Kalshi Co-founder and COO Luana Lopes Lara on the Long Fight for Regulated Prediction Markets

That was a very scary moment because I was just like, this is the most important thing in my life. The company is the most important thing in my life. And, and,

and you're betting the company.

And I'm betting the company.

Welcome to Confession, where I invite tech veterans to share their painful lessons. We all connect through shared pain, and here I offer an outlet to talk about them honestly and think about the lessons learned. I'm Ali Partovi, and I run NEO, a venture fund and mentorship community for startup founders. We've coached and funded the founders of Kalshi, Cursor, Whisperflow, and many more. In this episode, I sit down with one of those startup founders, Luana Lopez Lara, co-founder and COO of Kalshi. Kalshi is really successful today, but Luana shares the story of the 6-year-long struggle with the US government, and she showed unbelievable tenacity and courage to go all in. This is Confession. Let's begin. I'm so happy to be here with you. We've known each other since 2019, right, when I was just starting Neo and you were just starting Kalshi. And Kalshi today is a reportedly $22 billion startup, pioneered the concept of prediction markets or regulated prediction markets. Tell me a little bit about your, your journey prior to that. I'd love to go back to like the beginning. Where were you born? What was young Luana like?

Absolutely. And I want to say, I remember the first time we met was actually in this At Seth, you guys' office, was it Canopy? Yeah. Maybe the name. And it was just like both Tarek and I were terrified. It's like, oh, we're gonna meet this guy, he's so famous, everyone says he's amazing. We're so nervous that you're gonna like us. So I remember that very vividly. But yeah, so I was born and raised in Brazil.

Where in Brazil?

So I was born in Belo Horizonte, which is like the 3rd biggest city in Brazil. And then when I was like 5, my dad, he worked his entire life at IBM, he was transferred to work in Rio. So I moved to Rio and I was there till I was 13. And then I got into this ballet school because I used to be a professional ballerina before going to college called the Bolshoi Ballet School. Bolshoi Ballet is like one of the, probably the best ballet in the world. It's in Russia, but they have one school outside of Russia that's in the south of Brazil. So I moved there to do 3 years of high school in the ballet school. So it was like—

You moved to the south of Brazil for the ballet school?

Right. So I would—

With your parents or?

So that's the thing, it's like I forced my— I kind of forced my parents to have a long-distance marriage for 3 years because my mom— I know, my mom went with me because my parents were like, she can't stay by herself, like what is she gonna do? And then my dad and my sister stayed behind in Rio.

You split up from your own sibling?

So every weekend, or my dad and my sister would come, or we would go, and we would try to do that and to make it happen. So my parents and my sister were just So, so nice, honestly, to, to, to allow that. Yeah, in those 3 years, I was pretty much like, I would wake up very early in the morning, like maybe like 5:30, 6:00, normal high school in Brazil, like technical school from like 7:00 AM to 12:30. That's the time that in Brazil you go to school or in the morning or in the afternoon. There's no full-time. So I'd go to school in the morning, then I would go to my ballet school and stay there from like 1:00 to 9:00 PM. And then I would go home.

Oh my gosh.

And study, 'cause I had to learn English to try to come to, to the US and all those things. So it was, The most intense 3 years of my life really was those 3 years of that, like high school and ballet, a lot of that. Even though ballet was the thing, probably the activity I loved doing the most in my life, I really, really liked the technical side. I've always been a nerd. I mean, my dad is at IBM, he's an electrical engineer, but my mom was a math teacher, my sister did engineering as well. So I was doing all the math Olympiads and all of that. And I was very ambitious since I was very little. I wanted to do big things. Getting to the last year of high school, I was like, I should, you know, like the best schools in the world are in the United States. Maybe I should try and who knows, maybe I'll get in. So I decided to apply and, and that's kind of the background of how I got into MIT and everything.

You said you were very ambitious since you were very little. What does a little girl who's ambitious—

