市场现状、预测市场之战与 Kraken 追逐 Aave

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's looking sharp.

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?—my eyebrows waxed or something.

Rob was the one who—I think he was literally the first one. He's like, “I got my eyebrows waxed. How do they look?”

Yeah. Then we get on the pod and he's like, “No, no, Santi.”

Yeah. 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.

Waxed for sure. Guys, there are plenty of other people to roast. It's not going to be me at this point.

All right, fine. Rob, how was the World Cup game? You flew to Seattle.

It was amazing. Seattle is a great soccer town, a great football town. You can't undersell how good it is when you can walk to the stadium from downtown, hit up the bars, chant, cheer, and see all the other fans there. We have these games at MetLife or at SoFi Stadium in Inglewood, and you have to drive there, out to the middle of nowhere. They're big stadiums, but you just don't get the same pregame camaraderie. It was an incredible time in Seattle.

I hope they go there again. There's going to be another game there, I think, in the quarterfinals if the U.S. makes the quarterfinals, which I am betting heavily on. So, I'm excited for that.

Let's go. And then they lost to Turkey. What's going on?

The odds—Santi's trade was at 2.4 last time, and we're up to 3.1. Good trade, Santi. Good trade. Outperforming the markets, which isn't saying much these days.

I will say your Micron trade is good.

They delivered earnings yesterday.

One of the craziest earnings reports I've ever seen.

Yeah, it's pretty wild. The market's down today, though.

1. State of The Market

Broader sell-off. OpenAI pulled its IPO. SpaceX went down, which then triggered, I feel like, OpenAI to pull the IPO. Now we're seeing a broader sell-off. Thoughts? Maybe we can start with general thoughts on the markets.

Wasn't it you who talked about how, if a SpaceX IPO doesn't deliver as much, it likely delays some of the other IPOs? And that's just—

My call at the beginning of the year was that the equities market would top once the SpaceX IPO happened.

All right. Well, it was nice knowing you guys this year. Should we just come back in September?

I don't think crypto markets—crypto equities and crypto tokens—can come back without some sort of rollover in the AI market. I think there is too much capital going into AI. I mean, not a unique take here, but AI has sucked up every bit of attention and capital across all capital markets right now.

If you want money to flow back into crypto, you need some sort of rollover. I'm not saying you need a huge bubble bursting, but it wouldn't be the worst thing for crypto if AI pulled back a little bit.

The problem you have is that we're actually seeing, every quarter, that the market is a little bit concerned. What's happening in earnings? Is this capex? Are we going to get a good ROI out of it? Is there going to continue to be this upward acceleration happening to real GDP, to these businesses, and to demand for compute and AI every quarter?

And yet it keeps working. The P/E ratios are still mostly fine, earnings continue to grow, and there continues to be this nervousness each quarter. Then the markets do well afterward. Volatility has obviously increased. I think uncertainty is at all-time highs. People clearly do not know how to forecast this stuff.

There was some really interesting analysis out of SemiAnalysis a day or two ago. The short-term rates on H100s, I think it was, were down 40% month over month, but the long-term contracts were basically still going up and trending in the right direction.

That tells you that, for people who buy spot—which is not the actual big corporates, the people who are planning for this long term—there has been a discount in their willingness to pay for compute. But corporates continue to put money into long-term contracts. We've seen more switch that way.

I do think that if you're focused on a rollover for AI in any real way in the near term, that seems unlikely to me. If you believe that's what needs to happen, Yano, then I think we might be a little bit cooked. But considering what's happening with MicroStrategy right now, we might be a little bit cooked for a little bit of time, anyway.

I agree. I agree.

Two things I want to get your take on. I felt like Jordi, in the last pod, had pretty interesting takes. Just hearing him talk, he's probably one of the smartest guys and pretty plugged in, but I didn't hear him come out saying that he's really compelled or convicted on crypto right now. So, we can talk a little bit about that.

The STRC thing—I saw a pretty funny screenshot in one of the group chats. If you combine all the securities of MicroStrategy, it's like—

Did you see this one?

Pardon my French here, guys, but—

No.

I'll pull it up.

We get demoted every time you swear, Santi, so I hope that was worth it.

Our ratings are already so low that now is the perfect time for me to use all the colorful language.

Nobody's listening.

Yeah, nobody's listening. We can 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 you saw this.

All right, so this was Tom. Tom Dunleavy had Tom on the pod. There were signs: STRC, STRK, STRF, and STRD. You remember the clothing brand FCUK?

Yeah, exactly.

Something like that.

I was looking at some Blockworks data on the number of deals happening in fundraising, and the numbers are—wow. Let me pull this up.

