivity growth.
These problems are becoming more difficult to address as European governments face demands for greater defence expenditure, infrastructure investment and support for industries affected by higher energy prices.
ECB faces difficult interest-rate decision
The ECB has already increased its deposit rate to 2.5 per cent following successive increases in June and September.
As EU Today reported after September’s decision, the central bank has been attempting to contain inflation generated by rising energy costs without causing a more substantial economic slowdown.
The IMF now expects at least one additional quarter-percentage-point increase before the end of 2026.
Such a decision would bring the deposit rate to 2.75 per cent, although the ECB has not committed itself to that outcome.
The challenge is that tighter monetary policy would coincide with financial restrictions already being imposed by bond markets.
At the same time, higher energy prices continue to affect household purchasing power and business operating costs.
In her statement to the International Monetary and Financial Committee, Lagarde acknowledged that the eurozone had proved more resilient than expected, while warning that risks to growth remained tilted to the downside and risks to inflation to the upside.
The duration of the Middle East conflict, developments in energy markets and changes in investor confidence will be important in determining the economic outlook.
For the ECB, a bond-market slowdown could reduce the need for further interest-rate increases by weakening demand. But if energy-driven inflation remains elevated, the central bank may still face pressure to tighten policy.
Europe’s governments, meanwhile, have considerably less control over the borrowing costs demanded by international investors.
The next ECB interest-rate decision will therefore take place against an increasingly difficult combination of sluggish growth, persistent inflation and financial markets imposing their own constraints on public and private borrowing.
Endless illegal immigration, unaffordable energy, draconian speech policing – we're being conditioned to accept outrageous things as normal, says Nick Rendell. Now add to that economic crashes.
EU finance ministers have approved a compromise that would expand the European Securities and Markets Authority’s powers while exempting some major trading venues from centralised oversight. The agreement reflects continuing resistance to transferring financial supervision from national authorities to Brussels.
European Union finance ministers have reached an agreement to expand centralised supervision of financial markets, but Germany has secured provisions allowing important parts of Deutsche Börse to remain under national oversight, substantially narrowing the European Commission’s original reform proposals.
The compromise, agreed at a meeting in Luxembourg on 9 October, would transfer responsibility for supervising selected trading venues, clearing houses and securities settlement institutions to the European Securities and Markets Authority (ESMA).
However, the agreement introduces exemptions and thresholds that reduce the number of institutions automatically subject to direct European supervision.
The result is a significant political compromise between governments seeking deeper financial integration and those reluctant to surrender oversight of nationally important market operators.
Berlin secures its exemption
The most contentious element of the negotiations concerned Deutsche Börse, the German financial-market group that operates the Frankfurt stock exchange and provides trading, clearing and other financial infrastructure services.
Germany opposed arrangements that would place all major market operators under direct ESMA supervision, arguing that institutions with predominantly domestic activities should continue to be regulated nationally.
The agreed compromise refines the criteria for determining which trading venues qualify for centralised oversight.
These conditions allow certain Deutsche Börse operations to remain outside the new supervisory regime.
The exemption had already become a point of contention during negotiations among European governments.
As EU Today reported in June, Berlin had sought to protect Deutsche Börse from mandatory European supervision despite Germany’s broader support for integrating EU capital markets.
The October agreement formalises a narrower approach within the Council’s negotiating position, although the legislation remains subject to approval by the European Parliament.
Europe’s fragmented financial markets
The European Commission has repeatedly argued that fragmented national supervision weakens the EU’s ability to compete with financial markets in the United States.
Although the Union operates a single market, many financial institutions continue to face differing regulatory interpretations, procedures and supervisory relationships across member states.
These differences can increase operating costs and discourage financial businesses from expanding across borders.
The Market Integration and Supervision Package is intended to simplify those arrangements and strengthen common oversight of financial infrastructure with significant cross-border activity.
Under the Council’s position, ESMA would assume direct supervision of selected trading platforms and institutions involved in clearing and securities settlement.
Such institutions perform essential functions in financial markets, including managing transactions, transferring securities and controlling risks between counterparties.
Differences in supervisory arrangements can complicate the operation of financial services that increasingly function across national borders.
The Commission argues that greater consistency would allow European capital to move more efficiently between member states and provide businesses with improved access to investment.
Compromise reduces original ambitions
The Commission’s original approach envisaged broader centralisation of supervisory responsibilities.
The Council agreement of 9 October introduces more restrictive criteria governing the institutions that would fall under ESMA’s direct authority.
In addition to the treatment of trading venues, ministers agreed that direct supervision of crypto-asset service providers should initially concentrate on businesses with the most significant cross-border operations.
