Kalshi CEO Tarek Mansour - The Future of Free Markets

Tarek Mansour, is the Co-Founder & CEO of Kalshi, a regulated exchange & prediction market where you can trade on the outcome of real-world events (buy and sell event contracts). Kalshi has had a huge start to the year post-election from unlocking significant new markets, launching new products, integrating with top brokers like Robinhood and Webull, and welcoming Donald Trump Jr. as an advisor. Mansour delves into the process of navigating regulatory hurdles, including the surprising decision to sue the government. as well as the maddening journey, challenges, and bold actions needed to be made in order to create an entirely new asset class. Key Takeaways: - How Kalshi is reimagining financial markets by letting users trade on anything in the news. - The difference between gambling and investing in event trading. - Why Tarek believes prediction markets could one day rival the stock market in size. - Kalshi’s vision to make trading on real-world events accessible to everyone, from politics to sports and entertainment. Kalshi is a federally regulated financial exchange and prediction market based in New York City. It allows users to trade on the outcomes of future events through event contracts. The platform was launched in July 2021 and is designed for both retail and institutional traders. Kalshi is notable for being the first federally regulated exchange of its kind, approved by the Commodity Futures Trading Commission (CFTC). The company was founded in 2019 by Tarek Mansour and Luana Lopes Lara, both of whom are MIT graduates. Tarek worked at Goldman and Citadel, Luana worked at Bridgewater and Citadel. Kalshi was part of Y Combinator’s Winter 2019 batch and has raised $110M from SV and Wall Street heavy weights like Sequoia, Henry Kravis, Charles Schwab and more. Molly on X: https://x.com/MollySOShea Tarek on X: https://x.com/mansourtarek_ Follow Sourcery for the latest updates! https://www.sourcery.vc/ TIMESTAMPS: 00:00 Introduction: Struggles of Launching a Regulated Product 00:40 Welcoming Donald Trump Jr. as an Advisor 05:15 Vision for Prediction Markets 15:27 Expanding into Sports and Entertainment 23:11 The Future of Prediction Markets 30:38 Institutional Demand and Market Potential 31:52 Gambling vs. Investing 41:37 Insider Trading in Commodity Derivatives 43:38 Entrepreneurship vs. Trading 47:30 Business Model and Revenue Streams 52:16 Future Goals and Product Development #podcast #investing #technology #venturecapital #entrepreneur #startup #siliconvalley

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  You're not launching product, you don't have any customers, no one really gives a shit about you. I really, it's the worst form of torture anyone could ever imagine. Like, we were just a little crazy. We were just like totally nuts.

• 0:09Molly O'Shea?

  So what is the line between gambling and investing hedging?

• 0:12Speaker 00

  We were so hamstrung by the prior administration, like, we couldn't move. You know, we had the lawsuit with the election, we didn't have our own clearinghouse, we had the third party that was, you know, fucking with us left and right and not letting us do anything. Favorite market? I like the TikTok ban one. There's just no other way to get any truth about that.

• 0:26Molly O'Shea?

  I mean, it does feel like the space is about to blow up.

• 0:29Speaker 00

  When you don't know what's happening anymore, you can go to Kalshi and see the, like, the charts move in real time.

• 0:34Molly O'Shea?

  How big do you imagine prediction markets will become?

• 0:40Molly O'Shea?

  Tarek Mansour, welcome to the pod.

• 0:43Speaker 00

  Thanks for having me.

• 0:44Molly O'Shea?

  Thank you so much for taking the time. So we're coming off of a huge election season and a huge year for you already. So it's February and January 15th, you signed a new advisor to Kalshi. You signed Donald Trump Jr. How did you score him?

• 1:03Speaker 00

  Well, I mean, you know, maybe just before, gotta answer the question directly. Yeah, so it has been a crazy year because we, we, after the election, we basically tried to keep momentum and we're shipping actually faster than we ever did before. And so actually, January was actually three different things. We announced Don Jr., we announced our entry to sports, which we can talk about, that was a whole big thing. And then we actually announced our partnership, the integration with Robinhood, which was gonna be our first broker. We actually announced our second broker, Weibo, this week, two days ago.

• 1:33Speaker 00

  On Don Jr., I mean, I think, look, it's, we didn't qualify it as like scoring him. I mean, it's, you know, what happened in the election is I think, prediction markets, I would say specifically also Kalshi went mainstream because Kalshi is sort of the America first, onshore regulated prediction market. And where a lot of Americans were actually just using it, like, you know, you, people at the DMV, people like you would find. And this is a cool thing about this, like, it's Americans outside of the sort of Silicon Valley and Wall Street bubble. Those two were using it, but like, it's also just random people in random places. And so you had this kind of aspect that happened in the election where these, these markets went from something super niche to something pretty mainstream. And and they it got to the very top, right?

• 2:16Speaker 00

  Like the the the Trump family was using them, you know, uh, I don't know if you saw his tweet, like they were actually using Kalshi that day. Uh, and and and I think the beauty of it is like it actually aligns very strongly. And Don has actually been talking about these things for a while, uh, with this idea of talking directly to the American people. In some ways, actually, the Trumps were forced into talking directly to the American people because the media was actually a bad filter, a bad intermediary for their message. Uh, the message was always getting lost, uh, uh, with mainstream media and and Twitter was a very good outlet for that. And actually, prediction markets are a very good outlet for that because, you know, I think of it as Twitter is like the best way to get aggregate, like the use the wisdom of the crowds for where the news, like the past, for what just happened or what happened.

• 2:59Speaker 00

  And prediction markets are the way to use the wisdom of the crowds for what is going to happen. And and it, you know, applied to elections, people like realize like, oh, shit, you know, the everything that was going on with the news actually was going on with respect to punditry, how we view the future, polling, how we think about the election, and prediction markets were the antidote, the same way that X and Twitter were the antidote for for the news. And Don was very excited about that. Um, and, uh, you know, that's, I think, why he decided to join and and be part of this mission, and we're super excited to have him. He's been extremely helpful.

• 3:29Molly O'Shea?

  Did you ever imagine when you started the company that the son of the sitting president would be a part of it?

• 3:36Speaker 00

  I mean, there's a lot of things I didn't imagine would happen when I started the company, you know, I think both good and bad, I would say, like, you know, I I didn't I didn't imagine how hard it would be. Uh, I would say that's the headline. You know, the thing that I severely underestimated is like, like, I always thought we're gonna be successful and do interesting and and meaningful things, but like, I did not realize how hard it would be and and it was it's just much harder than I expected. Um, but, I mean, you know, I I grew up in Lebanon, I mean, I was born in California, I grew up in Lebanon, like, uh, you know, the the anecdote, I like two, two specific things that tell, I mean, I maybe summarize how I grew up, like, one, I I grew up till I, literally, I came to the US, I had never even thought that Google was a company. Like, that's the level of exposure I had, like, I I just had this one shitty computer

• 4:18Speaker 00

  that we had at home that, like, barely worked and, like, I, there was this box I would type things into, but like, I didn't realize there's actually a company making money out of this. Uh, and so, one, like, very non-entrepreneurial, like, I just knew nothing, I just knew math. And two, I actually learned learned most of my English studying for the SATs, so like, I was totally not exposed to anything, so that's kind of how I started, right? And and, you know, fast forward, you know.

• 4:43Speaker 00

  Half a decade to a decade now. Uh, yeah, I mean, I think things are very different. I would never imagine any of this.

• 4:48Molly O'Shea?

  What does the partnership look like?

• 4:50Speaker 00

  Which one?

