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0:01:59 Scott, we’re two days away from the presidential election.
0:02:02 I know who you’re voting for, but who do you have your money on?
0:02:04 I’m actually thinking of going into one of these
0:02:08 in gambling markets and placing some money on Harris.
0:02:09 They have 300,000.
0:02:12 This is where the money and the ground game kicks in.
0:02:16 They have 300,000 volunteers getting people to the polling
0:02:19 station, making sure they know where the polling station is,
0:02:19 banging on doors.
0:02:21 When you bang on a door and someone says, yes,
0:02:23 I’m voting for that person, they are much more
0:02:25 likely to actually go vote.
0:02:28 Supposedly they have 300,000 people on the ground,
0:02:30 feet on the street over the next two weeks.
0:02:34 And estimates are Trump claims he has 50,000, which
0:02:35 means he probably has 30.
0:02:37 So I like our ground game.
0:02:38 I like our choices.
0:02:40 I recognize I’m hugely biased here.
0:02:45 But I wonder if people are just sick of the chaos.
0:02:49 Anyways, I think Harris is going to be our next president.
0:02:54 [MUSIC PLAYING]
0:02:55 Welcome to First Time Founders.
0:02:57 I’m Ed Elson.
0:03:01 This election is very unique for a lot of reasons.
0:03:03 But one of them is that for the first time
0:03:08 in our nation’s history, Americans can bet on it legally.
0:03:11 My next guest is responsible for that change.
0:03:15 He created the country’s first CFTC-approved prediction
0:03:17 market that lets you trade on future events,
0:03:20 including the election.
0:03:22 And if you’re a regular consumer of politics,
0:03:25 you’ve likely heard of this company before.
0:03:27 This is my conversation with Tarek Mansour,
0:03:31 co-founder and CEO of Kalshee.
0:03:33 Tarek Mansour, thank you for joining me.
0:03:34 Well, thanks for having me.
0:03:34 I’m excited.
0:03:36 I’m just going to start with–
0:03:38 I was driving over here, I was in the Uber over here,
0:03:40 and I was just scrolling on TikTok.
0:03:41 Yeah.
0:03:44 This is 100% true about 20 minutes ago.
0:03:47 And this was the video that came up.
0:03:49 I’m just going to show you what this video is.
0:03:50 Can you see this?
0:03:51 Yeah, I’m looking and looking.
0:03:53 Captions, Uber driver kicked us for saying
0:03:54 he’s going to lose his bet on Trump.
0:03:56 Uber driver is literally kicking us out
0:03:58 because we’re not Trump supporters.
0:03:59 That’s not why I’m kicking you out.
0:04:01 I’m kicking you up because you make fun of me.
0:04:03 Because we made fun of you for betting.
0:04:05 You’re betting while driving.
0:04:07 Why are you doing that?
0:04:09 OK, if you want to do it, you’re out.
0:04:10 You’re out.
0:04:11 You’re out.
0:04:13 For people who are not watching on YouTube,
0:04:18 it is an Uber driver who is betting on Kalshi,
0:04:21 on Tarek’s platform, on the election,
0:04:23 on his actual screen on the Tesla,
0:04:26 and then the passengers are complaining about it,
0:04:27 and he’s kicking them out.
0:04:30 Your reactions to that TikTok I saw 20 minutes ago?
0:04:33 Well, I mean, it’s pretty ridiculous.
0:04:36 But like, I mean, first of all, don’t bet and drive.
0:04:40 I mean, you know, so we legalize betting in the US,
0:04:42 but not betting and driving at the same time.
0:04:43 That is actually dangerous.
0:04:44 It’s good, OK.
0:04:47 You know, I think betting on the election is not dangerous.
0:04:48 Betting on the election while driving,
0:04:49 that is actually dangerous.
0:04:50 Very different thing.
0:04:51 So do not do that.
0:04:53 Kalshi is not advocating for doing that.
0:04:55 But pretty cool, though.
0:05:00 It’s crazy, and I will also say, you are everywhere right now.
0:05:04 There are articles about you, a lot of very negative articles,
0:05:07 or about your company.
0:05:10 We’ve talked about your company multiple times on the pod.
0:05:14 We’ve had debates about whether it should exist or not.
0:05:18 So I would like to just get your, on a personal level,
0:05:22 how does it feel to be everywhere right now?
0:05:24 Yeah, we are in a lot of places.
0:05:26 I mean, I think, you know, we are obviously
0:05:28 ramped up the marketing with billboards.
0:05:30 I don’t know if you saw these live billboards.
0:05:31 I did, in New York.
0:05:32 These are actually, if you bet on Kalshi right now,
0:05:36 it will show up live on billboards in New York, Vegas, LA,
0:05:37 pretty much every single major city.
0:05:39 So yeah, I mean, it’s a big moment.
0:05:40 Look, personally, on a personal level,
0:05:44 I mean, I think there’s ups and downs in companies.
0:05:47 I think what Luana, my co-founder, and I have learned,
0:05:49 you just got to write it out.
0:05:51 We’re less volatile now.
0:05:53 We feel the ups a bit less, and we feel the downs a bit less.
0:05:57 And everybody’s super excited and loves us right now.
0:05:59 And in four months, we’re not the news anymore,
0:06:00 and people forget about it.
0:06:01 And it goes on and on.
0:06:04 And that’s what building a company is, right?
0:06:07 The street today is like, oh, Kalshi is the newest quote unquote
0:06:09 overnight success, but they’ve been writing it out
0:06:10 for God knows how many years.
0:06:12 So it’s a grind.
0:06:14 There’s been a lot of down moments, a lot of pain,
0:06:16 but these up moments make it worth it.
0:06:17 It’s really fun to do.
0:06:20 But honestly, I don’t think we really care about the attention
0:06:23 so much, as much as like, we just love this product.
0:06:25 We love that people can trade on the election right now.
0:06:27 We’re having these real-time odds.
0:06:28 We love that we’re providing,
0:06:30 and we believe we’re providing more truth
0:06:30 than we can talk about that.
0:06:33 But it’s been tiring as well.
0:06:34 We’ve been working 24/7.
0:06:36 – For people who don’t know, I think most do,
0:06:38 what actually is Kalshi?
0:06:41 – So Kalshi is the first legal prediction market in the US.
0:06:43 So the first legal place in the US
0:06:45 where you can bet yes/no or trade yes/no
0:06:47 on any future events.
0:06:50 So who will win the election as of this October?
0:06:52 We can talk about us winning the lawsuit,
0:06:54 but also will it rain tomorrow?
0:06:56 Will inflation go up?
0:06:57 Will the Fed raise interest rates?
0:06:58 Will COVID come back?
0:06:59 Will TikTok get banned?
0:07:00 Really anything you can think about?
0:07:03 We don’t do violence, war, terrorism, assassinations.
0:07:05 And as of now, we don’t do sports.
0:07:06 – And how did you come up with this idea?
0:07:09 – So I worked at Goldman Sachs when I was at MIT.
0:07:12 So at MIT, I interned at Goldman Sachs in 2016.
0:07:14 And I also worked at Citadel and a few other places.
0:07:16 But at Goldman, something striking happened.
0:07:20 In 2016, that summer, most of the institutional money,
0:07:24 like high net worth individuals, family offices,
0:07:26 just big, rich corporations or people,
0:07:29 it was crazy because they weren’t asking
0:07:31 about the instruments that we were trading.
0:07:33 There’s options and swaps and quite a default.
0:07:34 So all these complicated things,
0:07:35 but no one actually gave a shit about that.
0:07:37 Like what people cared about, they were like,
0:07:39 what do we do about the election?
0:07:40 What do we do about Brexit?
0:07:42 So those two were happening right in that fall.
0:07:44 And it was like, we want to bet on the election
0:07:46 or we want to hedge against Trump,
0:07:47 like bet on Trump or hedge against Trump,
0:07:49 bet on, at the time it was Hillary against Hillary.
0:07:51 And so we come up with these bundles.
0:07:53 And you see them right now, like Goldman and J.P. Morgan,
0:07:56 they’re all like the Trump bet, the Trump bundle, whatever.
0:07:59 And it was weird because one, it was a proxy.
0:08:00 It wasn’t exactly what they wanted for it.
0:08:01 It was indirect.
0:08:03 Two, we would charge them crazy fees.
0:08:05 It’s over-the-counter, not on exchange traded.
0:08:07 And three, this is the thing that hurt me the most,
0:08:09 which is like, why is it not accessible for everyone?
0:08:10 Well, they’re doing it.
0:08:11 Why can’t anyone do it?
0:08:13 So the idea of building, hey, like,
0:08:14 what if you build a New York Stock Exchange,
0:08:16 where this is actively traded, it’s transparent,
0:08:18 everyone can see, and anyone can access.
0:08:20 It’s like an exchange where you can bet on an event,
0:08:21 where you can trade on an event
0:08:22 the same way you trade a stock.
0:08:23 That was the generous of calcium.
0:08:24 It was illegal.
0:08:25 We spent three years getting it regulated
0:08:27 and we did get it regulated by the federal government.
0:08:29 – So you said at the time,
0:08:32 betting directly on an election was illegal.
0:08:33 Why was it illegal?
0:08:36 – It was kind of never regulated in the US,
0:08:37 but it was done a lot.
0:08:38 So it was insane.
0:08:40 If you look at the New York Times and publications,
0:08:42 back in 1900s, 1800s,
0:08:45 they had like live tabloids of live bets,
0:08:46 live election bets, yeah.
0:08:47 And it was huge.
0:08:48 It was huge, like, even back in the time,
0:08:50 it was like, you know, hundreds of millions,
0:08:52 if you adjust for inflation.
0:08:54 But I don’t think it’s election specific.
0:08:56 I think it’s like financial instruments
0:08:59 consistently, consistently, whenever they come in
0:09:01 and they’re new, they face scrutiny.
0:09:02 And it’s like, is this gambling, is this not?
0:09:03 – Yes.
0:09:04 – I don’t know if, did you know grain futures,
0:09:05 do you know that at some point
0:09:07 they were gonna get illegalized?
0:09:08 – Is that right?
0:09:09 – People were saying it was gonna be gambling
0:09:11 and there was a Supreme Court decision in 1905
0:09:13 that legalized them.
0:09:14 They said like, look, some people speculate.
0:09:15 Yeah, sure.
0:09:16 Some people are quote unquote gambling
0:09:17 or betting on grain futures, which is true.
0:09:20 It’s still true today, but they have economic value
0:09:22 because people hedge and people use them to know
0:09:24 what the price, the future price of grain is gonna be.
0:09:26 And that’s very economically relevant.
0:09:30 – So why was the election contract,
0:09:31 the one they said no to?
0:09:34 They said, yeah, we’re down with you trading on the weather.
0:09:35 – Why elections?
0:09:39 – Yeah, as you point out, the economic value argument
0:09:42 doesn’t seem to hold up because there’s no economic value
0:09:44 necessarily in understanding what,
0:09:46 if it’s gonna be rainy tomorrow.
0:09:50 So what was the sticking point on the election question?
0:09:53 – So look, I mean, I think there’s like a,
0:09:55 well, first of all, I do think whether it’s gonna rain tomorrow
0:09:55 or not is very important.
0:09:56 – Okay.
0:09:57 – I do think it has economic value.
0:09:59 – Let’s hear that, let’s hear that first.
0:10:03 – Well, I mean, I think the OG traders of the weather
0:10:05 are actually the farmers.
0:10:08 It’s like, you know, there’s this lingo of orange futures,
0:10:11 forecast the weather better than the weather channel.
0:10:12 – I didn’t know that, but I love that,
0:10:13 and I’m sure that’s true.
0:10:15 – And they do because actually oranges fluctuate a lot
0:10:18 with the weather, like the harvest and the prices
0:10:19 of oranges fluctuate a lot with the weather.
0:10:24 But so forecasting the weather is very important actually.
0:10:26 And you can extend it to knowing whether a hurricane
0:10:28 is gonna hit a certain territory versus not.
0:10:31 Like we actually have people in the keys in Florida
0:10:34 and every hurricane season, it’s interesting.
0:10:36 We do have a phone number on Kashi.
0:10:36 We keep it very hidden
0:10:38 because we don’t want a lot of people to call us
0:10:39 and support, we get flooded.
0:10:40 No one uses it, right?
0:10:42 People use Zendesk and chat and,
0:10:44 but actually around hurricane season,
0:10:45 we start getting phone calls.
0:10:48 And it’s basically people from the keys in Florida
0:10:51 that usually, you know, it’s a bit kind of like older,
0:10:53 older generation and so on.
0:10:55 Insurance companies have pulled out of the keys in Florida.
0:10:57 They don’t insure, they don’t love insuring
0:10:59 and taking the risk because there’s been so many hurricanes.
0:11:00 It’s kind of like a very dangerous area,
0:11:02 but we have a market about that.
0:11:05 So people put on a hedge on Kashi
0:11:07 against damages to their properties,
0:11:08 against a hurricane hitting their time.
0:11:10 So that’s economically relevant.
0:11:11 That’s insurance, that’s important.
0:11:12 Like that’s important to do.
0:11:13 And yes, some people are speculating,
0:11:14 but that’s true for insurance, right?
0:11:16 If you’re insuring against something bad happening,
0:11:18 someone else is speculating on that on the other side,
0:11:21 which could be the insurance companies and so on.
0:11:22 You asked about elections.
0:11:24 I mean, okay, I can’t speak on behalf of regular,
0:11:26 but the thing that happens is like,
0:11:29 there’s always a sort of official and unofficial like,
0:11:30 I think the official response was like,
0:11:35 hey, trading on the election is gaming.
0:11:38 That’s no different than, you know,
0:11:41 going to a casino and betting on a slot machine
0:11:45 or betting on the outcome of roulette.
0:11:46 And I think you’re asking a good question.
0:11:49 Like how is that gaming, but whether it’s not?
0:11:52 That sounds like a weird line to be drawing.
0:11:53 So there’s an unofficial answer.
0:11:55 It’s just like people have found it to be taboo.
0:11:58 DC doesn’t love the idea of people trading on the election.
0:12:00 Generally speaking, that has always been true,
0:12:02 but that does not mean it’s a bad thing, right?
0:12:04 And so we argued in court, actually,
0:12:08 it’s a tremendous proposition to be arguing
0:12:09 that elections are a game.
0:12:10 – Right.
0:12:12 – If elections are a game, what are we all?
0:12:13 – What are we doing?
0:12:14 – What are we doing, right?
0:12:15 Like, what if people get some?
0:12:18 I mean, you know, elections have no economic impact
0:12:23 on society that is hedgeable, like clearly like,
0:12:26 hedgeable and you can transfer risk with respect to,
0:12:27 then what do we care so much?
0:12:29 Like, you know, and we won, right?
0:12:32 I mean, the law is on our side very squarely.
0:12:33 – How did the ruling go down?
0:12:36 What were some of their reasons for why you are correct?
0:12:38 – So, I mean, we’ve always been consistent about the law.
0:12:42 We’re like, look, I think the law says the underlying,
0:12:44 the thing that you need to be trading on
0:12:46 cannot be gaming, right?
0:12:50 And we argued elections are not a game, right?
0:12:53 Elections are different from looking at, you know,
0:12:57 two boxers fighting and betting on the outcome, right?
0:12:59 Like, or rolling a dice and betting on the outcome.
0:13:01 And at a high level, the way to think about that
0:13:03 and how do we differentiate these from betting?
0:13:05 Look, I’m okay with people calling this betting.
0:13:06 I’m actually okay.
0:13:08 People, when CME launched Water Futures,
0:13:10 one of the most economically relevant commodity,
0:13:13 like financial instruments you can imagine, it’s water,
0:13:15 people call it betting.
0:13:16 Oh, now you can bet on the water.
0:13:17 Okay, fine.
0:13:19 So that’s fine because betting is very similar
0:13:21 to speculation, are people betting on the stock market?
0:13:22 Yes, in some forms, but that doesn’t mean
0:13:24 the stock market in and of itself is bad.
0:13:26 But there is a line to be drawn.
0:13:29 And the line is artificial risk versus natural risk, right?
0:13:31 If you and I, right now, I don’t know,
0:13:36 like pick dice and roll it and we bet on the outcome,
0:13:39 we create an artificial risk so we can speculate on it.
0:13:40 That’s entertainment.
0:13:42 We’re having fun with it, right?