The Council also supported changes to ESMA’s governance arrangements, including the creation of a full-time executive board.
The proposed board would strengthen the authority’s ability to make supervisory decisions independently of individual national regulators, while preserving mechanisms for cooperation with those authorities.
The compromise also introduces arrangements allowing national supervisors collectively to challenge certain decisions.
These provisions reflect concerns about concentrating regulatory powers within an institution that must oversee financial businesses operating under different national legal systems.
Why capital markets matter for European investment
The supervision reforms form part of the EU’s broader Savings and Investments Union initiative.
European policymakers want to increase the availability of private capital for companies investing in technology, defence, infrastructure and industrial development.
The Union has substantial household savings, but much of that money remains in bank deposits or is invested outside the European economy.
Companies seeking capital for expansion may consequently face higher financing costs or more limited investment opportunities than comparable businesses operating in larger and more integrated markets.
Financial-market supervision represents only one element of that programme.
Differences in taxation, insolvency law, national investment products and corporate governance requirements also influence where investors allocate their money.
Nevertheless, regulators regard consistent supervision as an important condition for reducing fragmentation.
Parliament faces a political decision
The agreement reached by finance ministers does not conclude the legislative process.
The European Parliament must adopt its position before negotiations can determine the final provisions.
Parliamentary discussions could revisit the exemptions secured by Germany and the criteria determining which institutions fall under direct ESMA supervision.
The debate will expose differences over whether European financial integration should proceed through incremental reforms or a more substantial transfer of regulatory authority.
Governments supporting national exemptions argue that supervision should reflect the actual geographic scope of a company’s activities.
Supporters of broader European oversight contend that major trading businesses can influence financial markets beyond their home jurisdictions even when individual operations appear predominantly domestic.
The Deutsche Börse exemption has become a prominent example of the conflict between those positions.
Europe’s largest economies broadly support the objective of deeper capital markets, but remain divided over the institutional powers needed to achieve it.
The final legislation will determine whether the expanded responsibilities granted to ESMA are sufficient to reduce fragmentation or leave important parts of Europe’s financial infrastructure operating under substantially different national supervisory systems.
France faces growing pressure from eurozone governments and financial markets to secure its 2027 budget as borrowing costs climb towards levels not seen for more than two decades, raising questions about Paris’s ability to restore control over its public finances.
France is coming under increasingly direct pressure from its eurozone partners to resolve the political dispute surrounding its 2027 budget, with European finance ministers warning that continued uncertainty threatens confidence in the country’s public finances.
The warning follows a sharp increase in French government borrowing costs. Yields on ten-year sovereign bonds have risen by nearly 80 basis points since September, reaching levels last recorded in 2002. Investors are demanding higher returns to finance a government whose debt continues to increase while its capacity to impose spending restraint remains constrained by parliamentary divisions.
At the Eurogroup’s October discussions, finance ministers and European Central Bank officials pressed Paris to demonstrate that it can adopt a credible budget and comply with its commitments under the EU’s fiscal framework.
France’s difficulties have implications beyond its domestic politics. As the eurozone’s second-largest economy, France occupies a position fundamentally different from smaller countries that experienced sovereign debt crises during the previous decade.
Borrowing costs expose political weakness
The French government expects to borrow approximately €340 billion in 2027, making continued access to financial markets at sustainable rates an essential element of its fiscal strategy.
That financing requirement reflects both the need to cover the annual deficit and to refinance existing debt as government securities mature.
France’s public debt is already approaching 120 per cent of gross domestic product. As EU Today previously reported, official projections indicated that the debt ratio could reach 121.7 per cent in 2027, up from 115.7 per cent at the end of 2025.
The latest increase in yields adds another complication. Higher interest costs do not affect the entire stock of debt immediately because much of it was issued at earlier rates. They do, however, increase the cost of new borrowing and refinancing, progressively reducing the money available for other government commitments.
France also faces a difficult political timetable. With the presidential election approaching in 2027, parties are reluctant to accept measures involving spending reductions, higher taxation or changes to public services.
Prime Minister Sébastien Lecornu’s government has been attempting to reduce the deficit from an estimated 5.4 per cent of GDP in 2026 towards five per cent. Even that objective remains substantially above the EU’s three per cent reference value.
Brussels has limited room to compromise
Economic Commissioner Valdis Dombrovskis has emphasised the importance of predictable fiscal policy and credible deficit reduction.
France is already subject to the EU’s excessive deficit procedure, under which member states must demonstrate progress towards agreed fiscal objectives.
