Kalshi CEO’s Bold Vision For The Future of Markets | Tarek Mansour

I, what I was interested in is building the New York Stock Exchange, but 10x bigger. Like that, that was the sort of vision that was the thing that excited us at the core. And for us, it's like the minute we have to waver on that, on that commitment, it just becomes less interesting to build this company. We are building the everything exchange, the exchange where you're gonna be able to resolve any qualitative difference of opinions.

Mm-hmm.

With a trade.

Yeah.

Right. And so that's, that TAM is gonna be very large long term.

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Thanks for having me.

I'm very excited. Yeah, pumped on this, dude. I want to start with— I want to actually start with like some turning points in the business. I was trying to think about from an outsider's point of view, like turning points for, for Kalshi, things that came to my mind were the 2024 election.

Yeah.

Susquehanna joining as a market maker to me was like one of those moments where I was like, oh, these guys are actually pretty real. And that was really before I knew much about prediction markets and Kalshi. But maybe the first thing was just regulation. And so actually, I'd love to hear the story about— I've heard a story about you calling lawyers all day.

Yeah.

Y Combinator calling lawyers all day. And just I'd love to hear about the extent at which which trading event contracts was seen as this like outrageous idea.

So let me tell you, maybe I'll just give you the kind of like, uh, the key turning points in my view, and then, um, I'll talk a little bit about this. Yeah, yeah, story of Kalshi. But, um, I think the first key moment was when we first got regulated as a financial exchange in the US, like the federal government approved us first. So that, I think that was the first sort of, I would say, like crucible moment. Where we got the license finally, like now prediction markets are sort of legal.

When was this?

2020, end of 2020. So it says, you know, and then I think there was a launch of the exchange. Then I think the critical decision to sue the government, then winning that lawsuit. And actually in between them, there's the Susquehanna launch. And then this year, sort of the entry in sports and the launch of our brokerage, the brokerage side of the business. So the story is, it's a very unusual story for a business and it breaks a lot of patterns in many ways. But, you know, so we started Kalshi out of MIT, straight out of MIT. And I always say this, but, and this is very important, like Luan and I did not want to start a company. Like we were not the sort of looking to be an entrepreneur or build product. You know how like in school you have the persona of the guy the sort of like tinkering with a bunch of things.

That was not you?

It was like totally not me. You know, it's like what I was is a trader. Like, you know, I mean, my story is like I grew up, I was born in California, I grew up in Lebanon. And my life back in the day was, I grew up, you know, it was a decently harsh reality. It's like war and terrorism and a bunch of things. And I always had a little bit of an obsessive brain. And so I was obsessed with math forever, got really good at it. Got into MIT, and then at MIT is where I sort of like started spending a lot of time in finance. I went to Goldman, Citadel, a bunch of other places.

Were you obsessed in other areas? You were obsessed with just math, or were you just hypercompetitive, or you were obsessed with winning, or?

I was extremely hypercompetitive on everything, like the, the anything I would do. And it was honestly comes a lot from my mom. Like my mom was, was sort of like would push us at every single thing we do. We could not do something, like there was nothing we could do sort of halfway. There was no sort of like, it's okay to kind of have it for like, do it for fun. It was like, you gotta win, you know, every single— like, you know, you're playing soccer, you gotta win. You're skiing, you gotta win. Uh, you, uh, you know, you're—

your mom is Lebanese?

Yeah.

And was it, uh, single mom or were you—

yeah, yeah, it was okay.

So she's like, yeah, stereotype.

My parents were divorced, but like, I grew up really with it with my mom. I mean, I, I had some relationship with my dad but not really, and I didn't see him often enough, but And so yes, it's a stereotype, right? It's a stereotype, like chip on your shoulder, you know, like, and so the thing, and that doesn't leave you, right? Like when you grow up, that doesn't leave you. And so I was really obsessed with math. My brain is a bit one-dimensional. I get obsessed with one thing and I can't get my brain off of it. So it was math, then it was getting to MIT. Then when I got to MIT, it was finance because a lot of these like the people that were really good at math were sort of into finance. And then when I got into finance, I really got obsessed with financial history more than like, so when I was trading at Goldman, like I would find myself staying up till like 1, 2 AM in the Goldman Sachs floor and just like reading up about like, why do we trade options? Like why do we trade swaps? How come 5 banks have a monopoly over the banking system in the US, right? And you kind of start realizing actually, like, one, there's a lot of arbitrariness to history. It's like some guy showed up and bent history and like now that's what we live with, right? And the answer to those banks was JP Morgan himself. He just made it to be that way. And two, it was like the other thing that was interesting is like financial markets never had like an easy path forward. You know, we saw it with crypto. I mean, it took so— I mean, even now it's still like a fight to basically legalize, but it was true for every single piece of meaningful financial innovation, like the stock market and the bubbles that happened in the early days that, you know, I don't know if you know about the South Sea Bubble.

Yeah, I'm reading House of Morgan.

Yeah, yeah, great, great book. But, but I think, you know, it was stocks and there was a lot of fighting at the time. It was like the stock market is bad because people are losing money and that's just gambling and, you know, then obviously the stock market is not bad. And then it was same with all the other markets, like, you know, when credit default swaps got big and then grain futures got big. So that was an interesting sort of like realization in the early days. And then, you know, the story I always say when the idea of Kalshi came to be was at Goldman, all the flow, all the demand that we're getting was basically people wanted to, they wanted to get exposure to events. Simple questions about the future. It was not like, it wasn't like, hey, I think the S&P is mispriced, I want to put on this trade. It was like, I think Trump is going to win, I want to figure out how to play that. And you know, that was 2016 and we didn't start the company up until end of 2018, like really 2019. So that goes back to this whole, like, we didn't want to start a company, but that was the first time we started thinking about the ideas. Like there's financial markets for all these different things, like equities, commodities, currencies, credit, like it feels like there's a need for a financial market about simple questions about the future. And then I saw it everywhere. Like I saw it at Citadel, the one I saw at Bridgewater. Bridgewater is interesting because they have two separate divisions, one that comes up about the views of what's going to happen in the world. And then the other one that actually figures out how to play those views.

Yeah. How do you make money from that view?

Yeah. Maybe it should be the same. Yeah.

Yeah.

And, and, and And Siddhartha was the same, you know, actually interestingly, both Ilan and I worked at a prop shop called Five Rings.

Is that how you guys met? Your co-founder?

No, we knew her, she was at MIT as well.

Oh, she was there from before.

But we had a lot of similar interests and like the Five Rings thing, like we used to play this game called Make a Market. Have you ever played the game?

No.

So it's basically like, hey, what's the population of Nigeria? Make a market around that. So we would do it, we'd ask and you know, you could trade and then you pay the difference, you pay the delta to the other person. You know what, and then remember like the big sort of debate was like, we were sitting in the office at one point and Luana was just like, I will take anybody, like, you know, what's the probability that Kylie Jenner is pregnant? And then Luana was just like, I will take anybody 100 to 1 odds basically. Like I'll pay 99 cents on the dollar. And then, you know, a lot of, you know, nobody wanted to take that trade because she had so much conviction. And then it was like, well, what if there could be a marketplace for that, right? Like, and this was sort of when we were like, well, I think there's something there. And we started looking at the history of prediction markets and like this idea.

And the main one then was PredictIt. Is that?

It was PredictIt. It was kind of like nonprofit small, you know, kind of like a research purpose sort of type, like a research project. Then there was, there was Intrade. I think Intrade was the OG. Do you know about Intrade?

No, I don't know.

Yeah, so it was this like market that like, Got started in the 2000s and like, you know, the founder is this guy, Intrade. Intrade.

All right.

And this guy was like John Delaney. Like he was, he was kind of like talking, he was like, he even appeared on CNBC a few times talking about election odds back in the day. It was crazy. And, you know, the business was not regulated. It was sort of like run offshore, like sort of not US, but like 96% of their volume was US. And then the CFTC shut it down in 2012. And then the guy went to Mount Everest 2 weeks later and died. And people don't know. What? Yeah. What? People don't know if he killed himself or like—

That's crazy.