If you look at the total crypto deal count, we're at the lowest level by quarter: 147 total deals so far in Q2 of 2026. That's the lowest number since Q4 of 2020. So, in nearly 6 years, we're at the lowest number of deals.

You can see that M&A is climbing, but fundraising hit a low in February—the lowest month since September 2024—and now maybe it's starting to climb back up.

I'm actually, Rob, 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—Series B, Series C, Series D. Pre-seed and seed still feel really dry, but I feel like there's actually a decent number of companies starting to come to market with a fundraise, more on the later side.

Yeah, you see it with the M&A side. Obviously, that usually also coincides with later-stage activity picking up, because we're seeing a lot of product-market fit in very specific verticals in crypto.

The payments, stablecoin, and tokenized-asset sides of the space are continuing to grow. We've talked a lot about companies like Rain on this podcast. It doesn't matter what is happening to prices; they are growing tremendously month over month.

Every type of company like them that is serving global fintechs, global technology companies, and even corporates that want to be able to do treasury management—the stablecoin and tokenized-asset market—is growing extremely quickly. Companies that serve that market are also growing extremely quickly, so we've seen that really pick up on both the M&A and fundraising sides.

We've also started to see—I get calls from basically every fintech today saying, “I'm a traditional fintech, but we currently serve the domestic market. We want to go international. The best way to go international is to use stablecoins, tokenized assets, a non-custodial wallet, and a Rain card. We're launching that, and we need someone like yourself on the cap table alongside our regular Silicon Valley venture investors who can provide this different perspective.”

I'm getting all of those calls as well.

The exchange side, or the capital-market side, has been a little bit interesting because all of those companies are doing okay, but token trading—crypto trading—is down 40% on the year. They’re all launching real-world assets, equities, prediction markets, and pre-IPO stuff. We’re still seeing action there. Prediction markets are obviously very, very active. I think both Kalshi and Polymarket are going to have their best month ever this month.

We’re still seeing a lot of focus on those things that work, and we’re seeing that pick up. All of fintech, and a little bit of AI, is coming to this realization that crypto should play a part of that story. They’re calling the crypto investors—at least the few of us who have the size to do those deals, like myself and Paradigm. That market is very hot. The early-stage market, I agree with you, especially when we talk about crypto and on-chain stuff, is really, really tough, and the founder quality is really low on a relative basis compared with what we’ve seen over the last 5 or 6 years.

Hey, Rob, can you unpack what that call looks like? You talked about fintechs—is it founder-led and motivated, or is it, “Hey, the board really wants us to understand”? Is there a particular catalyst? “We saw Stripe,” or “we saw Facebook.” There are 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 think stablecoins in the fintech space and the financial-market space are a little bit like AI was a year and a half ago. Since GenAI got big, every board is like, “I know this is an annoying board question, but what is your stablecoin strategy?” People have had to react to that, but at the same time, they’ve started to see people expand their businesses using stablecoins in a real way that’s driven revenue.

The biggest light-bulb moment for everybody has been these domestic businesses or these UK businesses that have gone international much more quickly because of the way they’ve been able to figure out their infrastructure. It takes a long time to onboard a bunch of new banks. There may be regulatory requirements if you’re going to be custodial versus non-custodial, or if you’re going to deal with fiat versus digital assets. In some places, we’re a little bit in a gray area at the moment.

We’re seeing a lot of these companies say, either at the board level or at the founder level, “I have a good domestic business. I have a good UK business. I want to do global expansion now.” Now there’s a real way for me to do global expansion, save costs, but also drive new revenue very obviously and very easily with the service providers that are out there.

What would be a good dashboard, for instance, in Blockworks to track? I had a dashboard running that I think I shared with a podcast I did around public companies like Klarna that are doing it—obviously Western Union—and you guys have covered it well, Yano. I’m curious: What would be the best signal for investors and the broader community to quantify what you’re talking about now? Is there something you guys track, or what would be good for folks to track?

Yeah. So it’s tough from a quantitative perspective right now because the stuff that people talk about—let’s say they talk about stablecoin transfer volume—the vast majority of stablecoin transfer volume is still just bots trading against each other on-chain.

We can talk a little bit about the tokenized-equity story that’s out there and everybody’s pushing, but basically 90% of the stuff people are talking about happening on Solana is still just bots trading against each other and low-fee AMMs. But there is a way to try to back into it. There are a couple of service providers—Allium, Visa, Artemis, and I think maybe you guys are doing the same thing—trying to figure out an adjusted stablecoin transfer-volume number. Those numbers are still very much a work in progress.

