Kalshi’s Tarek Mansour vs. the Federal Government

The thing that was unique about us is we never pivoted. It was always Kalshi. I mean, Kalshi is everything in Arabic. Like, we always wanted to build the everything exchange, the exchange for all these different assets. And we didn't build Kalshi to build a company. We built a company to build Kalshi. It's a bit different.

I see.

We were dragged by the idea. I wasn't the type that wanted to be an entrepreneur, or like, I think if you reroll the dice multiple times, I'd probably just be a trader or risk manager. Like, I would not be an entrepreneur.

Got it.

But the idea was so like glaring in front of us that we just had to do it. Like, we felt that we had to do it. And so the whole point of doing this whole thing is the idea.

Hey everybody, today we have Tarek on from Kalshi. He is a gem. This is a really good episode. They walked through the desert for many, many years in this company and went sideways. Then they made a very risky bet to sue the federal government and won. And this thing has ripped ever since. It's growing, you know, similar rates to OpenAI and Anthropic, but a few years behind. I think you're going to like it. I'll be back at the end for my takeaways. We just met for the first time a couple of weeks ago at David Solomon's house. And it was a CEO dinner and you had some very unusual ideas about CEOing. This is why I wanted to have you on the pod.

Yeah.

And so I want to get into those. Let's just start with your co-founder.

Yeah.

It sounded like it's a semi co-CEO relationship. How do you two run the company? How do you split it up?

Yeah, it's interesting. You know, we've over the years constantly been asked this this question and we never really had a very clean answer to this. And we always thought it was sort of like a weakness. And our perspective on that has changed, I mean, dramatically. I actually think whatever model works for us works for us, great. You know, and if you figure that out, then, you know.

Yeah.

And you know, the best way to describe it is I think like I operate at the very high level strategy, make sure that we're going in the right direction. Where's the world heading? Where are our rights to win? And just thinking, a lot of thinking continuously. And then I'm very, very low in the details.

Okay. You're high and low.

Yeah, extremely high.

Head in the sky, feet in the ground.

Yeah.

Okay.

But very, very low. I'm talking like coding.

Yeah.

And more specifically, like, like marketing and the copy and the details and like everything around how we're marketing.

Okay.

Yeah.

Yeah.

How we're talking about the product, all these little things that like the end consumer, whether it's someone looking at a billboard or someone who's like in the product, is going to experience. Like what are they gonna feel? And everything else that is actually running the company is Luana. Okay. That's basically, you know, I think one of the best ways to describe it. And then I do the external stuff, the regulatory, the policy, you know, the fundraising, all the other external aspects of the job that tie to marketing and sales. But the day-to-day running of the company, like making sure that the company is actually run, is Luana.

How do you disagree? You must disagree about stuff.

We disagree a lot, like all the time.

So how does that play out?

I actually think we kind of disagree by design. Like we have this thing, this dynamic over time, it's become a thing where like we essentially will always take the opposite side of the argument.

Are you a contrarian?

I'm the guy in the room that will be sort of the negative. Like everybody's pumped about a plan. I'm like, oh, here's how it's gonna fail and all the issues. Okay. I have, you know, but we tend to sort of just like disagree with each other often. And I think also like, you know, again, it's people like, oh, you know how you disagree and disagreement, like continuous disagreement is an anti-pattern. But for us, it ended up being a pattern because we're coming to this, we're this very complicated company that has this constant, continuous, delicate balancing between how much risk to take on the regulatory front and innovation regulatory. And you have to always balance those two things out. And you see it now in AI and safety and innovation, all of that. And that sort of debate is a continuous force to drive us to the middle. We end up getting not always the right answer, but we're not too far from the right answer. And we never oscillate between the two extremes. And I think that's one of the powers of having 2 equally powerful, like, 2 co-founders in an organization. Because if you're, if you're the only one, you know, anyone, like, anyone that reports to you or whatever, like, anyone that you hire that is not a founder, it, it's inevitable that they won't always tell you the truth. It's inevitable. Like, no matter what culture you build, etc., like, there's different incentive structure than someone who's a founder that owns as much equity as you, etc. And so you can stray, right? And, and, and here it's very hard for either of us to stray.

So I talked to Luana to prepare for the interview. It sounds like you're kind of the more conservative of the two.

Yeah.

And maybe you're on the regulatory side and she's on the innovation side. Is that the way it sort of plays out?

More often than not. Yeah.

Okay.

Luana is very faith-based, like optimist. Sometimes I would say like over— like, like super irrationally optimistic. Like she sometimes doesn't really do the, the math on how something is going to work out, like, like on why it's going to work out. And that's continuously happened at Kalshi. And that used to, I mean, throughout for years it frustrated me. I was like, this is like, this really like, it doesn't make any sense. And I'm the other side. I'm like, I'm a risk manager. I'm paranoid. I have a paranoid demeanor, which is also usually an antipattern for a founder. I think about risk and expected values and like I think probabilistically about the world and here's all the things that could go wrong. And I think that sort of, that tension has led to all the decisions that we've made over time. But it's interesting because, you know, like Luana's approach to things, and now I now believe that given enough time horizon, it's gonna end up being true no matter how irrational it sounds. Okay. It's kind of amazing. But I think my side is the thing that like for a company that has to get regulatory right, you have to make sure that like you, you're doing things the right way. Like I'm kind of that forcing function in the company. And again, so I think we land somewhere in the middle where we've managed to achieve the results we've achieved. I'm actually very bad at a lot of things. It's actually shocking. Like if you see my day to day.

'Cause you're obsessive. You're very good at a couple things.

Exactly.

A lot of founders are obsessive.

Yeah, but I'm kind of procrastinator. Huh. Like I'm so disorganized. Like if like people that work around me, you ask them, it's just like such a shit show. But like Luana like orchestrates everything.

She's organized.

Very, and like she drops, but like, I'm like the opposite of what you imagine for an operator, but I can get so obsessed with certain things that I want to get good at that I can get good at pretty fast and I like get good. So I don't think I'm a good marketer. I just like obsessed about it for long enough that I, you know.

That's how it worked with my co-founder. He's very obsessive and goes very deep down a rabbit hole and you can't get him out of that rabbit hole. You've had a long, strange trip growing up in Beirut.

Yeah.

Certainly an unusual childhood. Is the risk aversion sort of rooted in growing up in such an unusual place?

For sure. I mean, most things, right, that end up sticking with you are really how you grew up. This definitely applies here. I mean, so I grew up with a single mom and I grew up in Lebanon. And Lebanon, you know, it's not a, I feel like oftentimes the headline make it sound like a—

Sounds like a constant war zone if you read the New York Times.

Yeah, it's not. It's actually more of a volatile country.

Yeah.

Like the word is volatility. It's a lot of ups, a lot of downs. You can have a lot of fun, great life, and then all of a sudden you're like, you know, running from a— so the mix of those two, my mom was paranoid. She was always afraid we would sort of take a lot of issues that would be thrown at us to the extreme and we would carry them as like— and I was really young and the eldest child, we were two brothers, and that doesn't leave you. So my brain is wired to think about all the ways that something is gonna, you know, go wrong, right? Like if I get on a On a hot air balloon, I can list you immediately.

On a flight?

Yeah, on a flight too. I can list you immediately all the 20 ways this thing is gonna go south, right? Okay. But it's important for our company. We're a company that has financial risk involved, regulatory, I mean, all these different things. But that has helped us over time really become very hyper-attuned to what exactly is our risk in a variety of different ways and where we can take risk and where we can't.

Okay, I've heard you on other pods bring your mom up. Can you just give us some more paragraphs on her?

Oh, it's interesting.