• 4:51Molly O'Shea?

  With?

• 4:52Speaker 00

  Don.

• 4:52Molly O'Shea?

  Don.

• 4:53Speaker 00

  Well, it's great. I mean, I think he's been extremely helpful. He's helping us with everything, go to market strategy. I think we're expanding very aggressively. Um, and thinking about new jurisdictions, I think thinking about new types of markets and thinking about basically how to expand. Uh, our user base. So we onboarded two million people to our app, uh, last, uh, uh, last fall, and now we're basically scaling beyond that. And it's really all about like, how do we take this even more mainstream? Like, like my, my vision is like. I genuinely think, and this is how we started the company, like when I first got excited about the company with Luana, um, it was two things like.

• 5:26Speaker 00

  I, I, I strongly believe that from first principles, these like prediction markets, or without even using some fancy terminology, like a market where you can. Buy anything relevant, any question about the future should be one of the biggest financial markets. It makes sense, right? Like if you're buying stocks or things like bonds and options are kind of complicated, small percentage of the population cares about. Like if I ask you, what are like Cisco's financials right now? You don't really know.

• 5:51Molly O'Shea?

  I don't.

• 5:52Speaker 00

  Well, but if I ask you like who won the Super Bowl or who won the election or, you know. How did COVID go or did it rain yesterday? You know. Right? And, and it's, that's the whole premise. Like we're building a financial markets that can cater to anybody on things that they actually know and care about. So that should be pretty big. Um, and. Uh, you know, I, I think that like divisions, like I think this should be able to rival the stock market one day. Uh, especially with the rise of retail trading and so on and so forth. And I think Don can be pretty helpful with that.

• 6:22Molly O'Shea?

  I mean, it does feel like the space is about to blow up. Coinbase and Robinhood just mentioned prediction markets on their earnings calls. How do you feel about that?

• 6:31Speaker 00

  Yeah, a lot of, I mean, Coinbase's prediction market draftings, I mean, a lot of people are excited about, I mean, it's amazing. It's, it's great. Like, you know, if someone had told me a few years ago, like this would be one of the main topics of conversation and earning calls, like. I'd be ecstatic, so I, you know, we're extremely happy, like, I think that, you know, we just announced, so because the way I, so Kalshi has two business, business models, and it's a very, it's pretty typical for exchanges. So the comp for Kalshi is CME, so CME, are you familiar with CME?

• 7:00Molly O'Shea?

  No.

• 7:00Speaker 00

  So no one is, but like, CME is, CME and I are the two largest derivatives exchanges on the planet. Derivives is basically when you list something, a financial instrument, that doesn't have, like, you're not buying a stock, or you're not buying a, a bond, you're buying something that settles in something more intangible, in general. Those two companies are like, close to a hundred billion dollar companies, and they have the highest net margin profile in the Fortune 500. And those people, usually you don't go to the NewYorkStockExchange.com or CME.com to trade, you go to Schwab, Robinhood, you go to your brokers. On Kalshi, Kalshi is new, we have Kalshi.com, or you can trade on Kalshi, like, you go to Kalshi and you trade. But, that's Kalshi Direct, and then, you know, the thing that we're really focusing on this year is launching the brokers.

• 7:45Speaker 00

  So where you can trade our products on your brokerage app. And that's because a lot of people like to do everything in their brokerage, that's where they have their account, their wallet, and so on. And so, yeah, our first broker was Robinhood, and you know, Vlad has been talking about that, and, and, you know, we just got Weeble, and I think, yeah, I mean, I think over time, and discussions with all the other ones, like Coinbase, DraftKings, all the others, and various stages of the pipeline, hopefully also we'll get them at some point.

• 8:07Molly O'Shea?

  How big do you imagine prediction markets will become?

• 8:10Speaker 00

  I think it could just look like the stock market, maybe even bigger.

• 8:13Molly O'Shea?

  I guess like more, taking a larger step back, what was the exact like evolution of prediction markets to today?

• 8:21Speaker 00

  Yeah, so I think, it's been a kind of a long journey, the, the initial, actually, a lot of people don't know this, so, so the first version of prediction market that was created was this thing called Hedge Street. And it was created in, in 2000, it was like 2002 or something, it was like way back, like crazy, like 23 years ago now. I think it was way ahead of its time. It it had like it's it's it's kind of sick because like it was like, you know, very early internet and like and like the if you look at sort of what it looked like it's in the vision and like I I write some of the papers from the from the founder back in the day. It was a lot of what this a lot of what this looks like, you know, and I think that was interesting because like

• 9:07Speaker 00

  um I didn't know after I I learned about all this starting after starting the company, but like, you know, a lot of these people are actually pretty visionaries back in the day. It was just too early for its time. Uh and and then uh the financial crisis happens and you had a huge deregulation wave. So and there's this, you know, you might be familiar with Dodd-Frank, which is the the big sort of uh regulatory thing that was put on on the financial services and then they blocked but mostly basically they blocked prediction markets like it was it was made illegal. Uh and then you had a lot of like unregulated players pop up. So in trade was actually the OG. They were awesome, honestly, but it was run out of like, I think Dublin or something like that. And then they got shut down by the CFTC.

• 9:46Speaker 00

  And then there was another kind of version of a decentralized one like that was started by Augur, which was actually really cool. Like in the early days, we inspired ourselves a lot by by Augur because they just like really neat interface. Uh and it was it was cool. It was decentralized and I actually people don't know like we we first two weeks of cash, we actually started on chain. Really? Yeah, it was like, yeah, people don't know this. Uh it was like, uh uh it was crypto first, I remember and like there was when we were doing this like Y C hackathon thing and and you know, Michael Seibel now is on the board, but I remember we pitched it to Michael and he was like, well, everything is great about this thing. Sounds awesome, but like you have one problem. It's illegal. And we're like, well, like, we're pretty naive. We're like, okay, but we can figure this out. And then we kind of went through. We started talking to lawyers. We realized like actually doing it on chain will be harder to get regulated.

• 10:30Speaker 00

  Uh so we brought it on chain uh or off chain, I guess. Like we we just decided to build it in a normal and you know, decided to go to in the three year like long process of um of legalizing it. Uh but I think and then there was predicted also, which is a form of in trade. They got like this, hey, your research, small research thing for university. You stay nonprofit and we let you exist. What our unlock was was like I think that we believe there's a demand for this. But then we strongly believe that like two things, like if we wanted this to be to get be on a certain set of scale without regulators like shutting it down or like having it has to be regulated.

• 11:10Speaker 00

  And two is like, like any financial market, you have to be able to work with the brokers, like the Schwabs of the world, the Robin Hoods. And then the market like Citadel, Susquehanna, uh, uh, basically Wall Street to bring in the liquidity that is required to actually start a financial market. And make it large enough.

• 11:25Molly O'Shea?

  Right.

• 11:25Speaker 00

  And you see this even with crypto, right? Like once those institutional players came in, the volume started to look like what you see in traditional markets. And so we realized like we have to get regulated for this to happen. Otherwise, we wouldn't be building something that could be as big as we wanted to.

• 11:39Molly O'Shea?

  What was the process like for you?

• 11:41Speaker 00

  It was brutal. Like it was, it was, it was honestly the worst, really it was the worst form of torture anyone could ever imagine. Like it was like, and, um, I mean, we, we talk about this often, but we don't talk enough about like,

• 11:54Speaker 00

  like, I, I don't know. I think like if, if, um, we felt sort of an obligation. So we're pretty missionary of our prediction markets like, and so it's, it's, you know, obviously we want to make money out of this and all of that. That's obviously true. But we also want, want these things to exist. And we felt this sort of like,

• 12:13Speaker 00

  we wanted to do it right, basically. Like a lot of this community has been disappointed very consistently.