On the retail side, if you follow Payments Chad, it’s probably the only real person doing this right now, but they’re following credit-card swipe volumes. Those are really good indications of the fintech volume I’m talking about. They’re mostly still following crypto natives, but there have been publicly announced, to your point, the MoneyGrams, Western Unions, and Slashes of the world. Those will probably get added to this over time.

You’ll be able to look at the stablecoin-backed credit-card volume that’s starting to pick up, and you can see Rain’s volumes just go up every month. A few others are starting to do a little bit of work there. Also, right now, all the headlines are a big part of it. Eventually, you should be able to follow some of the on-chain volume from some of these big fintechs, but today it’s still not there yet where somebody can follow that, so it’s really a headline topic.

I can tell you I’m in a privileged position, but I see the pipeline of some of our portfolio companies. It’s not just, “Oh, these are the biggest private fintechs.” It’s, “Oh, here are 30 public companies that are planning on launching some sort of stablecoin business, and I’ve actually done an RFP and started implementing this.”

Yeah, we don’t—I don’t have the data that Rob has, which is more in the pipeline of stablecoin stuff. What I see are the RFPs coming in for on-chain data and crypto data. What you need if you’re launching a crypto strategy is to monitor the assets, have intelligence on the assets, OFAC compliance, and on-chain data: Who are the users? Where are they coming from? We see all those RFPs.

I don’t see the direct impact; it’s a second-order impact of the stablecoin growth. For us, the RFPs on that side have never been higher. And it’s companies that, let’s say, if we created a target-account list of our top 500 target accounts, it’s not even those. It’s companies we wouldn’t even dream about doing business with.

I’m like, “I thought you were 15 years away from doing anything in crypto. You’re an old-school, slow-moving European company, or you’re in South Korea.” And they’re coming inbound, too.

Yeah. Is that why Canton is sort of all the rage this cycle? I feel like they’ve done really well in terms of enterprise convincing. Rob, I hear you.

Look at Rob’s smirk. My God, what’s going on? Honestly, I don’t know. To be honest, I haven’t heard anyone really explain to me what Canton does. I just think they’ve done some really good relationship-building.

People need to watch on YouTube just 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 going to take an anti, and I’m a fan of Yuval. I like the team. Listen, there are 2 ways to frame what is happening at Canton.

One is: You can talk to Broadridge, which is one of the names that they trot out there all the time, and the Broadridge guys are pretty clear: “Yeah, we use this as a better database and a better way to operate our company and operate our repo market. We don’t really have any real plan to do, call it, cross-Canton-type trading and open this up outside our client base through a specific front end,” et cetera.

For that market, this is clearly a really good enterprise software solution, essentially, for those people, and they’re doing an incredible job on all of those proof of concepts. The negative framing of that is, “This is all this is going to be.” It’s a better database and a great enterprise SaaS business.

The other way to frame it is that the wheels of change move slowly in institutions, and eventually you’ll have this broader Canton ecosystem where they’re all interacting with each other through—I’m going to mess up their nomenclature—but they have sort of a hub-and-spoke model through which people can interact with each other. That’s the positive way to frame it. That’s the way they talk about it. Of course, DRW’s Cumberland did that round.

There have been people building there for a long time. Canton is not new. It’s an 8- or 10-year-old project that has tried to figure out its way a little bit, and they’ve clearly gotten a lot of traction. They’ve had Goldman Sachs as an investor and a client for a long time, along with other big institutions, but they now seem to be hitting their stride in a real way that they weren’t 5 years ago.

And so, listen, they've done an incredible job in that part of marketing. You don't really have to look at the names on those fundraisers. They talk a lot about contracts and transactions and validators and all these things, and they've paid a tremendous amount of essentially tokens as rewards or fees back to people to do that.

It's clearly been a subsidized product. But a lot of VC-backed companies subsidize growth for a long period of time until they become unit-economics positive, and that's not in and of itself a bad thing. 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 make-or-break time.

We'll have to see what the future holds, but clearly, it comes up in every conversation. The reason I smirked wasn't because I necessarily had this negative view; it was because I've had 3 meetings today, and in all 3 of the meetings I had this morning, Canton came up.

Yeah, yeah, that's what I'm saying. And you guys look at a lot of stuff. Did you ever look at it early on? Because I sat down at a dinner next to you all and I was like, “Wow, where have I been all these years?” He was telling me about the evolution of the company, and it felt like it was a slow grind. Then they had some key inflections, but the Goldman relationship and the Trafigura relationship are things that they've done really, really well.

