State of The Market, The Prediction Market Wars & Kraken Pursues Aave

Transcript

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to Empire. Very excited about this one. getting the show out a little late, but we're making it happen. Santi got a haircut. Santi looking [music] sharp.

Rob, >> you know, you know it's bad when people know you got a haircut, right, >> dude? You told me I got my What did you tell me? I my eyebrows waxed or something. >> Rob was the one that I think he was, he literally was the first one. He's like, I got my eyebrows waxed. Like, how do they look? And then like we get on on the pod and he's like, "No, no, Santi." Yeah. And then we get on the pod and he's like, "Oh, what's going on, >> dude? I don't think I've ever gotten my >> Santi, take off the glasses. Let's see the eyebrows. >> Enhanced. Enhanced. >> Waxed. Waxed for sure, [laughter] >> guys. There is plenty to talk about and other people to roast. It's not going to be me on this point.

>> All right. Fine, fine, fine. Rob, how's the uh World Cup game? You flew to Seattle. >> Uh it was amazing. So, Seattle is a great soccer town, football town. It's and the stadium you can't underell and they have this in the UK and and in in Europe, but just how good it is when you can walk to the stadium like from downtown and you can you can hit up the bars, you can chant, you can cheer like all the other fans are there cuz like we have these games at like Metife or um out at Sofi Stadium in LA in Englewood and you got to drive there in the middle of nowhere and like yeah they're big stadiums but like you just don't get the same like kind of like pregame, you know, commodery and so incredible time in Seattle. I hope uh they go there is

going to be another game there I think in the quarterfinals if the US makes the quarterfinals um which I am betting heavily on so excited for that. >> Let's go. Let's go. Uh and then they lost to Turkey. What's going on? Odds. Santi's trade 2.4 last time. We're up to 3.1. Good trade, Santi. Good trade. outperforming outperforming the markets, guys, which is not saying much these days, but you know, >> I I will say your your your Micron trade is uh like good me oh my >> it they they they delivered earnings yesterday. Um >> one of the craziest earnings I've like ever seen.

>> Yeah. Yeah. It's pretty wild. Market's down today though. >> Broader selloff. So, OpenAI pulled their uh you know, SpaceX was SpaceX went down which then triggered I feel like OpenAI to pull the IPO now broader selloff. Thoughts on maybe we can start with just general thoughts on on markets. Well, wasn't it you that that talked about like if if a SpaceX IPO doesn't deliver as much, it likely delays some of the other IPOs. And like that's just >> my call at the beginning of the year was that the market was going to the equities market would top once the SpaceX IPO happened.

>> All right. Well, it was nice knowing you guys this year. We should we should we just should we just come back in September? >> I don't think crypto e crypto markets I don't think crypto markets can come back crypto equities and crypto tokens without some sort of rolling over of the AI of the AI market. I think there is too much capital that going in AI I mean not a unique take here but AI has sucked up every bit of attention and capital in all of capital markets right now. And if you want money to flow back into crypto, you need some sort of rolling over. I'm not saying you need a huge bubble bursting, but like it wouldn't be the worst thing for crypto if AI pulled back a little bit. I I think the problem you have is that we're actually seeing like

every quarter you can tell the market is like a little bit uh concerned about okay well like what's happening in earnings like is this capex are we going to get a good ROI out of it? is there going to continue to be this upward acceleration that's happening um to like real GDP to to to these businesses and demand for compute um and and for AI every quarter and yet it keeps working like the PE ratios are still mostly fine earnings continue to grow like there continues to be you know this this sort of like nervousness each quarter and then you know the markets do well afterwards uh volatility has obviously increased I think uncertainty is at all times highs like people really clearly do not know how to forecast this stuff.

There was um some really interesting uh analysis out of semi- analysis a day or two ago which was that the like the short-term rates on H100s I think it was were down like 40% like month over month but the long-term contracts were actually still um you know basically like going up and and and trending in the right direction which is telling you that like you know for people who buy spot which is like not the actual big corporates the people who are um you know kind of planning for this long term those people have had you know, a a kind of a a discount in their, you know, kind of willingness to pay for compute, but the corporates are continuing to to to put into these long-term contracts.

We've seen more switch that way. >> Yeah. >> And so I I I do think that like they're if you're focused on a rollover for AI in any real way in the near term, that seems unlikely to me. And so, um, if if if you believe that's what needs to happen, Yano, then I think we we might be a little bit cooked. But um considering what's happening with Micro Strategy right now, we might be a little bit cooked for uh a little bit of time. Anyways, >> I agree. I agree. >> So um we should uh look um two things I want to get you guys' take on. I felt like Jordy in last pod had pretty interesting takes like just hearing him talk about he's probably one of the smartest guys pretty plugged in and I didn't hear him like, you know, come out

saying like he's really compelled or convicted on crypto right now. Um, so we can talk a little bit about that. But, uh, the stretch thing I saw a pretty funny, um, screenshot of in in one of the group chats. It was like if you combine all the securities of Micro Strategy, it's like, >> did you see this one? Pardon my French here, guys, but no. >> Uh, oh yeah, I'll pull it up. But >> we get demoted every time in Spotify when you swear, Santi. So, I hope I hope that was worth it. Well, our ratings are already so low that I can go out and like Now is the perfect time for me to use all colorful language. [laughter] >> But nobody's listening. Yeah, >> nobody's listening. So, we could all just free flow out here and have fun.