0:13:46 Brexit happening or not, hurricane hitting somewhere,
0:13:49 TikTok being banned or not, legislation,
0:13:50 elections are natural risks.
0:13:53 They exist independently of you and I.
0:13:55 And once there’s a risk that exists,
0:13:58 you now have the need for a market to transfer risk
0:14:00 from people that have it, but do not want it.
0:14:02 They cannot bear it to people that don’t have it
0:14:03 and have capacity for it.
0:14:06 It could be hedge funds, it could be large institutions,
0:14:06 it could be people, it could be people
0:14:08 that want to speculate and so on and so forth.
0:14:09 And that’s why we have a derivatives market,
0:14:11 it’s risk transfer essentially.
0:14:15 I think that the majority of transactions
0:14:18 that are happening on the stock market are gambling.
0:14:19 – Sure.
0:14:21 – I think that’s true of options too.
0:14:26 I think that’s true of trading and that’s okay.
0:14:29 And we’re down with that.
0:14:32 I don’t think it’s necessarily a good thing,
0:14:34 but I almost don’t feel like it matters
0:14:36 whether it’s a good thing or not.
0:14:37 It just is.
0:14:40 It’s something that people do and that’s okay.
0:14:43 And so that’s how I view Kalshi.
0:14:47 I’m like, in my view, I think it is gambling in most cases.
0:14:50 I’d be interested to see if you agree with that.
0:14:51 But that’s fine with me.
0:14:54 If you want to gamble, you can gamble and that’s okay.
0:14:59 And the other side to this is gambling is legal.
0:15:01 You can go to the casino and gamble
0:15:05 and you can bet on a boxing match.
0:15:08 So why, I still don’t fully understand
0:15:10 what the regulatory questions are here
0:15:14 because there are many, in many states,
0:15:16 you can gamble on sports.
0:15:18 You can do whatever you want.
0:15:20 – Look, honestly, I think that’s a very informed view
0:15:23 and I love that because I’ve learned to believe
0:15:27 that the simple statements like gambling on elections is bad
0:15:29 just resonate better.
0:15:33 Then telling people, like, hey, you should get informed.
0:15:35 Like, read why economists love these markets.
0:15:36 Why?
0:15:38 People don’t like going below the surface.
0:15:40 They just hear the thing and like, great.
0:15:43 – And by the way, I just want to point out, again,
0:15:45 I kind of agree with that.
0:15:48 Personally, I don’t want to gamble on the election personally.
0:15:49 – But you think it’s fine.
0:15:50 – But it’s fine.
0:15:54 I also don’t want to like smoke, chain smoke cigarettes.
0:15:57 – Yeah, I mean, again, I think like,
0:15:59 I would say a few things and I kind of like,
0:15:59 I’ll address a few.
0:16:01 So let’s talk about some of the kind of alternatives
0:16:02 and then we come back to our market.
0:16:05 So quite a default swaps,
0:16:08 which are basically a way to insure against company debt.
0:16:11 So generally, the market for that is around,
0:16:13 like I think it per year today,
0:16:15 it’s like in the tens of billions of dollars,
0:16:18 like maybe close up to a hundred billion, right?
0:16:21 That’s the market for hedging actual debt.
0:16:22 But the trading volumes,
0:16:25 the volumes are actually closer to trillions.
0:16:28 So you have a solid like 10 to maybe even like 50x factor.
0:16:29 – Exactly.
0:16:31 – What is the rest of that?
0:16:32 – Yeah, for exactly.
0:16:33 – That’s speculation.
0:16:34 – Speculation.
0:16:36 – No, no, I mean, it’s speculation.
0:16:38 So my point is we’ve just established
0:16:38 that in traditional market,
0:16:40 and by the way, this is also true for grain futures,
0:16:41 for commodity futures,
0:16:43 all these things that have a lot of economic value
0:16:46 that are important and the stock market.
0:16:48 I actually do think that most of transaction stock market
0:16:50 are not capital allocation.
0:16:52 And the reason why you cannot stop speculation,
0:16:54 if you take out speculation from the stock market,
0:16:55 you know what would happen?
0:16:57 There’s no more liquidity.
0:16:58 It dries up.
0:17:00 There’s no more stock market.
0:17:01 There’s no transactions anymore, right?
0:17:03 Like there’s no life-taking prices.
0:17:04 Nothing is happening.
0:17:06 So the people that need the capital at that point,
0:17:08 the very purpose of the stock market fades away.
0:17:09 And we’ve seen that.
0:17:11 No stock market weakens capitalism.
0:17:14 It, you just start airing on the side
0:17:15 of telling people what to do
0:17:17 and what not to do with their money.
0:17:18 So it’s the same thing here.
0:17:19 Yes, there’s a lot of speculation.
0:17:20 And I’ll tell you like,
0:17:22 majority of things are going to be stuck.
0:17:23 If the market is liquid on cash,
0:17:25 it will be a lot of speculation.
0:17:26 Because for every hydra,
0:17:27 you need multiple speculators.
0:17:28 You need that market to be vibrant
0:17:30 and you need that type of speculative activity.
0:17:33 But it doesn’t make the market itself bad.
0:17:35 Gambling and betting in my view though,
0:17:37 like I’m okay with calling betting and speculation.
0:17:38 Gambling is a bit weird.
0:17:41 It has some negative connotations historically,
0:17:45 which come with I’m betting against the house, right?
0:17:47 Like I’m going to casino and I’m betting against the house.
0:17:50 And if I make a lot of money, they’ll kneecap me, right?
0:17:52 There’s like odds that are tilted against me
0:17:54 because the house usually wigs the game
0:17:55 so that they always win.
0:17:56 That’s a really good distinction.
0:17:57 Whereas on cow sheets,
0:17:59 and this is why I called maybe speculation or betting
0:18:00 or like the stock market,
0:18:02 you’re trading against other people.
0:18:02 It’s fair game.
0:18:03 You’re not trading against like,
0:18:05 we’re not the one setting the odds.
0:18:07 It’s not tilted towards us.
0:18:08 You’re trading against other people.
0:18:10 – That is a good point. – We just take transaction fees.
0:18:14 And so that’s a different type of dynamic.
0:18:15 – Right.
0:18:18 – You’re not always negative EV in our markets.
0:18:19 Hopefully, if you’re informed.
0:18:20 I mean, I’ll ask you a question.
0:18:23 – I’m just trying to think like how sports betting works.
0:18:24 I guess that’s kind of like–
0:18:25 – A lot of it is against the house.
0:18:26 – The house sets the–
0:18:29 – You bet against DraftKings or you bet against FanDuel.
0:18:31 There are some new ones where it’s like kind of more
0:18:34 exchange driven where I’m betting against you
0:18:36 or other people and we are setting the odds
0:18:38 by putting orders against each other.
0:18:39 So our prices are not set by anyone.
0:18:42 It’s like actually market supply and demand.
0:18:43 It’s like the stock market.
0:18:43 – Totally.
0:18:44 I hadn’t thought of that
0:18:46 and I think that’s exactly right.
0:18:49 So I’m gonna go along with you on this
0:18:53 that we’re down and propose some potential issues
0:18:56 now that let’s assume we agree.
0:18:58 One of the events you can trade on
0:19:01 is whether or not Elon Musk will be nominated
0:19:03 to the cabinet, to Trump’s cabinet.
0:19:05 Let’s say you’re Elon Musk.
0:19:07 You’ve just had a private conversation with Trump.
0:19:11 He tells you, “I wanna have you in the cabinet.”
0:19:16 What is stopping Elon legally from rigging that market
0:19:20 and thus rigging all the other gamblers, sorry.
0:19:23 – And that example applies to a lot of event contracts
0:19:24 in prediction markets.
0:19:25 I mean, that’s definitely true
0:19:28 and guess what that example applies to as well.
0:19:29 – Stock market.
0:19:30 – Stock market, right?
0:19:32 – I should just rephrase.
0:19:34 How do you prevent insider trading?
0:19:36 – There’s so many interesting things.
0:19:38 So first of all, actually, weirdly enough,
0:19:41 insider trading is not illegal and commodity derivatives.
0:19:45 Yeah, because the farmers are trading on grain prices
0:19:47 and obviously farmers have insider information
0:19:48 on grain prices.
0:19:49 – Okay.
0:19:52 – To be clear, that said, we have it in our own rules.
0:19:54 Our designation is a designated contract market.
0:19:55 It’s like a legal designation
0:19:57 and what we are is a self-regulated organization.
0:19:59 Think of it as a little bit of an extension
0:20:01 of a government where we have our own set of rules
0:20:05 and these rules basically can go from civil prosecution
0:20:07 all the way to criminal prosecution.
0:20:08 And we have a rule against insider trading.
0:20:09 We do have it, actually, calcium.
0:20:10 But that’s not because of the law.
0:20:13 We impose the rule that you cannot trade
0:20:15 on material and non-public information
0:20:17 on prediction markets, on our prediction markets.
0:20:19 So if you do, you’re actually violating the law
0:20:22 because violating the rules of an SRO is violating the law.
0:20:23 – This is fascinating.
0:20:24 – Yeah, yeah.
0:20:25 So if you violate the calcium rules,
0:20:27 you’re violating the law and you can impose fines
0:20:29 all the way to criminal prosecution,
0:20:30 you can be prosecuted by the CFTC.
0:20:32 Basically, same way that if a Goldman trader
0:20:34 commits insider trading, they’ll be prosecuted by the SEC.
0:20:35 So same thing.
0:20:36 – Yes, yeah.
0:20:37 – So from a legal perspective, it’s the same thing.
0:20:38 We established that.
0:20:41 Now the question is like, how do you enforce against it?
0:20:43 – Exactly.
0:20:44 – Same thing as a stock market, right?
0:20:46 Like if Elon has a product announcement
0:20:48 or actually anyone at Tesla
0:20:50 has an upcoming product announcement
0:20:52 and they call their cousin and they say,
0:20:53 “Hey, this is coming.
0:20:56 You should load up on Tesla options.
0:20:58 How does the New York Stock Exchange police against that?”
0:20:59 Right?
0:21:01 They have actually a very good mechanism.
0:21:02 We have the same ones that we’ve built over the years.
0:21:05 So we have, first of all,
0:21:06 like we have surveillance systems
0:21:08 that are constantly ingesting trading data
0:21:10 and seeing weird artificial patterns, right?
0:21:12 Like if someone is loading way out of the money,
0:21:14 buying stuff that’s trading at 10%
0:21:16 and suddenly it moves to 90 the next day,
0:21:17 those usually get flagged.
0:21:19 Especially if the transactions are large,
0:21:21 they get flagged and they go to investigation.
0:21:22 We have a whole investigation department
0:21:24 that basically investigates who they are
0:21:26 because we KYC people, we know who they are.
0:21:27 We ask them questions.
0:21:28 It’s like opening a brokerage account.
0:21:30 So we have their SSN and so on.
0:21:32 And then they can be escalated for an investigation
0:21:33 where we figure out why did you place that trade
0:21:35 and how did it come to fruition.
0:21:38 Very similar to how insider trading is monitored on stocks.
0:21:39 Is this perfect?
0:21:42 No, but people do do insider trading on stocks.
0:21:44 The most important thing to flag
0:21:46 when insider trading becomes vile
0:21:48 and bad is when it’s large.
0:21:51 Like the larger, the more important it is to flag.
0:21:54 Like if someone puts $10 on Tesla options
0:21:57 because they had some of their cousin told them something,
0:21:59 like is that gonna be flagged?
0:22:00 Probably not.
0:22:02 Now, if that $10 turns into $20 million,
0:22:03 that’s a very different story.
0:22:05 But also $20 million is much easier to flag.
0:22:07 You figured out the regulation.
0:22:10 That’s your big innovation, exactly.
0:22:14 And you described how when you’re working at Goldman
0:22:16 and these family officers who wanna make bets
0:22:19 on the election, I would bet that Goldman
0:22:21 is looking at Kelsey right now
0:22:23 and they’re thinking, holy shit,
0:22:26 they’re about to take our entire trading business
0:22:28 or at least in that aspect of things
0:22:32 where people wanna make these sort of narrative driven bets.
0:22:35 And why wouldn’t they just do it on Kelsey?
0:22:37 They don’t need Goldman to bundle up
0:22:39 this special options package for them.
0:22:41 They can literally just bet on the story.
0:22:46 And it’s all because you guys figured out the regulation.
0:22:47 How did you do that?
0:22:51 And what did you learn about the regulatory system?
0:22:54 What about your process actually pushed this through?
0:22:55 – It took a long time.
0:22:57 Like because you need to imagine it’s three years,
0:22:58 all we’re doing is regulation.
0:23:00 I’m drafting law and policy and regulations
0:23:02 all day, all night.
0:23:03 Everyone around us was saying
0:23:04 this is never gonna happen.
0:23:05 Every single lawyer, I mean,
0:23:06 for when we first started a company,
0:23:08 one day we called 65 lawyers, all of them said no.
0:23:10 It’s not happening, this is stupid, yeah.
0:23:12 And the safety wasn’t giving us any like,
0:23:13 oh yeah, we’re gonna do this.
0:23:14 It was like mostly like,
0:23:15 oh, here are all the issues with this thing.
0:23:17 And we would go and take these issues, fix them.
0:23:18 And then there’s more issues and more issues.
0:23:21 It was like rocking through this desert.
0:23:24 You have no evidence whatsoever that the desert ends.
0:23:25 Actually, all evidence is pointed
0:23:27 that this desert is not gonna end.
0:23:28 And we kept going.
0:23:29 And I really think that was it.
0:23:31 Like I think a lot of it is actually
0:23:32 you just have to stick it through
0:23:33 and it’s a war of attrition.
0:23:35 And you have to just like keep pushing
0:23:37 and keep your conviction.
0:23:39 And what kept us convicted is like,
0:23:42 look, we will stop when we get what we want
0:23:44 or we are proven wrong.
0:23:45 And until we are proven wrong,
0:23:47 like literally mathematically proven wrong,
0:23:49 like why shouldn’t these markets not exist?
0:23:50 – Yes.
0:23:52 – So we’ll keep going and see what happens.
0:23:54 – We’ll be right back.
0:24:12 – Hey, it’s Scott Galway.
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0:26:47 – We’re back with first time founders.
0:26:49 I want to move on to another topic.
0:26:53 So this has become super, super politicized because–
0:26:55 – Yeah, the odds are off.
0:27:00 – Yes, and a lot of people are looking at the odds
0:27:03 on Calci right now, which as of today,
0:27:06 I think they’re around 60%.
0:27:07 Is it 60 right now?
0:27:08 – Let me try.
0:27:10 (laughing)
0:27:12 – It was, I think, 60 a day or two ago.
0:27:14 I thought it might have dropped to 58, I think.
0:27:15 – 59%. – 59, yeah.
0:27:17 – 59%.
0:27:20 So a lot of people are saying that this is,
0:27:22 one of the arguments in favor of this,
0:27:23 which I don’t fully agree with,
0:27:27 is that this is an alternative to polls.
0:27:29 Because it’s more accurate than the polls
0:27:32 because people are actually putting their money forward.
0:27:34 You’re drawing from the wisdom of crowds.
0:27:40 My belief is that this is not necessarily the base truth
0:27:45 because one of the biases that I’ve noticed,
0:27:47 which I saw you guys put your numbers out
0:27:51 on your demographics, is 90% of the people on Calci are men.
0:27:56 And so my view is, baked into this is a level of bias
0:28:01 that means that it can’t just be the exact truth.
0:28:03 Your points on my thoughts on that.
0:28:05 – Yeah, I think that’s a great point.
0:28:07 Let me address a few things.
0:28:09 Like, you know, and I kind of keep repeating this,
0:28:10 and I know you know this,
0:28:12 but it feels like general population doesn’t understand this.
0:28:14 Like, market odds are pricing the probability
0:28:15 of a candidate winning.
0:28:16 That’s not what polls do.
0:28:17 – That’s not what polls are.
0:28:19 – Like, if you’re up two points on the polls,
0:28:21 you’re kind of, you’re up more like 5% to 10%
0:28:24 in prediction markets and in odds.
0:28:25 That’s not the same thing, right?
0:28:28 Like 60% odds is not 60% in polling.
0:28:31 If you’re polling 60% up, you won.
0:28:34 You’re like 90% chance of winning in a certain place.
0:28:38 So I think people are overreacting to this
0:28:39 in either case.