I'm curious: did you guys look at it from an investing perspective, or have you considered it? You don't have to disclose anything you're not comfortable with.

Listen, we've had the discussion over the last 3 raises, and we've talked to them about it. Again, I consider you all, if not a friend, someone that I'm very friendly with. Every time we see them, we have a good rapport, and one of the guys on my team, as you know, Omar, has a good relationship with Eric, who is also running the business there. So it's been a constant conversation.

I think where we have struggled—and we're wrong all the time, so we could be wrong here—is getting validation that these companies want to go from, “Hey, this is an interesting proof of concept,” or, “This is an interesting, call it, enterprise SaaS database company,” to, “This is a thing that we want to build more broadly,” and that we expect to see a much broader type of adoption.

We've also found the fundraises to be a little bit interesting in the way they think about token exposure relative to the equity. I think we've struggled in the past a little bit with the structure, in a way that strategics obviously don't care about financials, while financial investors obviously have a lot more of a view on token versus equity. We've talked a lot about that on the pod.

All the strategics obviously don't care, and those have been an issue. But clearly, in the recent fundraising, they got over some of that interesting structure.

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3. The Prediction Market Wars

Can we get to some fun stuff in the prediction-markets world? Rob, put on your Polymarket uni, because we've got some stuff to defend, my friend.

There are 3 interesting prediction-market stories this week. One is about Polymarket. Two is about Kalshi potentially raising at a $40 billion valuation. Three is that Meta—Zuckerberg—directed Meta to create a prediction-markets app.

4. State of Crypto Venture

Maybe we could just start with the Polymarket stuff, Rob. I think you actually called this out. You said maybe a month ago on the podcast, “Look, there's probably going to be some hit pieces on Polymarket that sound like you believe competitors are directing this.” I don't want to put words in your mouth, but tell me what you think when you see all 3 of these headlines tied together.

I mean, listen, it's a very competitive space. The overarching point here is that prediction markets have had an incredibly interesting last 18 months. Both Polymarket and Kalshi—and, actually, Robinhood, Susquehanna, and J.P. Morgan—are all going to have incredible Junes.

The space continues to grow. The amount of institutional traders who continue to say, “Hey, we want to trade on these platforms,” is growing. We're seeing block trades get placed on platforms by institutions, and the interest on the retail side is continuing to grow.

It's very clear that this market has just outgrown some of the startup tactics that have existed before. Anytime a market grows that quickly, there's also going to be a lot of focus on it from regulators, the media, and competitors. You're going to start seeing people enter the space, like Meta. I cannot be more bearish on Meta building its own exchange, but that's fine.

But 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. I think these are going to be very, very, very big.

I think that's the overarching point on the piece in The Journal about Polymarket. You said it sounds like some competitors are placing these things in the media. Everybody who's around the space knows that there's a lot of oppo research and negative shopping happening right now.

If you still had a media business, all of your reporters would be seeing it too. It's very clear that there are people at these companies and investors in these companies who are actively doing things like trying to place negative stories about their competitors. That is a statement of fact; it is not a statement of opinion.

The thing that gets called out in the Journal article is obviously something that they probably should not have done. It's also something that's very common, that a lot of people do. The competitors to Polymarket do it as well, and it's not isolated to them. Somehow, The Journal only seemed to find a way to talk about one person, and that is because of some of the other people doing work for them.

We've seen this with the rise of trading getting much more retail-focused, gambling getting much more retail-focused, prediction markets getting much more retail-focused, and a lot of distribution happening through social-media platforms, along with the rise of clipping.

I think clearly there needs to be better structure around how people market all financial markets to retail going forward. Polymarket is one of those that needs to learn from this and move on. But this was not an isolated story, even though somehow 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 companies, actually not in crypto. It's a bunch of DTC and consumer founders, and that story got dropped in there. The main question from the other founders in the channel was, “Do you know who they're using? Can we hire that firm?”

Everybody is doing stuff like that, especially FanDuel and DraftKings. If you hire a creator or an influencer, they're not sitting around waiting for their turn. They've got business to do. They're not waiting around for the win to hit, right? There's a term for it. What do they call it? Not a fake website—I guess a fake website. There's a term for it.

It's usually paper trading. It's almost always paper trading.

The crypto exchanges do this too, by the way. I'm defending them, for what it's worth. There's some stuff in there that I'm like, “Yeah, you shouldn't be doing that.”

My wife worked at Lyft in the crazy days of Lyft versus Uber, and I'm like, “If you think what's going on with Uber and Polymarket and Kalshi is bad, look at what Uber and Lyft were doing.” I actually just think a lot of this stuff happens.

