Jill Weisenthal (2:43)

Why do you think Prediction markets are having this moment now after they've been around for decades, literally. Why now?

Tariq Mansour (2:50)

Yeah, I mean, I think there's like path dependence to these things. Right. Like, it's not sort of like, I'm a strong believer that sort of like, you know, in history you have to have a few agents that sort of like push and, you know, push the boundary of certain things and somebody's got to do it type thing. But my view on this, and that's why we started the company, is the fundamentals are there. Like, this should be a very large market and we could talk a little bit about the history, but when we first started the company, this idea of sort of like a financial market that prices, questions about the future sort of, we were very drawn to it because one, if you could build such a financial market, it could be the largest of them all because the largest number of people will care. And the number two is, could be the most important because, yes, pricing the share of Tesla is important, but pricing whether Brexit is going to happen or Trump's going to win an election or what's the next natural disaster going to be, I think that's at least as important, if not more. At least from our perspective. I mean, when I looked at the history and you were chatting a little about the history, like the elephant in the room was regulatory. It was. I mean, there's a very simple kind of like first order factor here. Well, it was illegal. Like, you know, that, that, that's pretty good reason for. Yeah, I mean, it's a pretty good reason for something not to, you know, generally kind of go mainstream and exist. And the legality has been sort of the thing that has weighed on all prior prediction markets. I don't know if you ever encountered in trade.

Jill Weisenthal (4:09)

Yeah, yeah, I traded on there.

Tariq Mansour (4:11)

Well, you know, so here you go. Right. I mean, Intrade was, you know, how that story kind of ended. How familiar are you?

Jill Weisenthal (4:18)

I don't know how to end it.

Tariq Mansour (4:20)

So John Delaney was. This, was the sort of founder of. In trade and he was just kind of visionary. I mean, like Don in many ways. I mean, he really believed in the. You know, he was on cnbc back in 2000, sort of like talking about the forecast for the election and stuff. But he sort of ran offshore from Dublin and it was kind of a like a VPN type setup. And then the company got shut down in 2012 by the government and two weeks later, John Delaney died and he died climbing Mount Everest. And there's a kind of whole controversy of like, what happened? I mean, you know, was there some sort of causation there? But for us, when we, we got really obsessed by doing this and we realized like, actually the only way for this to go big is we gotta legalize it. Like there was no other way. And, and no matter how big the company would get, no matter how kind of how much culture there was going to be around the company, it didn't really matter because the government could shut it down and they will after a certain level of scale. And so this was sort of like we spent, you know, three years and a half when we started, after starting Kalshi, like all we did was basically regulatory work. It was like, how do we fight? Exactly. The fight was actually like more like five years and a half. Like with three years and a half to get to legalize prediction markets. And there was sort of the whole thing with the prior administration around the election market, which we were completely uncompromising on. We had to do that. And that was kind of a whole two year long process that ended without suing the government, our own regulator. And then, and then I think that lawsuit, I view it as sort of probably what the turning point is for these markets. Like this is when we won that the institution. Like this is when everything changed, I think. Yeah.

Tracy Alloway (5:52)

Would you have died if Trump hadn't won in November?

Tariq Mansour (5:55)

Hmm, no, it would have just been slower and harder. But no, not died. I mean, we didn't die under the harshest environment of all, I think. Like, like, you know, well, the first. Right. The first three years and a half was like, well, this was just not allowed. Right. And we didn't mean, we kept sort of making progress on the. All the way up until legalizing and launching. But then, yeah, the reality is like the prior government I think was as hostile as it gets. It was just not. I mean, they just didn't want it to exist. So.

Jill Weisenthal (6:22)

Well, you say that like it's really important to have a change in the regulatory landscape, that there's no way this could have taken off had this changed, had this not changed. However, there is a competitor that you can access via VPN fund with stable coins. In theory, there doesn't even need to be a company that had been operating for several years. Couldn't it have happened and could it still happen that the future of prediction markets is on chain and essentially outside of the regulatory landscape?

Tariq Mansour (6:53)

I don't necessarily think that on chain, off chain is sort of necessarily kind of an unregulated regulated like. Like on chain doesn't mean illegal Right, like, sure. So, but I think that like, but.