Whoever I would learn about in school that I thought was awesome, I would write their name in this paper that was like right next to my bed, and I would be like, one day I want to do something that's like them in one way, shape, or form. And the funny thing is, like, I never even got even close. I mean, like, the names were like Churchill, Alexander the Great, or whatever, and I'm like, you know, very, very far from any of that. But I think it was just like the concept of I want to do something that will matter in some way. I thought it was insane that like thousands of years later, you'd still know and learn about these, like, very key figures that, like, changed the history of the world. I was always kind of thinking, like, I want to be the best, and how can I be the best and kind of put myself in a position like this? And obviously I'm not even close to anyone on that list, but I think it was just since I was very little, honestly, like, since I was probably 6 or 7, I— 'cause I was very nerdy. I remember also school in Brazil was January to December 'cause of the— Right. Calendar. But then the books for the year come out beginning of December that you need for the other year. So you can buy and you have a summer vacation. I would buy all the books the day that they would come out, read all of them before Christmas, and then reread them during the school year as needed for exams. So it's like I was like weird. I was a weird child for sure. That's why I also really wanted to go to do ballet in the Bolshoi. It was because it was the best school. And I was like, well, why wouldn't I go to the best place? And when I decided to come to the US, I was like, what was the— they're the best, best place in the world. Why wouldn't I want to go to the US? Why wouldn't I want it? So it was always kind of like common sense to me, which I guess is weird, but—

So you wanted to be like Alexander the Great, conquer—

That would be awesome. Yeah, that would've been awesome, but—

So you went to MIT.

So I was picking between schools. So I was between Harvard, MIT, Yale, and Stanford. And everyone was telling me I shouldn't go to MIT because my entire background isn't— even though I did do the Math Olympiad and all those things, like, I was a ballerina. That's kind of like if you had to be like a one-word description. And MIT, of course, would be the worst place if you're a ballerina to go. There's no really anything related to ballet there whatsoever. And the other schools have a lot more. And everyone's like, well, you're— first of all, you're not very good at math, so you're not going to do well at MIT. And then 2 is like what you really like, they, they don't have. But I thought it was important to really force— kind of really force myself out of my comfort zone. And really, like, if I'm here to try to be very good at math, I should go to the place that's going to really, really force me to be, to like just focus and try to get as good as I can be in like 4 years versus try to kind of like hedge my position and be like, well, I can do whatever I want to do in engineering, but I also have the safe— the safety of if it doesn't go well, I can just study something else or, or stuff like that. So I decided to go to MIT because I thought it would kind of push me the most.

What about ballet? Like, did you continue ballet at the same time?

So that is a great question. My, my, Thinking at the time, because I'm very good at, at compromising— I'm very bad, sorry, bad, terrible at compromising. So what I said was, I'll go to MIT and it's not going to be an issue because I can just go to the Boston Ballet and I'll take classes there. And then the Boston Ballet is better ballet than any of the other schools I was choosing from. And, um, and you know, MIT is better at the math and computer science stuff than the other, the others. So it would kind of be the best of both worlds. The problem was the first time I went on a Saturday to the Boston Ballet to take my first class after like a month that I was traveling and like, you know, getting to school orientation, all of that. And I just remember looking at myself in the mirror and like my arm, like I was losing my form.

Mm-hmm.

And I remember like at the end of the hour and a half class, I was just like, I can't do this 'cause I'm gonna see myself just get, getting so much worse at something I cared so much about that it's just gonna be very hard. Ballet was never a hobby to me. It was just something like I really, really wanted to be very good at it. And I thought it was kind of like better to leave on a good note than it was to kind of see myself get worse. So I stopped it completely and, you know, started swimming instead or like whatever. I was like trying different things to work out and like SoulCycle or whatever, but focused really on school. Yeah, at the start it was very tough because I was definitely very, very behind on the— like in Brazil you cannot really like You can't learn calculus in high school. There's like a mandated government program that every school needs to teach. Calculus is not for high school. Everything that I wanted to do was kind of, okay, like I wanted to do this physics class and I was like behind on my math classes that I had to take. So it was like very hard at the start. It took many years of, of a lot of nights, very stressful, and studying and all of that. But it was fun.

Really, I also want to talk about failure and fuckups. And it's something that in general, I think in tech, we don't have enough conversation about how difficult it is, you know, getting to whatever success people are at. So, I'd love to hear about more about the struggle.

Oh, absolutely.

Do you have any regrets or things you'd do differently if you could go back?

Yeah, no, absolutely. And it's funny because, well, as I said, 2019 we really started, but it was really 2018. So, now it's been many, many years, right? 7 years really that we've been around and, and, and building this company. And really the company really started only working a year and a half ago, 2 years ago. And I think before that there were many, many times that I'm way more optimistic than Tarek. So the way that we are is like we're com— completely, we're very similar in terms of what we studied, what we're good at, background and all of that. But we are polar opposites in terms of how optimistic and everything's gonna be great I am. And how pessimistic we're about to die and this is gonna be the end of the world. Tark is. But for the first 5 years, it really was way over 90% chance the company was going to die. Even when we were worth $1 billion, we were like, what are we doing here? It doesn't make sense.