I mean, the stakes are huge here. 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 hyper-high-stakes games. That would be my take.

Yeah, there's no doubt. All the direct-to-consumer trading companies are doing the same thing. All the direct-to-consumer exchanges—to your point, you talked about DraftKings and FanDuel, etc.—all the prediction markets are doing the same thing. It was an interesting article to me from that perspective.

Again, not to say I'm defending the practice or that we shouldn't have regulation and better standards around this, but the age of marketing these types of trading products to consumers has evolved this way. Frankly, I think we definitely need to figure out a way to either regulate it or make it easier for more normal consumers to realize that 98% of the time, somebody talking about a trading gain on social media is not real.

And that is absolutely true. What do you think of this? For about 2 years, Polymarket and Kalshi's valuations were moving hand in hand, right? And now you see this scoop that Kalshi is raising at a $40 billion valuation. What do you think about Kalshi's valuation moving away from Polymarket?

Yeah, I mean, listen, if you look at the data, they're 1.8 to 2 times the size now, at least in the most recent month. Both are still growing extremely quickly and doing very well, but clearly Kalshi has grown quicker, and their sports product was live. At least at this moment, they're doing more revenue and more volume, so it kind of makes sense that if they're doing 2 times the revenue, they have 2 times the valuation, in some sense.

I think they're a little bit different businesses. I've talked about this in the past. Polymarket continues to be very much focused on a direct-to-consumer model. They're doing things like the integrations into their exchanges that they announced today. They've had a lot of success with some of these integrations, and they went live on Telegram earlier this week. They're doing more of this—call it clearing for maybe institutional trades. I believe it was FalconX that did a compute trade that they cleared on Polymarket, and they're providing some of the backend infrastructure for other brokers.

They're doing some of that, but Kalshi is way ahead in that product right now, and that's obviously what's driving their growth. As these markets have grown incredibly quickly, all of the brokers have wanted to offer access to them.

They've done a great job. I don't know if they'll be able to raise at that amount, but in my mind, honestly, it's also good for Polymarket when they're both growing and both raising at high valuations. I don't begrudge them that. I think this is a humongous market.

I wrote our first check into Polymarket almost 2 and a half to 3 years ago. The valuation change since that time has been incredible, and we remain very long and very excited about the future of Polymarket specifically, but also prediction markets more broadly. I think people underestimate how big these markets can be.

Yeah. I may have missed this, but how do you think about the main concern that I get? I feel like prediction markets are the best product in mainstream. People get really excited, and they've used it, but the common question I get is how defensible and how monetizable it is. Have you guys updated your thinking from 2 or 3 years ago to today? Does it concern you around defensibility, moats, and whatnot?

There are a couple of interesting things happening. I was having this discussion with an institutional middleman for institutional trading earlier today—a company that facilitates trading and PMS and EMS.

Just so our audience knows, a PMS is a portfolio management system that does risk management and reporting for your trading, and an EMS is an execution management system, which is for actually executing the trades on an exchange. They've seen a lot of demand from their institutional customers to support both platforms for execution and on the risk side.

What does that mean? Institutions are coming today. I think most of the institutional access, quote-unquote, on these platforms is just market making, because they see it's retail flow on the taker side, and so that's very soft. They're able to make good spreads on those things.

But it is true that on Kalshi, it's still over 90% sports when you add in parlays. On Polymarket, with the World Cup today, it's like 55% to 60%. A lot of these guys don't actually want to market-make sports necessarily. There are businesses that have done that for a long time. Susquehanna has done that for a long time, and they're the biggest in the world at it. There are other market-making firms that do that.

The Bitcoin up-down markets have done really very well on both platforms, and a lot of market makers have been around those. But those markets alone aren't institutional markets. We've started to see signs of life. I talked about the block trade that FalconX did on Polymarket for compute. I think Galaxy did—I think it was also compute—a block trade on Kalshi.

There are some signs of life there from the institutional side. We've started to hear a lot of early conversations around insurance-linked contracts and other linked contracts, but they're mostly happening through RFQ. They're either directly brokered through a prime and then cleared on one of these 2 platforms.

I think the clearing opportunity is huge. We don't talk about that as much, but I probably don't get the Kalshi pitches, as you can imagine. I'm guessing they're talking a lot about the clearing opportunity when they go out to these markets, not just the brokerage side of the business.

On your point about revenue and take rates, Kalshi is about 2 times—maybe a little less, 1.5 to 2 times—above Polymarket right now. I think there's clearly going to be fee compression, so anybody looking at these rounds for either of these 2 companies needs to update their models on that.