• 12:19Speaker 00

  You know, entry was a huge disappointment for this community, for example, because, you know, it gets to a certain scale and then it gets shut down. So we're like, we, we need to actually solve this first and foremost. The elephant in the room for this, for these markets, we need to solve regulation. And if we do that, then, you know, we've delivered, we've already delivered something really big for prediction markets. We've like, we've made them legal. And, and then after that, we can build a really big business.

• 12:42Speaker 00

  And so that drove us through these years, but it was really hard because like you're not launching product, you don't have any customers. No one really gives a shit about you. No one cares. Like, you know, what, what are your, what your investor updates on a monthly basis are like, hey, I'm still banging my head against regulated doorstep, right? Like, and, and I, and it sucked. It really, really sucked because psychologically it's really hard to like, what's cool about being an entrepreneur is you make progress. You tinker with stuff and then you, you, you grow and sometimes you make mistakes, et cetera. But you, this is no, no progress. This is a promise of maybe a binary kind of outcome that you get regulated one day and, and, and actually all the evidence was pointing in the other direction. Yeah, I mean, we were just a little crazy. We were just like totally nuts.

• 13:23Molly O'Shea?

  Well, they do say psychosis is the effect of doing the same thing over and over again with no, no different outcome.

• 13:31Speaker 00

  Yeah, it was a little bit like insanity. It really was. Like, I mean, we would go back and like they would get, we would get back and they would look at us and like, no, and these are all the issues. And we'd come back, write another bunch of, like, a few hundred pages. You know, I became a legal expert. Like, I'm, I actually can safely say I'm one of the foremost experts in derivatives regulation. Like, like financial regulation, I'm actually, and because I had to, like, there was no other option. And, um, uh, but that, that period was really, really tough. It was really, really, really tough. And, but we had, we were lucky enough that a few investors in the, in the seed believed in it. And they were like, well, we'll do it. Uh, uh, you know, and, and they're all awesome. Like, you know, Neo, Ali Partovi is like, crazy guy, just like, you know, I believe, like, he had one meeting, he's like, I think you're gonna figure it out somehow.

• 14:16Speaker 00

  Even though I remember I was in the meeting at the time, I was like, I have no idea what the fuck we're doing, but like, um, Justin Matine is also in that same, I mean, there's a few other people in the early days that funded this. And then when we got regulated, things were actually much easier. Yeah.

• 14:28Molly O'Shea?

  So I guess, uh, how much has the company raised to date? Who are your investors? How did they exactly help out with that process?

• 14:35Speaker 00

  So raise goes to a hundred and ten. Um, um, we, they, I mean, the main investors, Sequoia, Y C, um, uh, Schwab, uh, Kravis, um, and, uh, I mean, a bunch of others. Um,

• 14:52Speaker 00

  no one can help with the regulatory thing. I, I mean, it just became such a strong muscle for us, like, you know, the, the policy aspects, the working with Congress, working with the administration, uh, working with regulators, like, that's just something that I do, you know, and, and Luana does, and, and we have a whole team for now. But, but yeah, I mean, all the, all their typical stuff, like, I, you know, and I think we go to investors for various different things.

• 15:12Molly O'Shea?

  Right.

• 15:12Speaker 00

  Yeah.

• 15:13Molly O'Shea?

  So I guess, fast forward today, we talked about this a little bit already. The election was huge for you guys.

• 15:19Speaker 00

  Yeah.

• 15:19Molly O'Shea?

  The Super Bowl just happened. I will admit, I used Cal She, I lost all my money on it, cuz I guess I'm not good. You recently launched sports. What, what was this like for you?

• 15:34Speaker 00

  So I mean, I would say like a few things like so. We got insane momentum last quarter and you know. And like we started the year now, it's like, okay, well, we're just gonna, we have two goals, I think, for, for, for, for the company, like. Separate ones like we want one. Grow a lot. And then two, we, we want to become one of the fastest shipping companies in Silicon Valley.

• 15:58Molly O'Shea?

  Okay.

• 16:00Speaker 00

  One is obvious, two is because like.

• 16:03Speaker 00

  We have an incredibly strong product and engineering team. We've always like, I think we've built an incredible team hired from a bunch of the top hedge funds and so on and so forth. But we were so hamstrung by their prior administration, like we couldn't move. They like blocked us on markets. They were like, you know, we had the lawsuit with the election. We didn't have our own clearinghouse. We had the third party that was, you know, fucking with us left and right and not letting us do anything. And what happened in, in like last fall is like we got unleashed, like we got, we won the lawsuits. So the universe of like the set of things that we could do just. Got 10x like we had a hundred markets back in the, in September, we have a thousand now, and I think that trend is going to keep going in that direction.

• 16:42Speaker 00

  We. We got our clearinghouse, people don't really know about, but like now we own the whole thing and like we're one of the only tech. The only tech first. Entire exchange clearing ecosystem, like we have the whole thing. We can list any financial market and so on. It's like, okay, now we can actually, we, we have control of our destiny. So we can actually like ship insanely fast, like we can just do everything and anything. And do it extremely fast. So. And then, you know, we, we ship a lot of like. A lot of improvements to the products. The big one I think is sports.

• 17:13Speaker 00

  It's people want sports. I mean, they really want sports. It's a huge market. I think we have, we, we, uh, there's a few things that like, I believe this is. Forever gonna shift. The landscape, basically, a little bit like what we did the election.

• 17:28Speaker 00

  It's the first time that sports like trading on sports is actually legal in all 50 states. Because we are regulated by the, you know, by the feds, like at the federal level, not state by state. And the federal regulation, like the law actually supersedes state law. So anything that you do on Calci on an exchange, like state law doesn't actually. Quite apply.

• 17:47Molly O'Shea?

  Okay, so that's how you can, you can go across all states versus, let's say, like DraftKings.

• 17:53Speaker 00

  Yeah, correct, because we have the federal regulation, like we're regulated by the CFTC. It's a bit like, you know, there are some states, for example, that say like. You know, like. If you read their law narrowly, like buying stock is not allowed, but you can do it because it's SEC or CFC regulated. Like if it's federal, it actually supersedes state law for financial services. And so, um, I think it's been incredible. I mean, I think we got like something like seven percent of the handle within seven days of launch. Uh, which is huge. Like it's it's testament to how big this could be. Um, and I think we were fourth in handles. So I think like it was it was draft. I was looking at something that was shared on Twitter yesterday. Things like FanDuel, DraftKings, Bet MGM, and then us, uh, in fourth position, then Fanatics and a few others, but like this is like amazing.

• 18:35Speaker 00

  It's like, and we haven't marketed that much. And I think what people really liked, like other than kind of the novelty that's all 50 states, like two, like you can live trade. I think you probably saw that, but like, it's kind of sick, right? Like it's incredible. Like I love, I love live trade so much because like it was same as the election. It's like, when you don't know what's happening anymore, you can go to Calci and see the like the charts move in real time. And actually know, okay, like was this last run, what was the impact on the odds? Like, was it bad, good? And a lot of people don't exactly know how, what's going on in the game, but they can see the odds and now they understand like what's happening. Uh, and then the last thing is like, people like the idea that you're trading against other people.