It's a very lonely experience because as a founder, you can't say that to the outside world. You have to project optimism to the outside world, and you have to, whether you're raising money or recruiting employees or talking to the press, Say a certain story and then whatever you're personally aware of or afraid of, you have to just keep to yourself.

Yeah. And for me it was always harder even because, so I think for example, having a co-founder is one of the best things you can do because at least you have someone else to kind of freak out to in a way. Really is like the amount of value that is in just having someone that you can freak out to. Obviously you can do that with your family and all of that, but it's different because your family, They don't really get it exactly what you're going through.

Yeah.

For me, it was always harder too, because, because I am supposed to be the optimistic one. So even if I was freaking out, I couldn't even do that in front of Tarek. Because if, if I even showed a little bit of, I might be worried about this or it might not work out, Tarek immediately would be like, oh my God, if you're saying this, it's game over, we're done. So it's always a complicated thing. But I think that there's a story of the overnight success. It's just like not a real thing. When we started, the biggest question with prediction markets actually was, can this be legal in the US? There were only 10 financial exchanges, becoming one of them. And took 3 years. It was awful. Like, right, every day we would— Tarek says, is it— it's like you're climbing a mountain and you think the peak is right above you, so you keep climbing. And when you get there, you look up and you're like, shit, that was just a little, like, you know, a little plateau. And I have, like, to keep going and keep going because It's just always harder than you think. And I actually think that helped us because we always thought we were close. So if you always have a next goal, it's a little easier. You're like, well, I know what I have to do for next 1 to 2 months. So it's a little easier than thinking about this is what we have to do for 3 years. It would've been, I don't know if we would've done it in a way.

Right.

It's a lot easier to think there's 1 to 2. So that helped us kind of get through this. And it's just like, it's 1 to 2 months, let's just push through it. We need to see it. through and then would go and then the government would like, here are the answers to your 100 questions. And they would be like, well, we agree with 5% of them. We have follow-up questions on 90% of them and we disagree with 5. So we'd have to go and like rework everything and do more data analysis to show kind of how these markets behave and, and all of that. You would expect that anything that takes 3 years, it would be, you know, immediate product market fit.

Right.

Because it's like, imagine, okay, it's an FDA approval or whatever, right? But for us, it wasn't the case. It was, if we are able to get this done, which people thought it was like 1% chance it would get regulated, then we would, all we would have is the shot of trying to build this and trying to get product-market fit into this thing. 'Cause it's not guaranteed that people like trading like this and that it's actually a better way to do it. It's just, that was our thesis at the time.

Yeah. First, the 3-year-long marathon of proving legality, then begin the starting line of what all normal startups have of, can you actually build a service that people want and get traction and make money?

I remember when we got regulated, we were like, well, now it's maybe where we should be going to an accelerator program after the 3 years of—

You just reached the starting line.

Obviously, it was like cool and everyone's like, oh, they got approval, but No one really cared when we launched. It was like, there were some people that were the nerds, right? They were the prediction market nerds. They were in PredictIt. They tried these crypto offshore stuff like Augur and stuff before, and they were there. But we were like, I don't know how many people of these there are. Maybe they're just all here already. They're already waiting for us to launch. Right. And we were an objectively worse product because they really like trading on elections. They really like these types of markets that we couldn't offer at all. And right when we launched, we were like, well, at least now we have something out. So at least we can iterate, talk to users, and get metrics and kind of build something. But at the time, it was clear, we needed to figure out how to get election markets because on the more sports side, we weren't even thinking about that at the point because we were like, the next step is like, the next type of contract we need to bring really is the election.

Right.

Because it's kind of like the first and only step we can take in that kind of expanding the type of markets direction. And then we're like, all right, let's talk to the government again and see if we can do it. The first time was already like, no, from the start. And then we sent something else, they're like, no, but this time we're going to let you have a comment period. So we spent months rallying every single person we knew, doing a public campaign to get all these people to write in kind of why election markets are good. And we got a bunch of professors and academics, and you probably Submitted a letter to support of those markets, and we really wanted to get this by the 2022 election—a midterm election—even though I think it was 80 to 90 percent of the comment comments were very positive. Maybe 85 was positive, 10 was kind of neutral and more like if you do this, you need to have safeguards and all of that. And then 5 percent, I think, was very negative. Even like that, it didn't matter. They said no.

This is now

2022

fall 2022. You had been trying to get. Permission to list a contract on the midterm elections, the '22 congressional elections.

