(bright inspiring music) - [Jason] On this episode of "The Hinckley Report."

As sports betting explodes online and enters new territory, our expert panel weighs in on the politics and policies surrounding prediction markets.

What are the major societal and economic impacts?

How has Utah responded?

And how is it all playing out in the courts?

- [Voiceover] Funding for "The Hinckley Report" is made possible in part by the Cleone Peterson Eccles Endowment Fund and by donations to PBS Utah from viewers like you.

Thank you.

(bright inspiring music continues) - Hello, and welcome to "The Hinckley Report."

I'm Jason Perry, Director of the Hinckley Institute of Politics.

Covering the week, we have McKay Coppins, Staff Writer with The Atlantic, Utah Attorney General, Derek Brown, and Senator Todd Weiler, a Republican from Woods Cross.

Thank you so much for being with us on this episode, a special episode of "The Hinckley Report."

We wanna get into some issues, as we often do here, that are really impacting the state of Utah in a significant way, including what's happening on the national stage and you're experts in this space.

And today, we're gonna talk about prediction markets.

We're gonna talk about online gambling.

You all are experts in your field, and I'm gonna start with you, McKay.

You've done some amazing writing, some amazing research on this particular issue.

Highly recommend what you've written on this for anyone following these issues.

But maybe set the stage for us a bit on what prediction markets are.

- Yeah, I'll tell you first what prediction markets say they are.

These are websites like Kalshi, Polymarket.

They brand themselves as online platforms where users can buy and sell shares tied to a future outcome.

So you could buy a position at a certain price, on a certain candidate winning a future election, or on Democrats taking the house.

But you can also buy positions in things like who's going to win "Dancing with the Stars" or whether the Rams will win by seven and a half points or more in their next game.

And very quickly, you get to a point where this is not really buying or selling positions, it's gambling.

And, you know, these platforms, the fact that we even call them prediction markets is kind of a triumph of marketing on their part.

It is, essentially, they are indistinguishable from DraftKings and FanDuel, except in one important way.

Rather than betting against a house or a casino like you would with, you know, DraftKings or FanDuel or at a physical casino in Las Vegas, you are, at least ostensibly, just betting against other people.

And because of that, the federal government has decided to regulate these platforms very differently than online gambling platforms.

- General, talk about this because that is a big distinction right there that people are bringing up.

You have gambling, which in the traditional sense that we've known for a very long time that's regulated by one entity.

We have this market, which right now is regulated by another one.

Explain what that distinction and what it means, if anything.

- Well, I think what's important to highlight, first of all, is that Utah is a state where gambling has been illegal for 130 years.

This is not a brand new development.

And ultimately, what happens is the Supreme Court has said, states can make a decision on a state by state basis.

If you wanna gamble and you're New Jersey, go for it.

If you don't want to and you're Utah, you don't have to.

And so that's, ultimately, what I've been fighting in the courts, and frankly, we've been winning on is to say that, look, states should have the opportunity to make these decisions.

Now, your reference to the federal side is there's an argument that the feds should control this.

But the reality is that's not what's happened, and ultimately, I think every state should make a decision.

And I mean, there's a federal component here, but again, it's just gambling, it's gambling.

As McKay said, it's good old-fashioned gambling dressed up in a suit to look like a trader that works at Wall Street, but the reality is it's still just gambling.

- And Jason, some people say, "Well, this is no different than the stock market."

It's absolutely different than the stock market because if I buy a stock today, I own something that has value that I could sell tomorrow.

If I put my money in Kalshi or any one of these other prediction markets, I don't own anything, I just own a bet.

- So how is this- - Specifically, even further than that, the money that you put into the stock market goes toward, at least ostensibly, producing some kind of good or service, right?

You are buying a share of a company that is doing something, producing something, trying to create value.

The bet vanishes once the future outcome happens.

There is no, you know, there is no product being created, and I think that's a really important distinction that a lot of people miss in this conversation.

- Senator, as a senator from the state, responsible for laws, talk about how you are viewing this, maybe your colleagues are viewing this when we're talking about a lot of these federal implications- - Yes.

- On this for... What has become a very much a state issue.

- Yeah, and, you know, Attorney General Brown just mentioned the Murphy decision, that was 2018 from the US Supreme Court, which says states can do this.

And in our state, the law of the land is our Utah Constitution.