• 19:12Speaker 00

  Because you're like, you can buy and sell and exit and enter. It's it's more social. It's more like, you know, your counterparty is not like the, the bookie. It's someone else. And so that's more interesting. Uh, I think sports is probably going to be very large for us. Yeah.

• 19:26Molly O'Shea?

  Well, it's definitely fun. I know I mentioned this before we started, but I bet on two things for the Super Bowl. One was a halftime show, so I'm a huge Baby Keem fan. I really thought Kendrick was going to bring out Baby Keem. I think that was a huge miss. I think he should have had more, uh, more people up there with him, some, some more artists. And so I lost a lot of money on that. I lost $45. It was pretty bad. It was pretty, pretty brutal. After that, I was like, you know, I have like $45 left. I put in like a hundred in total. Um, and we're like halfway through the game and I've, I've got to use it, right? I've got to bet.

• 20:05Speaker 00

  Yeah.

• 20:05Molly O'Shea?

  And if I bet on the Chiefs at that, or no, if I bet on the Eagles at that time, I would have only made like $9. And then if I bet on the Chiefs, I would have made like over 200. So of course I'm going to take the $200 gain and I lost it all.

• 20:18Speaker 00

  Yeah. Well, the Chiefs are less likely to win.

• 20:22Speaker 00

  Yeah, no, I think it's interesting. I think like it's interesting also that like there's a lot of interest in. I mean, this is the thing that excites me about Cal She is, you know, one of our fastest growing segments right now is actually, especially in January, is so obviously, politics is big. I mean, I think sports will end up being pretty big. We have crypto and financials are really large, but but the fastest growing right now is actually entertainment like culture.

• 20:45Molly O'Shea?

  Okay.

• 20:45Speaker 00

  And.

• 20:46Molly O'Shea?

  Was that always the case or how did that?

• 20:48Speaker 00

  I think it's more recent because we've expanded our offering more recently. Like we didn't have enough. We didn't have much on that category before. Uh, but it's things like you can basically like, you know, trade on who's gonna be like top of the Spotify charts on a daily basis like, who's gonna top the billboards? Um, uh, um, you know, like how much like who's gonna drop an album and when and like how successful is gonna be and and, um, how successful is a movie gonna be like what's the Rotten Tomatoes score etcetera? You know, we're seeing is like actually it's extremely sticky like people are doing it religiously like on a weekly basis. And two, it's it's growing. It's going really fast. And what we're realizing is actually, and this is the thing that I love about what we're building is,

• 21:31Speaker 00

  like, okay, there's a subset of America that cares about stocks and sure, they want to do their day trading. They can do that. That's fine. And there's a lot of people that do sports and okay, sure, but there's so many other interests. Like there's a lot of people that care about so many other things, uh, like culture, uh, that don't really have any product that appeals to them today. Like, like most America doesn't care about options. Like that's the that's a very weird esoteric like, you know, why would anyone do that? Uh, but but, um, but you know, some people do, but, uh, but I think a lot of people care about, you know, music and movies and all these different things. And I, and I think, I was saying that with the Super Bowl because like there were all these markets are like not exactly about the outcome, but like,

• 22:11Speaker 00

  related to, yeah, around it. They're like, we're extremely like they ended up being something like thirty percent of the whole like pie. That's pretty big, right?

• 22:19Molly O'Shea?

  Oh, wow. Yeah.

• 22:20Speaker 00

  Yeah, like that's really big on like, you know, what the commentators will say. Or like we have markets on what Trump is gonna say on a, on a weekly basis and people love these like it's, I mean, they love these because they move markets, right? Like he says crypto and then the crypto market goes up like you're gonna actually hedge your position like every time he doesn't say crypto in one of his, uh, uh, appearances like the crypto market tanks and it's kind of insane. Uh, but, uh, we had, yeah, like what the commentators will say, like how many, um, um, yeah, who's gonna show up to the, to the halftime show? Um, uh, and a bunch of other things and people love those.

• 22:52Molly O'Shea?

  Yeah, it was super fun. Um, I could see this going really well for the Bravo crowd and all the housewives. And um, I think the Oscars are coming up, or did that just happen?

• 23:02Speaker 00

  They're coming up.

• 23:02Molly O'Shea?

  Grammys, Oscars.

• 23:03Speaker 00

  And they're usually pretty big for us.

• 23:04Molly O'Shea?

  Yeah, I would imagine. Um, so I guess going into that, like, what other areas would you expand into?

• 23:11Speaker 00

  I think right now, I would say like three things, like, we expand our sports offering, uh, we want to expand our financials offering.

• 23:17Molly O'Shea?

  Hmm. I kinda, I think I heard that you might go into stocks, betting on stocks?

• 23:22Speaker 00

  Uh, well, I mean, we have already like indices, uh, so like S and P and crypto and a few other things where you can like, basically, uh, like it's a, it's a prediction market. So it's like, is it gonna be up or down for the day? And like, is it gonna be above or below a certain level? And uh, we're, we have dailies for those, we have weeklies, we have monthlies, and we just released like hourlies. So it's gonna be the first time that you can do like sub one day, like, like intraday where the thing is gonna be. Um, and uh, they're extremely popular, like, they're, they're like, they're, they're big. They're, they're, these, these are gonna be very big. And, and, and those are also, we're also putting them on the brokers. So, so one of the brokers we will is starting with those. Um, I, I think Robin will pull some of them as well. Um.

• 24:07Speaker 00

  I don't know about single stocks yet. I think at some point, yeah, maybe this year, I don't know, but we, we're figuring out what the plan could be for that. But yeah, I mean, I think if you let people kind of predict our Tesla is gonna be on a daily, uh, and maybe even shorter term basis, like, it's gonna be, it's gonna be very effective. The last part is like more broad, like, we wanna have a market for anything that's in the news. And we have, we have some room to grow there. Like, I think we're at maybe like fifteen, twenty percent of the relevant news on any given day, like, we can get to a hundred.

• 24:34Molly O'Shea?

  Alex Paul wanted me to ask you what your favorite market was.

• 24:37Speaker 00

  Favorite market? Uh, I, I, I like the TikTok ban one.

• 24:40Molly O'Shea?

  The TikTok ban one?

• 24:41Speaker 00

  Yeah, it's just been an amazing, like, it's such an amazing, I, I think, yeah, it's, for me, that's my favorite, because like, there's just no other way to get any truth about that, like, really, like, how, what, like, you know, how else would you know if it's gonna get banned or not?

• 24:58Molly O'Shea?

  What's your take?

• 24:59Speaker 00

  I just trust the market. I mean, I don't know, just look at the market, I, you know, don't trust me.

• 25:03Molly O'Shea?

  You're not allowed to, to use your platform, right?

• 25:05Speaker 00

  No, I can't, I can't. Yeah, unfortunately.

• 25:07Molly O'Shea?

  That's a bummer.

• 25:08Speaker 00

  Yeah, it's, no one in the team can use it, which actually makes it hard to develop product, but um, uh, TikTok ban is definitely my number one, because uh, I, I would say two things, like, one,

• 25:20Speaker 00

  It's just such a good representation of like the power of friction markets where like you cannot like there's no other way to get truth about the probability of this thing happening and it's actually important like the TikTok being banned versus not is actually super important. And so that's one. Number two, uh, I mean, we have, we have a very deep partnership with Susquehanna. I don't know if you've ever heard of Susquehanna, which is like the largest, they're like Citadel, so it's the largest.

• 25:44Molly O'Shea?

  I have, but I'm sure others haven't.

