Dr. Bo Kabala – Should Americans be allowed to bet on elections?

Prediction markets are becoming increasingly popular, with millions of dollars being wagered on election outcomes. But should betting on politics be treated like sports gambling, or does it create new ethical and legal concerns?

Dr. Bo Kabala, a political science expert at Tarleton State University, joins the show to discuss the rise of election prediction markets, concerns over insider information, and whether Americans should be allowed to wager on election results.

Transcript

SPEAKER_00 0:09

Welcome back to the Lawrence Clarsen Show. It's First Amendment Friday. You might have heard earlier this week because we mentioned it. President Trump's teleprompter operator actually uh reportedly earned about $100,000 by betting on what would be in the President's speeches, because of course he already knew so insider trading if he's guilty of what he's actually accused of. Uh should Americans be allowed to bet on things like elections and what the president has to say. I thought we'd put that first at Dr. Bo Kabbalah, who's an expert in political science, teaches at Charlton State University in Texas. Dr. Kabbalah, welcome to the program. Hey, thank you so much for having me. So prediction markets have begun uh become kind of a big deal uh on the internet, haven't they?

SPEAKER_01 0:54

Yes.

SPEAKER_00 0:56

Would you mind describe my to for my audience how big they are right now?

SPEAKER_01 1:02

I mean, uh we're talking about millions and and hundreds of millions of dollars um bets that are being uh placed on uh anything and everything. Uh so quite literally, uh outcomes of uh sports events, uh, you know, political uh decisions. Uh in this case, uh Gabriel Perez betting on specific words and phrases uh that would end up in the president's speeches. So you can't make this up. And I would just caution the inside information uh that he's using, uh, you know, that's absolutely uh unacceptable. And that's why he's got uh the Commodities, Futures, and Trading Commission uh really looking into his conduct. I would caution given how widespread betting has become, and in many cases, how effectively it seems to be replacing traditional polling. You know, when you don't have inside information, but people have a little skin in the game and they're willing to put some money down, that ends up being a better poll in many cases than Gallup or CNN. So I would separate that from what happened here, uh, which is a trusted presidential insider absolutely monetizing inside information. We shouldn't allow for that. Um, and fortunately, there's already a legal framework that exists to nip that in the bud.

SPEAKER_00 2:15

Well, in fact, Dr. Kabbalah, when I saw that report of what he was doing, so this is the guy who for a decade since 2016 has been running Donald Trump's teleprompter. So, of course, he gets a chance to see the script before the president even reads it. But I wondered how did he think he was not going to get caught when he started putting bets on Calchi? I've never put a bet on that, so I don't have a dog in the fight. How did he think he was not going to get caught? Or did he think he wasn't doing anything wrong?

SPEAKER_01 2:43

Well, and uh exactly, uh Calchi, you know, polymarket, once you're leaving uh that paper trail and those records uh exist, you know, how can you uh assume that you won't get caught? I completely agree with you. In my opinion, what makes this sad and tragic in some ways, apparently Perez was a trusted insider, uh deputy assistant to the president and technical advisor since 2016. So really bright future, uh, you would think, uh unlimited horizons. He goes and does something like this. Very sad, in my opinion.

SPEAKER_00 3:14

Well, and very sad, and it sounds like the guy will probably I mean, he's he's suspended for now. And if the Commodities Futures Commission decides he did engage in insider trading, but that raises another question. Is it insider trading? I understand that if you work at, say, Nike or Microsoft or Boeing and you're working in the C-suite, so you have access, and you know the company is about to cancel one plane or start another plane, that's insider information in trading on Boeing stock. But is it insider information if you just know the speech the boss is about to give?

SPEAKER_01 3:48

So if you know the speech, I think, and the specific words that the boss is about to use, I would say yes, that's inside information. Where it's your gut and and just the feeling that your average everyday voter has on the street, I think it's important to actually be able to protect people's ability legally to bet on their gut impulse, even though I don't defend betting morally, but I would I would distinguish between those two. So let me start there as a starting point.

SPEAKER_00 4:19

Okay. So let me ask you something. Way back when, I I seem to remember several decades ago, didn't somebody actually propose that there be sort of a futures market on terrorism? Because they said the marketplace does have a really powerful ability, uh predictive ability. And then I think I think people realized that it was it had sort of the wrong odor to it, so it never actually came about. But you made the point that predictive markets tend to be a lot more accurate than what anybody else comes up with.

SPEAKER_01 4:49

Well, they they certainly can be, uh, and that kind of you know, futures market on terrorism would seem to be in line with a very libertarian vision. Let markets work and let's see what uh the predictions are. As far as I know, Colchi and Polly Market, unless they have internal rules saying you can't place that kind of bet, as awful as it sounds, you know, that's that's a bet if we're talking about information uh that that people are willing to wager on. So, what assures me a little bit in this scenario, in terms of the legal structure that exists, uh, I mean, we talk about the the commodities um that commission, uh, so they're already looking um at uh specific laws. We have the Commodity Exchange Act, section uh 6C1 that says deceptive, manipulative uh devices in connection with swaps, futures, commodity transactions aren't allowed. There's some other categories legally of what you can't do, and they do cover uh what Mr. Perez allegedly engaged in. So I'd be cautious about saying we need a million new laws or we need to sort of uh further burden these emergency. Well, exactly. That would be that would be my thought here, if that makes sense.

SPEAKER_00 6:02

It does. And and Dr. Kabala, tell me this. Should we allow people to bet on elections? They're going to anyway, but should we allow it in places like these predictive markets that can be regulated?

SPEAKER_01 6:15

So um they're going to anyway. I like how you you phrase that, and and there's a long history uh of people betting on uh elections, whether we're talking about uh 16th century Spain, uh 19th century uh England, some very interesting uh research on this. So I there's not currently a law. What's interesting to me about our federal system, there's some very different laws state by state. So Texas is very restrictive in terms of can you bet on elections? Can you bet on your own campaign? Other parts of the country uh less restrictive. There's not currently a federal law prohibiting it. I don't I don't know that we need one.

SPEAKER_00 6:53

No, I don't think we do either. And Dr. Kabbalah, I'd make I'd make the case this way. If you say, well, you can just pay it, pay attention to the polls. The polls tend tend to be done by two two different kinds of players. One is the campaign and they have a dog in the fight, and the other is the news media, and from my point of view, they have a dog in the fight, and yet the predictive markets are just people saying, I think so-and-so is gonna win, and I think they might be more free from that other bias that you find in either the campaigns or in the news media.

SPEAKER_01 7:25

Absolutely. And are you actually uh suggesting that the media has a dog in the fight? I'm just kidding. Yeah, people are. Yes, I am absolutely and you know, we break it down now increasingly in poly side classes. If you are looking to rig a poll, I mean, don't do this, but if you go just to Austin, Texas, and ask people who the next president is, you'll get one answer. If you go just to Lubbock, well, you'll get a different kind of answer. So it's possible based on the method, and this is where my worry would be nipping in the bud these emerging markets that are decentralized, kind of like Bitcoin cryptos, you know, it's decentralized information.

SPEAKER_00 8:03

I couldn't agree with you more. That's Dr. Bo Kamala from Tarleton State University in Texas. Doctor, thanks for the time.