0:28:40 Like the Republican candidate.
0:28:41 – They’re going crazy.
0:28:43 This has been crazy on this question.
0:28:45 – I know, it’s been crazy.
0:28:46 I agree.
0:28:47 Like, I think the Republicans are like kind of taking it
0:28:48 as a strong sign of victory
0:28:51 and the Democrats are taking as a strong sign of defeat
0:28:53 and it’s rigged and all that.
0:28:55 But like, I’m telling everybody, like calm down.
0:28:57 First of all, this is a still coin flip.
0:28:58 It’s slightly biased.
0:29:00 And if it was in the sports context,
0:29:02 like if Barcelona is slightly disfavored
0:29:04 versus Real Madrid, Barcelona wins very often.
0:29:06 Like, you know, so that’s one.
0:29:09 Two, 10 days is a very long time for these markets.
0:29:11 10 days ago, the odds were 51% Kamala Harris.
0:29:13 Now there’s 60, it moves.
0:29:14 That’s like the whole point is it moves
0:29:16 and it’s pricing in real time.
0:29:17 So that’s kind of putting that out there.
0:29:21 Now, I don’t think sampling bias is a real thing
0:29:23 in prediction markets, to be honest.
0:29:24 I don’t think so.
0:29:27 And I don’t actually really agree with that.
0:29:28 The basic point is actually, so fine.
0:29:30 There are more men than women on Kashi, that is true.
0:29:33 We released that, we said that publicly.
0:29:34 90% is men, 10% is women.
0:29:38 But amongst the women, like if you just see
0:29:40 where women, what women are buying and betting,
0:29:42 they’re actually buying more Trump than Kamala.
0:29:45 There is zero evidence right now that if we had 50/50 women
0:29:46 that it would actually change.
0:29:51 Actually, the Trump bias is slightly higher amongst women
0:29:54 than it is amongst men.
0:29:54 – Interesting.
0:29:57 – So does it definitely, like this is not a poll by the way,
0:29:59 this is not saying that more women
0:30:01 is gonna vote for Trump than Kamala, not at all.
0:30:02 That’s not what this is saying.
0:30:03 All that this is saying is,
0:30:04 I don’t think this bias is really there.
0:30:09 – So, one of the issues with polling that has often happened
0:30:14 is that Democrats, historically speaking,
0:30:17 have been more down to pick up the phone
0:30:19 and to answer the polling question.
0:30:20 – Sure, sure.
0:30:23 – And Republicans, historically speaking,
0:30:24 when they hear someone,
0:30:26 “Hey, I’d like to ask you a few questions about the election.”
0:30:27 Fuck off.
0:30:29 So that’s historically been what’s happened.
0:30:31 And that could totally change.
0:30:34 The point being, there is a very specific
0:30:38 and kind of weird bias baked into the polling,
0:30:40 which means that you can’t take it as base truth,
0:30:42 which I think all of us already know.
0:30:46 What I would say about Kalshi is that,
0:30:47 you mentioned that the women on Kalshi
0:30:49 are actually more pro-Trump.
0:30:51 I would bet that Kalshi is also attracting
0:30:53 a certain type of woman.
0:30:55 And the certain type of woman
0:30:57 is probably more likely to bet Trump.
0:31:00 Would be my guess, but again, that’s total speculation.
0:31:03 And my point being, both of these things
0:31:08 are trying to draw the base truth out of what’s happening.
0:31:08 – But it’s biased, yeah.
0:31:11 – But they’re biased in small different ways.
0:31:15 And so the idea that either is more accurate than the other,
0:31:17 to me, isn’t true.
0:31:18 – That is a fair point.
0:31:20 And I think that there is a difference, though,
0:31:22 and that’s why that was my second point, actually.
0:31:24 So first, I mean, that’s kind of the face value.
0:31:26 Maybe, maybe, maybe these women are actually more pro-Trump
0:31:26 than they are pro-Kamala,
0:31:29 and they wanna buy more Trump, that’s possible.
0:31:32 But, and that’s important to understand.
0:31:34 In polls, if that happens, it’s done.
0:31:35 You poll the bunch of people,
0:31:36 and you get the number, and that’s it.
0:31:41 In markets, if the true value, if the fair value,
0:31:43 the theoretical correct answer is 50,
0:31:46 and there is weird flows that are biasing it to 60,
0:31:49 arbitrageurs and traders that like making money.
0:31:51 I hope that we can all agree that people in America
0:31:53 are really everywhere like making money.
0:31:56 Like, I hope that, like, there’s no disagreement
0:31:57 about– – No, I don’t,
0:31:58 I don’t care about money. – Like, people are greedy.
0:32:00 Like, as long as you trust that people are greedy.
0:32:01 – I love it, yeah.
0:32:05 – People are studying these insanely obsessively.
0:32:07 They study the polls, they study how the polls
0:32:08 are being made, they study statements,
0:32:11 they study historical data, they study the markets,
0:32:15 they study other markets, like stocks and so on.
0:32:17 Now, if this is true, if we are really at 50-50,
0:32:20 and the others saying 60-40,
0:32:24 there is a multi-10 million dollar incentive to bring it back.
0:32:25 And we have institutional liquidity.
0:32:27 We have institutional liquidity on the platform,
0:32:29 like really smart money, it is there.
0:32:30 It could be individuals that are really smart,
0:32:32 I mean, we have Susquehanna on the platform,
0:32:35 SIG, one of our main partners that, you know,
0:32:37 has been pricing and trading these things forever.
0:32:39 We have other prop shops and hedge funds,
0:32:41 some of the smartest people on earth, like, you know,
0:32:43 you can imagine all the names, they’re not,
0:32:45 SIG is public, the others didn’t make it public,
0:32:48 but smart money brings back the prices to where it should be
0:32:50 because there is incentive to do so.
0:32:54 Like, fine, there is a Trump bias in the flow.
0:32:59 That is like what people consider to be the best type of flow
0:33:01 for the Citadels and Susquehannas of the world,
0:33:02 because they come and trade against it
0:33:03 and bring the prices down.
0:33:05 And these people are actually trading at a loss
0:33:07 at a negative expected value,
0:33:08 and the market makers are trading
0:33:10 at a positive expected value.
0:33:11 – That makes a lot of sense.
0:33:13 What I would say is that, you know,
0:33:15 the stock market has a lot of liquidity,
0:33:17 and oftentimes, as we have seen in the past,
0:33:19 the stock market can be wrong about things.
0:33:22 People can be just sort of wrong
0:33:23 and they can get things. – Irrational, yeah.
0:33:24 – They can be irrational.
0:33:26 So that is my view on this,
0:33:29 is that people are irrational,
0:33:31 therefore, polls are irrational,
0:33:32 and therefore, markets are irrational.
0:33:37 And so this debate over this one’s true and this one isn’t,
0:33:39 to me, feels a little bit useless.
0:33:42 And I guess the question that I would sort of wrap up
0:33:44 at this specific point to you with is,
0:33:49 do you think that Kalshi should be replacing polling in some way?
0:33:50 – I think let me address liquidity
0:33:52 and then the sort of irrationalism of markets,
0:33:53 which I agree with, by the way.
0:33:55 So we are very liquid, actually.
0:33:57 – By the way, could you just give us the statistics
0:33:59 on how much money has been wagered?
0:34:00 – It’s different, by the way.
0:34:03 So liquidity, and people confuse this a bit with volume.
0:34:05 Liquidity is how much you can take at a point in time
0:34:06 without moving the price a lot.
0:34:09 How robust is the pricing and how much you can take?
0:34:10 On Kalshi, you can take multi-million dollars
0:34:12 without moving the price at all.
0:34:12 It doesn’t move it.
0:34:13 The price won’t move.
0:34:14 You can take multi-million dollar position,
0:34:16 the price won’t move.
0:34:18 You can take up to a hundred million dollars.
0:34:19 – Which is reflective, by the way,
0:34:21 of how much money is here.
0:34:23 – But also how much the liquidity providers,
0:34:25 the institutional market makers,
0:34:27 that makes a difference in a small betting market
0:34:29 versus a stock market.
0:34:30 You can take up to a hundred million
0:34:33 and it won’t move the price by more than one to two cents.
0:34:34 A hundred million.
0:34:36 So it’s very hard to move the prices.
0:34:37 You need tens of millions
0:34:38 and the impact will be very marginal.
0:34:40 So that’s one.
0:34:43 Two, I have never said, by the way,
0:34:45 these markets are always accurate, nothing else.
0:34:48 We can’t say what the future holds, right?
0:34:50 That doesn’t make any sense.
0:34:51 But what I can say is these markets
0:34:52 are more accurate than alternatives.
0:34:54 And I do stand by that, right?
0:34:56 Like if you look at the mean error of our forecast
0:34:57 to everything else,
0:34:59 we’ve been the most accurate on inflation forecast,
0:35:01 better than the Blueberry Economist survey,
0:35:02 a variety of other surveys.
0:35:05 Yeah, Fed interest rate decisions, climate and weather,
0:35:07 even earthquakes.
0:35:09 That doesn’t mean we can forecast earthquakes.
0:35:10 That’s a crazy statement.
0:35:11 I’m not making that statement at all,
0:35:12 but the alternative is like,
0:35:13 you hear a pundit on the news
0:35:14 or like, hear someone saying something crazy
0:35:16 because they want to get some press or whatever.
0:35:17 But now you have a mechanism to like,
0:35:19 hey, if you have some information about this,
0:35:21 come put it to market and get paid for it.
0:35:22 And then we get an accurate price from that.
0:35:25 But these should not replace polls.
0:35:26 They’re doing something different.
0:35:29 This is an additional source of data.
0:35:31 I keep saying more truth.
0:35:33 I don’t say exclusive truth
0:35:35 or like we’re the only truth.
0:35:36 No, we’re not.
0:35:38 Like more truth, just get informed.
0:35:40 Look at the markets, look at the polls.
0:35:42 Maybe don’t look at all the crazy videos on TikTok.
0:35:44 Like this misinformation left and right, right?
0:35:46 Like if you, but I don’t think they should replace polls.
0:35:48 They’re doing something different.
0:35:49 Polls are important.
0:35:51 And by the way, these markets rely on polls.
0:35:51 Right.
0:35:53 Yeah, that’s how they’re informing their bets, right?
0:35:54 Yeah, like how are traders, like traders,
0:35:56 a lot of, I don’t know about any traders
0:35:58 that doesn’t have polling in their methodology.
0:36:00 Let’s talk about the business itself.
0:36:02 How does Kalshi make money?
0:36:04 How has this worked out for you as an actual business?
0:36:05 Yeah, so it’s again,
0:36:07 it’s kind of one of the decisions I’ve drawn.
0:36:07 So we’re in exchange.
0:36:10 So our business model is like New York Stock Exchange or CME.
0:36:12 We take transaction fees, like trading fees.
0:36:14 So you do a few thousand dollars,
0:36:15 we take one to two percent in fees.
0:36:18 So we take 20 bucks on that transaction.
0:36:18 That’s how we make money.
0:36:20 Over time, I think we have a lot of requests for our data,
0:36:22 like people want to poll data and more granular data.
0:36:23 But for now, we’re making it open source.
0:36:24 We want everyone to have it.
0:36:25 It’s part of the mission.
0:36:26 We’re not charging for it.
0:36:27 And specifically on the election,
0:36:29 we’re not charging fees right now.
0:36:31 We just want to have, like we want to promote.
0:36:32 Just get everyone in there.
0:36:32 We want to get everyone in there.
0:36:34 We want the market to do their thing.
0:36:36 No kind of barriers, fully efficient and so on.
0:36:39 And we’re also actually, we pay back the interest.
0:36:41 We don’t take the interest ourselves.
0:36:43 I don’t believe in making money off of people’s interests.
0:36:45 So if you deposit money on Kalshi,
0:36:48 both your cash, but also your open bets.
0:36:50 So if you buy, like if you put a position on Kamala or Trump
0:36:54 right now, that bet will pay you 4.1% annualized variable
0:36:56 interest as it’s outstanding.
0:36:59 And it’s cool because if your position goes up in price,
0:37:01 like if you bought at 50% and then now it’s 60%,
0:37:04 you get paid on the marked up position.
0:37:05 So you have no opportunity costs.
0:37:08 We’re paying your interest based on your kind of outstanding
0:37:10 bets and positions on Kalshi.
0:37:12 And the expenses, is it an expensive thing to run?
0:37:13 Yeah, regulatory.
0:37:15 I mean, we have to think of building the new stock
0:37:16 exchange from scratch.
0:37:17 So we run a clearing house.
0:37:19 We have one of the handful of clearing houses in the US
0:37:24 that can really move money and clear derivatives exchange.
0:37:27 We have the surveillance systems, you know,
0:37:28 a lot of very, very heavy infrastructure
0:37:30 that took years to build.
0:37:31 So it is expensive to run.
0:37:33 It’s a lot of upfront costs, but the marginal costs
0:37:34 are very low.
0:37:37 So it is very hard business to get into and get
0:37:38 the flywheel running for the marketplace.
0:37:40 But once it does, it’s a very profitable business
0:37:43 because the unit economics, the marginal expense
0:37:43 is very low.
0:37:44 It’s AWS.
0:37:47 And you have some significant competitors,
0:37:49 but from my understanding, no competitors
0:37:52 that have been approved in the US.
0:37:54 What is the competition?
0:37:56 So I mean, like, look, there’s always been–
0:37:58 so there’s like offshore, like polymarkets offshore
0:38:02 unregulated crypto-based pollution market.
0:38:03 Oh, it’s crypto-based, I didn’t know that.
0:38:05 Yeah, yeah, they actually did get enforcement action
0:38:06 from the CFC two years ago.
0:38:08 So they’re not allowed to cater to US.
0:38:11 And there are a lot of others similar to polymarket.
0:38:13 What I would say is don’t trust the volume on these sites,
0:38:15 because it’s not actually true.
0:38:16 There’s a lot of wash trading.
0:38:18 So it’s a lot of bots, fake bots just trading against each other.
0:38:19 But it’s not economics.
0:38:21 Like, I give you 100, you give me back 100.
0:38:24 And is that because they haven’t verified their customers
0:38:25 as well as you have?
0:38:27 Yeah, it’s like, there’s no KYC, you don’t know who’s trading.
0:38:28 It’s not reported to the government.
0:38:29 We can’t do that type of thing.
0:38:32 But it’s like, I give you 100, you give me back 100.
0:38:35 That’s called wash, which is like not real trading.
0:38:37 But the volume just went up by 200.
0:38:39 So imagine we do that 10,000 times, 100,000 times a day
0:38:42 with bots, suddenly the volume is very large, but it’s not real.
0:38:45 So that’s why we always say, trust the one that’s safe,
0:38:48 regulated, trusted, and we’re only Americans.
0:38:51 We don’t have foreign kind of participation for now.
0:38:53 We’re just only Americans and so on.
0:38:54 Look, honestly, competition is good.
0:38:58 It’s more like, I always think more people being educated
0:39:00 about these markets is a good thing.
0:39:02 I believe the regulated approach is the only approach.
0:39:03 That’s what I believe.
0:39:05 That’s a strong belief we firmly hold the company.
0:39:07 The last thing I always say is, I always worry a little bit
0:39:10 about the unregulated doing something bad.
0:39:12 And I always worry about nascent asset classes.
0:39:15 I always try to advocate, trust the regulated actors
0:39:17 and less the unregulated actors.
0:39:19 And I hope the unregulated actors come and get regulated
0:39:21 and do it the right way so that people can trust this asset
0:39:24 class because things can go wrong in unregulated venues.
0:39:28 And when they do, people don’t blame the unregulated venues.
0:39:30 Regulates blame the asset class.
0:39:31 We’ll be right back.
0:39:34 (upbeat music)
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0:42:51 (funky music)
0:42:58 – We’re back with First Time Founders.
0:43:01 I want to shift gears to your personal journey
0:43:02 as an entrepreneur.
0:43:04 Tell us a little bit about your background.
0:43:06 Like, what inspired you to get into this?
0:43:09 You mentioned you worked at Goldman, you went to MIT.
0:43:12 What sort of led up to Kalshi in your life?
0:43:13 – It’s interesting because both Michael Vander and I
0:43:15 had very similar backgrounds.
0:43:17 So I was born in LA, I grew up in Lebanon.
0:43:20 Loana grew up in Brazil.
0:43:21 We were both math geeks in school.