Right, exactly. And we've been doing this, and we were trying to do it since beginning of 2021. So we worked with them for like a year and 9 months. And it's like what they were trying to do is like everything they would ask us to send, they would send it, and they would be like 6 months to get back something like, oh, we don't agree, we need to open for comment period. And it was kind of like that very slow process. We still had that kind of clear, if we get the midterms, we're good. The midterms come, we obviously lose the midterms, and then we're like, well,

you lose meaning you don't get the

commission

in time for

the midterms. Yeah, yeah, yeah.

So yeah, it was really surprising because when the CFTC published their decision, there was like a public dissent by one of the commissioners saying that like we've departed from the rule of law here, that Not everyone follows this kind of stuff, but it's not common for a government regulator to have like individual members publicly saying they disagree with their own commission's decision.

Yeah. And that's kind of what was so frustrating to us is that usually most things felt somehow somewhat in our control. It was like the approval was somewhat in our control because we could just, you know, work harder and push for more questions and do more. They were like—

Meaning learn the law and comply with it, basically.

Yeah. And also just like, There were clear, like, next steps that we could do. But with the election, the problem is that now after the 2022 election, I think it was when we weren't able to list this market, the first thing that came to my head was like, wow, I don't know if there are things we can actually do because we were clearly legal and right on the law.

In your own opinion.

Yeah. And I mean, and then the judge 2 years later agreed with us. But yeah, it's like in our own opinion, we were clearly right on the law and these markets were objectively good. And then we also look at these comments and we're like, we couldn't have had a stronger kind of track record, like a stronger record of all the people approving and supporting this. And that was kind of like the first time I interacted with politics in a way that sometimes people were just like more worried about their agendas and they're like, I want to get crypto jurisdiction, so I'm going to not look at anything that might rock the boat. Then I'm worried my party's behind or whatever. It wasn't the type of growth that we needed or wanted for the company to be successful. It just, we would've been like a cool, like, experiment, I guess. Right. Like social experiment. But, and then, yeah, so after 2022, we start continuously engaging with the government. And then, as you said, it's like even inside the government, they were dissenting with each other and disagreeing and saying that they were being political. And there was all this drama around it. And we try again and they open it for comment period again. So we're like, all right, let's let's let's call everyone again. Let's get them to submit letters in support and all of that. What happened this time is that the actual the government was actually calling people, asking them to submit things against us.

Wow!

Which is crazy. It's like they would actually call these like think tanks or whatever that they thought were going to be very against us, say what they wanted them to say. They would do it, and we we were like, that's insane. It's like. If they're right on the law, first of all, if they actually think they're right on the law, they need— they don't need to do this. If they think they're wrong, then like, why, why would they do this? Why wouldn't they just, you know, apply the law? And that again was kind of like a very like powerless moment for us because we were like, okay, I mean, in some ways it's fair. We are reaching out to people to, to help us, but the government shouldn't be kind of like just taking an opposite side. They should just be applying the law.

It should be a neutral party.

Exactly. All of that goes, we get rejected again, and then they asked us another time to engage with them. We're like, please, like, is there a direction? And then one of the commissioners was like, maybe if you do this product just for institutions, it will work. So we work again, we start working on this in beginning of 2021. We are ready like end of 2023. And we tried the institutional, doesn't work. We were like $100 million. We were trying to like get anything to just get the product out the door.

Product meaning trading on election outcomes.

Trading on election outcomes. And at that time, it was a very hard time because first of all, between Tarek and I, I was always the, we need to do elections. I was like, there's no way this company's gonna really work if we don't do elections. And Tarek was like, well, maybe we switch and we start doing more in like financials and crypto and we just focus on that type of market or maybe we do this or, and I was like, no, we absolutely need elections. And every time that it didn't work, I was like, shit, that's— he's gonna get mad at me. That's gonna be on me yet again. In the beginning, it was easier to convince him that it was just like, we should do it again because, well, we just tried once. We know this market's very big, so it's gonna be hard to get. And at this point, it's been almost 2 years. A big amount of resources in the company has always gone into this. Our mind space was always like 20% on this market. The only option for us was to sue the government, and I was like, I remember I thought about it. I was like, well, I'm gonna have to argue that we need to sue the government. How am I gonna do that?

Sue the government because you believed it is legal to trade on elections, right? And that their rejection of you was

unlawful. Yeah. So basically, the only reason they would have to stop it is legalese, but there's a way like that you can read the statute. The CFTC statute, and you can see kind of like what the CFTC actually has the right to block. And there are very few things. It's like contracts associated with war, terrorism, assassination. I'm thinking to myself, what is my argument? How am I going to do that?