Yeah.

This is interesting. I'm reading the Wikipedia page. It says the 2012 US presidential election was a bellwether event for Intrade. Getting the company high levels of web traffic. Well, we've seen that game before.

We've seen that game before.

So don't, basically don't go climb Mount Everest.

I mean, yeah, I mean, yeah. So, but the thing, the other thing, so, but then we're like looking into it, it's like, man, like this is like really like illegal. Like this is not allowed in the US. And I never doubted, like the US is the biggest market to start something like that. And it's the one that we need to get it right.

Yeah.

And you know, we sort of like could not stop thinking about the idea. Like I was gonna go work at Citadel and I just like, it was one of those things where the idea pulled us into building it. And so incrementally we started like reading more and then started building some stuff and then went to YC and to like apply to YC because like why not? And then we got into YC and like, well maybe we do YC for 3 months and see what happens. But like—

Wait, let's go there for a little bit. Let's talk about YC. 'Cause what did YC say when you pitched this?

So it was the first time we went to this, one of my friends, this guy Sudanshu, he was telling me about like, hey, there's this like hackathon going on. You should go and like do this exchange event, exchange idea there. And I pinged the guy from YC and he was like, oh well, deadline is passed. I was like, man, so sorry, I didn't have like a car, something, but like I didn't have like a house to stay in or whatever. Like, can I please come? And he's like, okay, fine, sure. So we showed up to this thing, we put together some like front end, uh, that looked the first version of like front end of prediction markets and like, um, you know, and then we, it was, so there was Michael Seibel, the CEO of YC. Yep. Who's now on our board. And, and you know, I don't know if you know about a company called Vanta. Christina.

Vanta. Yeah, of course.

Yeah.

Yeah.

Christina, the founder, the founder of Vanta was also one of the judges. Oh, so Luan and I show up and like, uh, um, Actually, funny enough, this is 2018, 20, uh, end of 2018.

2018. Okay.

It was like Luan and I, and we had found also another guy, this guy Duncan from Nifty Gateways.

Oh, Duncan Cock Foster.

Yeah, yeah.

I went to, I went to school with Duncan. I know Duncan.

Yeah, yeah. Two of us kind of like put together the site.

Wait, I didn't know the— that's crazy.

Yeah. And then he was like, I'm gonna, I wanna really go work on sort of Nifty Gateway.

Yeah. They sold to Gemini.

Uh, yeah, exactly. And then like, you know, we continue with Kalshi, but like No, we started pitching Michael, then Michael was like, well, this idea sound— he goes like, he basically goes something along the lines like, this is the stupidest thing I've ever heard. Like, your thing is outright illegal. Like, you know, like nothing about this is legal basically. And so we got out of that room, we're like, okay, we probably lost. So you have to pitch separate judges and they pick 8 finalists and like, you know, and I go and we're like, kind of, okay, we did our best, we tried, like it is what it is. And so I go and I drink a few beers, I got kind of tipsy and then they call us to be finalists. I was like, okay, that was weird. Like, I mean, he shat on the whole thing and then they call us to be finalists and like we did end up winning that hackathon. And so then we get into YC and I always ask Michael like, what went through your mind at the time? And he was like, it's just one of those things that sound, He was like, a pattern that we saw at YC, it was really one of those things that sounded so ridiculous. Like one of those things that like really, like, you know, you see a lot of pitches of a lot of different things, but then once in a while, like you hear one thing that like really makes you feel off. Like it was so ridiculous. I was like, we just had to take the bet, you know?

You know? And I just, by the way, I just pulled up the site, the early site shared here.

No, there's an earlier one actually. This is not the earliest. Okay.

But I found this on the archive. Yeah. Yeah, but for people who are listening, you could bet on Champions League, Game of Thrones, Brexit, and elections. I bet you couldn't even bet, but this is the front end for it.

Yeah, you could do like some like no money at the time. I mean, some stuff like that, but yeah, no, it's crazy. And then we get into YC and like, we didn't have a product because all they were doing is like figuring out how to get legalized. I mean, because you cannot launch. So everybody was like metrics and users and customers and like week over week would be the kind of the like, we were not like one of the cool, like the, you know, there's like the cool companies at YC. Like we were just like, we were the odd dog. Like we were really weird.

Well, you can't get customers, so you're just—

No customers and everyone's looking at us like, what are these guys doing? You know, it's like, oh, you're like reading legal papers all day, you know? And then I, you know, at the end of YC, like it was interesting because my pitch was like, look, I think there's like less than 1% chance that I get this legalized. But if we do, it's gonna be a very large company and a very large market. And I think if anybody does it, it's gonna be us.

Yeah.

And we raise money. So we managed to raise money out of that. And you know, then we went into sort of 3 years and a half, 4 years, like literally no product, nothing.

Like what were you doing? Just trying to get regulated?

Literally like regulation all day. Yeah, it was like, I mean, and this is when I talk about—

Were you doing any product stuff?

Not really. I mean, some, but like we couldn't put it in our custom. I mean, I always said, because what Luan and I realized, and we defined this principle very early, and we looked at the sort of landscape prediction markets, is like the only way this becomes a big business is we need to legitimize it as a financial instrument. It has to be something that is legal, approved by the federal government, where one day we can put it on brokerages, work with market makers. And make properly take it mainstream, put it in the App Store, like not this sort of like website on the side that like people sort of sneakily, you know, like bet or trade on. I want it to be like right at the center of Wall Street. We're going to reimagine this whole ecosystem. So we were so convicted in that and we're like, we're not going to waver no matter what, no matter how hard, either we die as a company or we make this legal. Yeah.

But why, why did you take that approach? Because this was at the time, like, you know, there are all these companies that were kind of skirting regulations, like not just crypto companies, but like Uber or Airbnb. Like, it was kind of a tech playbook of like, you do follow the regulations, but like you kind of get around it too.

Yeah, we were very intentional about that. I mean, I think that like, and it's interesting because Uber, a lot of our investors like are in Uber and Airbnb. And we talked about a lot about this a lot. I actually think there's a big difference. And so I think in financial services and healthcare, there's two key differences that make these two sort of industries unique. One, it's generally more federal than state, and federal law is like, you know, it's like the, you know, it's just more like it goes criminal pretty quickly and it's kind of like the bad type, but that's not the most important. The most important is the second one, which is like when things go bad, they go really bad. You know, like in an Uber and like everybody like, okay, some driver is pissed off and like, but in financial services it's like, you know, you don't need the regulation in the normal days, but in the bad days it's like the difference between, you know, when a deposit issues happen on Coinbase versus deposit issue happens on FTX. Right. And that difference is very key. That's like, do you survive as a business or do you end up being a really negative thing for society long-term? So And so for us, that second thing was a key thing, which is like, we are not going to be able to get that sort of mainstream adoption if it's not considered a real financial instrument. Like we, we, we just, we knew there were, because Intrade, you know, as you saw, like they did get somewhat big, like they were not a small company. And, and there were a lot of trials in the past. To me, it's like the elephant in the room is regulation. If we figure out that problem, this is going to be a very large industry. And, but we need to figure out that problem. And if we don't, it's never going to be a very large industry. And for, for us, I did not want, you know, we, I just did, was not interested in building something on the side, something offshore. What I was interested in is building the New York Stock Exchange, but 10x bigger. Like that, that was the sort of vision that was the thing that excited us at the core. And for us, it's like the minute we have to waver on that, on that on that commitment, it just becomes less interesting to build this company.

Yeah.

And so we wanted to deliver that to the prediction market community because it's like without it, it was still going to be this sort of like weird niche corner of the internet, not what it is today. Right.

So then, okay, so you'd spend like a year or two years getting regulated. 2020, you're able to launch.

It was two years first to get approval for the license.

Got it. A little bit more, which is from the CFTC.