0:43:22 Go to MIT.
0:43:24 – This is your co-founder, Loana Lopez.
0:43:25 – Lara, yes.
0:43:28 – And you met at MIT?
0:43:29 – Yeah, so we met at MIT.
0:43:31 It was kind of like, we were both math geeks.
0:43:32 We were like, love getting into MIT.
0:43:33 That was the place for math geeks.
0:43:35 And then we both kind of love finance.
0:43:37 But we didn’t, we weren’t like the type that was,
0:43:38 you know how like there’s a persona.
0:43:40 I was like the entrepreneur, the person that’s always
0:43:41 building products.
0:43:43 I want to be kind of like, we weren’t that.
0:43:45 Yeah, we didn’t have that.
0:43:47 We weren’t reading books or listening to podcasts.
0:43:49 I think I was fairly firmly convinced
0:43:51 that I was going to be a trader.
0:43:52 I was going to be at Citadel.
0:43:53 I love working at Citadel.
0:43:53 Citadel was amazing.
0:43:54 It was incredible.
0:43:57 But it was one of those things that the idea was just,
0:44:00 wouldn’t let go basically.
0:44:03 It was just like, the idea was so kind of like,
0:44:05 constantly in the back of our minds.
0:44:07 And it was like pulling us to it slowly.
0:44:09 It kept on popping up, right?
0:44:13 Like it’s always the idea pulled us into building the company
0:44:14 rather than the vice versa.
0:44:15 Like we’re looking for an idea.
0:44:16 It’s like the idea just kind of pushed us.
0:44:18 And we kind of loved it.
0:44:20 It’s like this beautiful notion of,
0:44:24 what if you can apply markets to price the future, right?
0:44:26 Like we price anything now.
0:44:27 Why don’t we price our future, right?
0:44:29 Like imagine we can ask questions like,
0:44:32 will GDP go up if Trump gets elected?
0:44:34 Will GDP go up if Kamala gets elected?
0:44:36 And you can have a market-based pricing for that.
0:44:37 Let the market tell you.
0:44:38 Market truth, right?
0:44:39 And that was the elegance of it.
0:44:40 And we really liked that.
0:44:44 And so slowly, we basically just kind of got dragged into it.
0:44:46 And they were like, all right, we’re going to have to build
0:44:48 this company now because we would regret not doing so.
0:44:52 It’s almost like there are some ideas that are so obvious
0:44:53 that they have to get done.
0:44:56 Like if it, I feel like if it wasn’t going to be you,
0:44:58 someone else was going to do it.
0:45:03 And it’s so interesting to me that the hurdle was the regulation.
0:45:04 And you want it to be a trader.
0:45:06 You clearly have a massive math brain.
0:45:08 I doubt you’re doing any math these days.
0:45:09 Not anymore.
0:45:12 Well, we do some, I mean, we’ve hired people
0:45:15 that are a lot smarter than us, which is-
0:45:16 Helpful.
0:45:17 Which is helpful.
0:45:18 Yeah, yeah.
0:45:19 We do less for sure.
0:45:23 We were making jokes this week, actually, like I’ve slowed down.
0:45:24 I was better at math before.
0:45:25 Yeah.
0:45:26 I had to practice.
0:45:27 I had to practice for sure.
0:45:29 I’m sure you’re going to lobby in now.
0:45:30 Yeah, better.
0:45:31 Yeah, yeah.
0:45:32 I mean, not, you know, but like engaging regulators
0:45:33 and politics.
0:45:34 Yeah.
0:45:35 Definitely better.
0:45:36 But yeah.
0:45:37 I would like to hear a little bit about that.
0:45:40 I mean, first let’s talk about maybe fundraising.
0:45:43 I mean, you’ve had a huge success in fundraising.
0:45:44 You’ve got some very big name investors.
0:45:48 What would you say makes you a good fundraiser
0:45:51 and what are the qualities of a founder
0:45:52 who can go out and raise a lot of money?
0:45:54 I think I’m a good fundraiser in some ways,
0:45:56 but like there are better fundraisers for sure.
0:45:59 But I think like I build relationships with people.
0:46:00 I don’t play a lot of games.
0:46:02 I’m very honest and transparent up front.
0:46:03 Yeah.
0:46:06 And I’ve always kind of had that approach to raising money.
0:46:08 And I explained to people like, hey, this is a long journey.
0:46:13 This is a company I’m committed to and we want to build long term.
0:46:15 And I think a lot of investors kind of appreciate that
0:46:17 because they’re used to the games and the kind of…
0:46:20 So I just usually build relationships with people that I kind of like
0:46:22 and I talk to them about the business.
0:46:25 And I genuinely consider it as a two sided interview.
0:46:26 It’s like, do I like this person?
0:46:28 Do I think they get what we’re trying to build?
0:46:30 And I think like all things, it’s a bit like dating.
0:46:33 And you have to be convinced that what you have is valuable.
0:46:35 And I never meant to claim like cash sheet is going to be…
0:46:38 I hate these claims, and all funders do that.
0:46:39 We’re the next Apple.
0:46:40 Yeah.
0:46:41 We’re the next Apple.
0:46:42 We’re going to be a hundred billion dollar company.
0:46:44 And I’m like, I don’t know that, right?
0:46:45 Like I don’t say that.
0:46:48 There’s a lot of things that have to go right for us to get there.
0:46:50 But what I do say is it has the potential to.
0:46:51 And I do think so.
0:46:53 Like I think we have the potential to be a hundred billion dollar company.
0:46:56 And if things go our way, that’s the size of the time.
0:46:58 That’s the potential opportunity.
0:46:59 Will that happen or not?
0:47:00 I don’t know.
0:47:01 I can’t say for sure.
0:47:02 But I will work as hard.
0:47:04 I mean, I’ve shown how hard I’m willing to work and how much I’m going to sacrifice
0:47:06 to make it happen.
0:47:08 And I think a lot of people appreciate that.
0:47:11 It gets to the basics of just negotiating, right?
0:47:17 And it sounds like what you are is an incredibly skilled negotiator and you’ve kind of proven
0:47:21 that through getting this through in your dealings in DC.
0:47:28 And what I have found in negotiating is that it does all start with kind of your initial
0:47:35 position, which is like, how confident am I in myself and in the product that I’m trying
0:47:36 to sell?
0:47:39 So you mentioned like a two sided thing.
0:47:41 It’s like, this is where I stand.
0:47:43 This is what I’m looking for.
0:47:45 And this is what I’d like to get from you.
0:47:46 That’s my position.
0:47:50 And it sounds like you’re very, very confident about that.
0:47:56 And I think the question is for people who want to get good at that, where do you get
0:47:57 that confidence from?
0:48:00 Like, what do you sort of hype yourself up before you go into a meeting?
0:48:05 How do you sort of walk into the room and say, yep, this is who I am and I’ll be unapologetic
0:48:06 about it.
0:48:07 I’m always like interested.
0:48:11 People around me say like, hey, where’d you get the confidence from?
0:48:12 But it always rings the bell.
0:48:17 I’m like, I have long periods of lack of confidence.
0:48:18 You know what I mean?
0:48:20 It’s like, I have a lot of insecurities and variety of different ways.
0:48:24 And maybe I’ve gotten tougher over time.
0:48:26 People don’t see it as much.
0:48:31 But people over assume how confident founders are and how it feels on the inside.
0:48:36 I think I’ve really taught myself a few things.
0:48:38 You’ve gotten punched down and beat down so many times.
0:48:42 Press loves us at some point and the press hates us at other points.
0:48:44 And everything that happens at the company is always your fault.
0:48:47 And everything that happens at the company is always because you’re a legend.
0:48:50 Anything good you get congratulated for and everything that you get ready for.
0:48:54 And then you realize actually, it’s not like, I didn’t do anything in the last two months.
0:49:00 All the work was actually the day in, day out of chopwood, carry water.
0:49:05 So I realized actually less things are in my control than I think are in my control.
0:49:06 Or that people think so.
0:49:10 Two, I think I genuinely try to start loving the process.
0:49:11 I really do.
0:49:16 I’m trying not to love too much the attention and not to hate too much the bad times.
0:49:19 I’m trying to just like like my job and like my work.
0:49:24 And I would say the last one is, it’s a bit of absurdity of life.
0:49:26 Like don’t take yourself too seriously.
0:49:27 Yes.
0:49:28 You know?
0:49:29 It’s like, I’m not a legend, I’m not.
0:49:31 I think I’m a pretty good founder.
0:49:33 I think I work and the reason is not because I’m this mythical genius.
0:49:35 I like work really, really hard.
0:49:36 I really do.
0:49:38 Anyone around me knows how hard I work and how much I’m willing to sacrifice.
0:49:43 I’m reasonably smart, like, you know, I’m neither a genius nor, but I, you know, and
0:49:47 that’s because I’ve partly because of one and I’ve worked on my EQ over time.
0:49:50 Like I, and I like engaging with people and meeting people and so on.
0:49:52 But number one is by far and large, the most important.
0:49:53 That’s it.
0:49:54 I just work really hard.
0:49:55 Yeah.
0:49:57 And I, and if you really understand why, where the success or lack of success comes
0:50:01 from, then you’re like, it doesn’t get to your head.
0:50:02 100%.
0:50:03 Yeah.
0:50:07 Because as you are, you’re becoming more and more famous.
0:50:08 Yeah.
0:50:09 The company is special.
0:50:15 I mean, this company is everywhere and, you know, when this episode airs, it’ll be a few
0:50:17 days before the election.
0:50:25 I will bet that you or Kalshi are going to be just somehow in the crosshairs of all of
0:50:28 the political craziness that is going to happen.
0:50:31 And maybe it’s already happening to you.
0:50:35 Do you read the comments?
0:50:37 Do you read what people say about you?
0:50:41 I mean, I know there have been these articles that have been saying Kalshi is a problem.
0:50:42 Do you read those?
0:50:46 Like what do you think about when the public starts talking about you?
0:50:47 I don’t really read anymore.
0:50:48 You don’t read?
0:50:49 I don’t really read the press.
0:50:50 I read it.
0:50:53 I barely, like people call me like, oh, sometimes they call me about my own quotes and I’m like,
0:50:55 I don’t even remember saying that.
0:51:01 Like I really like, look, I think the way I view it and Luana Kofana is very good at
0:51:02 this.
0:51:06 If you’re long-term oriented, there’s going to be ups and downs in the short term.
0:51:10 It’s a bit like a stock, but it all stabilizes over time.
0:51:13 And so be long-term oriented, so you don’t worry too much about the short term, whether
0:51:14 good or bad.
0:51:16 Like don’t be too happy about the good and be too worried about the bad.
0:51:20 But then the second thing is actually do good.
0:51:24 I really believe in that because like, look, honestly, I was working at Citadel.
0:51:27 I think I might have been actually richer if I stayed at Citadel.
0:51:30 I mean, maybe now it’s compared, well, like, you know my point, like it’s cash, you get
0:51:31 paid a lot at Citadel.
0:51:33 Like frankly, it’s insane now.
0:51:35 Like the things I’m hearing are truly insane.
0:51:37 So like, yeah, I’m not doing this out of pro bono.
0:51:41 Like I want to make money and so on, but I really genuinely want these markets to exist
0:51:42 and I want to do good.
0:51:47 And so as long as we’re doing the right things day in, day out, I believe that there’s going
0:51:48 to be mean reversion.
0:51:52 Like when people overestimate us, it’s going to come down and be what it actually is.
0:51:55 And when people think it’s worse than what they should be thinking, I think it’s going
0:51:56 to be mean reverts.
0:51:58 I believe that.
0:52:02 My favorite saying from Scott, he has a quote that he always says, which I love, which is
0:52:06 nothing is ever as good or as bad as it seems.
0:52:07 It’s so true.
0:52:10 And I actually read this, there’s this, you know, this Chinese proverb or story about
0:52:11 the Chinese farmer.
0:52:12 Oh, I know a bit.
0:52:13 Tell it.
0:52:18 I say a lot to the company multiple times, which is like, you know, so there’s a Chinese
0:52:19 farmer in a village.
0:52:24 He’s a farmer in China and like so, you know, he had this horse that he really loved and
0:52:25 the horse basically disappears.
0:52:26 It’s just like fleas.
0:52:31 So the village comes down and it’s like, Hey, like, you know, Oh my God, it’s so unfortunate.
0:52:32 So sorry to hear the news.
0:52:35 And he’s like, you know, his answer is like, I don’t know, we’ll see.
0:52:38 And the next day, the horse comes back with a flock of horses and it’s like, wow, you
0:52:41 know, this dude is like, you know, rich and he has a flock of horses.
0:52:44 And again, they come back, they, the farmers come in and it’s like, how fortunate you’re
0:52:45 so lucky.
0:52:46 Like it’s crazy.
0:52:48 Life loves you and you know, God loves you.
0:52:49 I don’t know.
0:52:50 We’ll see.
0:52:54 His son next day is riding one of the horses, falls, gets, you know, injured.
0:52:55 Same thing.
0:52:56 I don’t know.
0:52:57 I don’t know.
0:52:58 And so on.
0:52:59 Next day, China goes to war.
0:53:01 All the young people are get, you know, drafted into war.
0:53:02 His son is injured.
0:53:03 So he doesn’t get drafted into work.
0:53:05 You’re the luckiest man alive.
0:53:06 You’re so fortunate.
0:53:09 And it ends with this kind of like, you know, he smirks and he’s like, I don’t know, we’ll
0:53:10 see.
0:53:11 And I always say, like, I don’t know.
0:53:12 We’ll see.
0:53:15 Like, you know, like just, just chop wood, carry water, do the, do the work the end day
0:53:16 out.
0:53:17 And, and, and we’ll see what happens.
0:53:20 That is a great place to end.
0:53:23 Do you have a prediction for the election?
0:53:25 That’s what people really want to know.
0:53:28 I’d love to get it from you just before we wrap up.
0:53:31 You don’t have to say who’s going to win unless you’re down.
0:53:37 I’d love to hear if you, you are the, the, the expert on prediction markets.
0:53:38 What’s your prediction for this election?
0:53:41 It’s funny because a lot of people are asking me this question now, but I will answer.
0:53:42 You’re the guy.
0:53:43 You’re the guy.
0:53:46 I don’t have any different, like I just want to say I’m, I’m still a regular dude when
0:53:47 it comes to this.
0:53:50 Like, you know, if I trade on cashier, I may be, I may lose money, you know, I can’t
0:53:52 trade because I run the exchange.
0:53:55 I, I’m legally not allowed to trade, but I don’t know if I’ll make, I’d be that good
0:53:56 at doing this.
0:54:00 So, so I, I think trust the markets as the whole point, right?
0:54:01 And get informed.
0:54:02 Like, I think look at the markets, look at the polls.
0:54:07 I think the markets are accurate gauge, 60% doesn’t mean a hundred percent.
0:54:10 But I think right now 60% seems to be what fair value is.
0:54:13 And that doesn’t, you’ve got your money on truck.
0:54:17 I, I, I don’t have, but I really think trust the market, but no, but I think 10 days is
0:54:18 long.
0:54:19 It’s going to move a lot.
0:54:20 Yes.
0:54:21 Whether up or down, but it does move.
0:54:22 We’ve seen this.
0:54:23 People are so short-term driven right now.
0:54:24 It’s like, oh my God.
0:54:26 I see tomorrow that it’s moves and moves and moves.
0:54:30 Um, so it’s a very long day, 10 days is a very long time.
0:54:34 Um, and, and two, I really think 60, 40 is, is close to a coin flip.
0:54:35 It really is.
0:54:39 So, so what, what you should take from these markets, it’s a very tight race.
0:54:43 Tarik Mansour is the CEO and co-founder of Kalshee, a regulated exchange and prediction
0:54:44 market.
0:54:45 This was awesome.
0:54:47 I’m really happy you came in and thank you for doing this for me.
0:54:48 Yeah.
0:54:49 Well, this was really fun.
0:54:50 Thanks for having me.
0:54:57 Our producer is Claire Miller, our associate producer is Allison Weiss and our engineer
0:54:59 is Benjamin Spencer.
0:55:02 Thank you for listening to First Time Founders from the Vox Media Podcast Network.
0:55:16 Tune in tomorrow for Prodigy Markets.
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0:01:59 Scott, we’re two days away from the presidential election.
0:02:02 I know who you’re voting for, but who do you have your money on?