I don't think they're indefensible because, at the end of the day, liquidity begets liquidity, and we're going to continue to see that grow. For Polymarket specifically—but Kalshi is also making more strides here—they have a great retail brand, so on the direct-to-consumer side, I think they will continue to do well.

I was trying to explain this, and I think I remember asking you in a pod a couple months ago: when Polymarket and Kalshi were at similar valuations and FanDuel was at that same valuation, DraftKings in the public markets had been getting crushed. I think it's now down 50%. It's trading at like $11 billion, which is secondary to Polymarket, give or take. It's trading at like 2 times revenue.

I was trying to make sense of that. From a risk-reward standpoint, I don't agree with your last point. I think the market is sort of saying, look, prediction markets are just much better products. From a customer-acquisition standpoint, the ability to bet on very discrete types of things—you know, if you're a user, I guess you've known about DraftKings and FanDuel for a while, and some of these other platforms—but prediction markets have captured the attention of a user who wants to bet on all these other things that are becoming way more fun.

That's how I rationalize it. How can you justify a valuation that, on most metrics, just doesn't necessarily make sense? I don't know if you would agree with that or disagree with that.

Well, I think people get stuck on DraftKings and FanDuel. They clearly have one product, which is, “We do sports,” and they're mostly a direct-to-consumer platform. We're not doing clearing. We don't have this institutional sort of story about the future.

DraftKings announced that they did $3.4 billion in annualized volume last week, right? Let's just be very clear: they did $3.4 billion of annualized volume last week. Both Polymarket and Kalshi did more in actual volume last week, right? And so the DraftKings prediction market is extraordinarily small relative to those 2, and even Robinhood now.

And they feel capped in terms of what they can offer people, even if they launch prediction markets. When you think about what I just talked about with the clearing opportunity and some of the institutional trading—and, obviously, Kalshi, with Coinbase launching the first perp in the U.S.—there seems to be a story here about a modern digital exchange that is focused on net-new products first but can grow that into something that calls to a much bigger imagination for what these can be than DraftKings or FanDuel.

Even though it’s 92% sports on Kalshi today and 60% sports on Polymarket, the people who are investing in these things do not believe that’s 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 DraftKings.

5. Kraken Pursuing 15% Stake in Aave

Yeah. Let me move us on to two other interesting deals. One is Kraken and Aave. I don’t know if folks saw this this week, but there was a CoinDesk report—which I will say Stani and Luigi D’Onorio DeMeo said is maybe not completely factual. Let me tell the story, and then I can walk through Stani’s response.

There was a CoinDesk article titled “Kraken in Talks to Buy 15% Stake in Aave at a $385 Million Valuation,” which is obviously quite strange to someone who reads that because the market cap of AAVE is $1.4 billion. It’s obviously a huge discount. What’s the math on that? Roughly a 70% discount.

“Crypto exchange Kraken in talks to acquire 15% stake in Aave at $385 million.” According to 3 people familiar with the deal, a potential deal would see Kraken investing 35,000 ETH in return for 250,000 AAVE tokens and a 15% common equity stake in Aave Labs, according to a document seen by CoinDesk.

Stani responded, “Lots of discussion around Aave. I want to clarify a few things. First off, there is no way we’d sell AAVE at a 70% discount. Second, 100% of Aave protocol and GHO revenue goes to the AAVE token. No protocol or product revenue goes to Aave Labs. Aave Labs owns an allocation of AAVE that multiple market participants have discussed purchasing, either directly or indirectly.”

I’m curious: when you guys see a deal like this, what do you think is going on behind the scenes?

I know the details, and I’m not entirely sure what I can say publicly or not publicly. What I would say is that the article is wrong in terms of the details. There has, of course, been strategic interest in Aave, the same way there has been in Morpho and some others. You’ve seen Uniswap announce something, and typically when you see prices and things like that, I would expect there to be something happening that’s probably more equity-like than token-like. That’s probably where I would leave it.

What I would simply say is that’s typically what’s going on. Why this got leaked, there could be a bunch of reasons. I don’t know why. Usually, when things like this come out, or when things about new fundraises and certain valuations come out, they get leaked for one of 2 reasons. They get leaked from one of the parties involved because they want to pressure somebody to maybe make a deal, or they want things to trade away so maybe it makes it harder to do a deal. Or there’s just an incentive to make yourself look good, or make the other party look bad.

I don’t know why it got leaked, but I think the broad strokes are that people like Kraken, other fintechs, and other exchanges are very interested in figuring out how to deepen their relationships with on-chain lenders and on-chain businesses that can help them bring a sort of DeFi/CeFi-type experience to their end users. At the end of the day, that’s probably the main takeaway from anything that Aave might do.