Yeah. Okay. Um, and then the minute we got it, the, you know, the, the CFTC turns and basically says, actually, we're not gonna let you launch any markets.

Hmm.

And so that was horrible. So now we're like fighting for the right to exist and launch a single market for the next 2 years. So it was like we had 3 to 4 years of like, literally we cannot operate the business. And again, we were like, we're gonna be committed. We're gonna do it right.

Were you, were you running out of money because you were spending on legal bills or it's like, we had money crunch, but then we raised a Series A from Sequoia where we raised quite a bit. So how do you raise money from Sequoia if you're like, I haven't been around for 2 years, just kind of been fighting with the lawyers?

I think what happened is like Alfred, you know, he did a PhD on prediction markets when he was back, when he was, uh, uh, uh, at Harvard. So he really believes in the market. He was always like, he was, he's seen it coming. He's invested in a bunch of prediction markets in the past also, crypto and a bunch of others. There was a company called, um, I forgot the name of the company. It's like a decentralized prediction market.

Oh yeah, yeah. The one started by Jeremy.

Yeah, yeah, yeah.

Jeremy Gardner.

Yeah. No, not Augur. Another one. Another one.

Oh, okay.

There was another one also, but, but, but, you know, he was like, you gotta figure out the regulatory piece. That, that's the one. And I think what Alfred realized is like, I think there was a little bit of a founder thing. He was like, okay, these guys, I think it was as simple as like, I think these guys are crazy enough to basically make it happen.

This is Alfred Lin. Yeah. That's Sequoia.

Yeah, he was like—

so did he— he led your guys' round?

Yeah, he led the Series A, and like, it was a very controversial Series A. And he was telling me, like, this is one of the most debated, uh, rounds of the partnership. He was like, which is usually a sign that like either the company is going to go zero or going to be a massive success. Like, it's, it's a very high variance type bet. Um, but I think it was the— I think he realized, like, look, I— it's— we cannot know if this regulatory thing is going to happen, but if anybody— like, he really felt like if anybody's going to make this happen, it's going to be those guys. And because he saw how committed we are to this, like, I really love this idea of a financial market. And like, in some ways it's interesting, like, I kind of want my legacy to be like, okay, he's the guy that sort of made financial markets and everything happen. And I think there's, I'm lucky enough that I'm being able to work on that. So they gave us money, so it gave us the runway to basically make it happen. And then we launched and then it was a limited launch because they were blocking every single market. And I always say this, like the first set of markets, would take us like 18 months to launch with the CFTC. Now we can launch stuff at, uh, you know, within 30 minutes, which is crazy. Um, and but like we got the approval, that was key. Then we managed to launch like another year and a half later. And, and then like the fight for elections, like because we were so dead set, is like the way that this goes mainstream, the way that people understand the power of these markets, you need one singular event that just takes it The absolute—

so in your mind, that was the 2024— that was going to be the 2024 election.

Yeah.

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The lawsuit.

The lawsuit.

Well, no, we were talking Saskatchewan before then. And then, so we started talking to CFTC about the election market end of 2021. Then we're trying to do it by 2022. They blocked it. Oh. Then they were trying to do it end of 2023. They blocked it again.

And you guys had proposed also contracts about, I think it was which party would—

Yeah, it was which party. Yeah.

Yeah.

And they blocked it again. And you gotta imagine like we're a company that now has spent 3 years fighting for this election market. Yeah. And employees start leaving, you know, because what happens when you like lose a fight like that is like people start saying that like it was a problem with strategy, even though the coin just like landed on the other, like, you know, so it was a very tough time. Like early 2023 was like one of the harshest times in the company because like we had spent so much time on this. So much money. It's not really like, like the government is dead set on not letting it happen. You know, that was peak sort of Biden era.

So like, yeah, also all the like kind of gambling, but financial market stuff had quieted down. We had ZIRP and then everything, and then companies and then everything had quieted down.

Everything was sort of like very dark times for like any company in general. But for us, it's like your regulator basically wants to shut this whole thing down and we don't even know if we're going to exist next month. And then they're coming up with new rules to shut down the whole thing. And then enforcement action, like all the kind of stuff to basically kill this business. And I think this is where like, this was a very tough, I would say this is one of the hardest times. I mean, the early days were very hard because also we're doing regulation all day, but this was a very hard time in the history of the company. And I think what like the craziest part of it all is like, I think Luana, like, it, it was a sort of delusional, like, belief that, like, we were just gonna make it happen just because we were right. She had, like, unwavering commitment to being like, I will literally not work on this business if we do not do anything in our power to get the election market. And so after 2 years, like, end of 2023, she's like, we're gonna sue the government now. And, you know, we go to our board, we talk to Sequoia, YC, like, a bunch of our shareholders, and like And they're all like, this is like one of the worst ideas we've ever heard. Like, this is literally what—

Sequoia says this.

I mean, everybody, because they're like, look, I mean, it's your regulator. Your regulator has all power over you. They can stop you. They can block you. They can shut you down. They can pull the license. They can like, they could do anything. And you're a tiny startup. Like, even as a big company, they don't like suing their regulators or they kind of never do it because it never works. As a small company, it's like you're gonna die. And, but the one thing to their credit, like that Alfred and Michael said, it's like, but like historically, every time you came with a stupid idea like this to us, you know, magic ended up happening like some weird, you know, and, and, and they said it was also true that a lot of the most legendary companies ever built, they kind of break patterns.

Right?

You know, it's like you cannot apply like, here's how this business should scale. It's— there's some weird thing that happens to that company that like is unusual.

Yeah.

And so they're like, you guys should make the decision.

Yeah.

Like you should decide. And you know, I was like, I'm a bit more calibrated. I like think about things a bit more. Luana is the more sort of stubborn, like she just doesn't give a shit about anything. She's like, I want to like do it. Yeah.

Get it on. Yeah.

Whatever happens. And so we ended up suing. Um, I didn't sleep 3 weeks before filing the lawsuit. And then the day I filed the lawsuit, I like went to sleep pretty well. He's like, nah, let's just see what happens. But that I think was maybe one of the most—

like, and then, and then the district court ruled in your favor.

Yes.

Yeah. Yeah. Which is a glorious day.

I mean, that was the craziest day. That was the craziest. I mean, it was like that day we knew it was like, okay, this is going to—

where were you at the office?

Yeah.

Yeah.

Because the lawyer, so the lawyer, Yakov Roth, is just like this legend. The reason we picked this lawyer, we interviewed everybody, all the fancy, but this guy came to the office in 20, at the end of '23 to pitch us that, you know, we should go with Jones Day for it. And man, like this guy, like I, this guy, I have never seen someone as passionate with like putting like, like, like, like reining in the federal government.

Nice. Let's go.

And I was like, I think this guy will succeed if he loses. Oh yeah, Yakov.

Yeah, yeah, yeah.

All right, good.

Love that. So that's why. 2023, then you guys—

no. Yeah. And then 2024 was—

and then 2024 was a huge year, obviously, because of the election. I remember, I remember because I didn't know too much about Kalshi, but it was— I think it was like Q1 or something or Q2. I read a news story about how Susquehanna was going to—

that's when they launched. Yeah.

Because my problem with prediction markets, I had played around with the liquidity. Yeah, it was always the liquidity. So then I saw Susquehanna. So tell me about how that deal came to be.

So, so we had met them actually very early. And look, Sig is incredible at spotting like asymmetric, um, opportunities and like getting in on them early.

Yeah.

Um, and the other separate thing here is like Jeff Yass, who's the founder of SIG, um, I mean, he's really one of the most legendary figures on Wall Street. Um, and he's a bit more private about his life, so people hear about him less, but he is literally like, you know, um, I mean, the OG sort of like market maker, like the OG, you know, started his career, um, book— like bookmaking and the horse tracks, and then like evolved that into options trading because a lot of the similar patterns were, uh, were emerging.

Yeah.

And then made, you know, like built Susquehanna. So, um, and as a side, he owns a huge chunk of TikTok, which is a, you know, I mean, people don't know him.