Jill Weisenthal (7:02)

There is a lot of volume on this entity that had all kinds of things while you.

Tariq Mansour (7:07)

Poly.

Jill Weisenthal (7:07)

I'm talking about Poly Market.

Tariq Mansour (7:09)

So it's not like we couldn't go on chain, right? It's like, this is not a very hard thing to build. Right? And actually, like, it's funny, like, the first two weeks of cash, we tried to do something on chain and realized like, well, again, it was a good way to sort of be maybe like somewhat smart about regulation, but not really because Augur was on chain also. And like, that was also sort of shut down. And there was a bunch of issues for us. We stood very firmly that for this to go mainstream, well, you should avoid a vpn, you know, but also like, how do you have this be. Legitimize the financial markets, attract the type of institutions that would trade. You have a bunch of institutional partners and now the brokers. And actually truly take this ministry. It was just no, no way to do it outside of the, like, this is the universe of financial markets. You cannot do it outside. You have to expand it. And if you expand it, then I think we have a real winner. And I think the results show like, you know, yes, Poly has a lot of volume, but like, there's not real revenue yet. There's a lot of wash. Like, it's kind of. How do you account for all this stuff? And even if you account for all of that today, we're like something like 3x bigger within a year.

Tracy Alloway (8:05)

So definitely want to talk about the brokers and the market makers. But before we do, a very basic question. But often the basic questions are the most interesting. Can you walk us through the life cycle of a binary event contract that gets created on your platform?

Tariq Mansour (8:22)

That's a good question, because that's a hard problem, right? Because in traditional markets, the life cycle is like, we have an idea like grain futures or onion futures or GPU.

Jill Weisenthal (8:35)

Don'T do onion futures.

Tariq Mansour (8:36)

Onion futures is a bad idea, but.

Tracy Alloway (8:38)

You can set up a prediction.

Jill Weisenthal (8:39)

You know what though? You can't. Actually, I do think it's a little lame that polymarket if there hasn't done onion futures. Because if you're going to like, what's the point of on chain if you're not sticking it to the man anyway?

Tariq Mansour (8:51)

If, like the onion farmers are like finally having instrument to hedge, what's the.

Jill Weisenthal (8:56)

Point of crypto if you're not using it to fight against these absurd rules?

Tariq Mansour (9:00)

I mean. Well, the onion futures rule is truly absurd. Yeah, yeah, it's like that's one of those. But I guess now it's maybe kind of funny, maybe we should just keep it. But like, or like GPU futures, I mean like the point here is like you have something where the lifetime is infinite. You list the future and the derivative and it's sort of there forever. And then you build the liquidity over time. You can take your time and takes like usually these things take time. They take years to kind of build up to market them and build liquidity. This is different, right? Like this is much more dynamic. It comes and goes. Like oftentimes the trend could be sort of like there for two to three weeks, sometimes a week, sometimes it's a day. And you have to much more, much faster. And my mental model for what this looks like is sort of like there's an idea that can be from a user, from the news, from a trend, from some tweet, then there's a listing of the market and then there's kind of like from a listing to kind of making it reasonably liquid and active. So we've gone through all kind of types of regulatory winters but the first time we listed a market it took us 18 months. That was just for listing. And because there's a lot like operations attack. These are tickers, right? Like you list them like a stock or like a like WTI crude oil. Yeah. Now we do it within 30 minutes. And so we've expanded the territory quite a bit.

Tracy Alloway (10:17)

And when you list it, does it go to the CFTC or what's the approval process?

Tariq Mansour (10:23)

There's like a self certification which basically you fight with the CFC and they kind of like generally historically is basically like if you file it and you haven't engaged with them beforehand, they usually will basically block it. They'll call you and say stop until we talk and then you do it. But now we've covered so much territory and we've built so much technology and like the operations and the regulator in the loop that like most new things that we do actually fit into a bucket that we've already done. And sometimes there are complete new things. Like right now the frontier is actually some of the SEC company related markets I think is the sort of next frontier. But we've covered so much grounds now that like most things are like of a similar flavor.

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Jill Weisenthal (12:16)

Going this whole time. You know, you talk about company related stuff, talk about hedging onion futures, maybe hedge or, sorry, hedging onion prices. Maybe you want to strip out something related to Tesla car sales. But let's talk about the business. How much of this is sports right now? How big is the gap between volume on a Sunday versus volume on a Wednesday?