The reformed European fiscal framework permits certain deviations from expenditure commitments in exceptional circumstances, but it does not provide an unrestricted exemption from debt sustainability requirements.
Paris therefore faces a double constraint. It must convince domestic political forces to support a budget while demonstrating to Brussels that its spending plans are sufficiently credible.
The danger is not necessarily an immediate financing crisis. France retains a large, diversified economy, deep financial markets and substantial tax-raising capacity.
The more immediate risk is that prolonged political deadlock produces progressively higher borrowing costs, making future fiscal adjustments more expensive.
Why the ECB cannot simply intervene
The European Central Bank has instruments designed to counter destabilising market conditions, but these are not intended to finance governments that are unwilling or unable to implement sustainable fiscal policies.
Bank of France Governor Emmanuel Moulin said on 7 October that France did not currently require ECB assistance. He argued that the solution lay in adopting a credible budget rather than expecting monetary intervention.
His position follows increasing speculation about whether the ECB could intervene if French bond yields continue rising.
Such intervention would raise difficult questions about the relationship between monetary policy and national fiscal responsibility. The ECB must consider financial stability across the entire eurozone, but it cannot remove the political obligations of individual governments.
France’s existing excessive deficit procedure also complicates its eligibility for certain forms of exceptional support.
The wider European consequences
France’s problems are developing at a particularly difficult moment for European public finances.
Governments are confronting higher defence commitments, expensive measures to protect households against energy inflation and demands for greater investment in industrial competitiveness.
Italy, another heavily indebted eurozone economy, is facing related pressures. The combination places additional importance on the credibility of the EU’s fiscal rules.
Those competing programmes illustrate the difficulty of securing a parliamentary consensus capable of reassuring markets.
The approaching presidential election reduces the likelihood of a durable settlement before voters choose France’s next head of state.
Eurozone partners cannot resolve that impasse from Brussels or Frankfurt. They can insist on fiscal commitments and provide a framework for adjustment, but the political decisions remain with Paris.
France’s immediate challenge is to prevent its budget dispute from becoming a broader loss of confidence in the government’s capacity to manage its finances.
TOKYO – China gave global investors one of 2026’s biggest AI thrills. Yet the country that helped ignite excitement about artificial intelligence is home to one of the worst-performing major stock markets. While AI fever has propelled Seoul, Taipei and Tokyo higher, Chinese shares are stuck in reverse.
So what gives? Several forces, actually. Weak household demand, for one. Consumer spending continues to disappoint, weighing on the earnings potential of mainland internet companies, automakers, and retailers.
The global bond markets are a sensitive lot. And they’ve been having a particularly tricky time lately. Spooked by high inflation, high interest rates and high levels of government debt across the world, those markets have become less stable over the summer. The prices of government bonds – what governments sell to investors – have gone down. […]
Public records show that businesses associated with Tavira have undergone changes to their custody operations following regulatory intervention in Dubai and Monaco. Separately, Tavira Monaco is a defendant in English civil proceedings concerning shares provided as collateral for a stock-backed loan.
The civil allegations remain disputed, and the public judgments reviewed for this article do not establish that Tavira knowingly participated in fraud. Neither Tavira nor its founder, Eliot Goodfellow, is charged in the related United States criminal case.
An international financial group
Tavira was founded in London in 2005 as Tavira Securities. It has since expanded into areas including agency brokerage, asset management, corporate broking and custody.
The group has operated through regulated businesses in several jurisdictions, including the United Kingdom, Monaco, Dubai, Australia and the United States.
Goodfellow remains Tavira Financial Limited’s controlling shareholder. Companies House records state that he owns at least 75 per cent of its shares and voting rights and has the right to appoint or remove directors.
Tavira Financial’s accounts for the year ending 31 March 2025 reported increased revenue alongside a wider annual loss. The accounts also referred to the closure of its contracts-for-difference business and restructuring of its custody activities as the group concentrated on agency brokerage, asset management and corporate broking.
The Salinas civil proceedings
Tavira Monaco is one of six defendants in English civil proceedings brought by Mexican businessman Ricardo Salinas Pliego and Corporacion RBS.
According to the claimants’ case, as summarised in a 2024 High Court judgment, Salinas transferred Grupo Elektra shares worth more than $400 million to two custodians, Weiser Global Capital Markets and Tavira Monaco. The shares were provided as security for loans under a stock-loan agreement concluded in July 2021.
The claimants allege that they entered the transaction after being led to believe that the lender was associated with the prominent American Astor family and that the shares would not be sold unless an event of default occurred.
They further allege that Vladimir Sklarov, who used the name “Gregory Mitchell” in connection with the transaction, caused the shares to be transferred and sold without their authority and used part of the proceeds to fund the loans themselves.