Like, riff on your mom.

She's very, I mean, she's like, she's definitely a tiger mom, like, in that, you know, so tiger mom, very intense, like very, very intense.

My way or the highway. You are too.

Yeah, I am very intense too, yeah. But yeah, my way or the highway, we're like completely uncompromising, completely. And then it was the sort of thing where like, so what happened is I think she had to basically sacrifice a lot of her life to, because my dad left us at age 6, kind of, and she had to sacrifice a lot of like her career, everything she wanted to do to basically make sure that we're okay. And she wanted us to have the best life we could and come back, you know, come back to America. So I was born in California, I went to Lebanon, and she wants to come back and get to a top school, et cetera. And so what happened is I think like a lot of her personal pride ended up being attributed to her kids. Like my kids' success are gonna be what I deliver in life. And so her bar was so high on us. Everything. Like we would do a sport, like go play tennis or play soccer and you have to win. And if you come silver, like it's bad. So that just creates like a hyper competitive nature. But also there's this feeling of like there's always an answer. Like, you know, whenever we had like a financial issue or like, you know, like you don't give up, you bang your head against the wall, you go up, you go left, you go right, you go down. I mean, it doesn't really matter. You're gonna figure something out. All of that I think ends up, you know, now like, you know, decades later, right? Like it's all in me and it matters because there's this sort of higher gear sometimes that like, so most people have this thing of like, well, there's certain things that are within my control and certain things are not. I don't really believe in that dichotomy. I think it depends on the person. Like some people can just make a significantly larger subset of the universe of things that are like, I feel like it can make things happen, maybe irrational. Yeah. You can make, you can bring more things into the control.

Yes.

If you have, you know, it's like some, some people just think like, okay, like I, I can do it. Yeah. And it could, the scale of the problem could even become big. I mean, it's, I mean, Elon has a little bit of it, right?

Like he's a lot.

Yeah. Like I, I feel like Elon sometimes, and I'm not, you know, my sense is like, as long as it doesn't break the laws of physics, like we probably can make it happen. It's in our control.

Yes. Yeah, we're going to get into more CEO stuff. We just heard Ken Griffin from Citadel speak at this conference we're at, and he talked about picking best practices from different companies and sort of assembling his CEO playbook from other people he learned from— Jack Welch, etc., etc. Do you look up to one CEO? Are you following a playbook, or are you just, I'm going to make it up as I go?

I have a lot of I'm going to make it up as I go. Yeah. So, you know, and I think this applies to Luana too. Like both of us, we're probably very sort of like entrepreneurially illiterate. Like we haven't read all the books, we haven't watched all the podcasts.

You don't live on Twitter.

I do Twitter a bunch just because a lot of our users are on Twitter, but not like in the sort of like here are the 4 steps to build a company sense.

Okay, you're not in that ecosystem.

But I have, I look up to, like there's a lot of aspects, a little bit like Ken honestly, like a lot of aspects of CEOs I look up to. Like I think, The extreme boldness of Elon, his ability to attract talent is amazing. I think Tony Hsieh, I always go back to because I think his operational discipline and execution, I think is, I wanna say is one of the best. His business is so hard.

Mm, so hard. So is yours, by the way.

Yeah, our business is hard and marketplace and all these issues. I mean, but I think those are two names that consistently come to mind. But there's everyone, like there's so many people. I mean, like the Carlsons have done such a great job. At like creating this sort of brand aura around their company to attract like incredibly like talented people to, you know, build something that just goes beyond what the company is exactly building. And so I observe a lot of these different things and figure out like what I can take. But then after that, it's continuous iteration. Like what we do well, I think, is like we just try and we try fast and we're continuously like, did this work, didn't work? Okay, like change it fast, whether it's a hire, whether it's an approach to things, whether it's my own voice, whatever it is, I think. We do this, you know, and I think that's the best way to find the right answer because oftentimes these things are very like, I'm gonna say company dependent, but as I was saying that, it's very like CEO or founder dependent. Like it's to your image. It's very hard, you know, to market even your product if it's not coming truly from what you're, from who you are, because the company is gonna be to your image no matter what you do.

In your headquarters in New York, do you think if you were based here, you would be more in the mold of every other company?

Probably.

I also think it would have been harder because you wouldn't have talked out of some of your crazy ideas.

Yeah, maybe to some extent. The, the harder piece I was thinking is just recruiting. I mean, one of the reasons we moved that time— what I like about New York is for our company's mission, which is, you know, like figuring out how to build this idea of infinite market, the next generation exchange, like fundamentally rebuilding Wall Street, like this new Wall Street that is more like global, more for the people, it attracts, it has a stronger, let's call it like market fit with the talent in New York.

Yeah, much better.

Much better. And then there I felt confident we could hire the top 1% of talent, whereas here maybe, but I don't see it. It doesn't feel like it burns as cleanly. I think here it's really AI right now. And I think even if, I mean, we didn't necessarily know that in 2020, but like even if it wasn't AI, it was going to be something that is not finance.

Right. Okay. You and Luana have, I think it's 130 sort of direct reports. Have I got that about right?

Yeah. Yeah, pretty much. I mean, there's some functions that like we sort of let them do this, like what they do. And but pretty much most of the company reports to between the two of us.

Okay. That's unusual.

Yeah, it's pretty unusual.

5 years from now, are you— it's unusual because it's small and it's unusual because there's zero hierarchy and it's unusual because they report to both of you. How does it actually work? How is it not chaos?

It's kind of chaotic.

Okay.

But I think you could build an organization that's somewhat okay with that because what you get out of chaos is like continuous constant adaptability. It's very easy for our company to adapt. Very easy. I mean, Sam talked about pivoting and pivoting feels like a bit of a strong word, but like the point is like you want to constantly reorient and reassemble around the biggest challenges or biggest opportunities for the company. And you wanna be able to do that with no friction, that's inherently chaotic.

How do you—

That's a complex, right? Like it's a complex system.

Totally.

It's like organisms and cells are sort of moving around and like floating in the ether and then they, you know what I mean? Yeah. And so like, that's it. Like the world is inherently chaotic. Yep. System. So, so you know what I mean? And so we're trying to impose structure that is unnatural given how the world is moving. And in a world that's accelerating over time, you kind of have to be more sensitive to the fact that it's increasingly more chaotic. So your structure needs to be as adaptable as possible.

Okay, this is sort of the crux of the podcast because the CEO playbook that I grew up with, like handed down through the generations, I think is getting a big rethink. And like Brian Armstrong and Jack Dorsey are talking a lot about this new way to organize where it's not a pyramid, it's a circle. AI's in the middle, you're training the AI, all your systems are legible, your people are feeding the AI. And the AI makes more and more decisions. Org chart's gone, compensation's different. All the things are getting thrown out. Are you following along with any of that or you're just kind of making it up as you go?

Making it up as I go. I didn't even know about that. I never heard about that. But like, it's interesting.

One of the things I've learned, by the way, about all this, I've interviewed all these CEOs, there's no one way to do it.

Yeah, it's—

You look the way Jensen does, it's totally different than Elon. It's totally different from—

Yeah, it's, I was saying, imagine Jensen running Citadel.

Yeah, totally.

That would be nuts. Or so I don't know. I mean, I think that like, or like even funnier, like imagine Ken getting dropped into OpenAI to run it. Like it would be so crazy. But like, I don't know. I'm actually curious to hear your thoughts. I mean like the world is more interconnected than ever and I think just things are accelerating. Like the rate of learning, the rate of changes. Like if it used to be, I mean, maybe like you have to readjust fundamentally every 3 or 4 years, then every year. I mean, I honestly think you have to readjust fundamentally what, every month or two?