Your argument to convince Tarek?

To convince Tarek, because I feel like—

Your co-founder doesn't love suing governments.

I think it's him and like 99.99% of the world wouldn't like it. I think there was a part of me that was worried that the time that I would talk to Tarek about this, He was, he was gonna come into the conversation with like, amazing, this proves we need to move on from elections. It's just not gonna work.

Oh, that—

That, that is just like, we need to move on and do something else and let's just give up on the election thing. And I was like, he's gonna be thinking that? So if he's thinking that, how am I gonna convince him? And I remember, so Lior actually that we hired through Neo, and it's like, like I say that he's better than Tarkan Akonbayan times 10. He joined us like 5 years, 6 years ago as an intern. And I remember I was walking with Liordi to get tea and I told him, I was like, so I think I'm going to tell Tarek that I think we should sue the CFTC to get elections. What do you think I should tell him? And he's like, wow, yeah, that's going to be a tough one. And I mean, at the point I was like, look, whatever, I'm just going to tell him what I actually think and we'll see how it goes. And then I sit down with him. He's like, all right, so what's the plan for the quarter? We need to move on. Like, we need to move. Like the employees are very upset about this. And by the way, there's something I forgot to say right before this. So when we got the no, I mean, 2023, we kind of didn't have another plan.

Yeah.

So we had to, like a lot of employees started leaving because they were like, these people are delusional. They just keep thinking that elections are gonna come and they don't come. We also fired, kind of did a layoff, fired some people 'cause we were like, well, we're not really making money. How are we gonna figure that out? And it was kind of a very bad morale moment for the company because I think not just that, I think that obviously we've always had investors like yourself, like Alfred, that were very supportive of us, whatever we did. But there was also a lot of the small investors that we had from our Demo Day round at YC that started asking questions and, what are you doing? And we just felt like people just weren't trusting. our decision-making and how, how we were thinking. So it was very like tough time and we were kind of like, okay, the company's smaller. It's just the people that we want here. So like, what are we gonna do? And by the way, what we did for the people that wanted to stay was actually we did the layoff and then a lot of people left and we announced it at the same day, the people that were leaving the layoff. And then we said, if anyone wants to leave the company that wasn't laid off or didn't leave, you can get the same deal. So like the 3-month or whatever.

Severance.

Severance and whatever. And we did get people that took that and left the company. But then after that we were like, okay, this is the team and we're going to figure something out. And there's 5 people from that period. Rainer, also from Neo, who was amazing. And yeah, and I sat down with Tarek and I was like, you're going to kill me, but I will be honest with you. I think we should sue the government. And he is like, you have to be kidding me. There's no way that your conclusion after this 2 years is that we should sue the government. and I walked him through kind of how I was thinking about it. That was like, it was a mix of like, they are not, there's not that much more damage they could do. They were doing like death by a thousand paper cuts. Everything we wanted to do, they would ask like 100,000 questions and all these things. And they started dictating the font that we had to use on our website, like the size of the font. They're like, you need, this needs to be like a 14px, which is insane. Like they can't do this type of thing. And I told him, I was like, it's the holy grail of the markets. We're right legally. We know that they're not approving this because of political reasons. The judges, you know, the judicial system is supposed to be independent. They're going to look at this with fresh eyes. And all of the lawyers say we're right. So there's that side. I remember I was like, this is very clever. It wasn't very clever, but I was like, this is very clever. What I'm going to tell him is that it could actually be a good thing because if they are in a lawsuit with us, if we, if we sue them, they might actually think that they should retaliate less against us because they're worried of like the repercussions with the, with the—

If it looks like they're being—

If it looks like they're being—

Impartial.

Exactly. So I was like, and maybe it would be a, a positive and they'll stop retaliating and kind of being so against us on everything else. And then Tarek was like, well, that's bullshit. That's not gonna happen. We know it's gonna be infinitely worse because If we actually even try to claim to the court there's retaliation, that would be like infinitely more complicated. There's discovery, there's all these things. I kept saying, I was like, we have to sue. That's the only way we go. And, and I had a plan of like how we actually detach it. 'Cause a lot of his argument was we can't have the company focus on this again. And I was like, well, I agree. So we're gonna hire a law firm, they're gonna handle this. And we're not, we're only allowed to spend an hour a week on this when in the meeting with, with the litigators and, and that's it. Mm-hmm. He thought I was insane, but honestly, I feel like he—he was at that point—he was also like, "I'm not gonna keep arguing with you," and he's like, "But you're gonna tell the board," and I—and and he was like, you know, he's like our.