• 25:46Speaker 00

  Jeff Yass from the company is like, you know, uh, you know, one of our partner with Sig and, um, and I think it's a kind of a big question for them, obviously for, for TikTok. And so there's a little bit of this sort of like, I, I personally feel like kind of like, I, I just want to know what's going to happen and I, I monitor it a lot. Yeah.

• 26:02Molly O'Shea?

  Going back to the start of founding Kalshi, um, what was the, what's the difference between equity exotics and consumer trading, retail trading?

• 26:13Speaker 00

  Yeah. So I, you know, I was a Goldman in 2016 and, and, um, I was at this desk, uh, the equity exotics desk, uh, and, and what we did is basically, I mean, I was very young. I was like an intern and, and,

• 26:28Speaker 00

  a lot of the questions in the flow that was coming to us was essentially like, hey, will, it would, people didn't care about buying a stock or buying an option or whatever. I mean, some people did, but not, not a lot of them. They just wanted to get like exposed to Brexit. Like I want to bet on Brexit. I want to hedge against Brexit. I want to trade on, on Trump winning versus, you know, losing. And three things, like we would package a thing, like a bunch of option stocks, et cetera, that should give them what they wanted, but it was not actually, um, uh, it was not actually, it was a proxy. So oftentimes like we'd say, hey, here's a bundle and this should go up if Trump wins and then Trump won and it went down or vice versa. And so

• 27:10Speaker 00

  bad, like that was a, you know, bad way, non-direct way to do the trade. It was two is very expensive. Three is like, you know, most people don't have access to Goldman Sachs or an investment bank. Um, and so that was really the idea of like, well, what if we could just like let anyone participate in this and also make it more transparent instead of like you going to one person, ask them for a price and having them structure or something for you. What if you can trade on an open marketplace? That is transparent, that is like, you know, open. So that's where we came at it from. It wasn't like this prediction market notion. It was more like, how about we build a financial market for these events, for these questions about the future that clearly everyone cares about. Right? They're just doing it indirectly right now. They're not doing it directly. And that was really the genesis.

• 27:49Molly O'Shea?

  How does that lead to starting this company? Like, I, I understand that, but like, that's real institutional trading and this, this is, this is abstract, it's new, essentially, like, the way that you're doing it. So how do you deal with not knowing the certainties around trading events and like, dealing with, did you have any doubts?

• 28:08Speaker 00

  Yeah, I mean, I think like, I mean, it was like a lot of, you know, I, I think we were young and sort of naive. And so a lot of it was like, you know, you just have to like, we, we reason a lot by sort of, I mean, actually it's a good thing, but like, we reason by first principles, like, you know, and, and, and, and we reason, so, so reason by first principles and it was kind of like, very much like a mathematical proof. It's like, hey, like, prove to me that this doesn't work, otherwise it probably should work, right? And, and like, then you think about it, then it's like, well, if institutions care about events, then definitely retail cares about events, like, you know, if the institutions don't care as much as we thought about like, all these complicated financial instruments, then retail definitely cares way less. So the overall, I think the, the amount of interest or caring about events is actually pretty large.

• 28:52Molly O'Shea?

  Hmm.

• 28:53Speaker 00

  Um, and, and so, because yeah, people don't think like, hey, I think this, this option should be trading at, you know, four delta instead of five delta. Like, they think, I think Brexit is gonna happen, right? Like, that's how people think naturally. Um, so from first, first principles, it felt like there should be a lot of demand, given how much demand there is for traditional assets, for, uh, these types of markets. Um, the second issue was regulatory, maybe this word, we were the most naive, but like, I, I got, you know, I got extremely obsessed with the law, I read everything, I was like, well, nothing I read in the actual law should make this not allowed. Like, I think there's probably a way to convince regulators to do this. And it's a people problem at the end of the day, and like, you can work through this whole thing and might take a long time, but we can convince them.

• 29:36Speaker 00

  And it did take a long time, way longer than expected and so on, but we did convince them. And then three, there's a question of liquidity, like, the, the idea, that's one of the big things about prediction markets, like, they're not liquid, like, and what, what liquidity is basically like, okay, you can easily take ten dollars, you can easily maybe take a hundred, thousand, but if you wanna take like, ten thousand, a hundred thousand, a million, it gets harder, like, you can't take that freely. But then the interesting thing is like, that's true, but like, two things, like, most financial markets didn't start liquid, like, you know, it's it's a bit of a chicken in the egg, like, yes, it's true, like, you you need you need supply and that brings a demand, demand brings supply, it's like Airbnb, you need all the houses and stuff, but that's not a, like,

• 30:17Speaker 00

  that's not an intrinsic property, like, of, like, if you figure out how to build that flywheel, then it should work, it might work. And then too, not all the events need to be equally liquid, like, you know, Tesla, for example, you can buy any size, you don't move the price much, but if you buy some random shitty stock, like, it's not as, like, you know, if you buy like a ten million dollars, you'll move the stock pretty drastically. Um, and so it's the same thing for events.

• 30:38Molly O'Shea?

  Do you have any goals to institutionalize? Are you dealing with very large customers?

• 30:44Speaker 00

  I think over time, yes, we have demand, we have a lot of demand, we should make sure that when we go after it, we we cater it pretty effectively. So right now, it's like launch of brokers, expand our offering, really kind of like grow the retail business, I think. But I think we have goals for institutions, because the the view, the way I always think about this, like, prediction markets are extremely cool and very useful society in terms of like being able to engage with the news more meaningfully and see the future better. But it's not just that, like, the core unlock that could happen in prediction markets is like, if you forecast the future better, you are pricing risk.

• 31:19Speaker 00

  Like, you price any risk, and and what I mean by that is like, now we have a better way to measure all these risks that could happen to companies, to government, to humanity, to anything, whether it's, you know, climate, COVID, health, um, the economy, all, you know, politics, all these different things. And if you can price risk, then you can do, make better decisions about the risk, like, if you understand the risk better, you can make better decisions about how to manage it. And then also, you can like transfer it, like, you can hedge. And I think that's where the institutions will, the market really, really becomes very, very large, because institutions are very exposed to all types of bad things happening in the future, they they don't have control over.

• 31:52Molly O'Shea?

  Well, so what is the line between gambling and investing and hedging?

• 31:56Speaker 00

  Yeah, I think for me, it's actually been very simple, and it's interesting because, um, here's what I would say. The line has always been debated forever. It's like amazing. It's like incredible. Like, like when in the South Sea Bubble, which was the first form of bubble that happened in the, I don't remember. There's this thing called the Dutch East India Company.

• 32:19Molly O'Shea?

  Yeah.

• 32:19Speaker 00

  Yeah, so like they, you know, they, the first version of kind of like a really retail stock market. People speculated like crazy. A bunch of people lost money and then people were saying like, well, maybe this whole retail speculation thing is actually gambling. And, and now, you know, fast forward, very few people think that the stock market is actually like a gambling thing. Like, some people do. Like, there's some, some fraction of the Senate that still does. But, but like, the point here is like, speculation and gambling, yes, I understand why they like, they can have very sort of strong ties. And it was the same thing. Great futures used to be thought gambling and then they got legalized in 1905. It was Supreme Court decisions, very similar to our election. The, the difference is actually about whether the underlying thing, like the thing that you're actually engaging in,

• 33:03Speaker 00

  has actually some sort of economic, social, cultural relevance outside of the act of placing the trade, right? Like, and so, so it's like, is it artificial versus natural, right? Like, if, if I roll a roulette spin right now and we bet on it, that's artificial. Like, that, that doesn't exist outside of the purpose of us recreationally speculating on it. But that's very, very different from like whether Brexit is going to happen or not. Like, yes, you can speculate on that. Like, you, you're, you know, taking a bet or trade or, you know, whatever people want to like, you know, criticize it for. But like, that's a natural risk. That's something that exists independently of us doing it versus not. And some people may actually want to manage it and be, want to be more informed about that risk.