>> Is this the tweet, Will? >> Oh, yeah. Here. >> Yeah, this is the one. >> Let me pull this up. >> Rob, you're in the same group, I feel like. >> All right, so this was Tom. Tom Dunlevy had Tom on the pod. There were signs ST strc S strk st K E D. [laughter] You remember the clothing brand that was FCUK or something like this? >> Yeah, exactly. >> Something like that. >> Um maybe we could talk actually. So, uh I just I was looking at some Blockworks data actually on on deal number of deals that are happening in fundraising. Um and the the numbers are whoa my god. So, let me let me pull this up. So if you look at the uh total crypto deal count,

we are the lowest by quarter 147 total deals so far in Q2 of 2026. That is the lowest number since Q4 of 2020. So in near we are the lowest number of deals since nearly Q2. Um, and uh, yeah, I mean, you know, you can see this M&A, right, is is is climbing, but fund fundraising is just fundraising hit actually a low in uh, February, the lowest quarter, lowest month since September of 2024, and now maybe it's starting to climb back up. I'm actually, Rob, I'd be really curious to get your take here. I feel like in the later stage markets there's actually starting to be some activity on the growth side and the later stage side like series C,

series D, series B. Um preseason seed still feels really dry, but I feel like actually there's a decent number of companies starting to come to market with a fund raise. Um c but more on the later side. Yeah, I mean you you see it with the um like obviously the M&A side that usually also coincides with like later stage also picking up because we're seeing a lot of product market fit and like very specific verticals in crypto. So you know the payments, stablecoin, tokenized asset side of the space like those are continuing to grow.

We've talked a lot about companies like like Rain on this podcast which you know it does not matter what is happening to prices like they are growing tremendously month over month. every type of company like them who is serving call like global fintexs, global tech companies, global um you know even like you know corporates who want to be able to do treasury management etc and stable coins tokenized assets that market is growing extremely quickly and so companies that serve that market are also growing extremely quickly and so we've seen you know that really pick up uh both on the M&A and and on the fundraising side we've also started to see I'm getting calls from like basically every fintech today that is like hey you know I'm a traditional fintech But you know, we're you know, we currently serve the domestic market. We want to go international. Best way to go

international is to use stable coins and tokenized assets and a non-custodial wallet and a rain card and like that. We're launching that and we need a, you know, someone like yourself on the cap table alongside our, you know, regular Silicon Valley venture investors who are able to, you know, provide this like kind of different perspective, right? I'm getting all of those calls as well. um the exchange side or the you know call it the capital market side that's been um a little bit interesting because all of those companies are doing okay but the token trading the crypto trading is coming way down you know down 40% on the year but you know they're all launching real world assets they're all launching equities they're all launching prediction markets they're all launching preo stuff and so you know we're still seeing action there prediction markets

still obviously very uh very very very active I mean I think both couch and poly market are going to have the best month ever this month and So like we're still seeing a lot of focus on those things that work and we're seeing that pick up and then all of fintech and a little bit of AI is coming to this realization that crypto should play a part of that story and so they're calling the crypto investors at least the few of us who have the size to do those deals like myself and and paradigm etc. And so um that market is very hot. The early stage market I agree with you especially when we talk about crypton it's like onchain stuff like that market is is really really tough and the founder quality is really low on a relative basis to what we've seen over

the last you know five six years. Hey Rob, can you unpack uh what that call looks like? Uh you talked about fintex like uh is it like founderled motivated or is it like hey the board kind of really wants us to understand or yeah is there a particular catalyst of hey we saw stripe or we saw Facebook right there's like a number of interesting signals in the market but what does the conversation look like? I'm sure they're all somewhat different in their own way. >> Yeah they're all a little bit different.

I I think stable coins in the fintech space and the um you know kind of the financial market space is a little bit like AI in this you know was a year and a half ago which is that you know since genius has gotten past every board is like hey I know this is an annoying board question but like what is your stable coin strategy and you know people have had to react to that but at the same time what they've seen is they've started to see people expand their business using stable coins in like a real way that's driven revenue. And so, um, the the biggest I think sort of light bulb moment for everybody has been like these domestic businesses or these UK businesses that have gone internationally much quicker because of

the way that they've been able to figure out their, you know, kind infrastructure. Uh, like, you know, it takes a long time to onboard a bunch of new banks. Maybe there's, you know, regulatory requirements if you're going to be custodial versus non-custodial. If you're going to, you know, be, you know, deal with fiat versus, um, digital assets. And so in some place we're we're like a little bit of a gray area at the moment. But we're seeing basically a lot of these say either at the board level or at the founder level say hey you know I have a good domestic business. I have a good UK business. I want to do global expansion now. And now there's a real way for me to do global expansion. Save cost but also drive new revenue uh very obviously and very easily with the service providers that are out there.

What would be a good dashboard for instance in block works to track like um I had a dashboard running that I think I shared with I think a podcast I did with around like public companies like CLA um that are doing it obviously Western Union and you guys have covered it well yano but I'm curious like what would be the best signal for investors and also the broader community to quantify what you're talking about now like is there what do you guys track or what would be good for folks to >> Yeah.