He's like, I think he's like the 20th or 30th wealthiest person in the world.

I think he's actually like bigger.

Yeah.

But he's just quite, he just lives a normal, I mean, very humble, but like, he loves prediction markets. You know, and he's always said like, he's a big gambler. He's a big, he loves kind of this idea of pricing, like, like instead of emotional, this idea of like taking qualitative opinions and turning them into quantitative opinions. It's like, if you have such a strong opinion, why don't you put money on it? Like I will buy you at this price at this size. And he loved this idea of he's, is this idea that like we're, we make the world smarter by, by, by enabling it.

Started up there. Are you meeting with— when you're talking to Susquehanna, are you pitching Jeff directly? Are you sitting down?

Yeah, we're talking to like Jeff and the team with Jeff. Uh, um, you know, uh, two kind of ones that stand out, like Jeremy and, and Rick, they're from the, from the team that are sort of closest to this. You know, they're doing some of the macro stuff that had done some sports stuff at the time. And but Jeff loves this idea, like he really loves this idea. And I remember like we had a conversation. He's like, you know, we want to take a bet on this company because like, you know, we think you guys are— we don't know if you're gonna be— he, he literally told me, he's like, I think there's less than 1% chance you legalize election markets.

Hmm. But if you do—

but if you do, yeah, it might be pretty large. But he really thought it was less than 1%. He's like, look, I want this. It was a bit also emotional for him. Like, I think it was like, I want this to happen so bad. Like, you know, I wanna, I wanna, I wanna help. And I remember I called him on the day we won and I was like, Jeff, we won. And it was like the greatest call. He's like, look, he's like, Tarek, I told you, I really thought it was less than 10%, less than 1%. But man, like I've been thinking like, you know, I think it's delusional people like you that make this sort of change happen, you know? And like, and then, you know, he asked like, I want us to be the first. I wanna try to be like first to market. We'll be ready to trade us so that we do the first trade.

Wow, nice.

And then we ended up doing like this really nice like, uh, plaque for, for, uh, I think he has it on his desk about like, uh, the first trade that ever happens on the—

oh, that's cool—

on a legal action market.

Yeah. So are they still one of the big market makers on the platform?

They, they are. Yeah, they're, they're like a mean— like a meaningful part. Uh, they're great. Um, and they've been supporting a lot of the different markets now, sports and some of the other. Um, but they made the bet before. Yeah, yeah, they launched before. It's, it's a good question because they, they, they, they kind of wanted to be part of the making it happen rather than just sort of like showing up when it happens. Yeah.

Yeah. Okay. Fast forward 6 months, we get the election. You guys were, I remember you guys were late to the election market.

Very late. Yeah.

Yeah. Why, why was that? Regulatory?

I mean, like the commitment, right?

Yeah.

So it, I mean, it was hard because people like, I, I, I think the, the story of Cash App sometimes is a little bit misunderstood. Um, in terms of sort of this legal regulated— so the problem with being a regulated exchange, it comes with the ability to take this thing mainstream and like actually build it, but it comes with a lot of responsibility. There was always this burden on our shoulders that if we do something, anything that we do that can go bad will actually hit the industry pretty hard. And so for us, it's like if we listed that market without the approval, that would make these markets illegal forever, basically.

Yeah. Yeah.

So we were like, we cannot do like, we just can't. Yeah.

But take me like inside the company then, because you must have been watching Polymarket, obviously.

Yeah.

Who had taken a different strategy and they had the markets. And I'm sure you've got both investors and employees being like, Tark, man.

I mean, our customers were leaving the market.

Yeah.

They were all like, we were losing. A lot of our customers were going over to Poly and Poly had a good product and it was ripping and they did a great job at marketing. And we talked about it with the investors a lot and they were like, man, like, what do you, like, why, like, you know, what is happening basically? And like, how is this sort of allowed? And like, how would you make this? And we were like, what we sort of, we were adamant. We were like, we gotta legalize it. And if I don't do this, we will lose the court battle, which means these are gonna be illegal for the rest of history. And if we lose that court battle, prediction markets are never gonna be big. Doesn't matter. Like, both of us will have a great year, but this is not going to be the way to make prediction markets big long term. And it's a bit like the story of crypto.

Yeah.

You know, like, I think Coinbase is often in a very difficult spot because they do something, they will hurt crypto long term, and they always kind of take this sort of approach where like, what is the right thing to do long-term for the community, even if we trade off the short-term. And look, when we did get it, it worked.

Yeah.

Right? Like we're number one on the App Store within like a week or two.

Yeah. Yeah. I was looking at your guys' user numbers. I think your adoption right now is faster than any company outside of, outside of the AI business.

Yeah.

Like you can't compete with ChatGPT and stuff like that. But I think you guys are one of the fastest, definitely the fastest financial app. Maybe let's take it, let's, let's go into today, like current state of the business snapshot. Um, I don't know how much you share publicly, but like users, volumes, all that, all that kind of stuff.

So we are, we are shocked by how large we've gotten. Yeah. I was talking yesterday on the SEC CFTC roundtable and I revealed that like we're now at $40 billion of annualized volume. You're $40 billion of annualized volume. So we're by far the largest today.

Like the, what, what's Poly?

I honestly don't know.

Okay. But you guys just passed PolyMarket.

Yeah, we're a bit, I mean, we have been bigger. I think we have been bigger for some time because Poly has a bit of the dYdX like effect where there's like some like farming, farming, right? Airdrop farming. And that's okay. Like that's, I think, fine and it helps foster the ecosystem. But like we think of it as like, what is the economic trading? What's the one that you can like charge fees on, which is the way to build this thing into a long-term business. And if you look at that, like we, we've have been larger, larger for, for a time, for, for a while. I mean, now if you account even for the sort of that, that way of accounting volume, we're even bigger. Um, but, uh, I mean, I think we're also like a number of customers, like, you know, we really have mainstream adoption. Like when you walk around in, in a variety of circles, like people are using Kalshi. Like people are sending me you know, pictures from the US Open where people had their app and like, you know, a bunch of people were using Kalshi. I got like 4 or 5 different pictures. Uh, uh, I had a friend actually ping me who, Penny Egg Schmidt, was, was using Kalshi while watching.

Oh, nice.

Yeah, yeah. So, uh, and then Terry Duffy yesterday said, you know, I saw the Duffy.

Yeah, yeah.

Uh, we go a long way, you know, 4 or 5 years ago, and I was like, Terry is like, doesn't believe in these markets. Now he's excited about them.

So, yeah, yeah. Um, okay, so you've got 40 billion annualized volume. I mean, you— how many markets do you guys have now?

So we— it was— it's crazy. Now we have, I think, around 3,000, 2,000 to 3,000.

Because the last year around this time you had what, 60 or 70, right? Yeah, yeah, yeah.

Because we didn't have—

you're up from 80 markets to 2,000 markets.

The government wouldn't let us do anything, and then we didn't have a clearinghouse. And then the election win kind of opened up kind of like a whole suite of markets. And it feel— this year was the first year we felt like we can now execute. Actually, the election month, our execution was also pretty— because if you look at that slope, you know that on the election day, we did the most volume out of any prediction market. So the slope was super fast when we got the opportunity to kind of really compete on a level playing field. And this year, I think we really kind of got unleashed, I think, this year.

How much volume in September alone? $2 or $3 billion or something?

I think we're gonna— I need to check the number. So I'm a bit superstitious. I don't check the numbers until way after. Yeah, but like, I think we're gonna— I think we're around $3 billion this month.

3. Okay. Do you know what percentage of that comes from sports?

It ebbs and flows, but right now, I mean, obviously it's football season, so there's a lot. Yeah. Yeah. So I think, I'm not sure it's, it's right now it's around 80 to 90.

80 to 90% of the volume is sports.

Yeah. But I think like, well, when the mayor race is gonna hit, that's gonna go much faster. So, but it's, it's path dependent because now we're investing quite a bit in the experience in sports and like scaling.