And our Utah Constitution expressly and unambiguously prohibits all forms of gambling, which Attorney Brown has successfully argued in federal court.

That includes prediction markets.

- In fact, the exact phrase of the constitution, which they wrote in 1896 is the phrase, "Gambling under any pretense."

It's almost like they were looking 130 years in advance and looking at things like this.

This is simply... It's a pretense.

- Well, we have had our lawmakers look at this.

And General, maybe describe what this means based on what you just told us.

It was House Bill 243, Representative Joe Elison from Washington County called it gambling revisions.

It expanded the definition of gambling to include proposition bets, meaning bets on individual actions, stats, occurrences.

Talk about what that means.

Why was it expanded?

Because that maybe was in the constitution itself, but is this more specific?

- Well, I think this is the legislature and you were there, Senator, so you can tell us about this.

But I think this is effectively the legislature saying, "Hey, this whole prop bet thing, you know, and the idea that maybe it's not really gambling."

We're gonna make really clear under Utah law that it is in fact gambling.

And it's, really, it's a common sense provision.

I mean, when I speak now to groups and we talk about the idea of, "Hey, it's not gambling, it's a prop bet."

When I say that, you know, I would say it's a prediction market, it's not gambling.

It's always a laugh line, you know what I'm saying?

Because people... You know, from a common sense standpoint, everyone understands this is gambling.

The only people who, honestly, with a straight face say that it's not are either people who are hopelessly addicted to these websites or people who have a vested financial interest in one of these companies.

- And, you know, I'm gonna go so far to say, Jason, if we call someone an escort, if they're selling their body, it's still prostitution.

So you can change the name, but if the underlying act is the same, and here it is, it's just dressing up the criminal act in a different word.

- McKay, break that down a little bit based on what you're seeing nationally as well.

It appears that this is one of those issues that's not necessarily drawn just on party lines and other states are looking at these issues as well.

- Yeah, you know what's interesting is I wrote a cover story for The Atlantic earlier this year about the explosive growth of the online gambling industry.

And I wrote about prediction markets, I wrote about more traditional online sports books.

And the reaction was really interesting because I heard from people across the political spectrum, from very far left members of Congress in the kind of AOC camp to very right-wing state legislators in places like Ohio and other states who are all increasingly worried about the role that prediction markets are taking in American life.

Because we've been talking about the kind of more normal gambling that you can do on these platforms like gambling on games, or players, or whatever.

You can also gamble on pretty kind of dystopian things.

You can gamble on whether there will be a war in Gaza, or whether a space shuttle will explode midair, or on wildfires.

And it's clear that on a kind of base, you know, spiritual level, that is bad for the soul of our country, right?

It is dehumanizing, it's toxic, it reduces life and death issues to transactional vehicles for profit making, which is desensitizing in a way.

But it also creates all kinds of perverse incentives.

I mean, we've already seen examples where people are using classified intelligence, you know, top secret information having to do with military operations to cash in on Polymarket bets.

And my guess is a lot more of that is happening than what's already been exposed.

And so I do think that across the political spectrum, you are seeing real energy around the need to regulate these prediction markets and crack down on them.

And I'm actually kind of heartened by how nonpartisan this issue has been, at least so far.

- Just to put a finer point on that also, as Attorney General, even though, obviously, I'm a Republican, I work with Democrats all the time.

I mean, and I love that there are a lot of issues.

I mean, I'm on a first name basis with most of the AGs across the country.

And this is one of those issues that transcends politics.

I mean, when it comes to hurting our kids, we're all on the same page.

And to make it clear, I mean, in federal court, we, as a state, me, particularly, we were sued by Kalshi.

- Yeah, talk about this, because you're one of these states that actually doing something with the law, we better explain what you're doing.

- And winning, and winning.

- Yeah, and winning.

Well, I mean, the reality is, you know, this came about because my son got an ad from Kalshi the morning of the Super Bowl saying, "Hey, you know, you can't bet on the Seahawks winning, but you can trade on a football future in which they win."

Which, I mean, come on, like a wink and a nod, I mean, anyone would say this is gambling.

So I was very public from that moment on, like this is where I stand.

This is gambling.

Kalshi sued me.

They sued me saying, "Hey, wait, we think we can operate in Utah."

And I said, "No, this is illegal.