>> So, so it's it's tough from a quantitative perspective right now because stuff that people talk about, let's say they talk about stable coin transfer volume, right? You know, the vast majority of stable coin transfer volume are still just like bots trading against each other on chain, right? We can talk a little bit about the tokenized equity story that's out there and everybody's pushing, but like basically 90% of the stuff people are talking about happening on Salana is still just bots trading against each other and like low fee AMMs. Um the but there is a you know there is a way to try to back into it. There's like a couple of the service providers Alium and Visa and Artemis and I think maybe you guys are doing the same thing trying to figure out uh like a like an adjusted stable coin transfer volume number. Um

those numbers are I think still very much a work in progress. Um there's uh you know on the retail side there's like very interesting if you follow uh I think it's it's payment scan is probably the only real person we're doing this right now but they're following the credit card uh swipe volumes like those are really good indications of the you know sort of this like fintech volume that I'm talking about they it's mostly still crypto natives that they're following but you know there are you know there's been publicly announced to your point the the moneygrams and western unions and slashes and of the world like those will probably get added to this over time. And so you'll be able to look at like, oh, what is the, you know, stablecoin backed credit cards uh volume that's that's starting to pick up and you can see like rains volumes just

go up every month and and and uh and a few others are are starting to do a little bit of of work there. Um you also right now like all of the headlines is a big part of it. I think you know you you will or you should eventually be able to follow a little bit of like some of the onchain volume from the some of these uh you know kind of big fintexs but today it's like still not there yet where somebody can follow that so it's really a headline topic but I I can tell you you know I'm in a privileged position but I see the pipeline of some of our portfolio companies and you know it's not just like a oh these are the biggest private fintex it's like oh here are 30 public companies that are planning on launching some sort of stable coin

business and I've actually done an RFP and I've actually started you know implementing this. >> Yeah, we don't I don't have the data that Rob has which is more in the you know pipeline of stablecoin stuff but what what I see is the um the RFPs coming in for onchain data cryp crypto data. So what you need if you're launching a crypto strategy is also you need to monitor the assets you need intel on the assets. You need OFAC compliance. you need uh onchain data. Who are the users? Where are they coming from? So, we see all those RFPs. I don't see the direct it's like a second order impact of the stable coin growth. And uh it's for us it's never been higher. Like the RFPs on that side has never been higher. And it it's it's it's uh it's companies that like let's say we created

a target account list of our top 500 target accounts. It's not even those. It's like it's like companies we wouldn't even dream about doing. I'm like, "Oh, I thought you were like 15 years away from doing anything in crypto." Like your old school slowm moving European or like in, you know, in like South Korea like I had and and they're and they're coming inbound too. So that's um >> look thing from Rob, but >> yeah. Is that uh is that why Canton's sort of like all the rage this cycle? Like because I feel like they've done really good in terms of like enterprise convincing and Rob, I hear you.

>> Look at Rob smirk. My god, what's going on? I I honest because you know I I don't know what like to be honest like I haven't heard anyone really explain to me what Canton does. Like I would just I think they've done some really good like you know relationship. >> People need to watch on YouTube just for to see Rob's reaction right now. Rob's going to take an anti. I'll take a pro. Rob, you can go anti. >> I'm not I'm not going to take an anti and I'm I'm a I'm I'm a fan of Yuvall. Uh and and I like the team. Um you know listen like like there's there's two sides of to I think frame what is happening at can talk. Um one is that like okay well you can talk to broadidge uh who's kind of one of the names that

they they tried out there all the time and you know the broadidge guys are like pretty clear like hey yeah we have we use this as a better database and a better way to operate our company uh and operate our our repo market. Um we don't really have any real plan to like do call it like crossc canton type of um uh trading and to like open this up to like you know outside of our client base through a specific um through like our front end you know etc. And and and for that that that market like you know clearly this is a a really good like enterprise last solution essentially right for for those people and and u they're doing an incredible job uh on all of those pro proof of concepts. uh and uh you know the the negative framing of that is like well like this is kind

of all this is going to be and like you know like the it is a you know better database and it's a great like you know enterprise SAS business. Um the other uh you know way to frame it is like you know the wheels of change move slow in institutions and like eventually you will have this like broader canton ecosystem that are all interacting with each other and through uh and I'm going I'm going to mess up their nomenclature but they have sort of like a kind of a a hub and spoke type model uh of which people can um can can interact with each other and so you know that's the the positive way to frame it. That's the way they they talk about it. Of course, Drew's interest did that did that that round. Um, you know, and there have been people building there for a long time,

right? You know, Canton is not new. It's an eight-year-old or 10 year old uh project that um you know has has kind of um you know, tried to figure out their way a little bit and clearly have gotten a lot of you know, they've had like Goldman as an investor and a client for a long time and and other big institutions, but you know, now seem to be hitting their stride in a real way that they they uh they weren't, you know, five years ago. Um and so, you know, listen, they've done an incredible job uh in that part of marketing. you don't really have to look at the names on on those fundraisers. Um, you know, there's also the story around, you know, they talk a lot about contraction and transactions and validators and all these things. And, you know, there's there's they've paid a uh a tremendous

tremendous amount of essentially tokens as rewards or or fees back to, you know, people to do that. And so, like it's been clearly a you know, sort of a subsidized uh, you know, product today. But a lot of VC, you know, uh VC backed companies subsidize growth for a long period of time until they become muted economic positive. And so, you know, that's not in and of itself a bad thing. And so, you know, the it's um it's an interesting spot that they're in right now because there's a very easy negative lens to view them and a very easy positive lens to view them and they're sort of at this like makeorb breakak time. Um and we'll we'll kind of have to see what the the future holds, but clearly um it comes up in every conversation. And the reason I smirked