I kind of agree. I'm learning so much faster than I used to learn. I'm picking up skills so much faster than I used to learn. Yeah, the world has changed.

Like January to today, like it's so crazy. I mean, like how it's hard for me to imagine making a certain set of decisions in January that truly applies still today.

Okay, so how do you plan?

Dynamically, right?

Okay, jump into, it's the end of December, you got a board meeting, Alfred Lin's on your board. What do you actually even present to the board?

Yeah, it's kind of like hazy a bit. Like it's, you know, the board used to be like, oh, it's not structured enough. But now I think it's, they're kind of used to it.

What is it?

It's usually, so look, I, yeah, yeah, it's a good question. I tend to not have too much structure And one other thing actually at Kalshi, we're not super metricsy.

Okay.

In general.

I thought you'd be the opposite.

No, we're metricsy, very hardcore on like risk, like how much margin we're giving to customers, like things that are like go directly into the product. But in terms of decision making, it's, we should be a little bit more and we will probably get to there a little bit more over time, but it's really more like what are the customers saying? What are the pockets of demand that like basically the energy is about and where can we basically be first or be most aggressive or have a right to win? That's all the conversation where it's at, right? And then there's usually like one or two key challenges that tend to be the single most important challenges in the organizations. Like, and let me just give you— Yeah, let me give you the last sort of like maybe 18 months. So off of the election, all the conversations, what are we gonna do about election? How are you gonna cross-sell people? Are they gonna stick? Yep. And what they're saying at the time is like, well, let's prove that this sort of this network effect engine, now that we had a massive growth catalyst, that it is gonna create the chain reaction. Let's figure out how to like make sure that people are, you know, adopting other products and like get going. And that worked. Like we really created that network effect where we use that new demand to attract more liquidity, which boosted all the other markets. And then that helps us get demand at a lower cost. And then we basically compounded there. Then after that, it was essentially like, okay, we need to prove our broker strategy is working. So we had the direct-to-consumer that was going pretty well, We wanted to make this bet that becoming an infrastructure layer, like all traditional financial markets, that we enable a bunch of brokers to basically go and like, could we prove that we can do both at once? And that one was going a little bit slow. So the next 6 months were like scaling that. We got a bunch of brokers that sort of really started working out. Then the next challenge was actually proving that we're not too dependent on the brokers.

Okay.

'Cause those became—

Worked too well.

They became 80% of our revenue.

Okay.

So all of a sudden it's like, oh, amazing, the revenue like ripped. But like now you're super dependent on a bunch of your big broker partners. So what are you gonna do now? It's like, okay, now we have to go back to focus on the direct and like really scale that now that we have an extremely liquid ecosystem because the brokers brought more demand, more liquidity. The whole thing is flowing now. Now the brokers are like 10% of our volume.

Okay, all the way back to 10.

Yeah, so that it, and I wanna talk a little bit about this adaptability thing because all of these were very, I mean we're talking about like going from like elections and like sports, then we got into financials, then you went to consumer business and a B2B enterprise motion and we went back and We did all these in the span of like, you know what, like 8 months, right? And then it was like a lot of the policy stuff and we should talk about that a little bit. But like, you know, you're like exciting, exciting, exciting all the way till you get mainstream. And when you get mainstream, society all of a sudden is like, whoa, whoa, stop, stop right there. Let's figure out what this is. We don't understand it. You know, now you have the grandmas and the moms.

I feel like that's going on right now.

Yes, exactly. It's been going on for 6 months. But like in AI, you know, AI is battling with it. Like Airbnb, Uber, all of them, at some point you get a reckoning. And now like number one priority since January. And I think we've done a great job at sort of positioning ourselves as a safe, responsible actor.

But particularly right now after all the news about Polymarket recently.

Yeah, I think we've done a really good job at always being kind of regulatory first, do the right thing. Yeah. But we had to kind of tell that story and that's also hard and comes with all these challenges. But I mean, think about that, right? Like it's completely different functions that like, you know, even if I build the best, consumer marketing company, how's that gonna help me with the brokers? And if I build the best sales function, how's it gonna help me, you know? And so it goes back to like, I think, okay, how do we really solve these problems? You know, generally there needs to be at least one founder in any of these big meaty problems that we need to get right. I really strongly, like, I affirmatively strongly believe in that.

And so is there one of you that's the DRI on these big hairy issues? Always. Okay.

Like the responsibility, the person that is gonna get grilled is one of Luan and I on these top issues, these things that we need to get right. And I cannot, and I may be wrong, and I maybe over time as the company gets more mature, I may change. So maybe in a few years we should have another chat and see what I think. But in this sort of level, like this growth phase and all that, like it's my analogy to this is a bit, and I think honestly this applies to any company at any scale. I really, really think so. It's like you're like on this big ship and you're driving, you know, the ship as fast as you can. You're trying to win this, but there's always a hole in the ship and that hole is leaking and there's water coming out of it. And I think there's two types of organizations. One where the CEO or the founders are straight up staring at the hole all day, every day, which is brutal. It's painful. It's like you're—

That was me.

Yeah, it's you, right? I think you talked about that, that, you know, And the other type of organization that like sort of either gives it to someone. Yes. And generally what that someone is gonna do, I mean, it's very painful. Why would they take through all that pain? I mean, you know how painful it is, right? Yes. It's constant pain. It's essentially like continuous torture, right?

Yeah.

So they add like a rug on top of the hole, you know? And like, you know, like we're good, you know, things are growing. But inevitably that hole at some point is gonna start sinking the ship, inevitably. And whether this is, your Google and AI is coming after you, or, you know, your AI and like 90% of America hates you, or like, you know what I mean?

Like, and then what's your hole now? What, what hole have you got?

I think in January what I would say our big hole was like we need to differentiate ourselves with the unregulated stuff and the insider trading issue. Because you've always taken it seriously, but like, you know, you poll people and they no idea, they have no idea what the difference between who, like the regulated onshore prediction markets like Cash App and Robinhood and others and some like Pauli and others that were doing it offshore. And that was really bad for the industry. So we had this, we had to kind of like clean up the industry's reputation. And I would say we've made a significant amount of progress, but that hole is not fully covered yet. Like we still have work to do in terms of like explaining that like, look, there is the right solution to all these things is get it regulated, do it the right way. And there are people doing it the right way and here's how. Like with all things, right? There's a right solution for AI is you don't decelerate AI, you add the right guardrails. And I think figuring out what those guardrails are and figuring out how to communicate it effectively figure out why they're the right ones is the hole. And that's where I spend pretty much like 80% of my time in right now.

Okay. The hole's an interesting spot. And your competitor has been called out by the Wall Street Journal for their marketing practices, and Congress is taking them up on it. You're used to all this stuff. Is this thing that's happening to Polymarket at this moment good for you or bad?

I think it's bad for us.

I think it is, too.

Yeah, for sure. I like— I think you know, when you start competing, you realize competition is actually really never a real problem. I really think so. I mean, unless, unless you're in a small market, I guess maybe that's a, that's a problem. But if you're in a small market, then you figure out the next big market and figure out how to go take it and split it with the competition.

It's okay. We used to always say at HubSpot, we competed with salesforce.com, and every time Salesforce would like move the ship a little bit, everybody in the company like, we gotta move the ship in the exact same direction. And I would say, Every time they zig, we gotta zag.

Yeah, yeah, there's always, I mean, but I just think, I don't think that's a, and maybe let me like say it maybe a slightly like more nuanced way. Like I don't think competition will be like a, is ever a true sort of like company killer. Like I, you know, it's like if you're in a big market, you're gonna have a big piece of the pie. And if you're not, you should probably be in a, like should be constantly iterating and shipping product and finding new untapped markets to basically go and win in. And, and, you know, like, there's— I believe in abundance. I mean, it's hard not to believe in abundance, right? Like, look at the last, like, 5 years. It's crazy.