It's gambling.

It's against the state constitution."

It went to federal court.

We are the only state in the country that won, we won.

The judge dismissed their claim entirely.

And, of course, they appealed, but what's interesting is in that appeal, unbeknownst to me, actually, I had 37 other state attorneys general that authored a brief and filed it with the court and said, "We agree with the Attorney General of Utah.

He won for the right reasons and we support him."

So as McKay said, this issue transcends any sort of politics or partisanship.

- And Jason, we've been talking around the harms, especially to young men.

The Institute for Family Studies studied 2,000 young men recently and found that more than half of them were gambling with nearly a quarter gambling every single day.

10% of them reported severe or extreme distress or problems related to gambling, and 29% more reporting moderate, and 28% reporting mild problems with gambling, and those who were gambling reported more loneliness.

And this is a problem, I think, that the government actually should have an interest in.

This is not good, and I just wanna make one other point.

If a young man is graduating from college in 2027 and they have 7% interest rates in Utah, half million dollar starter home, and a student loan debt, and then you throw another $20,000 or $30,000 in predictive marketing debt, Kalshi, or whatever, how are they ever gonna get a start a foothold in life?

And the answer is, they won't.

- Yeah.

- No, go ahead.

- McKay, you... Through your reporting and your experience, you have a very close and better understanding than many of the potential impacts of this.

So talk about this from the societal perspective that Senator Weiler was just referencing.

- Yeah, I mean, when I started reporting on this issue, I thought that I was going to do it in a kind of more straightforward way where I interviewed people who were gamblers, who were athletes, who worked at the major sports books.

And my editors actually decided they wanted me to experience the phenomenon firsthand.

So they staked me $10,000 to gamble with over the course of an NFL season to see what it was like.

So The Atlantic covered my losses, but in order to keep me emotionally invested, decided that we would split any winnings 50/50.

And, you know, I actually experienced a little of what the senator was just talking about personally, right?

Even though it wasn't my money, it only took a few weeks for me to be obsessively checking these apps, staying up past midnight, hiding in the bathroom or the pantry to put more bets in so that my kids didn't see how much I was gambling.

You know, there was a stretch last Christmas where I lost $2,500 in the space of 12 or 13 days.

And over the course of that time, missed out on a lot of family experiences, you know, holiday festive cheer.

I was kind of drowned out by my obsession with gambling.

So I got a taste of kind of how dangerous, how addictive, how compulsive these things can be.

And, you know, I was able to pull out of it, I haven't gambled since this experiment ended with the Super Bowl last year.

But for millions and millions of men in this country, they are kind of living in quiet desperation with this.

And the addiction, gambling addiction is different from every other form of addiction in that it's extremely easy to hide, right?

You don't slur your speech, nobody can smell it on you, your eyes aren't glazed, but it can very quickly become a personal catastrophe, and that's one reason that the attempted suicide rate among gambling addicts is higher than any other category of addiction.

- I wanna get into this point, so we see the ramifications, the potential implications.

But I wanna get to how we even enforce some of these laws that are being contemplated, General.

And I wanna start with a question from one of our students here at the University of Utah.

I wanna play this for you.

Maybe you respond to this and talk about from a law enforcement perspective as our top law enforcement officer for the state, how we're going to approach whatever this outcome ends up being.

This is from Carley, a student at the University of Utah.

- Hi, I'm Carley, I'm a student at the University of Utah.

And my question is that since these apps like Kalshi just block users in Utah and there's nothing really stopping people from getting either a VPN or just crossing across state borders, it seems a little bit more like a national issue than it is just a Utah issue.

And I know there's been a lot of bills that have tried to pass in Congress, but they haven't quite gotten through yet.

So what exactly is the national fix for this?

Is it a ban on it?

Is it regulation?

And if it's regulation, what exactly does that look like?

- Okay, so Carley's question is exactly right.

Now, first of all, she's right in terms of VPNs, and that's an issue.

But first of all, these companies can geofence.

I mean, they're arguing that they can't geofence.

Of course, they've been doing it for years in places like Nevada, because Nevada's laws prohibit this kind of thing.

So ultimately, she's right in that there's a potential federal fix.

Most of these lawsuits all around the country are being... They're arguing on the issue of what's called preemption, meaning did Congress intend to, basically, wipe out every state's ability to enforce their gambling laws?