wasn't because I necessarily had this negative view, but was because I've had three meetings today and all three of the meetings I had this morning, Kenton came up. >> Yeah. Yeah. That's what I'm saying. And you guys uh I mean, you guys look at a lot of stuff. Did you ever look at it uh early on? Because I sat down uh at a dinner next to you all and I was like, "Wow, where have I been all all these years?" And he was kind of telling me the evolution of the of the company. Uh and it felt like it was like a slow grind. And then they had some key inflections, but the Goldman relationship, Trafire relationships is something that they've did really really well. But I'm curious, did you guys look at it from an investing perspective or have considered it without like disc

whatever you're comfortable without? >> Listen, we we we we've had the discussion um on all kind of the last three recent raises and we've um we've talked to them about it and again I I consider you've all um you know if not a friend, someone that like I'm very friendly with, right? uh every time we see him and you know we have a a good rapport um and uh and and one of one of the guys on my team as you know Omar has a good good relationship with Eric uh who is also running the business there and so it's it's been a constant conversation I think our where we have struggled uh and you know we're wrong all the time and so we could be wrong here but where we have struggled is you know getting validation that you know these companies want to go from hey this

is a an interesting proof of concept or this is an interesting call it like you know enterprise SAS database company to like this is a thing that we want to you know build more into more broadly and that we expect to see you know kind of a much um you know broader type of uh type of adoption. We've also um you know the fundraisers are I'm not going to go into it because it's not all public but um they're a little bit interesting in the way they you know think about like token exposure relative to the equity and and and I think we've we've struggled in the past a little bit with the structure but um in a way that obviously strategics don't care about like financials uh investors obviously have a lot more view on you know token versus equity and we've talked a lot about that on the pod

right now um but the the all the strategic obviously don't care and so th those are have been an issue but but clearly you know um uh in the recent fundraising entries and got over you know some of that that that um that interesting structure recently. >> Robots and machines will outnumber humans on chain and peak is how they get there. Peak OS enables any machine to do business on any chain. It turns machines into autonomous actors [music] and liquid assets with ease giving robots access to capital and the ability to compound their value. That means funds, allocators, [music] and institutions can underwrite, finance, trade, and route capital to machines the same way they [music] handle any other asset. Millions

of new potential consumers for any web3 service, from compute to storage to anything a machine may need, without a human in the loop. Head to peak.xyz [music] or click the link in the show notes to find out more. Can we uh some fun stuff in the prediction markets world? Rob, put on your uh poly market uni because we got some we got some stuff to defend, my friend. So, uh there's three interesting poly uh prediction market stories this week. One is about poly marketing. Uh two is about koshi potentially raising at a $40 billion valuation. And three is that meta uh Zuckerberg directed Meta to create a prediction markets app. So, uh,

maybe we could just start with the Poly Market stuff, Rob, around, you know, I think you actually called this out. You said, uh, maybe a month ago on the podcast, you said, "Look, there's probably going to be some some hit pieces on Poly Market that, you know, sounds like you believe competitors are maybe directing this." I don't want to put words in your mouth, but um, uh, yeah, tell me tell me what you think when you see all these honestly all three of these headlines kind of tied together. >> Uh, I mean, listen, like it's a very competitive space. uh and anytime that it like if you take like the overarching point here right it it's that uh prediction markets have had an incredibly incredibly interesting last 18 months you know both poly market and koshi and actually rother which is the

Robin Hood Susuana JB are all going to have incredible Junes um they're uh you know the space continues to grow the amount of like institutional traders who continue to say hey we want to trade on these platforms. The amount of like we're seeing that block trades get placed on platforms from institutions. Uh the interest on the retail side is continuing to grow. And so it's very clear that this market has just outgrown you know some of the startup tactics that have uh existed before. And anytime a market grows that quickly, there's also going to be a lot of focus on it from regulators, from the media, from, you know, competitors. You're going to

start seeing people enter the space like Meta. I cannot be more bearish on Meta building their own their own exchange. But like, you know, that that's fine. >> Um, but the, you know, that's going to continue to be a topic of conversation for a long period of time because I don't think the growth in these markets is stopping anytime soon. Uh I think these are going to be be very very very big. >> So I think that's the overarching point I think on the you know the the the piece in the journal about uh about poly. Um listen you know you you said hey it sounds like some competitors are are are you know placing these things in in the media. Um I mean everybody who's around the space knows that there's a lot of um kind of oppo research and like negative shopping that's happening right

now. Um if you still had a media business all of your reporters would be seeing it too. Um and so like it's very clear that there are people at these companies and um you know cons people at these in at the investors of these companies who are actively doing things like trying to place negative stories about their competitors. Um that is not a that that is a statement of fact. It is not a statement of opinion. Um, and the the thing that um uh you know, that gets called out in the journal article is uh you know, obviously something that um you know was uh you know, I'm not going to sit here and defend what happened. It was um something that they probably should not have done. It was something that is also very common that a lot of people do. It was something

that also the competitors uh that to Poly Market does as well. Um and it is not um isolated to them. But somehow the journal only seemed to find a way to talk about one person and that is because of of you know some of the you know other people doing work for them. Um and it is uh it is something that you know we've seen in the the rise of um you know trading uh getting you know much more retail focused and you know gambling getting much more retail focus prediction markets getting much more retail focused and doing a lot of distribution through um you know social media platforms and the rise of clipping obviously and so um I I think clearly there needs to be better uh uh structure around how people market um all of the all financial markets to retail going