And so you were, you were well behind them. And you've— from what I can tell, you passed them a lot of it in sports, like really crushing that.

We're bigger than across. I mean, we're like in the US, 95% market share now.

Okay.

So across the board, how'd you do it?

I mean, I think it's like you were way behind.

You know, it's interesting. We were way behind in the headlines. Like, okay, maybe, but like, so we started the company in 2018. It's been a long time.

Yeah, right.

Like, but we didn't relaunch the general public until end of '22, and I think our proper launch was end of '24 when we were allowed to do the markets that people really want, which is the election and other markets. And, and they launched in 2019, a year later, or started the company, and then they launched immediately without a license. So they were the brand that sort of did it, but we were very dogmatic in our approach, which was we're gonna do it the right way.

Why?

I think there's two reasons. One that is practical, which I think in financial services and healthcare, I don't think you can cut too many corners.

I see.

I don't really believe in that. Like I know in Silicon Valley it's like move fast and break things and figure out how to regulate later. Like not in financial services. I think financial services inevitably things go wrong and when they go wrong, they go wrong bad. And so I, if you wanna build true mainstream adoption and true like institutional adoption and like all of that, these people will care. Like how are you doing things? Are you regulated? What, like, so they will care. And I think, so that was one. Number 2 is honestly like, it's a bit, it's a bit more philosophical. I was excited about changing the system fundamentally, like building the next generation New York Stock Exchange from within, like change the system no matter how hard it is, than going offshore and building something on the side. And you know, like that was just not exciting to me. I, I didn't feel like I'm pumped about doing that. So, and we were, we stayed dogmatic about that approach, but what we were doing is building an incredibly great product and great infrastructure and, and great regulatory infrastructure that like like the word trust. Like, I think people trust us more. Like, when they put their money there, they feel good about putting money with us. They feel good. There's not gonna be—

put some money on the Red Sox last night and they beat the Yankees.

Yeah, nice, great. But I think there was that— I think when we did get regulated and like we got approved, our trajectory just went, you know, really parabolic. And I think it's a mix of that sort of foundation laying that we've done for a while, which I really believe in. I think if you, if you believe that you're going towards a good market, building a solid foundation even if you're not growing is okay. And then I think we just have superior execution on product and growth. We compound at a much, much faster rate and give it enough time. The results start showing.

While you're there, 2018, you start the company, you wandered through the desert for a long, long time.

Very long time.

Yeah. CFTC was smacking you, saying no.

The government's trying to kill us.

Yes, it was. Must have been brutal. Did you— what was the lowest point?

Honestly, I don't even remember. It was basically like, it was truly like just sort of like, it was bad. Like, I mean, it was so bad. And it's like you're constantly in a state of grief and then you start like, you know, you're like in this desert and you start seeing like, you literally start like, you're so desperate that you start seeing fake—

Mirages.

Mirages, yeah. You know, you see something, oh, here it is finally. And then it's not true and it's disheartening and it's just hard. But the thing that was unique about us is we never pivoted. It was always Kalshi. I mean, Kalshi is everything in Arabic. Like, we always want to build the everything exchange, the exchange for all these different assets. And we always stayed sort of— because part of it, and looking back, and when I was thinking about it, we didn't build Kalshi to build a company. We built a company to build Kalshi. It's a, it's a bit different.

I see.

We were dragged by the idea. I, I wasn't the type that wanted to be an entrepreneur, or like, I, I think if you re-roll the dice multiple times, I'd probably just be a trader or risk manager. Like, I would not be an entrepreneur.

Got it.

But the idea was so like glaring in front of us that we just had to do it. Like we felt that we had to do it. And so the whole point of doing this whole thing is the idea.

Okay.

So when that's the case, then like if you lose the idea, then, you know, a lot of people listening to this are walking through that desert. Yeah.

And I read this book a long time ago. It's called The Dip. And you're cruising along, you get down the dip and you don't know if you're about to hit the bottom and come up.

That's what's hard about it.

Or if it keeps going. Everyone thinks you're delusional.

Yeah.

Advice for the CEOs out there walking through the desert.

You know the book, is it Ben Howard that wrote a lot about the— "The Hard Thing About Hard Things." Yeah, there's that paragraph that's so good about it, which is like the reason why it's hard, it's not like you're lifting something heavy or whatever. It's like no one can reassure you that it's gonna end, right? Like what I firmly believe, and I really do, is the number one reason—

Did you wanna give up?

For sure, every day you wake up and you're like, "What am I doing?" And was Luana like, "No, we're sticking with it." Like what was the dynamic? I mean, we both had our points. Luana was definitely much more stubborn. Continuously. Like Luana is just like, yeah, you know, like Luana had a lot more, you know, stop being a little bitch, basically. Like, you know, just, just life is fine, whatever. Like, let's move on. Yeah. And what I believe is basically if you give yourself enough of a time horizon, you inevitably win or you run out of money. Yeah. But I think that's like a— I don't think it's a real killer of companies.

Okay.

You can always extend your runway and like, it's not that hard to raise money these days.

Nowadays. Yes.

And you can pivot with a new idea and like, now it is. It's really the number one risk is giving up, right? And so, but then, but that, it's interesting because when I say that, to me the message should not be like, oh, I should like do it at all costs.

I actually, I see a lot of founders and they're walking through the desert. I think they should give up 'cause it's opportunity cost.

Yes.

You're 35, you're gonna spend the next 4 years walking through the desert. Start something new.

I think just ask yourself why you're doing it, right? So it goes back, I mean, you know this, like to me, maybe like there's a few buckets. There's like the idea is something that you're really passionate about, you should keep going.

Right?

Because you're gonna regret. There's, I think it's hard. I mean, maybe you're not, but like, then there's a second bucket that's sort of all the things that people believe to be true after you make it. And I think that's a bad rea— I really think that's a bad reason. I, I like, because I mean, you know this, like it's, it's, it's a career, right? It doesn't end. You have all sorts of different issues over time that like thing in your gut stays there. It never leaves you, right? You're always stressed. You have to make sacrifices on your, Like entrepreneurs don't have a good life in the traditional sense of the term, right? You don't get to that oasis that you thought you were gonna get to, right? You actually just get into different deserts and those deserts get maybe less, there's some water in the desert, but like.

Okay, I like this.

But maybe the better analogy is like you go from a desert to like a storm. And that storm sometimes is like very clean water, sometimes it's shit storm, sometimes it's like, you know, and then, you know, But it's a different type of, you know, craziness. And maybe it's more motivating day to day. It's stress and it's not just like depression, but like, but it's not the life that you like, oh, you finally made it, you're successful, you're on the pedestal, like.

Okay, so what do people think about what the life of a rocket ship CEO's like versus the reality? What do people have wrong?

The reality, it's just like a—

Is it glamorous?

No, no, no. I mean, especially if you do, I mean, look, some people I think, I see it sometimes. It's like when you get to that and it's finally made, like they really go enjoy life, but inevitably then like the company is gonna go sideways.

What's your life like?

I work a lot all the time. I mean, are you married?

Do you have kids?

I have a partner. It's been like 4 years and some.

Complains a lot?

No, she's honestly great, but like it's tough, right? She sacrificed a lot also for me to get here because she supported me in the hard times, supported me in the good times, which are also hard.

Keep her.