But you look, I mean, people have, when all of my couchy bets right now are politics.

Politics, right? Like the, the, what last year in the election, people were like, well, you're 90% elections, what are you gonna do after? And like, and the point with these markets is like, okay, what is the steady state in 2 years? It's like, it's just gonna depend on what's in the news and what people are talking about. Right now, a lot of people are talking about football. It's just huge. But I think culture is gonna be a huge category. It's actually the fastest growing.

Is that what does the most volume is kind of whatever is trending on Twitter or Instagram or TikTok?

At the time, yeah. Yeah.

Yeah, so like the trending societal thing is—

it's just that sports has a lot of markets, so we have— we need time to scale the operations to have as many political markets, as much liquidity in politics. Same with culture, same with all these different things.

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Which one?

He was talking about the impact of— I think it was a big, beautiful bill, basically, of taxes on FanDuel and DraftKings and how it's actually not profitable for whales, for whales in sports betting anymore. But, but, but if they move over to prediction markets and make those same bets, it is, it is still profitable for them because of how they're changing the taxes.

Yeah.

I don't know if you followed that, but how do you think about compete— like, let's just talk more about fantasy sports and sports and like that market. How do you think about competing with the FanDuel and DraftKings?

Yeah, I mean, on this specific— Matt called me before releasing that piece and he was telling me like, hey, a bunch of people think that like you were behind this, this bill thing. And like, and it's just funny how that would have been savvy.

That would—

well, I mean, so, well, first of all, I think this is not a very good bill. Change the tax code. Like I don't think it's a good bill at all. I think this is kind of, in my view, anti-competitive and I don't think it should exist. But it's funny, like this just kind of takes like the conspiracy theories that happen on like, you know, behind the scenes. I didn't know about it. I only knew about it because people started saying that like I was involved and then I read into it. I don't think it's a very smart bill. I think they should, you should probably just not have that in there. It is obviously probably net positive for us, but like I think it's gonna get repealed. I hope it does. But I think this is a bit, there's like business model disruption in here where like the prediction market model is superior in my view.

Why is that?

Because you, my mental model for it is OTC versus on exchange. You know? So, and by the way, this is how we started Cashy. Like, you know, people were coming asking for us for over-the-counter trades on whether Brexit is gonna happen or not. It's like, how about we make it on exchange? And when something is over-the-counter, you have one counterparty. So one person that's pricing, it's very opaque and you don't get to sort of know, like you don't have transparency. You don't know what the prior price is. On financial markets, you have a price. Yeah.

Yeah.

You have a moving price the whole time. So you can see you have much more transparency on pricing. And then the other thing is you can price improve. There's competitive bidding for your flow.

Yeah. Like I'm looking at the Rams versus Niners game and you can see the whole chart of the markets moving. Which is very nice.

Yeah. And I think that's important because like, when you go to like a sportsbook, they set the odds and you kind of like are betting against the house and you like, you know, there's a little bit of an inherent conflict of interest, whereas on prediction markets, like people are trading against each other.

Right.

And so it's a bit more of a level playing field. It's a fair game. You know, you want to be a taker and like take whatever's available you can. And if you don't like the price, you can actually, add your own price and take at the price you want.

Yeah. What do you think will be bigger in 5 years on Kalshi, sports or like what I'd roughly call traditional markets?

I think sports will be like 20%, 25% of the business. And then there's like going to be—

So you think it'll come down from 80 to 90 down to like 25?

Right now it's very high, but like in the summer it was like less than, you know, it was like way less than that.

Yeah, true.

So it just fluctuates a lot. I mean, like next year, I mean, obviously the World Cup is going to be very big, but like there's the midterms that's going to be huge and like it's just going to fluctuate. But I think there's— khalshi means everything in Arabic, right? Like we are building the everything exchange, the exchange where you're going to be able to resolve any qualitative difference of opinions with a trade. And so that TAM is going to be very large long-term.

Yeah. Well, you eventually— I saw the hearing with SEC and CFTC and you're next to Adena from NASDAQ and CME and a bunch of the big— I think it was Arjun from Kraken. And, you know, I saw a picture on Twitter and I was like, oh, that's interesting. It made me realize eventually you guys will— you'll, you'll be an everything exchange. So you'll, you'll be able to trade tokens and stocks and everything on the platform. Is that, is that the end goal?

I think that like, because you're—

I was like, and the other qualifier to this question is you're not just competing against Polymarket and other prediction markets platforms, you're competing against Coinbase and Nasdaq.

And, you know, I've always been consistent about this. I've never thought that the kind of direct, even back in the day, like, you know, I've never thought that the direct competition was, was, uh, I mean, look, I think Poly is direct competitor, but like, I've always thought that the, like, the competition at the end of the day is like, like the asset classes themselves. Like, how do we make prediction markets? And over time, Kalshi, which is gonna incorporate multiple asset classes, just like a bigger piece of the pie. And we have a long way to go, but, but I agree with you. I, I think all of these will intersect over time. because trading is trading. Like, you know, we, we, when you like, is trading on a stock that fundamentally different from trading on politics? Like, right, not really. If they're both very liquid, it's kind of the same thing.

Yeah. Um, let's talk like crypto nativity, which has been a conversation on Twitter recently. Like, how do you think about Kalshi being a crypto company or not a crypto company?

So look, I mean, we're not a crypto native company in, in like, um, in a, in a sort of like crypto Twitter sense, right? Like, I think that And you know, I think there's a lot of debate around like the, around that piece and I, and I find a little bit, and we're not claiming to be, I think that's, that's totally fine. It's like, the one funny piece is like actually when you first started in, in YC, when Michael said that, we're like, well, how, what if we did it on the blockchain? And then realized like, but the problem still exists, which is like we gotta get regulated and blockchain's gonna make it harder actually. And, and that's at that specific point in time. Um, the way I think about it is, is the way that a lot of, uh, companies like Robinhood and Stripe are thinking about it, which is like, look, if you believe in AI, if you really believe in AI, in 5 years there's— is not going to be AI companies and non-AI companies. There's going to be winners and losers. There's going to be like companies that have adopted AI to improve the, the product experience and companies that didn't, which are gonna be left behind. And I think crypto is the same thing. Like if you really believe in crypto, like if you really believe in the infrastructure layer and what the blockchain provides and what this sort of like developer-led ecosystem brings to the table, it has to be embedded in our financial system in ways that are like kind of like seamless. You know, the, the average person doesn't really care if you're using Python or Rust on the backend. They just don't, like, they don't even know what that is. Um, this— and I see that, I see it evolving that way, right? And, and for us, it's the first time, I think, you know, first we were kind of like literally fighting for the right to legalize the asset, uh, to prediction markets. Then we're fighting for a right to exist. Then we're finding the right to grow. And then now we're finally, you know, fighting to thrive, like, like actually growing mode. And I think it's the first time I feel like there's openness to basically bring uh, uh, bring more of crypto and, and embed them into financial services. Like, and there's so many examples. Like, we've been talking to CFTC about, for example, instead of holding dollars and fiat at the clearinghouse, can we hold USDC and other stablecoins, right? And why? Because it makes perfect sense. Like, you know, right now we accept the USDC and we're forced by the government to flip it to US dollars. Why? There's no point in that. And it seems like CFTC is kind of open to enabling us to do this. But over time, like, I see kind of a seamless integration where like, there's going to be a very— there's obviously going to be an on-chain flavor to this. And, you know, for Crypto Twitter and like the crypto native people, there'll be like an experience that they're used to where they don't have to go to kind of like a trad fi platform to trade. They can trade on the— whether the front ends and UIs and that they're used to, to trade like prediction markets on Kalshi. And then for mainstream people, they just won't even know that their payments are so much better now because on the back, you know, we have Crypto Rails.

Will you move Kalshi onto Crypto Rails? Like, will you ever like settle trades on Solana or Ethereum or something like that?