forward. Poly Market is one of those that needs to learn from this and and move on. Um and they but this was not a isolated story even though somehow uh the journal seemed to make it one. >> Yeah, it's funny. There's a founder group chat I'm in with a bunch of founders who run actually not not in crypto and it's a bunch of like DTOC and consumer founders and that story got dropped in there and the main question from other founders in this channel was do you know who they're using? Can we can we hire that firm? every everybody is doing stuff like that especially I mean it's FanDuel DraftKings like you if if you if you hire a creator or an influencer they're not sitting around waiting for their screen they they've got business to do they're not waiting

around for like the wind to hit right they're it's oftentimes uh what do they call it not a fake website I guess a fake website there's a there's a there's a term for it >> it's usually paper trading right so it's almost always paper trading and you know uh >> the crypto by the way the crypto exchanges do this too I'm defending for what it's worth. There's some there's some stuff in there that I'm like, "Yeah, you shouldn't be doing that." Um, but I don't know. My my my wife worked at Lyft in the crazy days of Lyft verse Uber and I'm like, "Oh, if you think what's going on with Uber and uh with Polymark and Cali's bad, like look at look at what Uber and Lift were doing."

So, I I actually just think a lot of this stuff happens. I mean, the the stakes are huge here. So, I I don't I'm I I don't agree with some of the stuff they're doing, but I also think this is kind of standard startup practice in some of these, you know, hyper high stakes games would be my take. >> Yeah, there's no doubt. And it's it's all the trading uh the direct to consumer trading companies are doing the same thing. All the direct to consumer, you know, exchanges, all the um you know, to your point, you talked about traffics and FanDuel and, you know, etc. All the prediction markets are doing the same thing. Uh and so it was um there it was it was a it was an interesting article to me from that perspective. Um again not to say that defending the practice and that we shouldn't have you

know kind of maybe regulation around this and you know better standards uh around this but the the age of of marketing on these types on any trading product to uh to consumers has evolved this way. And frankly, I think that, you know, we definitely need to, you realize this, but we definitely need to figure out a way to either regulate it or make it more easy for other, you know, more normal consumers to realize that 98% of the time that somebody is talking about a a trading gain in a uh, you know, on social media is not real.

>> And that is that that is absolutely true. >> Yeah. What do you think of so for like two years polyark and kshi's valuation were moving hand in hand right and now you see this uh you know scoop that kshi's raising at a 40 billion valuation what do you think about koshi's valuation kind of moving away from poly market >> yeah I mean listen if you look at the data they're you know call it you know 1.8 8 to two times the size now uh of poly market at least on the the most recent month. um both are still growing extremely quickly and both are still you know doing very well but you know clearly they've they've grown quicker and and you know that um and they the purpose product was alive and and so like you know very clearly you know uh at least at this moment like you know um

they are doing more revenue they are doing more volume and so it kind of makes sense that you know if they're doing two times the revenue that they have two times the valuation you know uh in some sense um and so and and I think they are a little bit different businesses and I've talked about this in the past and you know you know Poly still continues to be very much a focus on a direct consumer model. uh and they are doing things like they announced today um you know that they've had some really success a lot of success in some of these integrations into their exchanges and they went live on telegram uh earlier this week and and others and so they're doing some more of this call it like clearing for you know maybe you know institutional uh trades um I believe it was Falcon X who did a

compute trade that they cleared on on Poly and you know some of the the backend infra for other um other brokers um and so they're doing some of that but Koshi's way far ahead in that that product right now and and and that's obviously what's driving their growth this because as these markets have grown incredibly quickly um all of the brokers have wanted to offer access to them and and so you know listen they've done a great job and um you know I don't know if they'll be able to raise at that money I I I um at that at that amount but like um you know in my mind honestly like it's it's also good for poly market then when they're both growing and that they both raise at at high valuations and so like you know I'm I I don't begrudge them that and so um listen I I

think this is a humongous market you know we're still and you know we've I I wrote our first check into poly market you know almost two and a half three years ago. Now the valuation you know change since that time has been incredible and like we remain very long and very excited about the future of of poly markets specifically but also prediction markets more broadly and like I I think people underestimate how big these markets can be. Yeah, >> I may have missed this, but like how do you think uh the main the main concern that I get? Like I feel like prediction markets are like the best product in mainstream people. They get really excited, they've used it, you know, but the common question I get is like how defensible and how monetizable it is. Um have you guys like updated your thinking

like two, three years ago to today? Uh and does it concern you around like defensibility modes and whatnot? So I the so there's a couple of interesting things happen and I was having this discussion with um sort of like an institutional kind of like middleman for like re uh institutional trading earlier today like a company that kind of facilitates trading and PMS and EMS and things like that and you know they've seen a lot of demand among kind of like big institutional traders for uh both support and the PMS. So, and just so for our audience knows, a PMS is like a portfolio management system that does like risk management and like reporting for your trading and the EMS which is like the execution management.

So, actually executing the trading on exchange and so they've seen a lot of demand from their uh institutional customers to support both uh these platforms on both execution and on the the risk side. And so what does that mean? That means institutions are coming today. I think most of the institutional access quote unquote on these platforms are just market making because the you know they see it's retail flow on the taker side and so that's very soft. They're able to um you know make make good spreads on those things. But it is true that on Kelshi it's still like over 90% sports when you add in uh parlays.