0:02:04 I’m actually thinking of going into one of these
0:02:08 in gambling markets and placing some money on Harris.
0:02:09 They have 300,000.
0:02:12 This is where the money and the ground game kicks in.
0:02:16 They have 300,000 volunteers getting people to the polling
0:02:19 station, making sure they know where the polling station is,
0:02:19 banging on doors.
0:02:21 When you bang on a door and someone says, yes,
0:02:23 I’m voting for that person, they are much more
0:02:25 likely to actually go vote.
0:02:28 Supposedly they have 300,000 people on the ground,
0:02:30 feet on the street over the next two weeks.
0:02:34 And estimates are Trump claims he has 50,000, which
0:02:35 means he probably has 30.
0:02:37 So I like our ground game.
0:02:38 I like our choices.
0:02:40 I recognize I’m hugely biased here.
0:02:45 But I wonder if people are just sick of the chaos.
0:02:49 Anyways, I think Harris is going to be our next president.
0:02:54 [MUSIC PLAYING]
0:02:55 Welcome to First Time Founders.
0:02:57 I’m Ed Elson.
0:03:01 This election is very unique for a lot of reasons.
0:03:03 But one of them is that for the first time
0:03:08 in our nation’s history, Americans can bet on it legally.
0:03:11 My next guest is responsible for that change.
0:03:15 He created the country’s first CFTC-approved prediction
0:03:17 market that lets you trade on future events,
0:03:20 including the election.
0:03:22 And if you’re a regular consumer of politics,
0:03:25 you’ve likely heard of this company before.
0:03:27 This is my conversation with Tarek Mansour,
0:03:31 co-founder and CEO of Kalshee.
0:03:33 Tarek Mansour, thank you for joining me.
0:03:34 Well, thanks for having me.
0:03:34 I’m excited.
0:03:36 I’m just going to start with–
0:03:38 I was driving over here, I was in the Uber over here,
0:03:40 and I was just scrolling on TikTok.
0:03:41 Yeah.
0:03:44 This is 100% true about 20 minutes ago.
0:03:47 And this was the video that came up.
0:03:49 I’m just going to show you what this video is.
0:03:50 Can you see this?
0:03:51 Yeah, I’m looking and looking.
0:03:53 Captions, Uber driver kicked us for saying
0:03:54 he’s going to lose his bet on Trump.
0:03:56 Uber driver is literally kicking us out
0:03:58 because we’re not Trump supporters.
0:03:59 That’s not why I’m kicking you out.
0:04:01 I’m kicking you up because you make fun of me.
0:04:03 Because we made fun of you for betting.
0:04:05 You’re betting while driving.
0:04:07 Why are you doing that?
0:04:09 OK, if you want to do it, you’re out.
0:04:10 You’re out.
0:04:11 You’re out.
0:04:13 For people who are not watching on YouTube,
0:04:18 it is an Uber driver who is betting on Kalshi,
0:04:21 on Tarek’s platform, on the election,
0:04:23 on his actual screen on the Tesla,
0:04:26 and then the passengers are complaining about it,
0:04:27 and he’s kicking them out.
0:04:30 Your reactions to that TikTok I saw 20 minutes ago?
0:04:33 Well, I mean, it’s pretty ridiculous.
0:04:36 But like, I mean, first of all, don’t bet and drive.
0:04:40 I mean, you know, so we legalize betting in the US,
0:04:42 but not betting and driving at the same time.
0:04:43 That is actually dangerous.
0:04:44 It’s good, OK.
0:04:47 You know, I think betting on the election is not dangerous.
0:04:48 Betting on the election while driving,
0:04:49 that is actually dangerous.
0:04:50 Very different thing.
0:04:51 So do not do that.
0:04:53 Kalshi is not advocating for doing that.
0:04:55 But pretty cool, though.
0:05:00 It’s crazy, and I will also say, you are everywhere right now.
0:05:04 There are articles about you, a lot of very negative articles,
0:05:07 or about your company.
0:05:10 We’ve talked about your company multiple times on the pod.
0:05:14 We’ve had debates about whether it should exist or not.
0:05:18 So I would like to just get your, on a personal level,
0:05:22 how does it feel to be everywhere right now?
0:05:24 Yeah, we are in a lot of places.
0:05:26 I mean, I think, you know, we are obviously
0:05:28 ramped up the marketing with billboards.
0:05:30 I don’t know if you saw these live billboards.
0:05:31 I did, in New York.
0:05:32 These are actually, if you bet on Kalshi right now,
0:05:36 it will show up live on billboards in New York, Vegas, LA,
0:05:37 pretty much every single major city.
0:05:39 So yeah, I mean, it’s a big moment.
0:05:40 Look, personally, on a personal level,
0:05:44 I mean, I think there’s ups and downs in companies.
0:05:47 I think what Luana, my co-founder, and I have learned,
0:05:49 you just got to write it out.
0:05:51 We’re less volatile now.
0:05:53 We feel the ups a bit less, and we feel the downs a bit less.
0:05:57 And everybody’s super excited and loves us right now.
0:05:59 And in four months, we’re not the news anymore,
0:06:00 and people forget about it.
0:06:01 And it goes on and on.
0:06:04 And that’s what building a company is, right?
0:06:07 The street today is like, oh, Kalshi is the newest quote unquote
0:06:09 overnight success, but they’ve been writing it out
0:06:10 for God knows how many years.
0:06:12 So it’s a grind.
0:06:14 There’s been a lot of down moments, a lot of pain,
0:06:16 but these up moments make it worth it.
0:06:17 It’s really fun to do.
0:06:20 But honestly, I don’t think we really care about the attention
0:06:23 so much, as much as like, we just love this product.
0:06:25 We love that people can trade on the election right now.
0:06:27 We’re having these real-time odds.
0:06:28 We love that we’re providing,
0:06:30 and we believe we’re providing more truth
0:06:30 than we can talk about that.
0:06:33 But it’s been tiring as well.
0:06:34 We’ve been working 24/7.
0:06:36 – For people who don’t know, I think most do,
0:06:38 what actually is Kalshi?
0:06:41 – So Kalshi is the first legal prediction market in the US.
0:06:43 So the first legal place in the US
0:06:45 where you can bet yes/no or trade yes/no
0:06:47 on any future events.
0:06:50 So who will win the election as of this October?
0:06:52 We can talk about us winning the lawsuit,
0:06:54 but also will it rain tomorrow?
0:06:56 Will inflation go up?
0:06:57 Will the Fed raise interest rates?
0:06:58 Will COVID come back?
0:06:59 Will TikTok get banned?
0:07:00 Really anything you can think about?
0:07:03 We don’t do violence, war, terrorism, assassinations.
0:07:05 And as of now, we don’t do sports.
0:07:06 – And how did you come up with this idea?
0:07:09 – So I worked at Goldman Sachs when I was at MIT.
0:07:12 So at MIT, I interned at Goldman Sachs in 2016.
0:07:14 And I also worked at Citadel and a few other places.
0:07:16 But at Goldman, something striking happened.
0:07:20 In 2016, that summer, most of the institutional money,
0:07:24 like high net worth individuals, family offices,
0:07:26 just big, rich corporations or people,
0:07:29 it was crazy because they weren’t asking
0:07:31 about the instruments that we were trading.
0:07:33 There’s options and swaps and quite a default.
0:07:34 So all these complicated things,
0:07:35 but no one actually gave a shit about that.
0:07:37 Like what people cared about, they were like,
0:07:39 what do we do about the election?
0:07:40 What do we do about Brexit?
0:07:42 So those two were happening right in that fall.
0:07:44 And it was like, we want to bet on the election
0:07:46 or we want to hedge against Trump,
0:07:47 like bet on Trump or hedge against Trump,
0:07:49 bet on, at the time it was Hillary against Hillary.
0:07:51 And so we come up with these bundles.
0:07:53 And you see them right now, like Goldman and J.P. Morgan,
0:07:56 they’re all like the Trump bet, the Trump bundle, whatever.
0:07:59 And it was weird because one, it was a proxy.
0:08:00 It wasn’t exactly what they wanted for it.
0:08:01 It was indirect.
0:08:03 Two, we would charge them crazy fees.
0:08:05 It’s over-the-counter, not on exchange traded.
0:08:07 And three, this is the thing that hurt me the most,
0:08:09 which is like, why is it not accessible for everyone?
0:08:10 Well, they’re doing it.
0:08:11 Why can’t anyone do it?
0:08:13 So the idea of building, hey, like,
0:08:14 what if you build a New York Stock Exchange,
0:08:16 where this is actively traded, it’s transparent,
0:08:18 everyone can see, and anyone can access.
0:08:20 It’s like an exchange where you can bet on an event,
0:08:21 where you can trade on an event
0:08:22 the same way you trade a stock.
0:08:23 That was the generous of calcium.
0:08:24 It was illegal.
0:08:25 We spent three years getting it regulated
0:08:27 and we did get it regulated by the federal government.
0:08:29 – So you said at the time,
0:08:32 betting directly on an election was illegal.
0:08:33 Why was it illegal?
0:08:36 – It was kind of never regulated in the US,
0:08:37 but it was done a lot.
0:08:38 So it was insane.
0:08:40 If you look at the New York Times and publications,
0:08:42 back in 1900s, 1800s,
0:08:45 they had like live tabloids of live bets,
0:08:46 live election bets, yeah.
0:08:47 And it was huge.
0:08:48 It was huge, like, even back in the time,
0:08:50 it was like, you know, hundreds of millions,
0:08:52 if you adjust for inflation.
0:08:54 But I don’t think it’s election specific.
0:08:56 I think it’s like financial instruments
0:08:59 consistently, consistently, whenever they come in
0:09:01 and they’re new, they face scrutiny.
0:09:02 And it’s like, is this gambling, is this not?
0:09:03 – Yes.
0:09:04 – I don’t know if, did you know grain futures,
0:09:05 do you know that at some point
0:09:07 they were gonna get illegalized?
0:09:08 – Is that right?
0:09:09 – People were saying it was gonna be gambling
0:09:11 and there was a Supreme Court decision in 1905
0:09:13 that legalized them.
0:09:14 They said like, look, some people speculate.
0:09:15 Yeah, sure.
0:09:16 Some people are quote unquote gambling
0:09:17 or betting on grain futures, which is true.
0:09:20 It’s still true today, but they have economic value
0:09:22 because people hedge and people use them to know
0:09:24 what the price, the future price of grain is gonna be.
0:09:26 And that’s very economically relevant.
0:09:30 – So why was the election contract,
0:09:31 the one they said no to?
0:09:34 They said, yeah, we’re down with you trading on the weather.
0:09:35 – Why elections?
0:09:39 – Yeah, as you point out, the economic value argument
0:09:42 doesn’t seem to hold up because there’s no economic value
0:09:44 necessarily in understanding what,
0:09:46 if it’s gonna be rainy tomorrow.
0:09:50 So what was the sticking point on the election question?
0:09:53 – So look, I mean, I think there’s like a,
0:09:55 well, first of all, I do think whether it’s gonna rain tomorrow
0:09:55 or not is very important.
0:09:56 – Okay.
0:09:57 – I do think it has economic value.
0:09:59 – Let’s hear that, let’s hear that first.
0:10:03 – Well, I mean, I think the OG traders of the weather
0:10:05 are actually the farmers.
0:10:08 It’s like, you know, there’s this lingo of orange futures,
0:10:11 forecast the weather better than the weather channel.
0:10:12 – I didn’t know that, but I love that,
0:10:13 and I’m sure that’s true.
0:10:15 – And they do because actually oranges fluctuate a lot
0:10:18 with the weather, like the harvest and the prices
0:10:19 of oranges fluctuate a lot with the weather.
0:10:24 But so forecasting the weather is very important actually.
0:10:26 And you can extend it to knowing whether a hurricane
0:10:28 is gonna hit a certain territory versus not.
0:10:31 Like we actually have people in the keys in Florida
0:10:34 and every hurricane season, it’s interesting.
0:10:36 We do have a phone number on Kashi.
0:10:36 We keep it very hidden
0:10:38 because we don’t want a lot of people to call us
0:10:39 and support, we get flooded.
0:10:40 No one uses it, right?
0:10:42 People use Zendesk and chat and,
0:10:44 but actually around hurricane season,
0:10:45 we start getting phone calls.
0:10:48 And it’s basically people from the keys in Florida
0:10:51 that usually, you know, it’s a bit kind of like older,
0:10:53 older generation and so on.
0:10:55 Insurance companies have pulled out of the keys in Florida.
0:10:57 They don’t insure, they don’t love insuring
0:10:59 and taking the risk because there’s been so many hurricanes.
0:11:00 It’s kind of like a very dangerous area,
0:11:02 but we have a market about that.
0:11:05 So people put on a hedge on Kashi
0:11:07 against damages to their properties,
0:11:08 against a hurricane hitting their time.
0:11:10 So that’s economically relevant.
0:11:11 That’s insurance, that’s important.
0:11:12 Like that’s important to do.
0:11:13 And yes, some people are speculating,
0:11:14 but that’s true for insurance, right?
0:11:16 If you’re insuring against something bad happening,
0:11:18 someone else is speculating on that on the other side,
0:11:21 which could be the insurance companies and so on.
0:11:22 You asked about elections.
0:11:24 I mean, okay, I can’t speak on behalf of regular,
0:11:26 but the thing that happens is like,
0:11:29 there’s always a sort of official and unofficial like,
0:11:30 I think the official response was like,
0:11:35 hey, trading on the election is gaming.
0:11:38 That’s no different than, you know,
0:11:41 going to a casino and betting on a slot machine
0:11:45 or betting on the outcome of roulette.
0:11:46 And I think you’re asking a good question.
0:11:49 Like how is that gaming, but whether it’s not?
0:11:52 That sounds like a weird line to be drawing.
0:11:53 So there’s an unofficial answer.
0:11:55 It’s just like people have found it to be taboo.
0:11:58 DC doesn’t love the idea of people trading on the election.
0:12:00 Generally speaking, that has always been true,
0:12:02 but that does not mean it’s a bad thing, right?
0:12:04 And so we argued in court, actually,
0:12:08 it’s a tremendous proposition to be arguing
0:12:09 that elections are a game.
0:12:10 – Right.
0:12:12 – If elections are a game, what are we all?
0:12:13 – What are we doing?
0:12:14 – What are we doing, right?
0:12:15 Like, what if people get some?
0:12:18 I mean, you know, elections have no economic impact
0:12:23 on society that is hedgeable, like clearly like,
0:12:26 hedgeable and you can transfer risk with respect to,
0:12:27 then what do we care so much?
0:12:29 Like, you know, and we won, right?
0:12:32 I mean, the law is on our side very squarely.
0:12:33 – How did the ruling go down?
0:12:36 What were some of their reasons for why you are correct?
0:12:38 – So, I mean, we’ve always been consistent about the law.
0:12:42 We’re like, look, I think the law says the underlying,
0:12:44 the thing that you need to be trading on
0:12:46 cannot be gaming, right?
0:12:50 And we argued elections are not a game, right?
0:12:53 Elections are different from looking at, you know,
0:12:57 two boxers fighting and betting on the outcome, right?
0:12:59 Like, or rolling a dice and betting on the outcome.
0:13:01 And at a high level, the way to think about that
0:13:03 and how do we differentiate these from betting?
0:13:05 Look, I’m okay with people calling this betting.
0:13:06 I’m actually okay.
0:13:08 People, when CME launched Water Futures,
0:13:10 one of the most economically relevant commodity,
0:13:13 like financial instruments you can imagine, it’s water,
0:13:15 people call it betting.
0:13:16 Oh, now you can bet on the water.
0:13:17 Okay, fine.
0:13:19 So that’s fine because betting is very similar
0:13:21 to speculation, are people betting on the stock market?
0:13:22 Yes, in some forms, but that doesn’t mean
0:13:24 the stock market in and of itself is bad.
0:13:26 But there is a line to be drawn.
0:13:29 And the line is artificial risk versus natural risk, right?
0:13:31 If you and I, right now, I don’t know,
0:13:36 like pick dice and roll it and we bet on the outcome,
0:13:39 we create an artificial risk so we can speculate on it.
0:13:40 That’s entertainment.
0:13:42 We’re having fun with it, right?
0:13:46 Brexit happening or not, hurricane hitting somewhere,
0:13:49 TikTok being banned or not, legislation,
0:13:50 elections are natural risks.