• 33:48Speaker 00

  So that's actually economically important. That's socially useful. And I think that's how the line between financial services and gambling has been drawn by law historically. But I think it also should be how it's drawn ethically, basically, between the two.

• 33:59Molly O'Shea?

  In terms of real world, real time events, these are super irregular and the business might flux a lot. So how do you manage, you know, the roller coaster ride of like trend driven events? Some things happen, some things don't. Elections don't happen every year. So how do you manage that internally as an organization?

• 34:24Speaker 00

  Yeah, I mean, definitely it's a tougher business than like, you know, maybe like a.

• 34:30Speaker 00

  Like a B2B SaaS, maybe like because you know there their revenue is much more forecastable and you know you can really think in terms of ARR. For us it's harder, you know, it's it fluctuates and ebbs and flows and so on and so forth. Now. I would say two things, like that's true for consumer in general.

• 34:47Molly O'Shea?

  Yeah.

• 34:48Speaker 00

  You know, I mean, if you look at the P and Ls of Robin Hood, Coinbase, even Dora, I mean. It's just not as stable, like, you know, consumers are finicky, like.

• 34:59Speaker 00

  You know, they're kind of like erratic. But consumer businesses are very large if they work, like they generally like you can scale them faster, you can do. You can get better economies of scale, you don't have to have a huge sales. So like there's all sorts of interesting things in consumer businesses. So and then the ones that figure out how to kind of create retentive, consistent usage, obviously, like are the ones that can go supernova. In our case, I think like. So here's the thing that's interesting, like. Most of our revenue doesn't come from these kind of crazy, exciting events. Like at the breakdown of revenue right now, for this month, for example, like how much was it the Super Bowl versus the other things like it's actually much smaller than people would think like.

• 35:41Molly O'Shea?

  Really?

• 35:41Speaker 00

  Yeah, because like. It's not repeatable, like the things that like do do a lot of like, yes, the election as a one off was huge, like this one market was so big. But then we have a thousand markets, like you, if you have thousand markets, some of them repeat on a daily basis on that even repeat on hourly basis, like. That adds up, that adds up like drastically, right? And so the cool thing is like. The way you think about the business is like actually these exciting events are ways to kind of generate brand and acquire new customers.

• 36:11Molly O'Shea?

  Right.

• 36:11Speaker 00

  But then the the consistent stuff, the stuff that's repeatable on every day, every week. Is the stuff that actually builds up revenue and volume and and like consistent business over time. And I think the two can gel pretty well together.

• 36:23Molly O'Shea?

  How do you keep those consumers engaged after their first initial introduction to the company?

• 36:29Speaker 00

  I think we just like, it's really about like, uh, expanding the offering. Like just having a very large diversity of things that people can do.

• 36:37Molly O'Shea?

  Like on the go to market standpoint, like how do you, can you market to them?

• 36:40Speaker 00

  Creating, I mean, for us, it's like creating this kind of association between the news and Twitter and coming back.

• 36:45Molly O'Shea?

  Yeah.

• 36:46Speaker 00

  Uh, to Kalshi and it's, it's when we see it, like there is this kind of habit sometimes, like you, you know, someone makes a crazy prediction. Or says something dumb on Twitter and then people go and check the odds and then they place a trade and like, you know, there's this loop that happens. And I think we need to keep working on basically strengthening that loop, but that, that, that behavior is happening. And so as long as we create that behavior, it's a bit like, you know, how like, you know, during sports games, all the like sports betters, they're like, are used to now, like opening up FanDuel and DraftKings and like they, you know, engage with the game and by placing a bet. And that's a used, like that's a habit they have, they're used to it. I think we can do the same thing, but for all the news, like all the categories, everything. And I think that's, you know, that could be very, very large.

• 37:26Molly O'Shea?

  I will say, I was reading through the Kalshi blog and it's hilarious.

• 37:30Speaker 00

  Kalshi ideas?

• 37:31Molly O'Shea?

  It is so funny.

• 37:32Speaker 00

  It's like insane, like.

• 37:34Molly O'Shea?

  It's really funny. And then like the one on the website too, I, I forget what are your writers? I think his name is Tyler or something, but he's hilarious.

• 37:41Speaker 00

  Real old talent.

• 37:42Molly O'Shea?

  Really funny memes on there.

• 37:44Speaker 00

  You have to rein him in, I think.

• 37:45Molly O'Shea?

  Spicy.

• 37:46Speaker 00

  Yeah, it's a lot.

• 37:48Molly O'Shea?

  The Diddy one was pretty spicy.

• 37:50Speaker 00

  It was a lot. Yeah. I mean, he does, you know, I mean, there was one also in the election that I think blew up because, so that was a time where like Trump odds were up and then we were getting slandered in the press.

• 37:59Molly O'Shea?

  Yeah.

• 38:00Speaker 00

  And if you remember that, that time, there was like the time, um, the Times article and there's a bunch of articles that people came out, which is like, these prediction markets are like totally false, don't trust them. And like, it was no, it's normal. I mean, and look, I, I, you know, not to make this partisan, like, I think like it is either side. Like whenever the odds were up for either side, like that side was excited about the markets and, and whenever they were down for that, for that side, that side was way less excited about the markets. And that's fine. That's how.

• 38:26Molly O'Shea?

  Human behavior.

• 38:27Speaker 00

  That's human behavior. But so, but, but like we were getting like a time when Trump was a rapper, like getting very attacked by the media, like, you know, and like, I mean, all the whole thing ranged, there was like such a vast range of outcomes, like also like, you know, I was, I remember I was personally getting called like an Egyptian billionaire, uh, like a Muslim Egyptian billionaire to like, to like a Mossad agent.

• 38:48Molly O'Shea?

  Quite the difference.

• 38:49Speaker 00

  Yeah, I mean, between how the, you know, and it's like, I'm neither, like, I'm, you know, I was born California Lebanese Christian, like, no, no, you know, and, and so, but, but like, it was fun, like, you know, but, but the, um, like, like, in that period, I think, like, you know, um, we, we, like, we, we, we tried to tell people, like, you know, like, it just, trust the odds, like, they're, they're not, um, like, this is not being manipulated, there's nothing going on here, it's just, you know, what the market odds are. Um, and I think that's just like an education thing over time.

• 39:26Molly O'Shea?

  I'm just waiting for a subscribe button on that, like, blog internally, because it's really funny.

• 39:32Speaker 00

  So basically, like, he came up with this blog that day, when they kind of said, and like, well, if you really be, believe, it was basically the tale there, I was like, if you really believe that this whole thing is false, like, you know, you should pony up or shut the fuck up. Like, basically, it was like, you know, you should put money where your mouth is, if you're so, like, if you're so convinced that, you know, then you can make like a 2.5X right now on your money, like, what are you doing, right? And, and, and I think that was great, like, it was such a good response, like, maybe, then you should make money on it, basically.

• 39:58Molly O'Shea?

  That's really good.

• 39:59Speaker 00

  Yeah.

• 39:59Molly O'Shea?

  What are, uh, what are some, like, other events that you're looking forward to this year? Like, any, any big ones we should be looking out for?