Um on poly market with the World Cup today it's like 55 60%. And a lot of these guys actually don't want to market make sports necessarily like there's businesses that have done that for a long time. Tasuana has done that for a long time and they're the biggest in the world at it and there's other other market making firms that do that. But um the Bitcoin up down markets have done really very well on both platforms and those I think a lot of market makers have been been around. Um but you know those markets alone aren't institutional markets but we've started to see signs of life where um I talked about the block trade that Falcon X did on on poly market for compute. I think Galaxy did I think it was also compute a block trade that they did on Kelchi. Um yeah, and so

like there's there's there's some signs of life there from the institutional side. Um we've started to hear a lot of early days of conversations around insurance linked contracts and um and other linked contracts, but they're mostly happening through like RFQ and then there or or or you know kind of like directly brokered through a prime and then they're being cleared on one of these two platforms. I think the the clearing opportunity is huge. We don't talk about that as much, but I I think probably I don't get the Kelshi pitches as you can imagine. Uh but um I'm guessing they're talking a lot about the clearing opportunity when they go out to these markets, not just like the you know the brokerage and uh side of the business. Um and so that's that I think is going to be incredibly big on your point about revenue and take rates. Uh

listen um you know the take rates right now are Koshi is about I think you know call it roughly 2x maybe a little less 1.5 to 2x above poly market. I I think there's clearly going to be feed compression and so you know any of these people are looking at these rounds for either of those these two need to um need to update their models uh on that but you know I don't think they're indefensible because the at the end of the day liquidity gets liquidity and uh we're going to and and we're going to continue to see that grow and and then for polymer market specifically but Cali is also making more strides here they have a great retail brand and so on the direct to consumer side I think they

will continue to do well. >> I was trying to explain the and I think I remember asking you in a pod back a couple months ago like when Poly Market and Koshi were similar valuations and FanDuel was at that same valuation like I think FanDuel so draft kings in the public markets has been getting crushed. I think it's now 50%. It's trading at like 11 billion which is secondary for poly give or take. Um, and I it's trading at like two times revenue. And I think I was trying to make sense of that. Like, hey, like from a riskreward standpoint, I think I I don't agree with your last point. I think the market's sort of saying, look, prediction markets are just much better products. And from

a customer acquisition standpoint, the ability to bet on very discreet type of things, you know, like if you're a user, I guess you've known of DraftKings, FanDuel for a while, some of these other platforms, but like prediction markets have just captured the attention of a user that wants to bet on all these other things that are becoming way more fun. And I think I that that's sort of my only that's how I rationalize like hey how can you justify valuation that is on most metrics just doesn't necessarily make sense. Um but I don't know if if you would agree with that or disagree with that.

>> Well I think I think people get um on DraftKings and and FanDuel you know they have clearly very they have one product very clearly which is we do sports and we are mostly a direct to consumer platform. We're not doing clearing. we don't have this institutional sort of story about the future. And I think DraftKings announced that they did 3.4 billion in annualized volume last week, right? And so let's just be very clear. They did 3.4 billion of annualized volume last week. Both Poly Market and Koshi did more of actual volume last week, right? And so the DraftKings prediction market is extraordinarily small relative to um to to those two in and even Roth era now. and they they feel capped in terms of even if they

launch prediction markets, what they can offer people. And when you think about, you know, what I just talked about with the clearing opportunity and some of the institutional trading and obviously um Koshi, uh be with Coinbase launching the first per in the in the US, um you know, there seems to be a a story here about a modern digital exchange that is focused on the net new products first but can grow that um you know, c like calls to a much bigger imagination for what these can be than DraftKings or FanDuel. And so even though it's 92% sports on on um Cali today and 60% sports on poly market you like the people who are investing in these things do not believe that is the

long-term opportunity set. They believe the opportunity set is a lot bigger and it's impossible to convince anybody that the opportunity set is bigger for draft games. >> Yeah. Let me move us on to there are two other interesting deals. One is that um maybe we can talk about Kraken and A. So, I don't know if folks saw this this week, but uh there was a CoinDesk report um which I I will I will say Stanie and Luigi Adav said this is maybe not completely factual, but let me tell the story and then I can walk through Stany's response. So, there was a CoinDesk article Kraken in talks to buy 15% stake in Ave at a $385 million valuation, which is obviously quite maybe strange to someone who reads that because the market cap of A is 1.4 4

billion. So, you know, it's obviously a huge discount. What's the math on that? 70% discount roughly. So, crypto exchange Kraken in talks to acquire 15% stake in a at 385 million. According to three people familiar with the deal, a potential deal would see Kraken investing 35,000 ETH in return for 250,000 A tokens and a 15% common stake equity stake in A group according to a document seen by Coindesk. So, uh Stonyie responded. He said, "Lots of discussion around a I want to clarify a few things. First off, there is no way we'd sell a at a 70% discount. Second, 100% of a protocol and go revenue goes to the A token. Um, no protocol or product revenue goes to a labs. Uh, A

Labs owns an allocation of A that multiple market participants have discussed purchasing either directly or indirectly. Um, and uh, and a few other things. So, just curious when you guys see a deal like this, what you think is going on behind the scenes? >> Um, so I I know the details and I'm not I'm not entirely sure what I can say publicly or not publicly, but what I would say is the article is wrong in terms of the the details. Um, and there has been of course strategic interest um, you know, in a the same way there there has been in Morpho and some others. you've seen unis swap announce something you know etc and um you know typically when you see prices like that

and things like that I would expect there to be um it's something happening probably that's more equity like than than token like and that's probably like the the you know the kind of the where I would leave it but but what I would just simply say is um you know that's typically what's going on why this got leaked there could be a bunch reasons. I I don't know why. So, but usually when things like this come out or things about new fundraisers and certain valuations come out, they get leaked for one of two reasons. They get leaked from one of the parties involved because they want to pressure somebody to, you know, maybe make a deal. Um or they want, you know, things to trade away. So, like maybe it makes it harder to do a deal. Um or there's,

you know, there's just like incentive to like make yourself good look good, you know, etc. or make the other party look bad. And so I don't know why it got leaked, but um you know I I think listen I I think the broad strokes are that people like Kraken, other fintexs, other exchanges are very interested in figuring out how to deepen their relationships with onchain lenders uh and onchain businesses who can help them bring a you know sort of a DeFi CDI type um uh experience to their net users. And um at the end of the day, that's probably the main takeaway from anything that a might might do.