Right, yeah, yeah. She's just like, she's the best. I mean, I think the, but there's sacrifice on that front. I think that I travel a lot. I wake up, so basically I wake up every day at 7. I'm usually at the office by 8 and I work, I leave the office usually at 10. I work a little bit at home. I usually like maybe like waste time on Instagram Reels for like 30 minutes and I go to bed.

What's the weekend like?

I usually try to like go out for dinner one of Friday or Saturday, generally Saturday because Friday I'm so tired. Like I just need to rest. And if I'm not try, like if I'm basically in the office Saturday, Sunday, like I go to office Saturday, Sunday. I kind of like being in the office.

And is everybody, by the way, you're getting—

Most people, most people like—

They're in there.

Yeah, I mean, but it's not forced. It's not like, oh, you know, like the hardcore.

Yeah.

We try to do it in a way of like, so no one is ever kind of like, slapped or there's no expectation you need to be in the office with these hours. I don't believe in that sort of like put everyone in the office 24/7 hardcore grind. That's, that's gonna, uh, I, I do believe the founders can do it because we have the most incentive to do it. And if the founders do it naturally, others are like motivated. They want to be next. Like they like coming on Saturday because there may be a little bit less people and they can sit next to you and ideate about a bunch of things. And hopefully you got the right people that would show up, but they don't have to, you know.

Okay, let's just get back to the CEOing since we're there. 100— what we say, 130, 150 direct, 130, 150.

Now we grew a little bit.

150. You're— and like, 150 is an interesting number because it's Dunbar's number. It's hard to keep track of anything north of 150. It's hard to interview those people. Most companies start hiring middle managers. What is— is it— is it like 170 3 years from now? Is it 500? Are you like William— I'm friends with William Hockey. At column, and he's like at 130. He's like, I'm staying at 130. Is that you?

Uh, William is very good. I think he's done a great job. I, I don't know. I mean, um, I'm just thinking about the things that scale linearly. So historically, support, but we have less than 10 support people. We have, you know, obviously millions of customers.

You can automate a lot of that.

Yeah, it works really well, honestly. Like, if you train the right, it's amazing, honestly. Um, so that's, that's a linear thing that's gone. I mean, as we scale our institutional side, I think potentially sales could scale somewhat linearly, but I don't know. You know, I'm kind of a believer in— I'm actually curious what we think, but I'm kind of a believer in like a strong marketing and brand marketing as a fundamental enabler of sales and like enabler of top of funnel.

Yeah.

Where's he doing that?

Yeah.

Yeah. If you do that very well, I think people just sort of follow each other.

So where does that come from for you? You've mentioned that a couple times, like you're really detailed in the copy and all that. You didn't grow up, you grew up as a kind of mass CS guy. Where does that come from? And is it all gut feel or just studies?

Part of it's the paranoia about the perfectionism that came from my mom. Like, I'm like, I tend to have OCD and obsessive with these things and I want things to be really perfect, like as perfect as possible. And it actually is, it really matters. This is the key thing. Like all the results are in the last 10%. Like most people are 80/20, that doesn't work. Everybody's 80/20.

Okay.

It has to be perfect.

Okay.

And if you, it's like this sort of, especially with marketing, there's like this sort of like a resonant frequency that you have to hit.

This is your mom, right, talking right now.

But, but it's, this resonant frequency concept is very interesting because I think when you hit it, you get these dramatically improved results, right? And, and like—

Give me an example.

You know, the, the, there's so many of them, but I, I'll do, I'll give two separate ones specifically on marketing. So one is like, So when we first went mainstream was during the '24 election. And one of the ideas I had is like, we should do billboards across the country. And the billboards are basically the product. It has to be the exact same as the product, and it's live, and it has to be piped with the API. And every time a trade happens on the app, it's going to be projected out in Times Square and in LA and all these billboards in real time. That had to be perfect so that every time people look up, they build a habit of like, I want to see the odds, and like, Kalshi is there for me to see the odds.? And if it is, then you get the viral mechanism and like, you know, all of it works. And it worked. And, but it took maybe something like 20 iterations of putting it out there, retaking it back, and to get it right.

Okay.

It's brutal. Like your designer get exhausted at the time, the engineer gets, I mean, everyone is exhausted. Yes. And, but that's sort of stuff that no one's gonna do other than the founder. The other thing I think I believe strongly in marketing is the timing needs to be like exactly right. It really matters. And, you know, people always, you know, even when, for example, they don't—

What do you mean? Around what?

Pretty much everything. The more important, like, people don't care about us. People don't care about anything. Like, they just care about themselves and then what they're reading on any given app. I mean, it used to be any given month and week, day, and maybe now every few hours that changes. They forget. There's so much stuff going on all the time. You have to basically bring Kalshi to whatever is happening or you're gonna die. Yourself to whatever happening in the world, not try to kind of push whatever you're offering to people. And so what I mean by that, like, so in the last few months, if you look at all the marketing integration, we do a lot. Like, we partner with this and that. So we did Messi 2 days before his first game of his last World Cup. Why? Because, well, it's 2 days before his last— I mean, he's peak relevance right now, right? Timothée Chalamet, we launched that commercial 12 hours after the whole thing that happened with the Knicks. Why? Because everyone's talking about Timothée Chalamet at the time. Right? If we had done it now—

You also did the AI video before anyone did the AI video.

Yeah. Because it was a time where, you know, the artist, there was a whole debate about the, like, you know, the artist, are they gonna go? Now it's not cool to do that.

Okay, so that's you. You're obsessive about that kind of thing.

Yeah.

And nailing that kind of thing.

And always knowing what— But now if you do the AI video, like, you should not do AI videos anymore now. No. It's done. Now it's cool to do real things.

Yes.

Right? But that's— So the timing with these things is like, it's so important.

Okay, that's what you mean by that. The Messi timing was incredible. Yeah. And the Timothée Chalamet timing was incredible. I assume you had that in process with—

Yeah, but we were always waiting. I mean, Giannis, when we announced him as a—

Like, the Knicks get knocked out in the earlier round, you're still going live with that.

Yes, but we were waiting for the right— So we were used to thinking we were gonna do it at the Oscars, but then we waited.

I see.

And so we were waiting for the perfect moment because then that's when you get the 100x outcome, right? When Giannis, when we announced Giannis, a basketball player, was essentially, A day after he announced that he's not gonna leave his team, there was all— Yeah, exactly.

And now he's going to Miami.

Now he's going to Miami. He's peak relevance at the time and now he's peak relevance again. But that applies to everything. The AI ads, I think we've done a lot of work on the, like when we did the news integrations back in the fall, we announced CNN and CNBC and Fox. All of these were like, we really wanted to time them peak moments where people were talking about this debate between is the news sort of like, uh, gone? Is it like a thing of the past? And for us, the angle was never like, oh, Kalshi Partners. It was like, the news is actually modernizing.

How did you— I know you want to time it well, but does Timothy care? Does CNN care? Does the New York Times care? Do the counterparty care?

All these different things. Okay, you have too much process and you have to break their own process. You know, it's all of the same that we discussed.

It's a shit fight.

If you have a head of partnership that's doing, you know, a whole structure and they plan for 3 weeks. You can't do that.

Did you hire any professional marketing person inside your company?

Not like a head in any way. I could not. And I mean, we have a CMO, Alan. He's incredible. So Alan takes care of all the scientific pieces, very good at spending money to basically with high ROI. And then the rest is like, you know, so the person that leads our brand or leads is— doesn't have any direct reports. It's just sort of flying around country and like doing cool stuff. And he ran a Twitter account before. You know the inverse Kramer?

Wait, that's where he started?

He's the inverse Kramer account.

Remind me.

Like, you know the inverse, like Jim Cramer when he picks stocks?