I'm—I have to say, it's very interesting that when you're thinking about this challenge, it's not just the challenge of the government had rejected you; it's the fear of how to tell Tarek that you're still gonna push for this after. 2 years of failure and how to bend your own co-founder to your will to try one more time via a lawsuit against the federal government.

The funny thing about Tarek and I though is that the company really would not be close to here if it wasn't for both of us being here because I'm the overoptimistic, like, let's just do it, let's try again, and I just don't get fazed. But in our business and in our company, we need to kind of like be always looking at every single possible edge case, a thing that can go wrong, right? And that's what Tarek is like amazing at. Like for example, we, a lot of like how we think about how the company will be in like 5, 10 years is Tarek thinking about all the single edge cases and things that can go wrong so that we start preparing for it now. That I wouldn't even think about it because I'm like, things are great and everything's great. So in a lot of ways, I think that a lot of my work and his work is trying to convince each other. And I think that's actually one of the best forcing functions we have. Yeah. Because the debate that I have with him to convince him that we should take a massive bet and try it again, or with him that it's like we should be very worried about this thing and we need to start tackling it now and we need to focus and we need to put people to solve this big problem. And I think because of that, it's like a lot of our thinking is how do we convince each other? And kind of put ourselves in the other person's position so that we can kind of like calibrate our decision-making better.

So I don't know if you know this, Luana, but I might have been involved in convincing Tariq as well at this time.

Oh, nice. Nice. Nice.

There was a phone call I remember clearly. We had lots of conversations during the era that you were trying to get approval the nice way, you know, talking to senators and so on. And I remember Tara calling me saying, it's failed, it's been rejected. Not only that it's been rejected, but we're in this place now that the CFTC is micromanaging all sorts of little stuff that they shouldn't be. And it's not following the law. It's just like their capricious whims. Exactly. And, you know, and I asked like, well, what other option do we have? And he said, the only other option is to file a lawsuit against them. And I said, you know, I'm not on the board. We're one of your earliest investors, but we don't take board seats.

Yeah.

So I said, you know, like, what do your other investors think about this? And he said, all of them think it's a bad idea. And I said, so why are you calling me? And he was like, because I kind of think we should do it. And I said to him, we should do it.

Nice.

Thank you.

Well, I really appreciate it.

And it's partly— I will say it's partly because of my own experience. My second startup, We had this aspect of living another day. We'd have all these small failures, but we found some way to survive.

Right.

There were situations where we could have gone all in, but we were afraid. And so instead, we found some way to avoid the potential disaster or potential big swings in order to survive another day. Exactly. And that just dragged it out. After 7 years, that company failed. And if I could go back, I would've gone all in and either have a success or a catastrophic failure, but like,

you

know, get it done. And I said, like, if you guys hadn't sued the government at that time, it would've just been a drawn out, you know, 4 or 5 years later kind of fade into obscurity.

I fully agree. I think it's more like there's this kind of thinking in Silicon Valley, which I kind of disagree with, which is like, the company that, like, success is if you never die, but then you're optimizing for the wrong thing. You're not optimizing for how big your company can be, you're kind of optimizing for just like staying, like extending another like couple months or something. And I think it's more important to, this is what the company should be and that's what you want to be, and you should just go for it and be less afraid. But I think there's this thing in Silicon Valley that it's more, well, if you do this, the company might die. It's like, yeah, well, it might die, but it's not necessarily like— it's not necessarily—

But it might also survive and become—

It might also survive and become massive. And that's one of the reasons, for example, like why we're based in New York. I feel like the whole, when you mentioned at the beginning that it's just like people in Silicon Valley and it's just like, you can't really say, you have to always be projecting that the company's going great and all those things. One of the things I hated about San Francisco is like, whenever you go anywhere, Every single person you talk to, their company's doing amazingly well. And I'm like, statistically, this is impossible. There's no way everyone is at the top 10% of startups. And it's just, and I think in New York you kind of isolate a little bit yourself from there, which also helps with decision-making because at that point, I, I've always kind of like really isolated myself from this whole Silicon Valley kind of, a lot of the founders, even here in New York. I like my friends from college and, and it's like, it also gives you more clarity that you're like less afraid of like, what are people going to think? if you yet again try to figure something out and yet again fail, being free from external expectations in a way. Obviously, you have investors and all that stuff that still have that, but when I went to tell the board, our board is Michael Seibel from YC and Alfred Lin from Sequoia at the time, and as you said, they were very against it. They were like anti-pattern. We've never seen a company that's this—

You don't do lawsuits, period, let alone against the federal government.