>> Is this uh so just unpacking that a little bit, exchanges like Kraken and Coinbase have been very active in vaults and offer is that the main rationale here like they want to offer basically create a secure depositor base. If you're holding stables in an exchange, you want to offer them like a vault that pays you, you know, T plus like a compelling juicy yield there. And that makes them like, you know, basically you're just a more valuable business if you if you have stick your depositor base.

>> Yeah. So, so this isn't specific to this a situation, but I'll make a a broader point which is that it started with like Coinbase vault or there was a the CBPTC vaults on Morpho with Coinbase and there's no Kraken doing you know um you know vaults like that as well a and others. Uh and there's a lot of now talk as well around like onchain equities and is there a way to do like securities lending through you know sort of these types of vaults as well then in the future as more RWAS happen and is there ways to kind of expand the addressable market of the things that we do with all tokenized assets. um and is providing a money market like these, you know, probably a core primitive to to that.

And and I expect that that is as you hear Kraken talk about the everything exchange and Coinbase talk about the everything exchange and Bybit and Bitad and Binance talk about the everything exchange. Um I'd expect that that is a lot of what they're thinking about is the is both not just what exists today but the future. >> Yeah. H have you do you think that uh this deal closes? Um or I guess the rationale for the deal would only make sense to a strategic like an exchange or would a fund potentially be also in the mix.

>> I think in so much as a is interested to do anything right now, it is strategic in nature and not funded nature. They don't need money. Would would they have done this deal if the Kelt situation didn't unfold and or if Morpho didn't >> I don't think that I don't think that has anything to do with this Kelt situation. >> Got it. Uh Morpho just pressure from them. I I mean these two are like it's you know we're talking about like you know Uber Lyft and uh you know Koshi Poly Market and you know these guys are obviously Bastani and and Paul are um you know very polite people and so they're not you know they're not going at each other in the same way but it's like sort of the same level of competition right like >> it's the same which is there's a holy

grail right now which is uh integrations are now the thing that all of these lenders need and want. So integrating into Kraken and Coinbase and there's there's an allout sprint right now for integrations. So if Morpho powers Revolute or A powers Kraken, that is a that is the dream. And so actually you'll all these both teams are just beefing up BD go to market hiring in Asia, Europe, the US and raising lots and lots of capital and we saw the morpho fund raise right from uh Paradigm I think it was and and many other folks.

So >> Paradigm and and Ribbit all participating. Yeah. >> Yeah. Which Rivet I think has been along from day one. >> Yeah. They they were there in the last couple runs. >> Does it make sense like this from a strategic rationale perspective? Like why why does this make so much sense for some like Kraken? Like DeFi as far as I can tell is permissionless and you can just tap into these. >> Well, Kraken rolled out earn. Kraken rolled out Kraken earn. >> Yeah. Know a Coinbase guy ended up I think you introduced me to him. >> Zetler. Yeah. Zetler. Exactly. there. I I remember having a really good conversation with him and he was super This was almost six months ago or so, but why would Kraken need to invest in a other than maybe potentially getting a pretty big discount? Um like >> why why does any strategic invest into

uh you know service provider or a company that they want to do business with? It's to deepen that relationship. It's to, you know, make sure that, you know, you potentially can do things together that like you might not be incentivized to do otherwise that you are able to, you know, obviously I don't think that's not going to happen here, but you know, exclusivity like things like that. Like >> I guess this is the equivalent of Nvidia investing in the major suppliers andor bottlenecks and because they're going to drive up the valuation higher like you know I mean like it's very synergistic. If Kraken drives $10 billion of deposits into a benefits their investment benefits. So yeah.

>> Yeah. Well, and that's true too. And also like you know all these places have you know um uh they have so only so many engineering resources and so sometimes you want something that is prioritized right and so how do you get somebody to prioritize your integration for somebody else's integration or your product for somebody else's product? You invest. >> But by by the way this is not Kraken investing. So this is actually so Arjun by the way I think is a we have to have him back on the pod. He's a killer founder or a killer CEO. Um he was a board member for many years at Kraken and then you know Jesse >> rolled off the biggest one of the biggest investors in Tri was tribe invested in Kraken.

>> There's Payword is the Payword is the company that they really want to IPO. Kraken is a subsidiary of Payword. Payword will have many arms. Payword asset management is one of the new arms. This would be the first deal in Payward from Payward asset management is the way that is the way that I understand it. >> Yeah. But but Payword is uh pay for a long time. Yes. They're going to have a bunch of different things underneath it. By far in a way, almost all of the value and payware today is Kraken. >> Totally. >> Yeah. By the way, have Speaking of Kraken, uh the secondary's come down quite a bit as far as I can tell.

>> Have you guys looked at this at all? >> I haven't I haven't looked at it. No. >> Yeah, I think it's at like a now pretty pretty interesting discount. I guess like in line with broad crypto stuff, but I remember people there there was a round that was done last year, right, on the like preo round and and um I guess now there's a deeper discount to that last round valuation. I think it was like 19 billion. Now you can get it probably at 1012. >> Yeah. So Deutsche Bors did a secondary that they publicly announced um I think this was you know in March maybe. And they didn't tell you the exact valuation, but you could back into it.