0:13:53 They exist independently of you and I.
0:13:55 And once there’s a risk that exists,
0:13:58 you now have the need for a market to transfer risk
0:14:00 from people that have it, but do not want it.
0:14:02 They cannot bear it to people that don’t have it
0:14:03 and have capacity for it.
0:14:06 It could be hedge funds, it could be large institutions,
0:14:06 it could be people, it could be people
0:14:08 that want to speculate and so on and so forth.
0:14:09 And that’s why we have a derivatives market,
0:14:11 it’s risk transfer essentially.
0:14:15 I think that the majority of transactions
0:14:18 that are happening on the stock market are gambling.
0:14:19 – Sure.
0:14:21 – I think that’s true of options too.
0:14:26 I think that’s true of trading and that’s okay.
0:14:29 And we’re down with that.
0:14:32 I don’t think it’s necessarily a good thing,
0:14:34 but I almost don’t feel like it matters
0:14:36 whether it’s a good thing or not.
0:14:37 It just is.
0:14:40 It’s something that people do and that’s okay.
0:14:43 And so that’s how I view Kalshi.
0:14:47 I’m like, in my view, I think it is gambling in most cases.
0:14:50 I’d be interested to see if you agree with that.
0:14:51 But that’s fine with me.
0:14:54 If you want to gamble, you can gamble and that’s okay.
0:14:59 And the other side to this is gambling is legal.
0:15:01 You can go to the casino and gamble
0:15:05 and you can bet on a boxing match.
0:15:08 So why, I still don’t fully understand
0:15:10 what the regulatory questions are here
0:15:14 because there are many, in many states,
0:15:16 you can gamble on sports.
0:15:18 You can do whatever you want.
0:15:20 – Look, honestly, I think that’s a very informed view
0:15:23 and I love that because I’ve learned to believe
0:15:27 that the simple statements like gambling on elections is bad
0:15:29 just resonate better.
0:15:33 Then telling people, like, hey, you should get informed.
0:15:35 Like, read why economists love these markets.
0:15:36 Why?
0:15:38 People don’t like going below the surface.
0:15:40 They just hear the thing and like, great.
0:15:43 – And by the way, I just want to point out, again,
0:15:45 I kind of agree with that.
0:15:48 Personally, I don’t want to gamble on the election personally.
0:15:49 – But you think it’s fine.
0:15:50 – But it’s fine.
0:15:54 I also don’t want to like smoke, chain smoke cigarettes.
0:15:57 – Yeah, I mean, again, I think like,
0:15:59 I would say a few things and I kind of like,
0:15:59 I’ll address a few.
0:16:01 So let’s talk about some of the kind of alternatives
0:16:02 and then we come back to our market.
0:16:05 So quite a default swaps,
0:16:08 which are basically a way to insure against company debt.
0:16:11 So generally, the market for that is around,
0:16:13 like I think it per year today,
0:16:15 it’s like in the tens of billions of dollars,
0:16:18 like maybe close up to a hundred billion, right?
0:16:21 That’s the market for hedging actual debt.
0:16:22 But the trading volumes,
0:16:25 the volumes are actually closer to trillions.
0:16:28 So you have a solid like 10 to maybe even like 50x factor.
0:16:29 – Exactly.
0:16:31 – What is the rest of that?
0:16:32 – Yeah, for exactly.
0:16:33 – That’s speculation.
0:16:34 – Speculation.
0:16:36 – No, no, I mean, it’s speculation.
0:16:38 So my point is we’ve just established
0:16:38 that in traditional market,
0:16:40 and by the way, this is also true for grain futures,
0:16:41 for commodity futures,
0:16:43 all these things that have a lot of economic value
0:16:46 that are important and the stock market.
0:16:48 I actually do think that most of transaction stock market
0:16:50 are not capital allocation.
0:16:52 And the reason why you cannot stop speculation,
0:16:54 if you take out speculation from the stock market,
0:16:55 you know what would happen?
0:16:57 There’s no more liquidity.
0:16:58 It dries up.
0:17:00 There’s no more stock market.
0:17:01 There’s no transactions anymore, right?
0:17:03 Like there’s no life-taking prices.
0:17:04 Nothing is happening.
0:17:06 So the people that need the capital at that point,
0:17:08 the very purpose of the stock market fades away.
0:17:09 And we’ve seen that.
0:17:11 No stock market weakens capitalism.
0:17:14 It, you just start airing on the side
0:17:15 of telling people what to do
0:17:17 and what not to do with their money.
0:17:18 So it’s the same thing here.
0:17:19 Yes, there’s a lot of speculation.
0:17:20 And I’ll tell you like,
0:17:22 majority of things are going to be stuck.
0:17:23 If the market is liquid on cash,
0:17:25 it will be a lot of speculation.
0:17:26 Because for every hydra,
0:17:27 you need multiple speculators.
0:17:28 You need that market to be vibrant
0:17:30 and you need that type of speculative activity.
0:17:33 But it doesn’t make the market itself bad.
0:17:35 Gambling and betting in my view though,
0:17:37 like I’m okay with calling betting and speculation.
0:17:38 Gambling is a bit weird.
0:17:41 It has some negative connotations historically,
0:17:45 which come with I’m betting against the house, right?
0:17:47 Like I’m going to casino and I’m betting against the house.
0:17:50 And if I make a lot of money, they’ll kneecap me, right?
0:17:52 There’s like odds that are tilted against me
0:17:54 because the house usually wigs the game
0:17:55 so that they always win.
0:17:56 That’s a really good distinction.
0:17:57 Whereas on cow sheets,
0:17:59 and this is why I called maybe speculation or betting
0:18:00 or like the stock market,
0:18:02 you’re trading against other people.
0:18:02 It’s fair game.
0:18:03 You’re not trading against like,
0:18:05 we’re not the one setting the odds.
0:18:07 It’s not tilted towards us.
0:18:08 You’re trading against other people.
0:18:10 – That is a good point. – We just take transaction fees.
0:18:14 And so that’s a different type of dynamic.
0:18:15 – Right.
0:18:18 – You’re not always negative EV in our markets.
0:18:19 Hopefully, if you’re informed.
0:18:20 I mean, I’ll ask you a question.
0:18:23 – I’m just trying to think like how sports betting works.
0:18:24 I guess that’s kind of like–
0:18:25 – A lot of it is against the house.
0:18:26 – The house sets the–
0:18:29 – You bet against DraftKings or you bet against FanDuel.
0:18:31 There are some new ones where it’s like kind of more
0:18:34 exchange driven where I’m betting against you
0:18:36 or other people and we are setting the odds
0:18:38 by putting orders against each other.
0:18:39 So our prices are not set by anyone.
0:18:42 It’s like actually market supply and demand.
0:18:43 It’s like the stock market.
0:18:43 – Totally.
0:18:44 I hadn’t thought of that
0:18:46 and I think that’s exactly right.
0:18:49 So I’m gonna go along with you on this
0:18:53 that we’re down and propose some potential issues
0:18:56 now that let’s assume we agree.
0:18:58 One of the events you can trade on
0:19:01 is whether or not Elon Musk will be nominated
0:19:03 to the cabinet, to Trump’s cabinet.
0:19:05 Let’s say you’re Elon Musk.
0:19:07 You’ve just had a private conversation with Trump.
0:19:11 He tells you, “I wanna have you in the cabinet.”
0:19:16 What is stopping Elon legally from rigging that market
0:19:20 and thus rigging all the other gamblers, sorry.
0:19:23 – And that example applies to a lot of event contracts
0:19:24 in prediction markets.
0:19:25 I mean, that’s definitely true
0:19:28 and guess what that example applies to as well.
0:19:29 – Stock market.
0:19:30 – Stock market, right?
0:19:32 – I should just rephrase.
0:19:34 How do you prevent insider trading?
0:19:36 – There’s so many interesting things.
0:19:38 So first of all, actually, weirdly enough,
0:19:41 insider trading is not illegal and commodity derivatives.
0:19:45 Yeah, because the farmers are trading on grain prices
0:19:47 and obviously farmers have insider information
0:19:48 on grain prices.
0:19:49 – Okay.
0:19:52 – To be clear, that said, we have it in our own rules.
0:19:54 Our designation is a designated contract market.
0:19:55 It’s like a legal designation
0:19:57 and what we are is a self-regulated organization.
0:19:59 Think of it as a little bit of an extension
0:20:01 of a government where we have our own set of rules
0:20:05 and these rules basically can go from civil prosecution
0:20:07 all the way to criminal prosecution.
0:20:08 And we have a rule against insider trading.
0:20:09 We do have it, actually, calcium.
0:20:10 But that’s not because of the law.
0:20:13 We impose the rule that you cannot trade
0:20:15 on material and non-public information
0:20:17 on prediction markets, on our prediction markets.
0:20:19 So if you do, you’re actually violating the law
0:20:22 because violating the rules of an SRO is violating the law.
0:20:23 – This is fascinating.
0:20:24 – Yeah, yeah.
0:20:25 So if you violate the calcium rules,
0:20:27 you’re violating the law and you can impose fines
0:20:29 all the way to criminal prosecution,
0:20:30 you can be prosecuted by the CFTC.
0:20:32 Basically, same way that if a Goldman trader
0:20:34 commits insider trading, they’ll be prosecuted by the SEC.
0:20:35 So same thing.
0:20:36 – Yes, yeah.
0:20:37 – So from a legal perspective, it’s the same thing.
0:20:38 We established that.
0:20:41 Now the question is like, how do you enforce against it?
0:20:43 – Exactly.
0:20:44 – Same thing as a stock market, right?
0:20:46 Like if Elon has a product announcement
0:20:48 or actually anyone at Tesla
0:20:50 has an upcoming product announcement
0:20:52 and they call their cousin and they say,
0:20:53 “Hey, this is coming.
0:20:56 You should load up on Tesla options.
0:20:58 How does the New York Stock Exchange police against that?”
0:20:59 Right?
0:21:01 They have actually a very good mechanism.
0:21:02 We have the same ones that we’ve built over the years.
0:21:05 So we have, first of all,
0:21:06 like we have surveillance systems
0:21:08 that are constantly ingesting trading data
0:21:10 and seeing weird artificial patterns, right?
0:21:12 Like if someone is loading way out of the money,
0:21:14 buying stuff that’s trading at 10%
0:21:16 and suddenly it moves to 90 the next day,
0:21:17 those usually get flagged.
0:21:19 Especially if the transactions are large,
0:21:21 they get flagged and they go to investigation.
0:21:22 We have a whole investigation department
0:21:24 that basically investigates who they are
0:21:26 because we KYC people, we know who they are.
0:21:27 We ask them questions.
0:21:28 It’s like opening a brokerage account.
0:21:30 So we have their SSN and so on.
0:21:32 And then they can be escalated for an investigation
0:21:33 where we figure out why did you place that trade
0:21:35 and how did it come to fruition.
0:21:38 Very similar to how insider trading is monitored on stocks.
0:21:39 Is this perfect?
0:21:42 No, but people do do insider trading on stocks.
0:21:44 The most important thing to flag
0:21:46 when insider trading becomes vile
0:21:48 and bad is when it’s large.
0:21:51 Like the larger, the more important it is to flag.
0:21:54 Like if someone puts $10 on Tesla options
0:21:57 because they had some of their cousin told them something,
0:21:59 like is that gonna be flagged?
0:22:00 Probably not.
0:22:02 Now, if that $10 turns into $20 million,
0:22:03 that’s a very different story.
0:22:05 But also $20 million is much easier to flag.
0:22:07 You figured out the regulation.
0:22:10 That’s your big innovation, exactly.
0:22:14 And you described how when you’re working at Goldman
0:22:16 and these family officers who wanna make bets
0:22:19 on the election, I would bet that Goldman
0:22:21 is looking at Kelsey right now
0:22:23 and they’re thinking, holy shit,
0:22:26 they’re about to take our entire trading business
0:22:28 or at least in that aspect of things
0:22:32 where people wanna make these sort of narrative driven bets.
0:22:35 And why wouldn’t they just do it on Kelsey?
0:22:37 They don’t need Goldman to bundle up
0:22:39 this special options package for them.
0:22:41 They can literally just bet on the story.
0:22:46 And it’s all because you guys figured out the regulation.
0:22:47 How did you do that?
0:22:51 And what did you learn about the regulatory system?
0:22:54 What about your process actually pushed this through?
0:22:55 – It took a long time.
0:22:57 Like because you need to imagine it’s three years,
0:22:58 all we’re doing is regulation.
0:23:00 I’m drafting law and policy and regulations
0:23:02 all day, all night.
0:23:03 Everyone around us was saying
0:23:04 this is never gonna happen.
0:23:05 Every single lawyer, I mean,
0:23:06 for when we first started a company,
0:23:08 one day we called 65 lawyers, all of them said no.
0:23:10 It’s not happening, this is stupid, yeah.
0:23:12 And the safety wasn’t giving us any like,
0:23:13 oh yeah, we’re gonna do this.
0:23:14 It was like mostly like,
0:23:15 oh, here are all the issues with this thing.
0:23:17 And we would go and take these issues, fix them.
0:23:18 And then there’s more issues and more issues.
0:23:21 It was like rocking through this desert.
0:23:24 You have no evidence whatsoever that the desert ends.
0:23:25 Actually, all evidence is pointed
0:23:27 that this desert is not gonna end.
0:23:28 And we kept going.
0:23:29 And I really think that was it.
0:23:31 Like I think a lot of it is actually
0:23:32 you just have to stick it through
0:23:33 and it’s a war of attrition.
0:23:35 And you have to just like keep pushing
0:23:37 and keep your conviction.
0:23:39 And what kept us convicted is like,
0:23:42 look, we will stop when we get what we want
0:23:44 or we are proven wrong.
0:23:45 And until we are proven wrong,
0:23:47 like literally mathematically proven wrong,
0:23:49 like why shouldn’t these markets not exist?
0:23:50 – Yes.
0:23:52 – So we’ll keep going and see what happens.
0:23:54 – We’ll be right back.
0:24:12 – Hey, it’s Scott Galway.
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0:26:47 – We’re back with first time founders.
0:26:49 I want to move on to another topic.
0:26:53 So this has become super, super politicized because–
0:26:55 – Yeah, the odds are off.
0:27:00 – Yes, and a lot of people are looking at the odds
0:27:03 on Calci right now, which as of today,
0:27:06 I think they’re around 60%.
0:27:07 Is it 60 right now?
0:27:08 – Let me try.
0:27:10 (laughing)
0:27:12 – It was, I think, 60 a day or two ago.
0:27:14 I thought it might have dropped to 58, I think.
0:27:15 – 59%. – 59, yeah.
0:27:17 – 59%.
0:27:20 So a lot of people are saying that this is,
0:27:22 one of the arguments in favor of this,
0:27:23 which I don’t fully agree with,
0:27:27 is that this is an alternative to polls.
0:27:29 Because it’s more accurate than the polls
0:27:32 because people are actually putting their money forward.
0:27:34 You’re drawing from the wisdom of crowds.
0:27:40 My belief is that this is not necessarily the base truth
0:27:45 because one of the biases that I’ve noticed,
0:27:47 which I saw you guys put your numbers out
0:27:51 on your demographics, is 90% of the people on Calci are men.
0:27:56 And so my view is, baked into this is a level of bias
0:28:01 that means that it can’t just be the exact truth.
0:28:03 Your points on my thoughts on that.
0:28:05 – Yeah, I think that’s a great point.
0:28:07 Let me address a few things.
0:28:09 Like, you know, and I kind of keep repeating this,
0:28:10 and I know you know this,
0:28:12 but it feels like general population doesn’t understand this.
0:28:14 Like, market odds are pricing the probability
0:28:15 of a candidate winning.
0:28:16 That’s not what polls do.
0:28:17 – That’s not what polls are.
0:28:19 – Like, if you’re up two points on the polls,
0:28:21 you’re kind of, you’re up more like 5% to 10%
0:28:24 in prediction markets and in odds.
0:28:25 That’s not the same thing, right?
0:28:28 Like 60% odds is not 60% in polling.
0:28:31 If you’re polling 60% up, you won.
0:28:34 You’re like 90% chance of winning in a certain place.
0:28:38 So I think people are overreacting to this
0:28:39 in either case.
0:28:40 Like the Republican candidate.
0:28:41 – They’re going crazy.
0:28:43 This has been crazy on this question.
0:28:45 – I know, it’s been crazy.