Financial Mail reported in June 2025, citing trading logs reviewed by Salinas’s team, that some of the disputed shares were sold through transactions involving Morgan Stanley, BBVA and Merrill Lynch. The report did not allege that those banks knew of or participated in the alleged fraud. Their appearance in a transaction chain does not, by itself, establish misconduct or knowledge of any underlying dispute.
These remain allegations in continuing civil litigation. In the interlocutory proceedings, the Sklarov defendants maintained that the transaction documents entitled them to trade the collateral and that Salinas’s advisers had been told this. The public decisions reviewed for this article do not amount to a final determination of Tavira Monaco’s liability.
The High Court granted freezing and proprietary injunctions in August 2024. An application by the Sklarov defendants to discharge those injunctions was rejected in October 2024. Later appellate proceedings concerned procedural and evidential issues rather than a final trial of the underlying claims. Tavira Monaco was not involved in the most recent appeal.
Separate US criminal case
A US federal indictment filed on 30 April 2026 and unsealed in May charges Sklarov with conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering.
The US Attorney’s Office for the Southern District of New York alleges that Sklarov operated an entity presented as an established stock-backed lender associated with the Astor family. Prosecutors allege that he used aliases and false representations to obtain control of shares worth approximately $450 million.
Sklarov has not been convicted in that case. The charges are allegations, and he is presumed innocent unless and until proven guilty.
The publicly available indictment charges Sklarov, not Tavira Financial, Tavira Monaco, Goodfellow, Morgan Stanley, BBVA or Merrill Lynch. The existence of the criminal case should therefore not be taken as establishing criminal conduct by any of those companies or individuals.
Restrictions in Dubai
On 10 September 2024, the Dubai Financial Services Authority imposed restrictions on Tavira Financial Limited’s Dubai branch.
According to the DFSA public register, the firm was restricted from soliciting or conducting specified regulated financial-services business with new clients. It was also restricted from soliciting or onboarding new clients in connection with financial promotions.
The public register does not state the reason for the restrictions and does not connect them to the Salinas litigation.
Tavira’s accounts subsequently referred to a decision to close the Dubai branch’s custody operation and to restructure custody activities across the group. The DFSA register nevertheless continues to list Tavira Financial as an authorised firm, subject to the published restrictions.
Companies House records show that Goodfellow ceased to be a Tavira Financial director on 13 September 2024, three days after the restrictions were imposed. Neither the DFSA entry nor the Companies House filing gives a reason for his departure or establishes that it was connected to the restrictions or the Salinas proceedings.
Monaco sanction suspended pending challenge
Tavira Monaco has also been the subject of regulatory action.
On 12 February 2026, Monaco’s Commission de Contrôle des Activités Financières ordered the withdrawal of Tavira Monaco’s authorisation after upholding four regulatory breaches.
The published CCAF decision found that the company had failed to submit required accounts, activity reports and auditors’ reports within statutory deadlines. It also found that the company had not continuously maintained two people responsible for its strategic direction and management, had lacked a bank account in its own name with a Monaco credit institution since July 2023, and had lacked sufficient human and technical resources since 2023.
Tavira Monaco challenged the decision. On 21 May 2026, the President of Monaco’s Supreme Court suspended its execution. According to the CCAF’s current case notice, Tavira Monaco’s application to annul the decision remains pending.
The withdrawal decision should therefore not be described as presently effective without also reporting the suspension and continuing challenge.
Questions about custody controls
The Dubai restrictions, restructuring of custody operations and Monaco proceedings raise legitimate questions about governance and operational controls. They do not, by themselves, prove any connection to the alleged misconduct in the Salinas transaction.
The English civil case raises separate, disputed questions about the instructions received by Tavira Monaco, the authority it understood the relevant parties to possess, the movement of the collateral and the custody records maintained during the transaction. Those matters remain for determination in the civil proceedings.
Right of reply
EU Reporter sent Tavira Financial, Tavira Monaco and Eliot Goodfellow a detailed summary of the matters in this article and asked for their responses concerning the civil allegations, regulatory decisions, custody restructuring and Goodfellow’s departure from the board. EU Reporter has received no replies from Tavira Financial, Tavira Monaco and Eliot Goodfellow
EU Reporter also asked Morgan Stanley, BBVA and Bank of America, the parent company of Merrill Lynch, whether they could confirm the reported transactions and whether they wished to comment. Morgan Stanley replied, saying “no comment”. The others, BBVA and Bank of America, the parent company of Merrill Lynch, have not replied at all.
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