Yes, yes, yes, yes, yes.

He's like the inverse Kramer, like index.

Yes, you make more money betting against Kramer.

Yeah, exactly. And like, I thought he was like—

That was him.

Yeah, and I hired him. I was like, you wanna come and do our social? He started doing our social and he had like a knack for, he came up with the AI idea. He has a knack for these sort of like weird, esoteric ways to just like be part of the zeitgeist. And, and you know what's interesting? That has worked equally for consumers and for institutions.

Okay.

Which is— yeah, people would think like, oh, you know, institutions want sort of this. They do. And like they want to, they want to be able to talk to your chief risk guy and like they will. And we have all that. Like we have a very strong, robust foundation. But being top of mind just matters. Continuously top of mind is very—

You've got a knack, I'll give you that. Okay, I want to wind the clock back because we haven't completely finished the desert story. At some point, the conversation happened inside of the company. Hey, we should sue the CFTC. Whose idea was that and what was the reaction?

Luana, I mean.

What'd you say?

I mean, it's crazy, right? Like the, I mean, it is crazy. It is actually crazy in all sense. I mean, it ended up being crazy, all of it, even though we won. I mean, the, because like, um, it's so much more than just being right. Like it's so much more than just the law being, you know, right? It's unfortunate, but it's the truth. A lot of things are political and depends on how the winds are shifting. And, um, and the government is truly all powerful. Like they, they can just do things for private, to private companies or, or probably, or companies, just like companies in the private sector. Because, um, by the time you hold the government accountable to that thing, you probably will be dead, basically. Or the cost would be so ginormous. Yes. You know, the government doesn't really incur any cost. They're protected from any cost.

Okay, but take me in the room when she brought it up.

So, so, so, so, you know, there's a little bit of context to that because we started trying— and this goes back to how much foundation we built. Like, people always think overnight success. Oh, it's been 2 years. But it hasn't. All of this has been like part of a very long-term plan. A bit like Jensen, right? Like He's built such a foundation for so long, and that's how these things go. And we started engaging about the election market before we even launched the general public in the end of '21. Started talking to government saying, we wanna do this, it's very important, here's why it's gonna work, it's gonna be the most accurate gauge, and here's how it's legal, which it is. And they're like, okay, fine, we'll work with you, you know, whatever. Month after month, they wouldn't give it to us. They wouldn't give it to us. I had bet all the company on like the election market for '22, the '22 midterms. That was what we're aiming towards. The board is ready for it, et cetera. And they keep like delaying, delaying, delaying up until they pushed it after the midterms. So they pocket vetoed, like they didn't say no, they just managed to politely delay us enough that it didn't happen. So that was heartbreaking. You know, it's been like, so we started in 2018, we finally got to 2021, finally excited about launching.

The whole company was excited. Everyone's excited.

And all the issue about launch, started working on the election market and it gets banned at the end of '22. So now we launch with a very limited set of things that's gonna be very hard to get the exchange running, but they banned us. We lost a lot of the team over it. And you know, with these situations, what's really hard about these situations—

Did you push them out or they left?

A bunch of people left.

Did you do a layoff?

And then we had to do a layoff. And because what happens in these situations is that, I'm gonna go on a tangent. I think it's an interesting tangent.

Go to rip.

So there's this concept of expected outcome and outcome.

Yep.

And they oftentimes, It's not the same. There's a variance for the outcome and the expected outcome is, you know, based on your decision making where it should land. And then there's a bunch of variance in the world that pushes you in either direction. The world doesn't reward you for expected outcomes. They reward you for outcomes. Expected outcome is what you have control over, is like the work you do. And it's interesting because I think at that point, like the coin flip landed against us and the entire world is like, wrong strategy, wrong execution, et cetera. And it's interesting because that was the same time where I am a big Messi fan. So Argentina won the World Cup, I was super happy. But the day after Argentina won the World Cup, I don't know if you know this, but the French, France, the country really, the population wanted to kick out the French coach, Deschamps, who is an absolute legend. The guy won them the prior World Cup, incredible performance, got them to the final of the next World Cup and to the penalties. And obviously penalties are a coin flip. I mean, and they blamed him. And you know how hard, like the number of teams that made it past the sort of group stage after having won a World Cup is basically trivial. It's very, usually the team is very hard, it's very hard to kind of go twice in a row. So, and it was an interesting thing, which like he flipped the coin, landed against him and people wanted to oust him immediately, right? And so we lived through that and—

Did they want to oust you?

No, I think, but like people lost confidence. It's like we should pivot and like it's the wrong strategy, wrong strategy, wrong execution, all of that. We're not doing a good job, basically. It's on us. And it's fine. You should hold the founders accountable. But the key learning with that, what's interesting, a little bit with poker, the best poker players, they know when they're playing a good hand and they're okay with the variance. They can lose a lot, but they'll stick to their game. And then they know that over time the variance is gonna come back. And with enough plays, they're gonna get to, you know, they're gonna win over time. And you'll see with Elon, you'll see with some of these founders that can take these extreme risks, as long as they know their expected outcome and they can intake the variance over time. And I think there's a lot of alpha in there.

Yep.

Because, and for founders that have gone through that multiple times, I see it with Vlad and Robinhood, I see over time they gain a certain level of confidence.

Yes.

That is hard to describe, but it's like, I've gone through it, I'm okay with the fluctuations.

And is this making sense in the rearview mirror or is that making sense at the time?

No, not at the time.

Okay.

But now in the rearview mirror, because, okay, so '22 happens and we, so our answer at the time, oh, we got a reset, we're gonna do something else. We're gonna figure out what to do. But again, we're so, we wanna build Kalshi, that's what we wanna build. And we cannot do it without the election markets. We're gonna try again.

Okay.

So you go back to board, we're gonna try again. Everyone's like, I mean, okay, these guys are starting to get delusional. Yeah. We try till the end, another year, end of '23. Now they say no, they reject us.

Okay.

So again, you know, it's like goes from a low to a lower.

Yes.

And this was, you know, we're in the room, it's like, oh, what do we do again?

Roller coaster. The whole thing.

And Noah's like, all right, you know what? This time we'll sue them. You know what I'm saying? It's like, we're not—

like, was— how did it actually work? Like, you got the email that it's like no, and then right away she's like, we should sue.

We want to— and that someone was like, we're probably going to get a no again, so we should start preparing the lawsuit.

Okay.

And we should sue them. We started talk to the board. You know, we had a lot of conversation with Alfred. You know, Michael was at the board at the time.

And what did Alfred say the first time you pitched him on it?

He's like, it's a crazy idea. Like, you're a tiny startup. Even if you win, you're probably going to like incur a significant— you're probably going to lose. He's right that we, we were probably going to lose. And he's like, company of your size, even for bigger companies, you never win against the government. It doesn't, you know, he's your own, they have all power over you. They're your own regulator. Suing them is gonna call, like, they're gonna kill you. And, and when I was super dogmatic, I was sort of battling it, et cetera. But then there's a few things that sort of came out of that. Like, one-to-one was a complete no-brainer. It was pretty much, I mean, I, I would oscillate all the time. I would just be like, this is crazy. I mean, okay, they're gonna come after us. They're gonna come after us personally.

I think CEOs are gonna love this because I oscillate all the time on stuff.

Stuff like that. I oscillate a lot, which I think is okay.

I hid my oscillation as much as I could, but it definitely showed up.