I think over time, especially as sort of like, I don't see it as binary people because like, look, when I think about hyper liquid, which in my view is in, in recent history, I, I would argue that they're the most successful sort of, I would say, quote unquote, crypto-native company.

Totally.

It's kind of somewhat centralized, right? Like, like, you know, the, the core infra is actually— the reason it works so well is that there's a centralized database at the core, and then they print transactions on-chain. And so they got the best of both worlds, which is like, you know, a reasonably centralized company, but like, you have the, you have the transparency that comes out of printing transactions on chain. You enable the— you enable obviously like fast in and out, like you have access to liquidity that's sitting on chain. And then 3, they have a very thriving developer ecosystem, which is like they have an open ecosystem where people can build on top. Yeah, all these things can be achieved without this sort of strong binary dichotomy of like, are you on-chain or are you off-chain?

Yeah, it— to me it comes down to actually just KYC, which is like antithetical kind of to your regulated. So like for me, like, uh, as I'm a user of Kalshi, Right. And I've got— I, the way I think I, the way I got money on the platform was I think through MoonPay, like a MoonPay integration.

Yeah.

Something like that. Cause I wanted to go through the whole user flow or something. But for me, I'd way rather just connect my Phantom wallet.

And well, that, that will work. You're on. So, so, so you will be.

Oh, you are.

Oh yeah. We have a question. I mean, even by the way, Phantom has a question and this is sort of, so the KYC question is a very, very good one. Right. Like, and we think about this a lot.

I'm fine KYCing, but I just want to be able to connect. Yeah. But I just want to be able to connect my wallet.

No, that, that's going to be fine. So the wallet integrations are all going to be fine. I think the core question. So My view is like everything is going to be largely the same. Then there is one core question, which is the KYC question. And to be super honest, I don't really have the answer to that yet. And because it's like, it's just sort of depends on like kind of where this administration takes us and like where the government goes. And look, I see the arguments for both sides, right? Like I think a fully permissionless experience, which by the way, may be enabled on Kashi. I think we may have something actually coming pretty soon, much sooner than people expect, is important because some people like, you know, wanna be anonymous and they wanna be able to like, you know, deal with their money without having a centralized company, you know, handle that for them. Yeah. And I totally see it. And on the other side, I think, you know, KYC, there are reasons for why KYC exists. Look, and it's painful. We've made it actually very smooth now. It's very easy. Now you sometimes you can just give us your name and we'll figure out everything on the back and you don't have to worry much. Um, but you know, the history of KYC— I've been reading about this a little bit, like, why do— why, why is KYC so important for the federal government? It's like, when, when there was no KYC, a lot of bad stuff happened. Like, there was a lot of fraud and money laundering, all these different things. And so, like, could we come up to a reasonable middle ground where we can have an experience that's seamless and permissionless without, you know, like, Iranians moving money on the exchange without us knowing, right? And, and, and that's I feel confident that we're gonna be able to get there. It's gonna take a little bit more time.

I will say the KYC tools are getting so good now.

They're so good now.

They're so fast. Let's—

we need better, the always, we need better fingerprinting for on-chain presence. Yeah.

Or eyeball scanning.

But I'm talking about something simpler, which is not even eyeball, like I'm talking about something like you can build a profile of a person that's been on-chain that this is like a real legitimate trader that just wants to be anonymous versus like this is Iran.

That's a good— that is a good idea. Yeah.

So if anybody wants to build this, will be a very, very early adopter.

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Yeah.

Um, it's interesting. I was thinking about, cause you know, we've, we've had our conversations and stuff like that. And I was thinking about like the strategy from your point of view. Um, on one hand you get more distribution. I saw Robinhood has had a ton of success already out of the gate and you share the revenue. I don't know what the revenue split is, but you share, you share the revenue. The downside is you don't own the relationship with the customer and the user. Right. So how do you think about that trade-off as a founder?

It's a tricky balance, but like, Look, I think that, um, and this we discussed a lot, like if you look, so NASDAQ, New York Stock Exchange, CME, CBOE, um, uh, they're all what we call intermediated exchanges. They don't have, like, when you want to buy a share of Apple, where do you go? You don't go to New York Stock Exchange, right?

Right. Or you go to a brokerage that sits on a brokerage that then wraps the trade.

And that's the usual go-to-market strategy for exchanges usually.

Oh, I see.

That's actually the more normal.

That's the, yeah.

The weird part about Kalshi is that we have a kalshi.com. That was always weird with the CFTC. It's like, 'cause a little bit of a weird situation there.

Right.

And we were always, always believe in the broker strategy. That's also part of why we really want to be regulated because like, if you want this to be mainstream, this has to exist in the large retail brokerages long term where, you know, like if you combine the large, like the, the, you know, 10 largest brokerages in the US, you're talking about 200 250 million accounts. That's the sort of thing that you're, you're not gonna get out of like, yeah, yeah.

You know, it takes a little while to get those too.

It's gonna take a little bit, a little bit of time. And like, this is the way that you make this asset class truly mainstream. You have to put it on the brokerages and, and it's working really, really well. But we've been working on this for 3 years now.

Yeah. Yeah. I was looking at Vlad, let me just pull this up. Vlad tweeted yesterday, he's like, Robinhood prediction markets just crossed 4 billion event contracts traded all time. With over $2 billion in Q3 alone. It's pretty phenomenal. Um, so that, so that then routes to Kalshi and you guys share the revenue?

Yeah, I mean, we, we, we, uh, we, we're like the— it's a bit like how the, you know, if you route again, like a share of Apple being bought, you route it to the exchange. And so it's a very similar setup, right? I mean, yeah, obviously Rob— I mean, you know, Robin has done an incredible job at like— I mean, they move so fast as a company, it's like amazing. Um, it's amazing to see. And like, you know, their offering has gotten much better really quickly. I mean, I encourage people to check it out if you have a Robinhood account, or if you don't, like, it's really amazing how fast sort of the offering has gotten better. And now they have more markets and they're diversifying their sports, but there's also like economics, some politics, some culture. So it's really cool to see how that integration has evolved.

How do you think about media companies?

That's very important.

Yeah.

And we're talking, we have a few things coming, but like, That's a great question. Uh, I, I mean, we, you and I talked about this a lot, right? Like the, the, the, you know, is there a word like where like, you know, CNN and Fox and Blockworks and like, you know, all these like, you know, important media publications over time are sort of like, um, you know, they have their sort of commentary on what's happening in the world and what's going to happen, but it's sort of like. Grounded and related and set in a markets-based environment. So, and look, Bloomberg and CNBC have done a good job to about having a commentary plus financial markets integration.

Totally.

But man, prediction markets plus news is an even cleaner integration because now for every single piece of content, everything that you're talking about, there is a market.

Yeah.

You don't have to tie it back indirectly to some sort of stock. Now you can just talk about the direct, direct thing itself. So I think that will be a very big part of this being embedded in culture, going mainstream. Um, and in some ways, honestly, making the news better, like, which is a part of the mission, right? Like, the whole point here is like, maybe CNN and Fox don't need to be polar opposites every single issue. Maybe, maybe climate change is not 0% real or 100% real. Maybe it's like 40% chance that next year's gonna be a little bit warmer, right?

Like, so, so if you were Mark Thompson at CNN or, um, you know, Lachlan Murdoch at Fox or something, would you Would you embed a Kalshi? What should they do?

I mean, absolutely. First, start with the reporting. Make sure that there's all the tools for reporters to basically use if they want to. And we have strong, I mean, they're using them already very organically, right? Like, I mean, Harry Enten at CNN uses Kalshi pretty much weekly now.

Yeah.

Which is amazing. He's one of the main, he might be the main political forecaster on the Democratic side and he's using, and to be clear, like the Democrats are the most skeptical of prediction markets last year, right? And now they're embracing them.

Yeah.

Which is amazing to see. And, and I think it's kind of being a leader on that front. And like CNBC is integrating more prediction markets, Fox is also using the, the predictions. So reporting, and then over time, yeah, that, that evolves naturally into kind of like embeddable widgets, you know, um, maybe one day trade even from their own platforms, you know, the same way that we've set it up with some of the brokerages.