Tariq Mansour (12:40)

Volume on a Sunday is very, very big. But like, it's interesting, I mean, like, I'll say a few things, like the sports side has grown. Like, I mean, I'm shocked. I'm still shocked.

Jill Weisenthal (12:50)

Yeah.

Tariq Mansour (12:50)

Like every week I do a forecast and we beat it. And like, I mean, America likes NFL. I mean, I don't know. I mean, they like football. I don't know, more than expected, I guess. But it's a little bit more than that. Like, the thing about sports is let's say there's two things going on. One, there's just a lot of scheduled events. Okay. There's just a lot in the week. But if you compare like a one to one, like a game to like basically anything that Trump does, Trump will win. Like, you know, like the, in terms of volume one to one. He like these markets do really, really well and it could be literally on like any, I mean, anything he does. The problem there is like there's not enough scheduled like events.

Jill Weisenthal (13:29)

There aren't that many of them.

Tariq Mansour (13:31)

I think there may be over.

Jill Weisenthal (13:32)

But just like what percentage is on Sunday?

Tariq Mansour (13:35)

Like, it's not, I mean probably 90% of sports on like a regular weekday is like much lower.

Jill Weisenthal (13:40)

And what's the gap in volume between 3x maybe? Okay, okay.

Tariq Mansour (13:44)

So like, yeah, I mean, NFL Sunday is like massive, but it's a little bit like, it's a little bit like asking the question like, okay, well on election day, what was the volume? Right? Yeah, it's like 99.9 elections. Right. So so sports is very large. But, like, we have other categories now, like, like culture, for example, I think is, like, growing at a similar rate. It's just starting from a much lower baseline. And our market diversity, our liquidity is just not there yet. Whereas sports is much more, kind of like, I would say, like, much more diverse and much more liquid. Yeah.

Tracy Alloway (14:09)

Okay, so I'm going to ask the obvious question, I guess, but why is it not sports betting?

Tariq Mansour (14:15)

You know, I don't have kind of like, as much of a problem with the word betting. I think gambling is sort of where I have a problem. I mean, you know, when, like, CME launched water futures, like, three, four years ago, you know, I remember, like, the headline about that is like, oh, you can now bet on water. It's like, all right. I mean, I guess the word betting is used very sort of loosely. But, like, I would say two things. There's sort of the legal question and there's sort of the. The ethical is this good for society? Question. And those are my two that matter.

Tracy Alloway (14:37)

We'll do both of them. Don't worry.

Tariq Mansour (14:39)

Yeah, let's. I mean, I guess so. So the legal question, I mean, like, our approach has always been sort of legal and regulate first. Like, always do it within the bounds and expand the bounds. So we did this prediction market, then elections, you know, I mean, a year ago, right? A year and a half. Well, a year ago even. Like, I mean, people were saying, this is going to destroy democracy, right? Like, it was. It was the end of the world if we ever got legalized. And like, you know, and like, it was. And then we got legalized and it was like, super biased. And, you know, I was being accused of being wasad agent. I don't remember that period. But, like, it was like, I missed that one. Like, it was like a whole thing about, you know, I worked at Palantir, and thus I'm obviously kind of rigging the election. But, like. And obviously the vibe has shifted pretty dramatically with the election and because, you know, there is some kind of powers these markets. So when it comes to sports, like on the legal piece, like, it is legal. Like, the CFTC could stop it if they wanted to, but the states can't. That's federal preemption, and that's how it works. And we're extremely strong legal footing. I mean, Don was mentioning sort of this. I don't think the CFT is asleep at the wheel. Like, you know, they have less staff, but they have staff and the staff is aware of sports. We talked about it's. Not like we showed up one day and like hey, surprise, sports markets are here.

Tracy Alloway (15:46)

Like isn't Trump's nominee also on your board the nominee for cftc?