Your own regulator, exactly. And we were making like no revenue, like really it's like very little revenue. It was funny 'cause we did the whole board meeting update and then Tarek's like, Luana wants to talk to you. And I'm always a quiet one in the board meetings. I'm like, ah, let's just let Tarek speak. And I'm like, okay, so we are gonna sue the government and do this. And I kind of made it more as a decision 'cause at that point Tarek and I were on the same page. And Yeah, and I mean, at the end they were like, we are against this, but if you guys want to do it, sure. It's like an anti-pattern, but most times when you said something was very unlikely and you really wanted to do it, it worked out. The same with getting regulated and all of that. So we sued them, and it was— and Tarek was right and I was wrong. We were retaliated against a lot. My little trick there that I thought that maybe they would retaliate less wasn't the case.

Fonts had to be even more—

The fonts were like every single, like even the font family had to be a certain one. And we sued them and it was, they delayed our clearinghouse application, which you probably remember, for like months and months and months. Like by law it needs to be 6 months. They took 2 years at this point. Everything was awful. But we win in October, October 6th, which was like insane. It was like, You remember we got the news, we called you, you came to the office with a bottle of champagne. We were all drinking champagne. It was amazing. Everyone was crying.

I was in your office that day by coincidence.

By coincidence. Yeah, that's true.

And I remember looking around and everyone was like reloading on their browser, like, is the news in yet? Nope. No verdict.

It was the most insane moment. I remember one of the first times in my life that I actually felt— when people say weight off their shoulders, I never actually Understood what that meant.

Yeah.

Up until that moment that I remember I was walking home and I was passing by this Whole Foods here in Bowery, and I remember I was just like, I just feel lighter. I just feel like there's like I'm actually light on my back. But the problem was next day the government tried to get an appeal in the state pending appeal, which would again lose us the 2020 like the entire election cycle by delaying the decision a year till the appeals court looked at it. And then we had, then we couldn't launch. We had a hearing, all of those things. And finally on October 6th, we actually get it for real. We get the final, the final okay from the appeals court saying that they weren't gonna give the government a stay and we were gonna win it. And we, we were gonna get the election for, for that year at least. And then it was like amazing. It was like the best month ever. I remember I stopped. I usually try to work out in the morning. I think it's like something wired in my brain with all the ballet I did that if I don't do something like physical, I just can't work. But that month, it was just like I was not working out, I was not eating. We were just like all in the office trying to like build everything for a month. And it was like kind of like a vindication moment, but also like we felt so much responsibility over the whole space because it's— now it's real. We legalized this whole thing after 100 years.

That sprint to build the— actual business.

The actual business. And we're like, and then obviously there was enough thinking in our heads. It's like, we're gonna sprint everything that we can to, for this election night, and then we need to figure out how to retain them and what actual markets we're gonna do to continue to go forward. But the lawsuit actually cemented this kind of view, legal view, that the CFTC has, can't just decide whatever they want, right? They need to follow the law and they need to own, they are very, Congress was very clear with what they can and cannot stop. And I think that lawsuit kind of like opened grounds for us to have now, we went from 80 contracts right before the election at a time, now we have over 5,000, like I think it's like 7,000 live in the platform right now. And it's just like that lawsuit was actually, ended up having a lot of other positive externalities on top of the—

Changed the power dynamic, I'm sure.

It changed the power dynamic. It kind of put us in the position where we should be according to Congress, which is a self-regulating entity that we can do things and the government's there to watch it versus not. Versus like stop everything. Change the fonts. Exactly. Change the fonts.

So what was the hardest period or was there a moment where you felt particularly lonely or afraid of what's going to happen during those couple of dark years?

The worst part actually was right before we actually sued. Because when I had— Tarek and I were like, okay, we're going to sue. We told the board, they were against, but we did it. We decided to do it. Then we like picked the lawyers and all those things. But then there was like the actual, like, we're going to file it. And there was a couple days that Tarek started like going back and he's like, I don't know if we should actually do this. The expected value was that it wasn't going to work and we were going to get all the bad things with it. I was like, and that is unquestionably going to be on me. I'm the one saying like, we need to do this. I remember I had this, we were talking or whatever and I was like, well, if you pull this out now and if we don't do it, I'm going to leave the company and then the company's going to die. And then he was And he was like, no, we're not— you're not gonna leave. And it was, it was this very complicated thing. But I thought that the only way we were actually gonna see it, 'cause it's always like, it's always easier to have a plan, but when you actually have to do it in the last like 10 minutes, that's where the hardest thing is. It's like you have to do it. I remember I thought to myself, I was like, I'm gonna have to bluff. I'm gonna say, I'm gonna have to say that this needs to, to happen at that time. And I said it and he was like, all right, so, all right, so we'll do it.