Yeah, you think that'll happen?

I don't see—

do you think people want to go to CNN to trade though?

It's such a different This is, this is a user, but think about it this way, like, do you prefer going to CNN where you can, uh, you know, engage with the content and maybe trade on it versus go to CNN where you can engage with content and then be fed a bunch of ads? You don't have to trade, but you can if you want to.

I, I mean, my candidate is just no one will be going to CNN in a couple years, but that's a separate, that's a separate conversation.

I think that's possible. And then we need to figure out, okay, like, is there another medium for this to basically happen? And I actually somewhat agree with you. Especially with AI, like who knows what's gonna happen. Yeah. There, there's some, so I think voice is becoming increasingly more important and like, like audio and video is, is much more important. Yeah. I mean, I, we're gonna, we're gonna need a little, like we're gonna need surface areas that are different than the iPhone to let people interface with this sort of content better.

Let's talk video because we, that is, so I'm, I'm very bearish on websites as a, as a platform. Very bullish on, on, on video and like live streaming and things like that. You guys have, Had some really nice hires, John Wang, obviously, and some, some, some other people. How do you think about just distribution and like audience building? And you guys are pulling your— I'm trying to follow what you're doing with this like ecosystem strategy, like to talk. Yeah. Tell me about that strategy.

So, so I'll talk first about hiring strategy because that's—

yeah.

So we, we are very, I think, and honestly this is kind of a falsifiable statement. Like I think we, we, we have prob— we have done an incredible job at building talent density in the company. Like, we are very good, um, not because you're like kind of geniuses, like we spend so much time focusing on recruiting and recruiting great people. And the more great people you recruit, the more great people want to join the company. That's the kind of the key thing about recruiting is like people want to join a company because they want to work with the best people. It's not comp, it's not, you know, that's by far the kind of most important thing. And obviously the mission and vision needs to sort of like align be exciting. You want to work on something that you want to kind of die on a hill for. And I think that's the type of mission that is easy to die on a hill for, in my opinion. And we've applied this to engineering, to product, et cetera. And when it comes to crypto, like we spent a lot of time and very opportunistic, like we don't rush, we take a long time to hire. It's actually pretty hard to get recruited into Galaxy. And like I spent like a month, you know, talking to John, asking for docs. He was like writing a bunch of thoughts, like, I would give him some stuff. I see kind of his thinking. He's come back and like he spent a lot of time with Matt Huang from Paradigm, with Casamani from Multicoin. He even spent some time from Alfred from Sequoia and really thinking like, what do you think? And we had a lot of other options which are like more like veterans in the crypto industry, like older, have run big orgs, et cetera. And I think John is like 23 or something. And yeah, and it's like the same way that we did this, you know, we took a bet on Lior like 5 years ago and like he was like, I think 20 or something. Like we're like, we're gonna take a bet here as well because that's how we do. We take bets on young people that grow with us. They grow within the culture and they become part of the team and then, you know, they embody the culture over time rather than bringing a ladder higher. And then Ultra, ICO Beast, all these guys are like, have been really amazing. Ultra did this sort of South Park image generator a week ago. It was like incredible. Did you see it?

Yeah, yeah, I did.

It was crazy. Like thousands of people were like changing their profile pics and stuff.

Yeah, it was great. Maybe a few more things and we can start to wrap. I know you've got to— I know we got to wrap this up in a little bit. John, speaking of John, John wrote a piece about perps.

Yeah.

And I'm curious how you think about like perps and maybe more broadly, just like leverage, leverage on prediction markets.

It's, you know, Let me answer the first question. I mean, look, I, I, there's a lot of debates between perps and futures. Like, personally, I think perps are a better mechanism than futures. Yeah, like, if you want to close, you can close. If you don't want to close, you don't have to close. And I like the upside that perps bring. Um, I, I understand why for traditional markets perps are, are challenging. Like, if you're— it is true, like, yesterday Terry Duffy from CME was talking about that. It is actually a good point. Like, if you trade in, like, interest rate swaps or grain futures, like Perps may not be very good for that market structure because people do actually want to have their weekend. It is not as much of a global market. It's a market that follows the banking schedule or like the farmer schedule. And like, these people want to be— want to have an end of day, they want to have physical delivery. Like, that's how they kind of operate. So I don't think it's a one— I really don't think it's a one-size-fits-all. But when you think about products are digital first, like, like really sort of like either very retail heavy or like, like obviously crypto, the traditional futures structure doesn't really fit. Yeah. And that's why perps have been so much more successful.

Yeah.

Way more successful. So I'm very bullish on perps. Very, very bullish. Uh, leverage on prediction markets, it's a, it's a very exciting thought and idea. And we've been thinking about this a lot. It needs to be done well because lever— when you add leverage to a system, this is when things can get really dangerous. Right? Like this is when you can be in a situation where there's a hole and if it wasn't properly managed, things can go bad. And we're going to, I think if we do it, we're going to do it right. Yeah.

Yeah. Like how should this work? So I like, I'm looking at the New York City mayor election. So Momdani's 84%. And let's say I want to bet on that, but I was like, all right, well, I'm not trying to make like 20% here on Momdani. I'm trying to make like, I don't know, you want a 3, 4x that? Yeah. I want to 5x my Momdani bet or something, but I'm willing to lever up. How should that work? Or can that even work?

It can, but it's tricky.

Yeah.

Because think about it like—

It's tough because it's a binary outcome, right? So how do you—

Because the odds, it's more like the odds can move, can shift very drastic. So imagine you margin this thing like 50%, right? So instead of putting $84, you're putting $40.

Oh yeah.

Right? And we can eat from your $40 and close you. But the problem is that that $84 can go to $10 overnight. Now we are in the hole with $30.

Yeah.

So it's, it's a very complicated problem. It's not unsolvable, but I think it's gonna take some time.

Will you, is that a thing you wanna solve now or it's like punt that until, just punt that out?

I think it depends on the market.

Yeah.

Uh, we'll see. I mean, it's, it's a TBD, but, uh, um, I mean, there's also a difference between retail and like, like a Citadel, right? Like a Citadel, you can always call them back and say, hey, you owe us another 30.

Yeah.

Retail, tough to do. It's a bit hard to, you know, it's like, you know, yeah, yeah.

Uh, they're like 30, I, I bankrupt my guy. Um, let's talk Polymarket for a quick sec. They, um, people have described it as like the most intense competition behind the scenes right now is Polymarket versus Kalshi.

Behind the scenes, I feel like it's, it's more intense.

I would say, I would say behind the scenes for the last year and now it is becoming more public for how intense the competition is. And it makes sense. Like, I mean, you guys are going after such a large market opportunity. What is the, um, what is your relationship with Shane and what is your, what are your thoughts on Polymarket as a business?