And it was basically around 13 billion. >> And so, >> and the last round was 19, close to 20. >> Uh, no, I think the last round was 15 if I'm not mistaken. Um, and so, but, uh, you know, listen, like they're they're watching all these new products. They've done a bunch of acquisitions. uh you know they're trying to you know think through you know what the future of Kraken looks like or or Payword looks like which is obviously like everyone else includes you know non-crypto assets as well. Uh and so you know I I think like that's clearly uh driving a lot of the um you know their future or forward looking you know and that how they think about fundraising. But uh of course like you know crypto trading is down 40% for

everybody this year. >> Yeah. Last deal I want to talk about because we only have a couple minutes left. FOMO raised uh 75 million series B from index USV and benchmark which is uh quite impressive I'd say in this market especially to raise from benchmark and index who don't usually do crypto deals. Rob um or Sante, I don't know if you're an angel. Rob, I don't know if you guys looked at this or did this. To me, I I've never used the product. Um I, you know, I think they're they're XDYDX folks who I think really highly of, but um seems like another crypto trading app that's competing directly with a Poly Market and a Kali and a Robin Hood and a Coinbase and a Kraken. Um but like maybe I'm missing something here.

>> Yeah. So I I'm Yeah. So all and and full disclosure, they did a um they did an angel round preede uh and didn't let any funds in and so I actually did that. So I'm actually an investor through that that angel round that they did preede. Um Dragonfly as a fund did look at the round that benchmark did uh which was the the the A and um uh and you know they had great traction, they had great retention. You know the guys were you know very doing a very uh a good job on on the product. Um, you know, we didn't look again at at at this round that that index led, but you know, it's sort of I think kind of the just a, you know, kind of what they said they would do in the beginning, they've been doing. So, I don't think the story has changed, which

has been that we want to be a place for, you know, social trading. So, they have the leaderboard, they have, you know, the chat, they have a place where people can um, essentially, you know, put out thesis on like why they're doing things. And it's really about bringing like a social trading experience. today. I I believe they have PERPS, they have spot, they on on on crypto, they have RWAS, uh, you know, they're they're trying to expand out, I think, you know, to be, you know, a broader trading app. So, sort of the theme of what we're talking about with the exchanges as well, I think is also the theme of what we're talking about with apps like theirs, which is that, you know, we want to be the place for all assets, all asset classes, as you know, people more easily switch between trading and different

asset classes. It is definitely a crypto focused product today. My guess is you know the story they told when they were talking to index was not about crypto but about hey social trading and the way of which the you know social experience is interacting with finance and what that looks like in the future. >> Yeah Robin I know you got to jump content of the week. Sorry Sante unless there's >> no I was going to compare to e Toro but not not not as relevant. Let's go to content. >> Yeah I think early Robin Hood too is like a a good you know way to think about it as well. >> Yeah content of the week. Rob now you got to jump. What do you got? I mean, I'm not watching anything but the World Cup right now. So, like the World Cup like all all day every day. And so, um

the content of the week is Bosnia Herszgovenia versus the USA 900 p.m. Eastern uh or 8:00 p.m. Eastern, I think, on Wednesday, this upcoming week. Watch the US continue to move on on their way to their first World Cup finals. Okay. in the first semi-finals since 1930 and the first quarterfinals since I think believe it was 2002 last night they made the quarterfinals when by the way Greg Burhalter who is the parent of Sebastian Bhalter who scored last night and Clauddio Reena who is the parent of of Gioena who also started yesterday were both start uh well Bhalter wasn't started but we're both on the team uh back in 2002 so

>> historic run for the US coming watch it this Wednesday and then the following Monday and then the following Friday and and the week after that. It's going to keep coming. >> Let's go. >> Yo, your content. >> I'm falling. >> Content of the week. I realized that Henry Kravis, who's one of the founders of KKR, had a written 30 blog post outlining his life. And um yeah, I went down the rabbit hole and read all of them. They're actually quite quick, but they're on like pretty deep topics. It's uh you know, one chapter 28, the shock of losing my eldest son in a car accident. Chapter 29, the best days of my life. Um yeah, you know, chapter 25, looking for talent beyond skills and track records. And they're they're quick pieces. Like I'll I'll pull it up here.

It's a each one is about a five minute read. Two to two two to five minute read. And it's um yeah, I just spent like a you know two hours and just read all 30 of these and yeah gained I mean kind of gained yeah I obviously already respected Henry Kravis. Knew nothing about him though and yeah just gained a lot of respect for the firm and you know this guy. >> Well I'm going to cheat because I to to Rob's point I've just been World Cup maxing. Uh but Barbarians of the Gates a really good book if you want to learn about just financial >> he talks about this idea that he's like it you know really hurt our brand like people saw us as barbarians and >> uh similar uh bending spoons can IPO pretty interesting I'm reading the perspectus this weekend they're trying

to be like Berkshire Hathaway in Europe uh >> go listen to the uh episode on invest like the best with the founding with the bending spoons CEO >> pretty interesting yeah >> folks >> happy Friday go US Let's go. >> Go America. [laughter] >> Hey folks. >> Yeah, Santi. We got Santi on the America side. Let's go. >> I'm gonna get crucified, but I'm for America. >> Good luck, Santi. Good luck. All right. Cheers, folks. Have a good weekend.