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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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