Is this—just unpacking that a little bit—exchanges like Kraken and Coinbase have been very active in vaults on Aave. Is that the main rationale here? They want to offer, basically, a secure deposit base. If you’re holding stables on an exchange, you want to offer them a vault that pays you a compelling, juicy yield. That makes you a more valuable business if you have a sticky depositor base.

This isn’t specific to this Aave situation, but I’ll make a broader point. It started with Coinbase Vault, or the cbBTC vaults on Morpho with Coinbase, and now Kraken is doing vaults like that as well—Aave and others.

There’s a lot of talk now around on-chain equities, and whether there’s a way to do securities lending through these types of vaults in the future as more RWAs happen. Is there a way to expand the addressable market of the things that we do with all tokenized assets? Is providing a money market like these probably a core primitive to that?

As you hear Kraken talk about the everything exchange, and Coinbase talk about the everything exchange, and Bybit, Bitget, and Binance talk about the everything exchange, I’d expect that a lot of what they’re thinking about is not just what exists today but the future.

Yeah. Do you think this deal closes? Or I guess the rationale for the deal would only make sense for a strategic, like an exchange. Would a fund potentially also be in the mix?

Insofar as Aave is interested in doing anything right now, it is strategic in nature and not fund-related. They don’t need money.

Would they have done this deal if the Gauntlet situation hadn’t unfolded, or if Morpho didn’t—

I don’t think that has anything to do with this Gauntlet situation[?].

Got it. Is Morpho just pressure from them? I mean, these 2 are like—we’re talking about Uber and Lyft, and Kalshi and Polymarket. These guys are obviously—Bastani and Paul are very polite people, so they’re not going at each other in the same way, but it’s sort of the same level of competition, right?

It’s the same. There is a holy grail right now, which is that integrations are now the thing that all of these lenders need and want. Integrating into Kraken and Coinbase—there’s an all-out sprint right now for integrations.

If Morpho powers Revolut or Aave powers Kraken, that is the dream. You’ll see both teams beefing up business development and go-to-market, hiring in Asia, Europe, and the U.S., and raising lots and lots of capital. We saw the Morpho fundraise from Paradigm, I think it was, and many other folks.

Paradigm and Ribbit all participated.

Yeah, and Ribbit has been involved from day 1.

Yeah. They were there in the last couple of rounds.

Does this make sense from a strategic rationale perspective? Why does this make so much sense for someone like Kraken? 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. I know a Coinbase guy—I think you introduced me to him.

Zettler. Yeah, Zettler. Exactly. I remember having a really good conversation with him, and he was super—this was almost 6 months ago or so—but why would Kraken need to invest in Aave, other than potentially getting a pretty big discount?

Why does any strategic invest into a service provider or a company that they want to do business with? It’s to deepen that relationship. It’s to make sure that you potentially can do things together that you might not be incentivized to do otherwise, and that you’re able to do—obviously, I don’t think that’s going to happen here—things like exclusivity.

I guess this is the equivalent of Nvidia investing in the major suppliers and bottlenecks because they’re going to drive up the valuation. It’s very synergistic. If Kraken drives $10 billion of deposits into Aave, that benefits their investment. So, yeah.

Yeah. Well, that’s true too. Also, all these places have only so many engineering resources, and sometimes you want something that is prioritized. How do you get somebody to prioritize your integration over somebody else’s integration, or your product over somebody else’s product? You invest.

But, by the way, this is not Kraken investing. Arjun, by the way, I think we have to have him back on the pod. He’s a killer founder, a killer CEO. He was a board member for many years at Kraken, and then Jesse—

—rolled off. One of the biggest investors in Tribe was—Tribe invested in Kraken.

Payward is the company that they really want to IPO. Kraken is a subsidiary of Payward. Payward will have many arms. Payward Asset Management is one of the new arms. This would be the first deal in Payward from Payward Asset Management, the way that I understand it.

Yeah, but Payward is Payward. For a long time, yes, they’re going to have a bunch of different things underneath it. By far and away, almost all of the value in Payward today is Kraken.

Totally.

Yeah.

By the way, speaking of Kraken, the secondary has come down quite a bit, as far as I can tell. Have you guys looked at this at all?

I haven't looked at it. No.

Yeah, I think it's at a pretty interesting discount now. I guess it's in line with broad crypto stuff, but I remember there was a round that was done last year, right, on the pre-IPO round, and 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 $10–12 billion.