0:28:46 I agree.
0:28:47 Like, I think the Republicans are like kind of taking it
0:28:48 as a strong sign of victory
0:28:51 and the Democrats are taking as a strong sign of defeat
0:28:53 and it’s rigged and all that.
0:28:55 But like, I’m telling everybody, like calm down.
0:28:57 First of all, this is a still coin flip.
0:28:58 It’s slightly biased.
0:29:00 And if it was in the sports context,
0:29:02 like if Barcelona is slightly disfavored
0:29:04 versus Real Madrid, Barcelona wins very often.
0:29:06 Like, you know, so that’s one.
0:29:09 Two, 10 days is a very long time for these markets.
0:29:11 10 days ago, the odds were 51% Kamala Harris.
0:29:13 Now there’s 60, it moves.
0:29:14 That’s like the whole point is it moves
0:29:16 and it’s pricing in real time.
0:29:17 So that’s kind of putting that out there.
0:29:21 Now, I don’t think sampling bias is a real thing
0:29:23 in prediction markets, to be honest.
0:29:24 I don’t think so.
0:29:27 And I don’t actually really agree with that.
0:29:28 The basic point is actually, so fine.
0:29:30 There are more men than women on Kashi, that is true.
0:29:33 We released that, we said that publicly.
0:29:34 90% is men, 10% is women.
0:29:38 But amongst the women, like if you just see
0:29:40 where women, what women are buying and betting,
0:29:42 they’re actually buying more Trump than Kamala.
0:29:45 There is zero evidence right now that if we had 50/50 women
0:29:46 that it would actually change.
0:29:51 Actually, the Trump bias is slightly higher amongst women
0:29:54 than it is amongst men.
0:29:54 – Interesting.
0:29:57 – So does it definitely, like this is not a poll by the way,
0:29:59 this is not saying that more women
0:30:01 is gonna vote for Trump than Kamala, not at all.
0:30:02 That’s not what this is saying.
0:30:03 All that this is saying is,
0:30:04 I don’t think this bias is really there.
0:30:09 – So, one of the issues with polling that has often happened
0:30:14 is that Democrats, historically speaking,
0:30:17 have been more down to pick up the phone
0:30:19 and to answer the polling question.
0:30:20 – Sure, sure.
0:30:23 – And Republicans, historically speaking,
0:30:24 when they hear someone,
0:30:26 “Hey, I’d like to ask you a few questions about the election.”
0:30:27 Fuck off.
0:30:29 So that’s historically been what’s happened.
0:30:31 And that could totally change.
0:30:34 The point being, there is a very specific
0:30:38 and kind of weird bias baked into the polling,
0:30:40 which means that you can’t take it as base truth,
0:30:42 which I think all of us already know.
0:30:46 What I would say about Kalshi is that,
0:30:47 you mentioned that the women on Kalshi
0:30:49 are actually more pro-Trump.
0:30:51 I would bet that Kalshi is also attracting
0:30:53 a certain type of woman.
0:30:55 And the certain type of woman
0:30:57 is probably more likely to bet Trump.
0:31:00 Would be my guess, but again, that’s total speculation.
0:31:03 And my point being, both of these things
0:31:08 are trying to draw the base truth out of what’s happening.
0:31:08 – But it’s biased, yeah.
0:31:11 – But they’re biased in small different ways.
0:31:15 And so the idea that either is more accurate than the other,
0:31:17 to me, isn’t true.
0:31:18 – That is a fair point.
0:31:20 And I think that there is a difference, though,
0:31:22 and that’s why that was my second point, actually.
0:31:24 So first, I mean, that’s kind of the face value.
0:31:26 Maybe, maybe, maybe these women are actually more pro-Trump
0:31:26 than they are pro-Kamala,
0:31:29 and they wanna buy more Trump, that’s possible.
0:31:32 But, and that’s important to understand.
0:31:34 In polls, if that happens, it’s done.
0:31:35 You poll the bunch of people,
0:31:36 and you get the number, and that’s it.
0:31:41 In markets, if the true value, if the fair value,
0:31:43 the theoretical correct answer is 50,
0:31:46 and there is weird flows that are biasing it to 60,
0:31:49 arbitrageurs and traders that like making money.
0:31:51 I hope that we can all agree that people in America
0:31:53 are really everywhere like making money.
0:31:56 Like, I hope that, like, there’s no disagreement
0:31:57 about– – No, I don’t,
0:31:58 I don’t care about money. – Like, people are greedy.
0:32:00 Like, as long as you trust that people are greedy.
0:32:01 – I love it, yeah.
0:32:05 – People are studying these insanely obsessively.
0:32:07 They study the polls, they study how the polls
0:32:08 are being made, they study statements,
0:32:11 they study historical data, they study the markets,
0:32:15 they study other markets, like stocks and so on.
0:32:17 Now, if this is true, if we are really at 50-50,
0:32:20 and the others saying 60-40,
0:32:24 there is a multi-10 million dollar incentive to bring it back.
0:32:25 And we have institutional liquidity.
0:32:27 We have institutional liquidity on the platform,
0:32:29 like really smart money, it is there.
0:32:30 It could be individuals that are really smart,
0:32:32 I mean, we have Susquehanna on the platform,
0:32:35 SIG, one of our main partners that, you know,
0:32:37 has been pricing and trading these things forever.
0:32:39 We have other prop shops and hedge funds,
0:32:41 some of the smartest people on earth, like, you know,
0:32:43 you can imagine all the names, they’re not,
0:32:45 SIG is public, the others didn’t make it public,
0:32:48 but smart money brings back the prices to where it should be
0:32:50 because there is incentive to do so.
0:32:54 Like, fine, there is a Trump bias in the flow.
0:32:59 That is like what people consider to be the best type of flow
0:33:01 for the Citadels and Susquehannas of the world,
0:33:02 because they come and trade against it
0:33:03 and bring the prices down.
0:33:05 And these people are actually trading at a loss
0:33:07 at a negative expected value,
0:33:08 and the market makers are trading
0:33:10 at a positive expected value.
0:33:11 – That makes a lot of sense.
0:33:13 What I would say is that, you know,
0:33:15 the stock market has a lot of liquidity,
0:33:17 and oftentimes, as we have seen in the past,
0:33:19 the stock market can be wrong about things.
0:33:22 People can be just sort of wrong
0:33:23 and they can get things. – Irrational, yeah.
0:33:24 – They can be irrational.
0:33:26 So that is my view on this,
0:33:29 is that people are irrational,
0:33:31 therefore, polls are irrational,
0:33:32 and therefore, markets are irrational.
0:33:37 And so this debate over this one’s true and this one isn’t,
0:33:39 to me, feels a little bit useless.
0:33:42 And I guess the question that I would sort of wrap up
0:33:44 at this specific point to you with is,
0:33:49 do you think that Kalshi should be replacing polling in some way?
0:33:50 – I think let me address liquidity
0:33:52 and then the sort of irrationalism of markets,
0:33:53 which I agree with, by the way.
0:33:55 So we are very liquid, actually.
0:33:57 – By the way, could you just give us the statistics
0:33:59 on how much money has been wagered?
0:34:00 – It’s different, by the way.
0:34:03 So liquidity, and people confuse this a bit with volume.
0:34:05 Liquidity is how much you can take at a point in time
0:34:06 without moving the price a lot.
0:34:09 How robust is the pricing and how much you can take?
0:34:10 On Kalshi, you can take multi-million dollars
0:34:12 without moving the price at all.
0:34:12 It doesn’t move it.
0:34:13 The price won’t move.
0:34:14 You can take multi-million dollar position,
0:34:16 the price won’t move.
0:34:18 You can take up to a hundred million dollars.
0:34:19 – Which is reflective, by the way,
0:34:21 of how much money is here.
0:34:23 – But also how much the liquidity providers,
0:34:25 the institutional market makers,
0:34:27 that makes a difference in a small betting market
0:34:29 versus a stock market.
0:34:30 You can take up to a hundred million
0:34:33 and it won’t move the price by more than one to two cents.
0:34:34 A hundred million.
0:34:36 So it’s very hard to move the prices.
0:34:37 You need tens of millions
0:34:38 and the impact will be very marginal.
0:34:40 So that’s one.
0:34:43 Two, I have never said, by the way,
0:34:45 these markets are always accurate, nothing else.
0:34:48 We can’t say what the future holds, right?
0:34:50 That doesn’t make any sense.
0:34:51 But what I can say is these markets
0:34:52 are more accurate than alternatives.
0:34:54 And I do stand by that, right?
0:34:56 Like if you look at the mean error of our forecast
0:34:57 to everything else,
0:34:59 we’ve been the most accurate on inflation forecast,
0:35:01 better than the Blueberry Economist survey,
0:35:02 a variety of other surveys.
0:35:05 Yeah, Fed interest rate decisions, climate and weather,
0:35:07 even earthquakes.
0:35:09 That doesn’t mean we can forecast earthquakes.
0:35:10 That’s a crazy statement.
0:35:11 I’m not making that statement at all,
0:35:12 but the alternative is like,
0:35:13 you hear a pundit on the news
0:35:14 or like, hear someone saying something crazy
0:35:16 because they want to get some press or whatever.
0:35:17 But now you have a mechanism to like,
0:35:19 hey, if you have some information about this,
0:35:21 come put it to market and get paid for it.
0:35:22 And then we get an accurate price from that.
0:35:25 But these should not replace polls.
0:35:26 They’re doing something different.
0:35:29 This is an additional source of data.
0:35:31 I keep saying more truth.
0:35:33 I don’t say exclusive truth
0:35:35 or like we’re the only truth.
0:35:36 No, we’re not.
0:35:38 Like more truth, just get informed.
0:35:40 Look at the markets, look at the polls.
0:35:42 Maybe don’t look at all the crazy videos on TikTok.
0:35:44 Like this misinformation left and right, right?
0:35:46 Like if you, but I don’t think they should replace polls.
0:35:48 They’re doing something different.
0:35:49 Polls are important.
0:35:51 And by the way, these markets rely on polls.
0:35:51 Right.
0:35:53 Yeah, that’s how they’re informing their bets, right?
0:35:54 Yeah, like how are traders, like traders,
0:35:56 a lot of, I don’t know about any traders
0:35:58 that doesn’t have polling in their methodology.
0:36:00 Let’s talk about the business itself.
0:36:02 How does Kalshi make money?
0:36:04 How has this worked out for you as an actual business?
0:36:05 Yeah, so it’s again,
0:36:07 it’s kind of one of the decisions I’ve drawn.
0:36:07 So we’re in exchange.
0:36:10 So our business model is like New York Stock Exchange or CME.
0:36:12 We take transaction fees, like trading fees.
0:36:14 So you do a few thousand dollars,
0:36:15 we take one to two percent in fees.
0:36:18 So we take 20 bucks on that transaction.
0:36:18 That’s how we make money.
0:36:20 Over time, I think we have a lot of requests for our data,
0:36:22 like people want to poll data and more granular data.
0:36:23 But for now, we’re making it open source.
0:36:24 We want everyone to have it.
0:36:25 It’s part of the mission.
0:36:26 We’re not charging for it.
0:36:27 And specifically on the election,
0:36:29 we’re not charging fees right now.
0:36:31 We just want to have, like we want to promote.
0:36:32 Just get everyone in there.
0:36:32 We want to get everyone in there.
0:36:34 We want the market to do their thing.
0:36:36 No kind of barriers, fully efficient and so on.
0:36:39 And we’re also actually, we pay back the interest.
0:36:41 We don’t take the interest ourselves.
0:36:43 I don’t believe in making money off of people’s interests.
0:36:45 So if you deposit money on Kalshi,
0:36:48 both your cash, but also your open bets.
0:36:50 So if you buy, like if you put a position on Kamala or Trump
0:36:54 right now, that bet will pay you 4.1% annualized variable
0:36:56 interest as it’s outstanding.
0:36:59 And it’s cool because if your position goes up in price,
0:37:01 like if you bought at 50% and then now it’s 60%,
0:37:04 you get paid on the marked up position.
0:37:05 So you have no opportunity costs.
0:37:08 We’re paying your interest based on your kind of outstanding
0:37:10 bets and positions on Kalshi.
0:37:12 And the expenses, is it an expensive thing to run?
0:37:13 Yeah, regulatory.
0:37:15 I mean, we have to think of building the new stock
0:37:16 exchange from scratch.
0:37:17 So we run a clearing house.
0:37:19 We have one of the handful of clearing houses in the US
0:37:24 that can really move money and clear derivatives exchange.
0:37:27 We have the surveillance systems, you know,
0:37:28 a lot of very, very heavy infrastructure
0:37:30 that took years to build.
0:37:31 So it is expensive to run.
0:37:33 It’s a lot of upfront costs, but the marginal costs
0:37:34 are very low.
0:37:37 So it is very hard business to get into and get
0:37:38 the flywheel running for the marketplace.
0:37:40 But once it does, it’s a very profitable business
0:37:43 because the unit economics, the marginal expense
0:37:43 is very low.
0:37:44 It’s AWS.
0:37:47 And you have some significant competitors,
0:37:49 but from my understanding, no competitors
0:37:52 that have been approved in the US.
0:37:54 What is the competition?
0:37:56 So I mean, like, look, there’s always been–
0:37:58 so there’s like offshore, like polymarkets offshore
0:38:02 unregulated crypto-based pollution market.
0:38:03 Oh, it’s crypto-based, I didn’t know that.
0:38:05 Yeah, yeah, they actually did get enforcement action
0:38:06 from the CFC two years ago.
0:38:08 So they’re not allowed to cater to US.
0:38:11 And there are a lot of others similar to polymarket.
0:38:13 What I would say is don’t trust the volume on these sites,
0:38:15 because it’s not actually true.
0:38:16 There’s a lot of wash trading.
0:38:18 So it’s a lot of bots, fake bots just trading against each other.
0:38:19 But it’s not economics.
0:38:21 Like, I give you 100, you give me back 100.
0:38:24 And is that because they haven’t verified their customers
0:38:25 as well as you have?
0:38:27 Yeah, it’s like, there’s no KYC, you don’t know who’s trading.
0:38:28 It’s not reported to the government.
0:38:29 We can’t do that type of thing.
0:38:32 But it’s like, I give you 100, you give me back 100.
0:38:35 That’s called wash, which is like not real trading.
0:38:37 But the volume just went up by 200.
0:38:39 So imagine we do that 10,000 times, 100,000 times a day
0:38:42 with bots, suddenly the volume is very large, but it’s not real.
0:38:45 So that’s why we always say, trust the one that’s safe,
0:38:48 regulated, trusted, and we’re only Americans.
0:38:51 We don’t have foreign kind of participation for now.
0:38:53 We’re just only Americans and so on.
0:38:54 Look, honestly, competition is good.
0:38:58 It’s more like, I always think more people being educated
0:39:00 about these markets is a good thing.
0:39:02 I believe the regulated approach is the only approach.
0:39:03 That’s what I believe.
0:39:05 That’s a strong belief we firmly hold the company.
0:39:07 The last thing I always say is, I always worry a little bit
0:39:10 about the unregulated doing something bad.
0:39:12 And I always worry about nascent asset classes.
0:39:15 I always try to advocate, trust the regulated actors
0:39:17 and less the unregulated actors.
0:39:19 And I hope the unregulated actors come and get regulated
0:39:21 and do it the right way so that people can trust this asset
0:39:24 class because things can go wrong in unregulated venues.
0:39:28 And when they do, people don’t blame the unregulated venues.
0:39:30 Regulates blame the asset class.
0:39:31 We’ll be right back.
0:39:34 (upbeat music)
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0:42:51 (funky music)
0:42:58 – We’re back with First Time Founders.
0:43:01 I want to shift gears to your personal journey
0:43:02 as an entrepreneur.
0:43:04 Tell us a little bit about your background.
0:43:06 Like, what inspired you to get into this?
0:43:09 You mentioned you worked at Goldman, you went to MIT.
0:43:12 What sort of led up to Kalshi in your life?
0:43:13 – It’s interesting because both Michael Vander and I
0:43:15 had very similar backgrounds.
0:43:17 So I was born in LA, I grew up in Lebanon.
0:43:20 Loana grew up in Brazil.
0:43:21 We were both math geeks in school.
0:43:22 Go to MIT.
0:43:24 – This is your co-founder, Loana Lopez.
0:43:25 – Lara, yes.