Tariq Mansour (15:51)

Well, he was ex nominee now I mean we'll see. But I mean I don't know, but I don't know if it's ex nominee. But like there's a kind of questions. But I, it's kind of, I, he was not there when this happened and like he was, he's still not there actually. So I don't think it's very relevant to the question. I think the change of the administration is relevant to the question. Like yes, I mean I think it would have been much more challenging in the prior administration. Like there's no question about that. But the lie is pretty clear. I mean if you read the Commodities Exchange act, there's like a two pronged test and it's an event kind of related to war, terrorism, assassination, violence or gaming. And then there's some sort of illegal stuff that's illegal under state or federal law. And so you can fall under that category. We could debate whether this falls under gaming or not. And there's actually quite a bit of debate there. And then the second test which is like if it does fall under this category, the CFC can make an explicit determination that is contrary to public interest. Right. So there is that sort of second standard.

Jill Weisenthal (16:44)

Yeah.

Tariq Mansour (16:45)

Which brings me to second question which is like I'm just a strong believer in markets. Like I think a market based model for these market is better than the over the counter sportsbook model because the odds are better. Anyone can be a price bidder, they don't have to be a price taker. And the results show like less people. Like the percentage of people that basically lose on cash is closer to 50, 50. That's just not the case in like a traditional sports book. And I think that's the sort of argument that wins it long term which is like it's just better. Like you get better prices, more transparency and the ability to, you know, influence like basically participate in a way that you can't in a traditional model.

Jill Weisenthal (17:18)

You already said that you don't think that the distinction is not between trading and betting. The distinction is between betting and gambling. So you sort of preempted a question. But there is this Facebook ad that I saw and it says breaking news, sports betting in California is now legal. And I saw a screenshot of it but couldn't find it. I found it on a blog, but is that like a actual Kelsey Ad that ran well.

Tariq Mansour (17:41)

We have a very large marketing team. And this, the ad is not there anymore. But like, regardless, I mean the.

Jill Weisenthal (17:46)

So that was the way you got.

Tariq Mansour (17:48)

To imagine a company that's like grew 100x but like, so like, you know, like nothing.

Jill Weisenthal (17:53)

You know, you're saying like breaking news. Like, I guess what I'm saying is like, we all know what's going on.

Tariq Mansour (17:58)

Well, the news is breaking. I mean, it is legal to trade on cast in all 50 states. I mean, that's big news, you know.

Jill Weisenthal (18:03)

Yeah.

Tariq Mansour (18:03)

And we are lit. I mean, you know, so. But like, I do actually think that, like, I'm not as worried about this, like in some way. Like, you know, the word gambling is the one that really irks me. Like, I think, you know, because like, okay, 00 DTE options. Like, like what retail is doing what, like a trillion dollars of volume? I mean, you, you probably know the numbers. What is it?

Tracy Alloway (18:25)

I can't remember, but it's a lot.

Tariq Mansour (18:27)

Yeah. So what is retail doing there? Like hedging? I mean, right? No, what exactly are they doing?

Jill Weisenthal (18:34)

They're gambling.

Tariq Mansour (18:35)

I don't know about that.

Jill Weisenthal (18:36)

No, I think, I mean, I think it's fun. Like, I, I agree with like this premise that the idea, well, draw the.

Tariq Mansour (18:42)

Line is basically like, like it's, it's sort of thing where like, I mean, in 1905, I think we talked a little bit about this, like the Supreme Court, there was this whole question of grain futures and like, should it be gambling or should it be a financial instrument? And if it was gambling, it was going to go under the bucket shop laws. And it was this sort of Supreme Court case, Chicago Board of Trade versus Christie, where Supreme Court basically like ruled in favor of the Chicago Board of Trade, which is like, yes, a lot of people are speculating, but there's value to these markets beyond the actual speculative activity that's taking place. And then you get into the kind of question of like, what is the standard of the Commodity Exchange Act? Like, should all the activity be hedging? Well, if that's the case, then let's just cancel the whole act. Let's just stop trading altogether. Because in most markets, including grain futures, 95% plus is not hedging. It's speculative. And I think that's true in the stock market. And then like, okay, well how do you distinguish. And should we take out the speculative and just keep the hedging? Well, if you do that, then there's no liquidity and so it doesn't work. And then how do you even know who's hedging and speculating? Do you go and check? So you go into all these different questions. But to me, gambling is sort of like you create an artificial risk and then you roll a dice and then you gamble on it. You know, trading on whether Brexit happened or not, that's just like a natural risk that's sort of there. And then the second question is that, and to me, the even more important one is like the market based mechanism versus sort of like you walk into a casino, the odds are like structurally stacked against you. And actually if you start making money, they like in the best case scenario they basically, you know, stop you from participating. And that happens in sports books and others. And in the worst case scenario they like kneecap you, right? Like they. And so that to me is gambling like, it's like the revenue of the company is equal to the losses of its customer and vice versa. I just don't think this is the same here. Like, that's not how the New York stocks makes its money. It makes its money based on fees. Same with Robinhood, same with, you know, any other, same with Kalshi. And so I think there's a big structural difference.