Now, I would argue, of course, not.

I mean, literally, they're arguing that in the middle of a housing crisis, Dodd-Frank actually, Congress in a backdoor way like obliterated every state's ability to enforce gambling laws.

We're arguing that, of course, that's not the case.

You know, if they're gonna do it, they're gonna expressly say it.

But the answer to that really could be, it could be resolved by Congress in two seconds.

Congress doesn't really do stuff, they haven't done much for a long time.

And as much as this is a bipartisan issue, all across Congress, they could clear this up.

Ultimately, we know they're not going to.

So it goes back to the states to make the determination.

And so we can't enforce it, and in fact, I made some waves recently bringing criminal charges against Kalshi for violating our state laws.

- [Jason] Yeah.

- And Jason- - Let me get back to that.

Please, Senator.

- Let me just say, I'm an elected lawmaker, which means I set policy, I help set policy for the state.

There's a certain aspirational aspect to every policy.

So I'm gonna give you an example.

And if Carley were here, I'd say, "Carley..." I know this is shocking to us, but sometimes 16 and 17 year olds get access to alcohol and tobacco products from older friends.

Does that mean we should make it legal for 16 and 17 year olds to buy alcohol or tobacco?

No, we shouldn't.

- Yeah.

- And so yes, there can be a VPN that can circumvent this, but the question is what is the right policy?

What should we be doing to protect our society?

And that's why I'd say even if VPNs can circumvent our laws, that doesn't mean we don't make the laws.

- Go ahead, McKay.

- I'd also just add that even before the explosion of prediction markets and online sports betting, it was possible to go to a bookie in your town who was operating illegally and place bets.

It was possible to find an offshore sports book and gamble that way.

There have always been ways to circumvent the laws in your respective state.

But the friction that was built into that process prevented a lot of people from gambling.

It just did.

Friction is really important.

Friction is what keeps a lot of people like, you know, a casual football fan who just sees an ad for DraftKings and downloads it on their phone and starts gambling, and all of a sudden gets sucked in.

That guy probably would not have ever even thought to go seek out a bookie or an offshore sports book.

And that's why it matters that states try to enforce their gambling laws.

Because even if there are ways around it, it can slow down a lot of the harm that is caused by this vice.

- And Jason, every sports podcast I listen to, and I listen to a lot of them in the fall, they offer... Like you'll get some money to start gambling with and you'll double your... And I haven't downloaded any of them, but they are enticing our young men to get them addicted, and that's disgusting to me.

- And it's like a drug dealer.

"Hey, we'll give you your first hit for free."

Well, and then they keep coming back.

As McKay mentioned, I mean, the problem is, as a state, we made the decision that we want the friction.

We want to isolate gambling, traditional gambling to the desert of Nevada.

And now, that friction has been effectively eliminated and it's in your kid's pocket and it's for them to... It follows them into their bedroom into the middle of the night.

And so that's why what's interesting, I mean, I know I've made some waves by bringing these criminal charges.

- [Jason] Explain what that means because that is you- - Well- - You're the one that's done it.

- Yes, I'm the one that's done it, and never in history have we given someone who's a criminal who is breaking our state law so much notice that we're coming after them.

I mean, they literally came to us and sued us and said, "We believe we can operate in the state."

We said, "No, you can't."

A judge, a federal judge said, "No, you actually can't."

They continued to operate.

We said, "You need to stop.

You're violating not only just a state law, but this is a criminal law."

And the policymakers here have made that decision in addition to the state constitution.

So we brought criminal charges against them because it is a felony if you're running a gambling ring.

And so, I mean, this was something, by the way, that we've had in the works for a long time.

And I'm actually pleased that after doing that, I mean, ultimately, the goal is to enforce the law and encourage others in the market to follow the law.

'Cause I had one of these companies that approached me at a convention that I was at, and they said, "Well, what should we do?"

And I said, "It's simple, follow the law."

And as of right now, we have four different companies within about 72 hours of pressing criminal charges against Kalshi.

Four of their biggest competitors came to me and said, "We're leaving Utah."

So it's doing exactly what we intended it to do.

- I love Derek's analogy of in your pocket because if we went to parents, whether they're religious, not religious, left or right and said, "Do you think it'd be a good idea to give your child a slot machine that they could use 24/7 and gamble with real money?"

