Please welcome Brad Garlinghouse of Ripple, Billy Halt of Trade Web, and Jackie Alimony of MS Now News.
All right, let's get started. We don't have that much time. Brad, Billy, thank you so much for being here today. Both of you are currently building institutional infrastructure for markets that operate faster and with better signal, but from different sides of the universe. Policy is obviously the last thing that usually happens. But right now, at least in my view, it might maybe not be something that you two are both waiting on to sort of unlock the next steps of your businesses. And the two things I'm thinking about primarily, and our audience probably already knows this, the Clarity Act and Prediction Markets. And so I'm wondering to both of you just to kick things off before we get a little bit more into the nitty-gritty of what those policies actually look like, but are you building ahead of the policy or are you waiting for it right now?
Happy happy 11 year anniversary.
What Billy's referring to today happens to be our 11th anniversary at Team Ripple, which I'm happy about. But happy anniversary. I've seen a lot and one of the things that I think you're referring to here, look, we obviously had a long protracted battle with the United States government, the Securities and Exchange Commission, and during that time we just kept building. And to your point, or even around the Clarity Act, the US is not the leader here. And we have, you know, for a long time most of our hiring was outside the United States, most of our customers are outside the United States, and other jurisdictions leaned into regulatory clarity early. And I'm not talking about small markets. I'm talking about Japan. I'm talking about the UAE. I'm talking about, you know, Singapore, major financial capitals of the world where the regulators engaged and embraced this new technology that can rewire financial infrastructure and that could be good for the local economy. So, we've kept building. We hope the Clarity Act, I'm sure we'll talk more about it, but we hope the Clarity Act happens, but we certainly have kept building during this kind of time of not quite certain clarity.
Got to keep building for sure. That's exactly right. I think pattern recognition around all of these things is like really important. So we have a ton of DNA specifically around Dodd-Frank and how derivatives regulation was put into the swaps market. I think as this room knows really well, the swaps market was in the global markets world, it was like the most back-alley paper-intensive market. We had seen a bunch of other markets that we were in go electronic, and we invested a lot ahead of regulation and then wound up becoming pretty big winners once there became that clarity that I think is extremely important. I think ambiguity when you have technology change on the horizon with a bunch of really smart ambitious people is a bad idea and once you get that clarity I think you're off to a much better place. So you got to build ahead of it for sure.
So then first I have a lot of follow-ups for you Brad, but I want to jump off of some of the things you just said and talk more specifically about the partnership that you have announced with Kalshi. I believe that was in February. And talk a little bit more about how you make the right bets on innovation ahead of policy being very clear, right? Because right now a lot of Democrats especially are talking about trying to regulate these betting markets, but you right now are at least just using it from a data perspective. Is there any possibility going forward where...
It's a small bet for us? I mean, their headlines, their marketing is like amazing. But it's a small bet. It's a small bet for us. We think it's smart. We think it's a matter of time before, you know, the financial predictive markets, and I think it's really important that I say that financially oriented predictive markets become more mainstream in terms of the pricing of macro risk in the market. We think it's a matter of time before the big banks and the really intelligent non-bank liquidity providers are using that kind of information when they're pricing all different types of macro risk. That's a base case that we have. Whether or not it moves to like how we think about at TradeWeb an institutional market where BlackRock clicks a button and a bank provides a market on a predictive orientation, we'll see. What I would say is we've gotten tremendous amount of interest around how we integrate predictive markets, you know, from some of our biggest most sophisticated clients, which is a good start as you're really kind of trying to invest for the future around this.
So, what would you say would be the impetus for you to go further and introduce those trading capabilities?
You know, more regulatory clarity around it for sure. And then the kind of sort of sponsorship that we've traditionally had as we've built the markets in our company from, you know, the right kind of players in the market. And we're really doing a lot of roll-up-the-sleeves work and just trying to understand how would the cadence of the protocols work. It's an exciting time obviously around that space and for us with the kind of clients we have it's a really nice combination.
Yeah, and I want to put a pin in the innovation part of the combo and get back to that in a little bit, but Brad, can we dig a little bit more into the Clarity Act? You have been fairly optimistic about it. I'm wondering in light of this joint interpretive framework that was just announced last week or the week before by the CFTC and the SEC if you feel like the timeline to get the Clarity Act done is now expedited or if in your conversations you're hearing that lawmakers are now going to kick it even further down the road because they have a little more time now.
Yeah, look, I think what happened two weeks ago with the SEC and CFTC coming together with a joint statement was truly groundbreaking in a bunch of ways. And from my point of view it ended an era of lawfare against this industry which turns out didn't have the support of what the law actually said. So I think that was profound. But I also think we have to recognize that without codified legislative permanence, you still have the risk that the next version of the SEC comes back to Gensler's unlawful war on crypto. And I think that's bad for the United States. I think that's bad policy. It's also bad politics. And what we've seen certainly as we come up to midterms is, you know, being anti-crypto doesn't get you any votes. There's a lot of people who care about this industry who are directly or indirectly involved and you know I think that's why some of the voter education in the last cycle was impactful. So I am still optimistic the Clarity Act, I think it does still matter despite the CFTC and SEC coming together. I think the time is now. I would say I'm probably not quite as optimistic as I once was, but some of the smartest people in Washington insiders that I know have said to me when people are at their peak frustration, that's when they finally compromise and it gets done. I think we're there. I think we're there. So hopefully soon and Senator Hagerty has spoken out and said that he expects it to move through the banking committee in April. So that would be profound and I remain optimistic.
When you talk about voter education, it's not just voter education though, right? It's also a lot of lawmaker education.
Right. I mean, can you share a little bit without naming names? Can you take us into the room? I'm not afraid that you know what those meetings look like, how elementary you have to be when you're talking to people about this because something really interesting I thought you said in a recent interview was that you felt like this push to ban crypto was akin to lawmakers calling on people to ban email when the internet was coming of age.
Yeah. Well, I think that gets to the heart of like, I don't really genuinely, I say this, I don't understand how this became partisan. Like this is just a technology. How you apply the technology, okay, I get how you can be partisan about that, but like this is just technology. And so the example I gave was like why would somebody be anti-email? Why would you be anti? Now, it turns out we have had and you know, while this became partisan kind of towards Democrats not supporting some of this and being anti-crypto and I really think that started with Senator Warren raising and she had a whole thing about I'm raising an anti-crypto army and I just remember thinking why, I didn't get it, like what problem was she trying to address? Now, I think fortunately through education and through just understanding I think voters will, you've seen, you know, 78 Democrats supported the Clarity Act when it came out of the House last summer. And so it has become more bipartisan, but I still think I don't understand why it ever became so partisan in that regard.
He's right. I mean, just the concept though of what you were mentioning just around having to simplify I think is really important. When we were going through, you know, the real heavy lifting around the derivatives regulation, you cannot imagine what some of those conversations were like, which was like this is what, you know, principal counterparty risk is. When there's a buyer, by definition, the other side of the trade is the seller. And if there weren't sort of like those kinds of specifics on the table, that entire work that we did around the regulation would have changed the arc of the derivatives business. So there's a lot at stake on these things, but the reality is simplifying it and talking through the issues in very clear ways becomes really important.
Going into 2028 midterms, how would you characterize the change of posture from Democrats towards crypto and even looking further ahead to 2028 presidential primary?