Yeah. Deutsche Börse did a secondary that they publicly announced, I think this was in March, maybe. They didn't tell you the exact valuation, but you could back into it. It was basically around $13 billion. And the last round was $19 billion, close to $20 billion.

No, I think the last round was $15 billion, if I'm not mistaken. Listen, they're watching all these new products. They've done a bunch of acquisitions. They're trying to think through what the future of Kraken looks like, or what the future of Payward looks like, which obviously, like everyone else, includes non-crypto assets as well. I think that's clearly driving a lot of their future or forward-looking thinking and how they think about fundraising. Of course, crypto trading is down 40% for everybody this year.

6. Fomo Raises $75M at $550M Valuation

Last deal I want to talk about, because we only have a couple minutes left: FOMO raised $75 million in a Series B from Index, USV, and Benchmark, which is quite impressive, I'd say, in this market—especially to raise from Benchmark and Index, who don't usually do crypto deals. Rob or Santi, 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've never used the product. I think they're the dYdX folks, whom I think really highly of, but it seems like another crypto trading app that's competing directly with Polymarket, Kalshi, Robinhood, Coinbase, and Kraken. But maybe I'm missing something here.

Yeah. Full disclosure, they did an angel round pre-seed and didn't let any funds in, and so I actually did that. I'm an investor through the angel round that they did pre-seed. Dragonfly, as a fund, did look at the round that Benchmark did, which was the Series A, and they had great traction and great retention. The guys were doing a very good job on the product.

We didn't look again at this round that Index led, but it's sort of what they said they would do in the beginning—they've been doing. I don't think the story has changed, which has been that we want to be a place for social trading. They have the leaderboard, the chat, and a place where people can essentially put out theses on why they're doing things. It's really about bringing a social trading experience.

Today, I believe they have perps, they have spot, and on crypto they have RWAs. They're trying to expand, I think, to be a broader trading app. The theme of what we're talking about with the exchanges is also the theme of what we're talking about with apps like theirs: We want to be the place for all assets, all asset classes, as people more easily switch between trading different asset classes.

It is definitely a crypto-focused product today. My guess is the story they told when they were talking to Index was not about crypto, but about social trading and the way in which the social experience is interacting with finance, and what that looks like in the future.

Yeah, Rob, I know you have to jump. Content of the week. Sorry, Santiago, unless there's—

No, I was going to compare it to eToro, but it's not as relevant. Let's go to content.

7. Content of The Week

Yeah, early Robinhood is a good way to think about it as well. Content of the week. Rob, now you have to jump. What do you got?

Honestly, I'm not watching anything but the World Cup right now. The World Cup, all day, every day. The content of the week is Bosnia and Herzegovina versus the USA, 9:00 p.m. Eastern—or 8:00 p.m. Eastern, I think—on Wednesday this upcoming week.

Watch the US continue to move on their way to their first World Cup finals, in the first semifinals since 1930 and the first quarterfinals since, I believe, 2002. Last night, they made the quarterfinals. By the way, Gregg Berhalter, who is the father of Sebastian Berhalter, who scored last night, and Claudio Reyna, who is the father of Gio Reyna, who also started yesterday, were both on the team back in 2002. Berhalter wasn't a starter, but they were both on the team.

Historic run for the US. Come watch it this Wednesday, then the following Monday, then the following Friday, and the week after that. It's going to keep coming.

Let's go. Your content.

Content of the week: I realized that Henry Kravis, who's one of the founders of KKR, had written 30 blog posts outlining his life. I went down the rabbit hole and read all of them. They're actually quite quick, but they're on pretty deep topics: Chapter 28, “The Shock of Losing My Eldest Son in a Car Accident”; Chapter 29, “The Best Days of My Life”; and Chapter 25, “Looking for Talent Beyond Skills and Track Records.”

They're quick pieces. Each one is about a 2- to 5-minute read. I spent about 2 hours reading all 30 of them and gained a lot of respect for the firm and for this guy. I already respected Henry Kravis, but I knew nothing about him.

Well, I'm going to cheat because, to Rob's point, I've just been World Cup-maxing. But Barbarians at the Gate is a really good book if you want to learn about financial history. He talks about this idea that it really hurt their brand; people saw them as barbarians.

Similarly, Bending Spoons' potential IPO is pretty interesting. I'm reading the prospectus this weekend. They're trying to be like Berkshire Hathaway in Europe.

Go listen to the episode of Invest Like the Best with the founder and CEO of Bending Spoons.

Pretty interesting, yeah. Go US. Let's go.

Go America.

Yeah, Santiago. We have Santiago on the America side. Let's go.

I'm going to get crucified, but I'm for America.

Good luck, Santiago. Good luck.