Wait, what do you mean by bluff?

Because I wasn't going to leave the company.

So you were bluffing to your co-founder Tarek that if we don't follow through with this, you would resign?

I basically said, like, look, everything has been in motion for now months at this point that we have to do this. And it's insane for us to just change our minds like this. And I think this is the most important thing that we're going to do. And it doesn't make sense for me to be here if we're not doing things like this. He was a little bit like, That's insane. You don't actually mean it. And I was like, no, I do. And then he was like, all right. And then we ended up going and doing it. But in my head I was like, I'm obviously not going to leave the company for any reason ever. But I was like, well, if it doesn't go well, then it's 100% on me. And then that kind of like thinking to myself, should I just be like, never mind? And like not send the kind of like the brief or whatever the name is. And that was a very kind of like scary thing because I would talk to my fiancé and be like, I don't know, and whatever. And he's a very positive guy too. He's like, no, it's going to be fine. And like, we're scared. He's like, Tarek's going to forget it. Don't worry. And I'm like, I don't know. I don't know if he will.

You guys had already raised like $100 million of investor money.

Yeah.

You weren't making a lot of money, but you had a lot at stake.

We had a lot at stake.

If this lawsuit had been lost or if you had left the company, You know,

yeah.

All the investors would have lost their.

I think Tarek would have figured something out, but I'm joking, by the way. I would not have actually left. Tarek like saying that I would have. I wouldn't have actually left. It was more like sometimes when Tarek is very, very worried about something, he needs like a very strong show of hand on the other side of like this will happen, and then he kind of calms down a little. So it was kind of like a little bit of strategy, I guess, on my end there. But that was a very scary moment because I was just like. this is the most important thing in my life. The company's the most important thing in my life. And, and,

and you're betting the company at this point.

And I'm betting the company and it's all on me. Yeah. But now, now the company's doing amazingly well and we're very, everyone's very happy and excited and all of that.

Do you have any regrets?

Any regrets? That's a good question. I don't think so. But that's the hard thing with these things is that like everything is, is about probabilities, right? So even if we were, Right on the law, there's always like an maybe 80% chance we win. There's still a 20% chance you lose. So it's just very hard to like know if we're here because we made the right decisions or we were lucky or how to actually think about that. So I think it's like everything worked out very well, but it could have very easily not worked out very well if just like, you know, the coin flipped in another direction. But I don't think any regrets with the company, no.

If you could go back and give a message to the Luana of, I guess, 3 years ago or so when you were just beginning that, almost 4 years ago you were beginning the election effort, what would you say?

Just keep going, just do it. I think it's very easy to kind of like, I have a lot of smarter friends than I am by a large margin. And I think when people are very, very smart, they become overly obsessed with probabilities and expected value and all those things. And I think that like—

You can psych yourself out by—

You can psych yourself out of doing anything. by it because the ex— first of all, you never start a company because the expected value is awful. Even like changing jobs, like why would you do that if you're like, have a very clear career for the next 20 years? And I think that like just going for it, taking the risk, and kind of believing that, you know, somehow things would work out, I think is very important. I think, but yeah, I think just doing it, I think is an important point. If you have a culture that everyone is only thinking about you know, the math of like, is it gonna work or not at every point in time? It becomes a super negative culture that overreacts to every new information you have. So it's just important to kind of really have a lot of optimistic people and that wanna build things in the company, so.

I doubt that Alexander the Great would ever have conquered Europe if he was doing the expected value the whole way.

That's fair, that's a good point.

Well, thank you so much, Luana.

Of course, thank you for having me.

It's been wonderful having this conversation with you.

And thank you for all the, honestly, like I tell you this, And I said this so many times that NEO has been— is by far my favorite investor. And you guys have always supported us and backed us on everything.

Well, you're an inspiration to me. I, you know, I wish I could be more like you in my decisions. And certainly an inspiration to lots of, lots of founders.

Thank you so much.

Before you go, if you're enjoying Confession, please subscribe for more and leave me feedback. Like, what's a question that you wish I'd asked? Or who do you wish I'd interview next? We've got a lot more ahead, including conversations with Alfred Lin, Shuo Wang, Ali Godsey, Jeff Lawson, Rose Wang, and more. I'm Ali Partovi. Thanks for joining me, and see you next confession.