• 40:05Speaker 00

  The thing that's cool is, like, I don't know, because, like, there's all these-

• 40:07Molly O'Shea?

  You don't know?

• 40:08Speaker 00

  Yeah, because, like, there's all these new, like, it's very hard to anticipate what's actually gonna be, like, really large. Like, two examples that I've never expected, so one, after the election, one market that actually absolutely blew up was basically the margin of victory, like, by what, by how much is, is Trump going to win?

• 40:29Speaker 00

  And that thing was insane, it was like, a little bit like a, like a, like a GameStop moment, because it was like, so it was interesting, because you can pick, like, 1%, 2%, 3%, 4% and so on. And then there were like Discord communities that were created. Called the ones, the twos, the threes and the fours. And people started identifying as like, it was like tribal war. They started like, like, you know, we don't accept twos here and like, you know, the twos are like actually like, like snakes and like the threes are actually like, you know, thieves and like, and people were fighting like hardcore, like pushing the price against each other, like buying all this, you know. It got insane. Like, I was like, wait, what, like, how could you become so emotionally charged in this? Like, two or three, like, no one actually cares. And like, you know, we had these like

• 41:13Speaker 00

  communities that were getting set up, like where they were fighting about this. And then like that generated insane amount of volume. Like, I couldn't have predicted that before. Same thing happened with the executive orders for Trump. Like, when he was signing a lot of them per day.

• 41:22Molly O'Shea?

  Yeah.

• 41:23Speaker 00

  It's like, how many he's gonna do per day?

• 41:24Molly O'Shea?

  Oh my god, how many pens could he use per day?

• 41:26Speaker 00

  Yeah, that thing was like, like, number of executive orders was blowing up. Like, it was, it was like totally nuts also. And so I don't know, like, I think we just need to make sure that, like, there's chaos and volatility in the world, and I think we're probably gonna have a lot of it in the next four years.

• 41:37Molly O'Shea?

  One thing that I just learned is that insider trading is not illegal in commodity derivatives. And there's nuances around this, but can you explain this?

• 41:47Speaker 00

  Yeah, yeah, it's, uh, because like, so the, the original, like, commodity, like, type of derivative is basically like, for example, like grain futures, right? Like, the way it works is like farmers are hedging their grain prices and, you know, that enables them to produce more and so on and so forth. But like, the grain price itself, the way that it's actually calculated, is like you survey a bunch of farmers. So farmers obviously have insider information on what they're trading on, like, like by definition, that's the whole point. So like, yeah, you can, there's no insider trading in commodities. Like, it's all insider trading, actually, like, the, the whole thing. And it's interesting because then, like, they have insider trading on the prices, they think that they're gonna sell, and then how much they sold and so on,

• 42:28Speaker 00

  but then there's weather events that could change things and, but, but yeah, insider trading i- in the law actually is not very existent directly. It's, it's true for securities, like, uh, stocks. But with events, like, we had this all, all these questions. So the last administration took the position that we should enforce insider trading. This administration is revisiting that, um, on whether we should let insider trading happen or not. I'm kind of in between. I don't think, I don't think it should be full on insider, like, I think some people should not be able to use any information, uh, to trade. I think there's some subset of information that should, like, that is non-public that they cannot trade on. Uh, but I think we're being a bit too restrictive right now, yeah.

• 43:05Molly O'Shea?

  How do you prosecute against that?

• 43:07Speaker 00

  Oh, we're like, we're like, so we are an SRO, like we are, think of it as like a pseudo extension of government where we have our own set of rules and laws. So we have a whole investigation department. We actually have to do that by law. Like if I don't do this, I'm violating the law. And we have to prosecute people, like monitor all types of bad behaviors, and then we prosecute them. It can be from fines all the way to criminal prosecution. So they can go, it's like insider trading, all the same. So if you, if you commit fraud, financial fraud on cash, it's the same as committing financial fraud in the stock market or anything else. It's the same thing.

• 43:38Molly O'Shea?

  So you come from the trading world, world yourself, Goldman and Citadel, what's the difference in the opportunities of making millions of dollars there and the trade off of doing this?

• 43:50Speaker 00

  Yeah, I don't know. It's hard to think about that. I mean, it's just different. Like, it's, it's, I mean, it's just different. I think that's the way I, I'd put it. I mean,

• 44:00Speaker 00

  I think like-

• 44:01Molly O'Shea?

  But you think it's a bigger, like, long-term opportunity?

• 44:04Speaker 00

  Between the two?

• 44:04Molly O'Shea?

  Yeah.

• 44:07Speaker 00

  I don't know. I think about, I mean, you know, I think about this recently. I mean, like, it, it, so like purely monetarily wise, like, it's hard to know. I think from an expected value perspective, like definitely Citadel. It's like hard to beat that. Like, I think, especially with now, like, like, Ken is just giving ridiculous, like, it's insane, like, the types of packages and so on. So, so from an EV perspective, like, I, I think so.

• 44:34Speaker 00

  But, yeah, I think a building company has more variance. So you, you could hit, you know, hit much bigger and go really big. And I think that's, I would say that's the difference. Like, the rest is a kind of lifestyle. Like, I like trading a lot, actually. I think Citadel was a great place to work. I really liked it. I like the culture. I like everything about it. The, the thing is, like, it's just different lifestyle. Like, you're, you're trading, you're getting very specialized, very narrow. You're focusing on this one asset class, you become an expert in it, and that's your thing. Whereas, you know, being an entrepreneur is very, like, very different. You're all over the place. You're doing all sorts of things. Like, you're learning a bunch, bunch, a bunch of stuff. And you're building. You're building something that, like, you can put your name on long-term, whereas that's not quite there in trading. So

• 45:15Speaker 00

  I, I don't know. I have a view, like, I think either are fine. It really is, maybe the broader answer is, like, I think being an entrepreneur-

• 45:24Speaker 00

  Is um is oversold. Like I I think there's this kind of notion that like being a founder or being entrepreneur. That's like the the highest form of like, you know.

• 45:34Molly O'Shea?

  Social status.

• 45:35Speaker 00

  Yeah, like it's the most important thing to do. But like, I don't know, I think that's like kind of like, you know, I I I think it's kind of the boring. I really think it's the boring answer is like it depends like, you know, I I think it it. I think if you're kind of broken. You you gotta be a founder, otherwise you'd be very itchy in life. Like I I I think and that's me like I am I am in that I'm unfortunately in that category like. Most people I often tell me like I people do not want to be in my brain like I I really, really like. I'm extremely anxious like I also things going on in my head all the time. Um, and I I unfortunately don't have an option like I'm actually stuck doing this. Uh, but like, and I and I think that's fine like I think you can get asymmetric rewards and outcomes doing that and so on and so forth. But I I think if you know, some people can have like a healthy life.

• 46:20Speaker 00

  Well, well balanced life and be happy and be reasonably successful at a bunch of different. Like, you know, the FIFA, like when you play FIFA, you had all the sort of like, uh. Attributes like speed, like whatever, right, like.

• 46:30Molly O'Shea?

  I've never played FIFA.

• 46:32Speaker 00

  Whatever, but like, you know, in any of the video games, there's like attributes, right, like.

• 46:35Molly O'Shea?

  Yeah.

• 46:35Speaker 00

  Out of a hundred, like Messi is like, I don't know, like ninety here and like and Ronaldo is super high at shooting and whatever. And I think entrepreneurs are like extremely spiked in one thing. And then everything else is kind of like. Close to zero, actually, like completely incapable at every anything else. Uh, whereas a lot of a lot of people that live a happy, healthy life are catching more like rounded, it's more balanced. Um, and so I think that's fine too, yeah.