0:43:28 – And you met at MIT?
0:43:29 – Yeah, so we met at MIT.
0:43:31 It was kind of like, we were both math geeks.
0:43:32 We were like, love getting into MIT.
0:43:33 That was the place for math geeks.
0:43:35 And then we both kind of love finance.
0:43:37 But we didn’t, we weren’t like the type that was,
0:43:38 you know how like there’s a persona.
0:43:40 I was like the entrepreneur, the person that’s always
0:43:41 building products.
0:43:43 I want to be kind of like, we weren’t that.
0:43:45 Yeah, we didn’t have that.
0:43:47 We weren’t reading books or listening to podcasts.
0:43:49 I think I was fairly firmly convinced
0:43:51 that I was going to be a trader.
0:43:52 I was going to be at Citadel.
0:43:53 I love working at Citadel.
0:43:53 Citadel was amazing.
0:43:54 It was incredible.
0:43:57 But it was one of those things that the idea was just,
0:44:00 wouldn’t let go basically.
0:44:03 It was just like, the idea was so kind of like,
0:44:05 constantly in the back of our minds.
0:44:07 And it was like pulling us to it slowly.
0:44:09 It kept on popping up, right?
0:44:13 Like it’s always the idea pulled us into building the company
0:44:14 rather than the vice versa.
0:44:15 Like we’re looking for an idea.
0:44:16 It’s like the idea just kind of pushed us.
0:44:18 And we kind of loved it.
0:44:20 It’s like this beautiful notion of,
0:44:24 what if you can apply markets to price the future, right?
0:44:26 Like we price anything now.
0:44:27 Why don’t we price our future, right?
0:44:29 Like imagine we can ask questions like,
0:44:32 will GDP go up if Trump gets elected?
0:44:34 Will GDP go up if Kamala gets elected?
0:44:36 And you can have a market-based pricing for that.
0:44:37 Let the market tell you.
0:44:38 Market truth, right?
0:44:39 And that was the elegance of it.
0:44:40 And we really liked that.
0:44:44 And so slowly, we basically just kind of got dragged into it.
0:44:46 And they were like, all right, we’re going to have to build
0:44:48 this company now because we would regret not doing so.
0:44:52 It’s almost like there are some ideas that are so obvious
0:44:53 that they have to get done.
0:44:56 Like if it, I feel like if it wasn’t going to be you,
0:44:58 someone else was going to do it.
0:45:03 And it’s so interesting to me that the hurdle was the regulation.
0:45:04 And you want it to be a trader.
0:45:06 You clearly have a massive math brain.
0:45:08 I doubt you’re doing any math these days.
0:45:09 Not anymore.
0:45:12 Well, we do some, I mean, we’ve hired people
0:45:15 that are a lot smarter than us, which is-
0:45:16 Helpful.
0:45:17 Which is helpful.
0:45:18 Yeah, yeah.
0:45:19 We do less for sure.
0:45:23 We were making jokes this week, actually, like I’ve slowed down.
0:45:24 I was better at math before.
0:45:25 Yeah.
0:45:26 I had to practice.
0:45:27 I had to practice for sure.
0:45:29 I’m sure you’re going to lobby in now.
0:45:30 Yeah, better.
0:45:31 Yeah, yeah.
0:45:32 I mean, not, you know, but like engaging regulators
0:45:33 and politics.
0:45:34 Yeah.
0:45:35 Definitely better.
0:45:36 But yeah.
0:45:37 I would like to hear a little bit about that.
0:45:40 I mean, first let’s talk about maybe fundraising.
0:45:43 I mean, you’ve had a huge success in fundraising.
0:45:44 You’ve got some very big name investors.
0:45:48 What would you say makes you a good fundraiser
0:45:51 and what are the qualities of a founder
0:45:52 who can go out and raise a lot of money?
0:45:54 I think I’m a good fundraiser in some ways,
0:45:56 but like there are better fundraisers for sure.
0:45:59 But I think like I build relationships with people.
0:46:00 I don’t play a lot of games.
0:46:02 I’m very honest and transparent up front.
0:46:03 Yeah.
0:46:06 And I’ve always kind of had that approach to raising money.
0:46:08 And I explained to people like, hey, this is a long journey.
0:46:13 This is a company I’m committed to and we want to build long term.
0:46:15 And I think a lot of investors kind of appreciate that
0:46:17 because they’re used to the games and the kind of…
0:46:20 So I just usually build relationships with people that I kind of like
0:46:22 and I talk to them about the business.
0:46:25 And I genuinely consider it as a two sided interview.
0:46:26 It’s like, do I like this person?
0:46:28 Do I think they get what we’re trying to build?
0:46:30 And I think like all things, it’s a bit like dating.
0:46:33 And you have to be convinced that what you have is valuable.
0:46:35 And I never meant to claim like cash sheet is going to be…
0:46:38 I hate these claims, and all funders do that.
0:46:39 We’re the next Apple.
0:46:40 Yeah.
0:46:41 We’re the next Apple.
0:46:42 We’re going to be a hundred billion dollar company.
0:46:44 And I’m like, I don’t know that, right?
0:46:45 Like I don’t say that.
0:46:48 There’s a lot of things that have to go right for us to get there.
0:46:50 But what I do say is it has the potential to.
0:46:51 And I do think so.
0:46:53 Like I think we have the potential to be a hundred billion dollar company.
0:46:56 And if things go our way, that’s the size of the time.
0:46:58 That’s the potential opportunity.
0:46:59 Will that happen or not?
0:47:00 I don’t know.
0:47:01 I can’t say for sure.
0:47:02 But I will work as hard.
0:47:04 I mean, I’ve shown how hard I’m willing to work and how much I’m going to sacrifice
0:47:06 to make it happen.
0:47:08 And I think a lot of people appreciate that.
0:47:11 It gets to the basics of just negotiating, right?
0:47:17 And it sounds like what you are is an incredibly skilled negotiator and you’ve kind of proven
0:47:21 that through getting this through in your dealings in DC.
0:47:28 And what I have found in negotiating is that it does all start with kind of your initial
0:47:35 position, which is like, how confident am I in myself and in the product that I’m trying
0:47:36 to sell?
0:47:39 So you mentioned like a two sided thing.
0:47:41 It’s like, this is where I stand.
0:47:43 This is what I’m looking for.
0:47:45 And this is what I’d like to get from you.
0:47:46 That’s my position.
0:47:50 And it sounds like you’re very, very confident about that.
0:47:56 And I think the question is for people who want to get good at that, where do you get
0:47:57 that confidence from?
0:48:00 Like, what do you sort of hype yourself up before you go into a meeting?
0:48:05 How do you sort of walk into the room and say, yep, this is who I am and I’ll be unapologetic
0:48:06 about it.
0:48:07 I’m always like interested.
0:48:11 People around me say like, hey, where’d you get the confidence from?
0:48:12 But it always rings the bell.
0:48:17 I’m like, I have long periods of lack of confidence.
0:48:18 You know what I mean?
0:48:20 It’s like, I have a lot of insecurities and variety of different ways.
0:48:24 And maybe I’ve gotten tougher over time.
0:48:26 People don’t see it as much.
0:48:31 But people over assume how confident founders are and how it feels on the inside.
0:48:36 I think I’ve really taught myself a few things.
0:48:38 You’ve gotten punched down and beat down so many times.
0:48:42 Press loves us at some point and the press hates us at other points.
0:48:44 And everything that happens at the company is always your fault.
0:48:47 And everything that happens at the company is always because you’re a legend.
0:48:50 Anything good you get congratulated for and everything that you get ready for.
0:48:54 And then you realize actually, it’s not like, I didn’t do anything in the last two months.
0:49:00 All the work was actually the day in, day out of chopwood, carry water.
0:49:05 So I realized actually less things are in my control than I think are in my control.
0:49:06 Or that people think so.
0:49:10 Two, I think I genuinely try to start loving the process.
0:49:11 I really do.
0:49:16 I’m trying not to love too much the attention and not to hate too much the bad times.
0:49:19 I’m trying to just like like my job and like my work.
0:49:24 And I would say the last one is, it’s a bit of absurdity of life.
0:49:26 Like don’t take yourself too seriously.
0:49:27 Yes.
0:49:28 You know?
0:49:29 It’s like, I’m not a legend, I’m not.
0:49:31 I think I’m a pretty good founder.
0:49:33 I think I work and the reason is not because I’m this mythical genius.
0:49:35 I like work really, really hard.
0:49:36 I really do.
0:49:38 Anyone around me knows how hard I work and how much I’m willing to sacrifice.
0:49:43 I’m reasonably smart, like, you know, I’m neither a genius nor, but I, you know, and
0:49:47 that’s because I’ve partly because of one and I’ve worked on my EQ over time.
0:49:50 Like I, and I like engaging with people and meeting people and so on.
0:49:52 But number one is by far and large, the most important.
0:49:53 That’s it.
0:49:54 I just work really hard.
0:49:55 Yeah.
0:49:57 And I, and if you really understand why, where the success or lack of success comes
0:50:01 from, then you’re like, it doesn’t get to your head.
0:50:02 100%.
0:50:03 Yeah.
0:50:07 Because as you are, you’re becoming more and more famous.
0:50:08 Yeah.
0:50:09 The company is special.
0:50:15 I mean, this company is everywhere and, you know, when this episode airs, it’ll be a few
0:50:17 days before the election.
0:50:25 I will bet that you or Kalshi are going to be just somehow in the crosshairs of all of
0:50:28 the political craziness that is going to happen.
0:50:31 And maybe it’s already happening to you.
0:50:35 Do you read the comments?
0:50:37 Do you read what people say about you?
0:50:41 I mean, I know there have been these articles that have been saying Kalshi is a problem.
0:50:42 Do you read those?
0:50:46 Like what do you think about when the public starts talking about you?
0:50:47 I don’t really read anymore.
0:50:48 You don’t read?
0:50:49 I don’t really read the press.
0:50:50 I read it.
0:50:53 I barely, like people call me like, oh, sometimes they call me about my own quotes and I’m like,
0:50:55 I don’t even remember saying that.
0:51:01 Like I really like, look, I think the way I view it and Luana Kofana is very good at
0:51:02 this.
0:51:06 If you’re long-term oriented, there’s going to be ups and downs in the short term.
0:51:10 It’s a bit like a stock, but it all stabilizes over time.
0:51:13 And so be long-term oriented, so you don’t worry too much about the short term, whether
0:51:14 good or bad.
0:51:16 Like don’t be too happy about the good and be too worried about the bad.
0:51:20 But then the second thing is actually do good.
0:51:24 I really believe in that because like, look, honestly, I was working at Citadel.
0:51:27 I think I might have been actually richer if I stayed at Citadel.
0:51:30 I mean, maybe now it’s compared, well, like, you know my point, like it’s cash, you get
0:51:31 paid a lot at Citadel.
0:51:33 Like frankly, it’s insane now.
0:51:35 Like the things I’m hearing are truly insane.
0:51:37 So like, yeah, I’m not doing this out of pro bono.
0:51:41 Like I want to make money and so on, but I really genuinely want these markets to exist
0:51:42 and I want to do good.
0:51:47 And so as long as we’re doing the right things day in, day out, I believe that there’s going
0:51:48 to be mean reversion.
0:51:52 Like when people overestimate us, it’s going to come down and be what it actually is.
0:51:55 And when people think it’s worse than what they should be thinking, I think it’s going
0:51:56 to be mean reverts.
0:51:58 I believe that.
0:52:02 My favorite saying from Scott, he has a quote that he always says, which I love, which is
0:52:06 nothing is ever as good or as bad as it seems.
0:52:07 It’s so true.
0:52:10 And I actually read this, there’s this, you know, this Chinese proverb or story about
0:52:11 the Chinese farmer.
0:52:12 Oh, I know a bit.
0:52:13 Tell it.
0:52:18 I say a lot to the company multiple times, which is like, you know, so there’s a Chinese
0:52:19 farmer in a village.
0:52:24 He’s a farmer in China and like so, you know, he had this horse that he really loved and
0:52:25 the horse basically disappears.
0:52:26 It’s just like fleas.
0:52:31 So the village comes down and it’s like, Hey, like, you know, Oh my God, it’s so unfortunate.
0:52:32 So sorry to hear the news.
0:52:35 And he’s like, you know, his answer is like, I don’t know, we’ll see.
0:52:38 And the next day, the horse comes back with a flock of horses and it’s like, wow, you
0:52:41 know, this dude is like, you know, rich and he has a flock of horses.
0:52:44 And again, they come back, they, the farmers come in and it’s like, how fortunate you’re
0:52:45 so lucky.
0:52:46 Like it’s crazy.
0:52:48 Life loves you and you know, God loves you.
0:52:49 I don’t know.
0:52:50 We’ll see.
0:52:54 His son next day is riding one of the horses, falls, gets, you know, injured.
0:52:55 Same thing.
0:52:56 I don’t know.
0:52:57 I don’t know.
0:52:58 And so on.
0:52:59 Next day, China goes to war.
0:53:01 All the young people are get, you know, drafted into war.
0:53:02 His son is injured.
0:53:03 So he doesn’t get drafted into work.
0:53:05 You’re the luckiest man alive.
0:53:06 You’re so fortunate.
0:53:09 And it ends with this kind of like, you know, he smirks and he’s like, I don’t know, we’ll
0:53:10 see.
0:53:11 And I always say, like, I don’t know.
0:53:12 We’ll see.
0:53:15 Like, you know, like just, just chop wood, carry water, do the, do the work the end day
0:53:16 out.
0:53:17 And, and, and we’ll see what happens.
0:53:20 That is a great place to end.
0:53:23 Do you have a prediction for the election?
0:53:25 That’s what people really want to know.
0:53:28 I’d love to get it from you just before we wrap up.
0:53:31 You don’t have to say who’s going to win unless you’re down.
0:53:37 I’d love to hear if you, you are the, the, the expert on prediction markets.
0:53:38 What’s your prediction for this election?
0:53:41 It’s funny because a lot of people are asking me this question now, but I will answer.
0:53:42 You’re the guy.
0:53:43 You’re the guy.
0:53:46 I don’t have any different, like I just want to say I’m, I’m still a regular dude when
0:53:47 it comes to this.
0:53:50 Like, you know, if I trade on cashier, I may be, I may lose money, you know, I can’t
0:53:52 trade because I run the exchange.
0:53:55 I, I’m legally not allowed to trade, but I don’t know if I’ll make, I’d be that good
0:53:56 at doing this.
0:54:00 So, so I, I think trust the markets as the whole point, right?
0:54:01 And get informed.
0:54:02 Like, I think look at the markets, look at the polls.
0:54:07 I think the markets are accurate gauge, 60% doesn’t mean a hundred percent.
0:54:10 But I think right now 60% seems to be what fair value is.
0:54:13 And that doesn’t, you’ve got your money on truck.
0:54:17 I, I, I don’t have, but I really think trust the market, but no, but I think 10 days is
0:54:18 long.
0:54:19 It’s going to move a lot.
0:54:20 Yes.
0:54:21 Whether up or down, but it does move.
0:54:22 We’ve seen this.
0:54:23 People are so short-term driven right now.
0:54:24 It’s like, oh my God.
0:54:26 I see tomorrow that it’s moves and moves and moves.
0:54:30 Um, so it’s a very long day, 10 days is a very long time.
0:54:34 Um, and, and two, I really think 60, 40 is, is close to a coin flip.
0:54:35 It really is.
0:54:39 So, so what, what you should take from these markets, it’s a very tight race.
0:54:43 Tarik Mansour is the CEO and co-founder of Kalshee, a regulated exchange and prediction
0:54:44 market.
0:54:45 This was awesome.
0:54:47 I’m really happy you came in and thank you for doing this for me.
0:54:48 Yeah.
0:54:49 Well, this was really fun.
0:54:50 Thanks for having me.
0:54:57 Our producer is Claire Miller, our associate producer is Allison Weiss and our engineer
0:54:59 is Benjamin Spencer.
0:55:02 Thank you for listening to First Time Founders from the Vox Media Podcast Network.
0:55:16 Tune in tomorrow for Prodigy Markets.
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0:56:26 (gentle music)
Ed speaks with Tarek Mansour, co-founder and CEO of Kalshi, a regulated exchange and prediction market that lets you trade on future events. They discuss Kalshi’s fight to legalize betting on the election, how to deal with negative press, and his prediction for the outcome of the election.
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