Yeah. And I think it's okay, honestly. Like, I, I, because it's hard to have the right— I mean, it's so complicated, right? And, but, um, and I would all say it, etc. And I remember we got to a meeting at some point that, like, I was still oscillating, and, like, you know, it's the night before we're gonna file, etc. And, like, Laura was like, are you shitting me? Like, you know, it was basically— she, like, went so hard, and she's like, you know, fuck this. Like, you know, like, we should just do it. Like, we're wasting time. And, you know, it was like everyone else in the room, there was this sort of feeling, the missionary feeling, you could feel it of like, you know, we came so far, like, fuck it, let's just go full on war. Let's bet everything.

In your poker head, were you like, there's probably a 20% chance this will work, there's a 1% chance?

It was so hard to prize, but I thought through all of it, which was basically, and like Alpha was right in many ways, but like, They could kill us because they could essentially yank the clearinghouse from under us and kill the company. We would die maybe even before we even get the result, which is a risk. They would, they could like death by a thousand paper cuts. They can start doing a bunch of things for you. But then I was like, if it does work, the outcome is so big and the expected value seems pretty attractive actually. Even if low percentage odds of success, the outcome is so big.

Were you, okay, so obviously it's an asymmetric bet.

It's a, it's a big one. We bet the farm and we're like, let's see what happens. No plan B.

In the moment you, Although timing was extremely good on winning. Was it an email? Did someone call you? And what was the react? What was going on and where were you?

Yeah, so the litigator, Yakov Roth, who led this, and we interviewed everybody, I picked him because he's extremely smart. But the thing that I felt he was really good at, he had a missionary. This man wakes up in the morning and thinks about how to put the federal government in check. Okay. You know, you want that person just to—

this guy.

So it's like, he's an amazing litigator. But like, in the summer of '24, you know, usually we text and all of that. He called me and I got really anxious. I thought the court hearing came. Like, I, I was like, what? Like, you know, he's like, what's up? And he like talked to me about something, you know, and like, I was like, dude, my heart dropped. Don't ever call me. Like, you should only call me once you have the court decision. "Never call me ever again. Text me. I don't want you to call me because in the 10 seconds where I have to pick up the phone, my heart drops." So he's like, "Okay, fine. I won't call you until a decision." And I was sitting on my desk and I remember like Rainer, one of our engineers sitting next to me and like his name pops up on my phone. And like I could, like my entire body, like I just could feel, you know these moments where you feel your entire body just sort of like paralyzed, like, oh shit. And so I pick up the phone and I was, I was like, why are you calling me? And then he's like, we won. And after that, I don't remember. We was throwing chairs in the office.

Did you blackout?

I mean, yeah, we were throwing chairs in the office. We basically destroyed the office. It was unbelievable because it's like you won. And in that year we suffered so much 'cause you had the competitor, like where Nepali was getting the brand and we were staying true to our strategy. We're going to stick with it. The government was yanking the clearinghouse from under us. Enforcement action after the other. They were finding random things to just like create actions against us. Audits, you know, the audits that usually take 10 days, they were milled to 9 months. Yeah. It was just sort of like truly painful. Like, you know, the whole like warfare thing, it truly happened and they make your life miserable. And not just the company, you own personally. It's like kind of this intimidation tactic up until you cave, up until they, you know, you're so exhausted and it was just so vindicating. It was so nice. Yes. Right? Like then, and finally, like we finally, it felt like we finally had the opportunity to just sort of like win.

Yeah.

For the first time.

Okay. You win. And of course you knew this was going to work. Did it work like way better than you thought?

Not in the first few days. Oh, really? It was like all things. Yeah. It's like all things. You have to build emotion and you have to build a brand and you have to, So we, but this is the thing, you win and then you're like, oh, let's launch it. And then nothing happens.

By the way, the time you won this case, like 4 weeks, like 3 weeks and a half before the election. Was that random timing?

Yeah. You gotta get it sometimes. You know, fascinating. You know, Tony says it sometimes, like you, you need luck sometimes.

Yeah.

Is it because we're just lucky? I think part of it. Yeah. You need to be, you need to get lucky. But I think you took risk and we took 5, 6 years of expanding that lock surface area. So at some point we could do it.

But it did work even better than you imagined after we started compounding.

It takes time, everything takes time. But in those 3 weeks and a half, we're like, look, we have 3 weeks and a half to make this go mainstream. Yeah. Everybody's in the office. I don't care. I like basically honestly would shower maybe like once every 4 days. Like I was just like, I don't care about anything. This is my shot. And so we worked so hard in those 4 weeks. It was slow, slow, slow, but then it started upticking and then the machine started going. And then when it started going, it was beautiful. It was amazing.

I got a 21-year-old son and he and all his friends use Calchi.

Yeah.

And I know you're going to say it's trading, not gambling, but I'm a little afraid some of them are gonna get addicted.

There are similar impulses. I mean, look, I think there's a few ways to think about it. So let's talk about the policy and then actually what we're doing, because I care about, like, I think about that a lot and I care about that. Yeah. It's like my paranoid brain. I don't want people to get hurt. And with all technologies, people inevitably get hurt. They will use it in a bad way, right? This is true for Airbnb and, you know, yeah. And are you hearing from mothers Yeah, and actually it's mixed because, so let me kind of walk through a few things. So first the policy aspects, I think, and this is important for everyone, at some point you're gonna build something very big, especially in consumer. And when it truly hits mainstream, you're gonna get haters. There's gonna be a bucket of society that's gonna be worried because they don't understand it or they don't get it and they're worried about the risks and they don't see the, like a lot of people don't see the point of AI. Why? Why lose our jobs over someone, something that can do our homework better? I think they're missing the point, obviously, but you need to educate that part of society. And then you have incumbents because inevitably if you go mainstream, you're gonna be taking it from someone and those incumbents will go very hard after you. When the taxis went after Uber, they didn't go after them saying, hey, our margins are threatened, that's why you should shut it down. What'd they say? They said it's unsafe and kids are getting hurt and kidnapped. And Airbnb was the same thing with the hotels. Like they would find one case of one person that, you know, had a very terrible bad experience or something really horrible happened and they would blow it up New York Times. And, and the press likes scandals and drama, and, you know, so for us, the easy low-hanging fruit is to call it gambling. And it's interesting because pretty much all trading products that has ever come to society have come through a fight, like, have basically emerged through a fight of them being called gambling. So grain futures were actually legalized with the Supreme Court decision in the 1900s. Like, futures, a boring commodity futures market at the time, the states were, were suing and there was—

my son is not trading commodities futures in—

but they used to be.

Fine, the farmers were, but kids weren't.

No, that's not true.

Like, I mean, is it really? I don't know.

The farmers were 20 and 18. By the way, the, the age to trade futures is 18. Okay, right. It's, it's actually, you know, that's what it is. I mean, now there's other more—

maybe my son runs in a different crowd, but none of them—

by the way, I want to address— no, no, but I want to address this. But I'm saying But that's because society evolved. Like, there's now crypto and meme coins and all these other things, right? Like, at the time there was nothing else. This is— this was the primary mechanism of speculation. That's what everybody was doing. But the claim at the time was like, this is gambling and we should basically regulate it as gambling and not as a financial market. And Supreme Court said speculation does look like gambling because it does. Yeah.

So it's a stock market.

Yes, exactly. But there's a price discovery aspect to this where you're on an open, transparent exchange where people are trading against each other. That makes it a financial market. And that's why it needs to regulate as a financial market and so on and so forth. Fast forward to us, there's a few things that are very important. One, the incentive structure in the model. Gambling, I don't gamble. I don't like, I don't really like gambling. I like trading. Gambling is a business model where like the revenue of the company is equal to the customer's losses. So over time you block the winners, which is what they do. They don't want the smart mathematically oriented people that are doing research and they want the people that continuously lose. And those people, they give them promos to come back and that's how you create these addictions But they cannot really solve the problem of addiction because the revenues are equal to the losses. So over time, what do you do? Well, you have to increase the losses. That's what you do. You have to create those types of behaviors, or at least not throttle them too much. The losses don't go to me on Kalshi. That's the beauty of, of a derivatives market. Yeah, I take a 1% fee whether somebody lose or not. So when someone is exhibiting bad patterns, that those losses are going to someone else. I have all the incentive in the world to basically throttle them and figure out how to get it right. So, but let me just push back a little bit on that.