• 47:01Molly O'Shea?

  Little dark, but I get it, I get it.

• 47:02Speaker 00

  Yeah, I I no, I think it's not bad, I just think it's more like the choice, basically.

• 47:06Molly O'Shea?

  Well, I think you like, you're probably happy and you're probably healthy, but it's not like what a standard. Definition would be because it's not so stable.

• 47:16Speaker 00

  Yeah, I think I think it's just like what you need based on who you are and and I think like. A lot of people I think just wouldn't be happy with the kind of roller coaster on a daily basis and it's pretty taxing, right? And, uh, but for me, it's like I can't do anything else, so.

• 47:29Molly O'Shea?

  I get that. Um. We like talked about it a little bit, but before we're closed up, I know we have like a couple a couple of minutes left, but how does the business model actually work? Is it trading flows, fees, like regulatory costs? How does this work?

• 47:43Speaker 00

  Yeah. So I think, uh, one is we, uh, really it was predominantly like we take trading fees. Uh, so like, you know, if you put like, if you trade a hundred dollars, we take a fee on top of that. And that's how exchanges usually make money. I think since the election, we're learning actually there, there, there's a bunch of revenue sources that we can scale and focus on over time. Like I think, you know, one is we get interest on the float. So now we have a shit ton of deposits. Uh, after the election, especially like it's, and someone is like, oh shit, like we can make shit, like a bunch of revenue out of that as well. So that's that. I think, um, uh, uh, and then last is over time, I think we can, uh, well, then like market making, like we can just make money. Basically market making. So we have a separate fund that trades on the exchange. They make money as well.

• 48:28Speaker 00

  And, and then last, like, we don't charge right now for data, but I think data is, is always a good part. We can charge, like, there's a lot of people that want to pay for it. And now, now we're giving it for free, but over time we can charge. Yeah. I think exchanges are very profitable. The, the, the hard part is like actually just getting it up and running and like making it work. That's very, very difficult. But if, if, if it works, if the flywheel is working, it makes a lot of money.

• 48:46Molly O'Shea?

  Right.

• 48:47Speaker 00

  Yeah.

• 48:47Molly O'Shea?

  Switching to the personal side.

• 48:49Speaker 00

  Yeah.

• 48:49Molly O'Shea?

  So we have a really great question from our mutual friend, Christian Garrett.

• 48:53Speaker 00

  Nice.

• 48:54Molly O'Shea?

  One thirty seven ventures. Hey, Christian.

• 48:56Speaker 00

  Um. This is great.

• 48:58Molly O'Shea?

  He's awesome. Most extroverted person ever. I don't know how he does it.

• 49:01Speaker 00

  This is awesome.

• 49:02Molly O'Shea?

  Uh, so he mentioned to ask you what your mentor taught you about viewing life, everything in life as a trade on risk and calculating expected value.

• 49:12Speaker 00

  That's a great question, actually.

• 49:16Speaker 00

  Is he, is he a very specific mentor or?

• 49:18Molly O'Shea?

  I'm sure he is.

• 49:19Speaker 00

  Yeah. So like, I, I think, I, look, I, I think, um,

• 49:25Speaker 00

  It's interesting because, you know, um, I would say, I would say two things like, yes, my, my, it's my brain is naturally fits with that sort of view of the world, which is like, I try to price everything. And a lot of people in Wall Street, like, they do function that way. It's, it's so different from like Silicon Valley, uh, where everything is actually priced. It's literally priced, you know, like the, the way that law, like these big funds, I'm, I'm sure it's true for Renaissance, but Citadel, Susquehanna, like they, it's incredible. They have like these very sophisticated ways of pricing, like things. It's not just like, hey, like, I'm doing this deal and a bunch of things could happen and, and we'll see how it goes. It's actually like,

• 50:08Speaker 00

  we're going to list the things that could happen. We're gonna, um, you know, good and bad, like risks here and there, opportunities here and there, and then put prices on them, like actually attribute a probability of it happening and what's the impact if that thing happens. And so what happens is you have a model, like a mental model where everything that you're thinking about, you're thinking of it through the lens of like probability or expected value, or actually an option, like a literally like a, like a, so when you invest in something, I'm actually buying an option, uh, of something that on, on an ecosystem, on something else or whatever. And I think for running a business, uh, so actually, I think for being an investor, if you want to be really great, I, I believe it's actually a very, very

• 50:51Speaker 00

  good lens, um, uh, to basically just make a very good decision. For, for building a company, I think there's like, it's twofold. I think it's important to do the, to do it, like to apply the framework, uh, so that you have a pretty good lay of the land of all the options ahead of you and like you can price them. You can actually like put a dollar price on each option and like, okay, which one should I go after? And I think that's a pretty good thing to do. The flip of it is it can actually make you a bit too cynical. And I think that's actually something I learned over time. Like if I had priced the probability, like if I had done the math on the election lawsuits. But I did do the math on election lawsuit and the math didn't make sense. The expected value was too, like it was is bad. Like we shouldn't have sued the government.

• 51:35Speaker 00

  Like it doesn't make any, like from a legal perspective, we should not have sued the government. And it's funny because like, you know, when I talk to some of our like partners in Wall Street, like, like singing stuff. They were telling me like they think it was like less than one percent chance that this was gonna happen. And then after we won, you know, like the, the outcome was like, well, maybe this is like, you know, why entrepreneurs actually do sometimes things in a different way. Like sometimes in a select certain set of times, you have to take a leap of faith and just forget about the numbers like. Cause the numbers look very bad on the election thing like it was not gonna like. There's no way to rational, rationally think about this and actually end up doing it. Like the board was like, this is a bad idea.

• 52:08Molly O'Shea?

  Yeah.

• 52:09Speaker 00

  And we did it, but you know, that was more of a fuck it, fuck it. Like, like, let's just, let's just see what happens. Yeah.

• 52:14Molly O'Shea?

  That's a good example. Okay. Well, thinking about 2025, what are your goals?

• 52:21Speaker 00

  Yeah, I think like expanding our market offering, launching the brokers. Um, and I think our product could, could be a lot better still.

• 52:28Molly O'Shea?

  In what way?

• 52:29Speaker 00

  I think the app is just okay. Like I don't think it's great. I think it, it can be great. Like I think it can be much, much better. Like we. And it's interesting because like we've been fighting regulators and doing all this regulatory stuff for so long. Like we, we really started working on the app for like, you know, six months now. It's not been that, that long that really focused on it. And so I think we have a lot of opportunities to make it better, easier to understand, simpler, more fun. Um, I think our social features can expand a lot. Like if you've, if you've been reading some of the comment like. It's actually really fun to be on, uh, uh, on, we had this thing called Kalshi Ideas, which is like Twitter, but you have to have a position.

• 53:06Molly O'Shea?

  Mm hmm.

• 53:07Speaker 00

  And it's so fun because it's like, it's like people have actual money on this thing. Like they, they're not, you know, so, so they can only, and, and, and you know, people say all sorts of crazy things and it's like, you know. And I think we can like do a lot of work on expanding that, making it better, all of that. But yeah, I think those are the three, um, three main thing, main things.

• 53:23Molly O'Shea?

  It's exciting.

• 53:24Speaker 00

  Yeah.

• 53:25Molly O'Shea?

  Well, thank you so much, Tarek.

• 53:26Speaker 00

  Yeah, thanks for having me. It's awesome.

• 53:27Molly O'Shea?

  Great conversation.