I bet 99% or more of them would say, no.

In fact, they'd probably say, "Hell, no."

But that's what we've done.

That's the status quo with smartphones.

- And everywhere I go like now, I mean, other than those people who have some sort of vested interest in this industry, everywhere I go, every parent I talk to says, "Oh, this is a huge problem."

And McKay talked about this in his article, but like if you have a kid who's 21, ask them if they're doing this.

And if they're not, ask them how many of their friends are doing this, and it won't just surprise you, it'll upset you.

- Shock you, yeah.

- McKay, to that point, I thought it was an interesting article.

This is from Lia Nower, Director of Rutgers University Center for Gambling Studies.

It was just an interesting quote there 'cause we talked about this a little bit here.

She said, "We've been so worried that teens would be addicted to social media.

Were we worried about the wrong app?"

(McKay hums) Talk about that just a little bit.

- I don't think it's zero sum.

In fact, I think that one of the things that makes these apps so dangerous is that they've taken the most effective and addictive tactics and features from apps like Instagram and TikTok and then paired them with the intrinsically addictive and compulsive qualities of gambling and made this, basically, supernova of, you know, self-destructive, compulsive behavior and put it on everybody's phones.

And, you know, I think that... Look, I'm a parent, I have a 13-year-old daughter, I am worried about social media, but I also have an 11-year-old son, and I have a lot of conversations with him about gambling.

Because, you know, to Attorney General Brown's point, I think the average parent would be shocked by how much their sons, not just 21, teenage sons, even 10, 11-year-old, how much they know about gambling.

They can talk about point spreads, and money lines, and prop bets.

And if you don't know the vernacular, you might not be aware of it, but once you learn a little bit of the language, you'll realize that the conversation about sports is utterly permeated with conversation about gambling.

They have become completely linked.

- Okay, and go ahead.

- Can I just add?

I mean, I appreciate you taking this beyond even gambling.

Because one of the things that has just driven me nuts, and part of this comes from the fact that I've been very involved in a nationwide settlement with Meta, specifically, because of the features of their app that addict kids, and they know about it.

But what I would say is if there's any company out there whose business model and revenue is driven by or based on addicting other human beings, including kids, like I'm coming after you, bottom line.

- Our legislature has a lot of interest in this also, Senator.

Talk about this broader perspective here, because there've been laws dealing with apps, access to kids, the content kids get.

Put this in that broader context where you see the state going in our last minute and a half here about what kind of legislation you think we're going to get as we see these lawsuits play out.

- Yeah, I think we'll continue to, you know, engage in this space.

And let me just say, Jason, a lot of people will say, "You know, this isn't really the proper role of government, this is a parental responsibility."

And I agree it's a parental responsibility.

However, we still ID check people for rated R movies, even though that's a parental responsibilities.

We make 7-Eleven check your ID before buying alcohol, even though that's a parental responsibility.

So I do think, although it is a parental responsibility, that doesn't mean that government should be hands off, because I think we can work... We can help the parents make their job a little bit less hard, if that makes sense.

- And parents are literally the ones asking for this help.

It's not that it's not a parental responsibility, as he mentioned, but literally the parents are saying, "Look, give us some tools.

I mean, help us fight back."

I mean, it's one thing in the old days of a roulette wheel, you know, that doesn't know the name of the kid, now, we have apps that know the kid, they know their behavior, they are specifically engineered to feed their addiction.

So that's why parents are saying, "Help us."

- Yeah, McKay, we got about 20 seconds left.

Where is this gonna go federally in the national level?

- As of right now, the CFTC, which is run by the Trump administration, has decided to be very hands off in terms of regulating these financial markets.

I think that could change in the next administration.

And in the meantime, it's up to Congress to decide if they want to actually defy Attorney General Brown's prediction and do something.

They have been paralyzed by dysfunction up to now, but we have a new Congress coming in.

We'll see what happens.

- All right, we're gonna have to leave with this.

Such an important conversation.

Thank you for having it with us and helping us become more informed.

And thank you for watching "The Hinckley Report."

The show is also available as a podcast.

Thank you for being with us.

We'll see you next week.

- [Voiceover] Funding for "The Hinckley Report" is made possible in part by the Cleone Peterson Eccles Endowment Fund and by donations to PBS Utah from viewers like you.

Thank you.

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