In the casino, um, they try to block the, the card sharks. Um, yeah, but in your world, there's a lot of card sharks betting against my son's friend who—

for sure, but that's like—

who's going on a gut feel.

Yeah, that, that's absolutely right. Like, absolutely.

That—

now it depends on the incentive structure. I want gut— I want smart trading. I want to incentivize people to do research because the more liquid The better the forecast, the more truthful my forecast, the more people look at it, the more my top of funnel increases. I want the smart traders, which is a very different structure from the casino, which is like you don't want the smart behavior, you want just the excessive money-losing, continuously money-losing behavior, right? So there's that. Now it's important to understand not everybody wins on Kalshi. Of course not. Everybody wins in the stock market, not everybody wins in Not everybody wins in the options market. Not everybody wins in athletic competitions. Not everybody wins in competitive environment, in highly competitive environments, right? It's a highly competitive— it's a competition. It's a highly competitive activity in nature. And inevitably, there's going to be some people that win and win more. Like, how many people win the NBA Finals? Or how many people win, you know, the Champions League? It's a small percentage of participants. Now, here's what's interesting. Everybody can win. It's a fair and neutral platform. And my incentive is to give as many tools as possible for people to do the right thing and do research and do all of that. And what we do and what we do really well is we do take this sort of issue of excessive behaviors pretty seriously. So for, for example, the 18 to 20 buckets, I think the data doesn't show dramatically different behaviors, but society tends to be worried about that. We add a lot more throttling to the accounts.

What does that mean?

Like you cannot basically lose too much in excess. We add throttling and we start asking for additional verification that makes it so— add a lot of friction for you to keep going or keep going in the success. And the reason we do that, because the positive sides of this. So when I asked the parents in the mom question and their 25-year-old is trading on Cashew, what they get excited about is like they're actually getting smarter about the future. They're smarter about the world because the alternative is they're spending time on Instagram and social media where it's like extremists and all the hate and constant brain rot and all these different things. Whereas here—

And they get addicted to that, of course, but they can't lose all their money on it.

I think they're losing a lot more on that.

They can lose their, they can, they turn their brain off.

And I think sometimes I'm losing my brain on that. I mean, you know, but like, I think there's all sorts of other issues there. But my point here is like, they're spending time getting smarter about the world, which I think is the whole premise of what we're building. Like, I think this is gonna be the ultimate antidote to a lot of the polarization extremism we're seeing because, you know, these calibrated, well-reasoned takes are not getting reward on social media, but they get reward in prediction markets. And that trains people over time to get a little bit smarter. And I want it to be a tool for that, especially for younger people, rather than a tool that like, I'm losing all my money and I'm doing excessive behaviors. And there's easy ways to do that, which is like, you can cap how much people are doing, you can throttle these accounts. Um, you know, one of the things we do very well, I think better than even some of the financial brokers or traditional brokers, um, we think we self-regulate. We don't just do what regulation requires us to do, we go above and beyond because I think about all the risks. So miners, for example, We obviously— they're banned and we do KYC and all these different things, but the way that miners access all these platforms is they use their parents' IDs. So one of the things we create is a parent portal where moms and parents can give us their ID and tell us don't let anyone else use it. That solves 95% of the issue, and I think we're doing a great job. And the numbers show, like, you know, the percentage of people that show these signs of these patterns of excessive behaviors or are losing excessively, or losing in general on Kalshi, is actually lower than options trading, and it's lower than any active trading of stocks. So if you buy a stock and hold it for 5 years, it's investing. But if you're trading it on a daily basis, etc., 75-80% of people lose. And I think people have not come to terms that there, there are irresponsible behaviors in all these markets. And the, the way to do it is basically you have to figure out how to flag these behaviors and basically get better at throttling them.

Okay, I guess my last question, this this pod is a lot of CEOs and founders listen to it. You've had a really unusual, like really long strange trip. Yeah. One last piece of advice or tips for folks going through the desert.

I think that like, I would say a few things, but like one, like really question really hard why you're doing it, you know? Because the thing that you're like, if it's not for the company itself, the thing that you're hoping to get I don't know if it's really there, which is a glamorous, yeah, you know, I never found it the least, obviously financially rewarding at some point. For sure. There's many ways to do that these days. The option cost is very high, right? Like if you, I mean, you can join a fast-growing, I mean, there's so many ways to do that, right? Um, so I just think the monetary reward just feels like, uh, um, Risk adjusted is probably a stupid move. Yes. And if you adjust also for lifestyle and amount of pain. Yeah, it gets pretty unattractive, right?

So, okay, your little brother comes to you and says, I want to start a company. What do you say?

I just say, why?

You push back?

Yeah. Why? Like, what? Like, like, explain. What is it like? Oh, I want to be my own boss.

You're not really.

Yeah.

What does that mean? You got a board, you've got— you work for all your employees.

You work for everyone, your users. I mean, you're a good CEO. You're Basically, they work for everybody. Yeah, I mean, I don't think it's that sort of sense of freedom is real in any way. Actually, you're the least free, right? And the more it grows, the less free you are, right? I agree. You know, so like, the second thing is like, I really believe in the sort of theory, like I really strongly believe in the theory of like, it has to be true to you. Like it's gonna be very hard to build it a company, market a product, build a product that is not you. It's very hard. I honestly don't see how that works. And it's so interesting because every time you see a big company and then you meet the founder or the CEO of that company, and you'd probably agree with me on this, like it's shocking.

It's them. Yes.

Yes.

The office is them.

Like you meet them, you're like, oh, it's, I now totally understand why that company is the way it is.

It's in here.

Right? And so, and I feel like, People, I don't know, I feel like that's not put into practice enough. Does that make sense? Like, I think people just try to, you know, figure out all the right ways to do things. I just, I mean, I wish there was, but if there was, then everybody would do it.

There's a really good quote, "Be yourself, everyone else is taken." You're definitely yourself. Thanks for coming on the pod.

Thanks a lot for having me.

Congrats on all your success.

Thanks so much for having me. It's great.

Okay, hope everybody liked that. I really enjoyed talking to him. It's the second time I met him. He's a gem. A couple of my takeaways. Holy crap, is he mission driven. He had a mission of how we wanted to see the world change and the company was just like, okay, we're going to build a company to pull that mission off. People talk about mission a lot, very much in his case. It rhymes with kind of how HubSpot started. Our vision mission was we wanted to change marketing from outbound to inbound., and we just were like, oh, we need to create a company to pull that off. It wasn't originally a company, it was an idea. So I like that. And I like founders who are— he's very obsessive and very mission-driven. I feel like today with startups, everyone's trying to win, win Twitter for the day and sometimes making short-term decisions. The thing I like about Kalshi and the thing I really like about SpaceX is they made some big foundational bets and were super patient and were really rewarded once those things paid off. And I think more founders can learn from that. Last thing I would say is he's got a unique relationship with Luana, his co-founder. Luana is the kind of organized one and very risk-seeking, and he's a little bit all over the place and he's risk-averse. It was the exact opposite of what I thought those two relationships with were, uh, but it's very much 1 1 3. It's reminded me of my relationship with Dharmesh and how complementary the two are. Hope you liked it.