So first, I think it's actually more intense in the scenes than behind the scenes. I, I think a lot of things end up like that, you know. It's like I was thinking a lot, like, do people in the boxing, like, the people that end up boxing, like, when they, when they, you know, when they're not on camera, like, are they actually, you know, like, you know, is it the same? Like, you know, are they actually insulting each other or like And look, I think like, by my general view, I, um, I've been thinking about this, uh, recently. Like, man, I think that like in 5 to 10 years, we're probably both gonna look back at this and think that like we're kind of gonna be grateful for this dynamic. I think it's a bit like, you know, when Tom Brady, um, talked about Manning and like he would talk a lot about like At the time, it was so intense. But in retrospect, both of them achieved just significantly greater heights because they existed. It's a bit like Messi and Ronaldo. Would they have— I don't know. I don't know if they would have gone in that level. And part of me thinks that some of that is happening. This sort of rivalry actually, it pushes you to your limits. It pushes you. We do something and they have to kind of one-up us. And they do something and we have to one-up them. And that sort of thing, the net result is we have prediction markets are legal now, we have way more mainstream awareness, we have way more markets, we have way more liquidity, we have way more volume. So if you're a customer and you're sitting around, you're like, this is great. You know, like these two gladiators in the arena are like making this way better, way bigger, way more fun way. And so in some ways, like, I think it's interesting. Like, I, you know, I think it's a net good overall. There are some parts I think are like, are sort of extractive. Like, I think the higher-level sort of thing, I think this rivalry is pretty good. I think it's going to make predictions. I think it's going to help both of us make prediction markets as large of an asset class as it can be, which is amazing. I think there are some negative, I would say there are some sort of toxic aspects to this rivalry that we've completely leaned out of. We obviously made the mistake with the Antonio Brown tweet. In last year. And it wasn't like a top-down orchestrated, you know, the whole thing when the FBI raid happened, there was a little bit of controversy. I don't wanna get into it. And so the team got really annoyed by what happened, that what Poly did. And so they basically made, wanted to make these memes. We made it extremely clear, like, don't ever do this again. This was bad. It doesn't reflect what we wanna do. It kind of like makes us look bad. It makes everybody look bad. And I think now there's also some of it that's happening that we're like on the other side, there's a lot of, I think there's a lot of FUD, like there's, you know, like, sometimes like fake, like there's a lot of like fake, like yesterday there was like a fake image being circulated by a Kelsey DM being sent to somebody and it's like just like not even true. And I hope that we stop all like the not true, like the not real paying influencers to fight each other like that. I mean, we've never done it since Antonio Brown, but I hope the other side stops doing it. And I, right now we're just really focused on product. And if you see the product velocity at this point, um, which is kind of super locked in. Yeah. And I think they will do the same over time. And I think the net winner is going to be the consumer. Yeah.

Why, why do they, why have they been able historically to raise at higher valuations than you guys? Because you guys raised around the similar time.

Well, the CW raised at higher, I don't, I don't think valuations matter at all. Like, you know, there's a lot of stuff behind the scenes that happened with valuations. So the headline number is very different from the actual number in general. And I don't know much about the But like, look, I mean, I think, I don't think that's the most important thing, honestly. Like, valuation I think is relevant, but even then, like today we're bigger, we're bigger, we're more mainstream. I think we're more integrated in the enterprise side. We obviously were monetized. I mean, we're the fastest growing company in America today, I think, aside from AI.

Yeah, yeah, I think so too.

And the difference is AI, there's negative gross profit, so we don't, we'll see, they're not actually, you know, No, they're negative unit economics. Whereas I think we, there's a prediction market that's real now. Like it's amazing to me.

Yeah, totally. So I don't think that matters. Do you think, have you been thinking about IPO at all? The IPO market is very open.

We've been pitched very heavy recently because, you know, we are.

It'd be good for you guys to be a publicly traded company.

What's more important, you know, and we think about this a lot, like whether it's an IPO or like a token or other, like, like what's more important is, is building a great company, like a truly generational company, than when you go IPO and how. Like, I always think about DoorDash, like Tony never cared about anything. Yeah, he just cared about building the single greatest company of all time. And he— and just to be clear, the reason I think DoorDash is so great they have the shittiest market of all time.

Yeah, Tony's an amazing operator.

Like, he has the shitty— like, it's the shittiest market of all time, and he built a $100 billion company out of it. Like, you know, and like, people forget, like, you know, Uber was outspending them 20 to 1, um, and giving incentives and like lower fees and like all this different stuff. And Tony was like, we're not lowering our fees, we're going to focus on making this experience better for, for our customers. Until we have like— and then remember he had the metric where he's like, once I have 2x the retention of Uber Eats, I will drive the marketing. So his market share went from like, I think, 5-7% all the way to 55% in 9 months.

That's crazy.

Yeah, right. And so I'm answering— it's a long-winded way to say like, I just want to build a great company that will sustain, like, that will make prediction markets big and sustainable long term. And if we do, I think, yeah, everybody's gonna be happy. It doesn't really matter when we go public, how, you know, I personally don't care about like our short-term personal gains for me or, and our employees are all long-term aligned, same with our investors.

Yeah. Maybe just as we wrap this up from a, I guess just like founder to founder perspective, one thing I'd be curious about is, you know, you had like 4 or 5 years of like, yeah, things are going well. Like you're raising from Sequoia and you're like, company's growing. But the last year is just parabolic growth. Like, yeah, that's just like truly insane growth. How has that just been from like a, I don't know, like what do your days look like? How's that been from like a mental perspective? Like how is it? I imagine it'd be tough to like prioritize inside of the company when so many things are going well. Like how, just talk to me about that.

I think, um, I'll say a few things, but like, um, you know, 2021 was like a crazy period. We raised a bunch of money. It was, it was exciting. And then '22, '23 hit and it was horrible. And what I realized is like, it's very easy to get pretty arrogant in good times and it's very easy to really beat yourself bad in bad times. But the reality is like, it's a cycle. Yeah. You know, and it's the same with Robinhood and Coinbase. It's like, you know, and I asked Vlad the same question and he has this kind of perspective. He's like, well, it goes up, it goes down. As long as you go up over time, but like, you know, Vlad is a complete killer. He's really like that, you know? He like, you know, he speaks in very simple terms, but he just like absolutely kills on a daily basis. But like, I think that like the first up and down, I think I overshot more on the up and then, you know, undershot harder in the down. Now I think the one thing that we've done really well as a company is we really had this philosophy of the score takes care of itself. Just keep doing what you're doing, keep training, keep doing the reps. And then that's why I don't look at the volume. Like I, you know, it's going great now. At some point I'm gonna get, it's gonna get harder and then it's gonna go great again. We just gotta keep focusing on the process. And I try not to kind of like, my life hasn't changed basically. I live in the same apartment. I like, you know, I do the same things. Like I don't, I haven't really changed much. Yeah. I just love building this. Like I really do. I don't wanna do anything else. I just wanna work all, you know, I just wanna work all the time. Like I love doing it so much. The one thing I'll say is like, and I have a lot of respect for people like, for people like you that have conviction. Like you have this sort of like unusual view, like it's somewhat of a contrarian view and you kind of have the balls to stick with it. But the interesting, so the hard part is not the work day to day. The hard part is that psychological thing of like, am I right?

Mm-hmm.

And like, how long should I do this for?

Yeah.

Yeah. Before I'm getting the rewards and like, Oh, well, my other friends are doing better. And oh, well, there's this guy in AI who's being paid $200 million by Zuck to join his company. And that's the hard part. The psychological part is the uncertainty. It's not the work. It's like, I don't know if it's going to work. And I don't know if it's going to— like, I'm ever going to make it to that nirvana. But the interesting thing is like— and this is why I have respect for characters like you, because these types of characters are like, they kind of will it to existence over time. It just happens. It, in some ways, if you keep going, inevitably the probability of that happening— it's like what Jeff was saying, it's like less than 1%. In some ways he was wrong. The probability is actually closer to 100% because he's going to keep going until it happens.

Just keep doing it.

Yeah, right? Like, and like, and, uh, it genuinely works. So maybe like the advice to founders there is like, like, or whatever, it's like, if if you have a contrarian view that's grounded, like that's, you know, you're not just saying stuff out of thin air, you actually thought about it a lot and you really believe it at your core, like just the sheer, like just continuing, just keep going actually works.

Yeah.

Isn't that amazing? Like it's, you know, it's like amazing. It's an amazing thought because like all you have to do is keep going, you know?

Yeah. Yeah. I agree. Um, yeah, it's, it's very cool to hear your journey, man. We've had some dark, I mean, These days, actually, right before this podcast, we just record quarter as of— that's amazing— an hour ago. So biggest, biggest quarter in Blockworks history. We're feeling good, but we've had times where it's like, yeah, just the dog days and just, yeah, you think, you think it can't go on, but yeah, you just got to keep putting one foot in front of the other.

Yeah. I mean, you don't know. So.

Yeah, exactly. So. All right, my friend. Well, this is great. Thanks for the time.

That's right.

That's on everything.

And you're welcome.