Tracy Alloway (20:35)

Well, this was going to be my next question actually. So setting aside the gambling terminology, part of your argument here is that even if it is, it is somehow qualitatively different than traditional betting where you have a sports bookmaker who's setting all the prices. And you said earlier that there is more transparency and fairer pricing and all of that. But then again, if you look at some of the words that your own company has used to describe this, you put up job advertisements saying that you need experts in something similar to sportsbook pricing.

Tariq Mansour (21:09)

No, that's not quite right. No, the job is sports operations, is listing the markets, how to settle them and all these different things. That dynamic is very, I mean similar, right? Like you have to know which markets to list, how to list them, what are the price feeds to kind of like pull up to pull to basically settle. Whether it's sort of like this team one versus the other. That's very different from like, you know, we need, I don't know, like someone who is like an expert in like, you know, like program to like, you know, bring in traders and figure out how to optimize, like how to like optimize like losses and things like that. Like this is very, very different.

Tracy Alloway (21:42)

Well, talk to us how the prices are actually set then and why does you know, a platform that ostensibly is A peer to peer trading platform need market makers at all?

Tariq Mansour (21:51)

Well if you listen to market right now like on. Let's give an example, like even Fed rates, you gotta kickstart somehow, right? Like the financial markets need market makers, right? And they are peer to. Like financial markets are the ultimate version of peer to peer. That's what they are. But it's basically a way to kick start the Korean actually our most liquid markets. The more successful a market becomes, the more profitable market becomes, the lower the percentage of market makers like whether it's like partners like Susquehanna and institutional market makers and others and the higher it is that it's basically organic liquidity. So actually the more successful it is and the more profitable for us and like you know anybody, it's the lower the participation of these market makers. So the use is actually like you gotta have somebody that starts the bid ask like you. Otherwise you put a market and there's nothing, it's just dead. And so you have to kind of break the chicken and the egg in some ways you start with the chicken and you incentivize that chicken so that the egg comes and then you basically get the flywheel rolling. So I think it's kind of exactly the same as financial markets and like a lot of our liquidity is in the non liquid markets market make it driven and the liquid markets non market driven.

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Jill Weisenthal (23:44)

About some non sports stuff and the future like you could sort of futurize anything right? When you envision it. Could you have. Could we one day have a future for every single stock on the exchange? A perpetual future. A perpetual Tesla future. A perpetual Apple future. A perpetual. Like could there be a world that we live in one day and a perpetual 10 year treasury future?

Tariq Mansour (24:10)

I mean cash is everything in Arabic, right? So. So you know the long term vision is like Yes. I mean I just think like you we should have a market perpetual.

Jill Weisenthal (24:18)

A future for private companies. SpaceX future.

Tariq Mansour (24:22)

Yeah. And you know like the idea of sort of Can I get like one. I guess general and then specific answer generally and then specifically so the general sort of principle is like I think anything that has a different of opinion, difference of opinion of qualitative opinion should basically have a mechanism to resolve that quantitatively. So like instead of debating subjectively or something like let's debate about it objectively and quantitatively which is trading, you know, what's the main. And so and then there's some limits. Like I think there are markets that do create bad incentives and I think actually CA does handle them and like we really haven't done these markets. But to your question, like yes, I think that's, that's probably what the next frontier looks like. And I think that the concept of security futures has been like a very kind of like I'd say it's been a very exciting concept for Deck. I mean even pre Kalshi it's not like we're. But I think the CFTC SEC relationship historically has been a big part of the bottleneck because if you're on the SEC side you can't really do, don't really do futures and if you're on the CFTC side you do futures but you don't do securities. And you have this question like should I get regulated by both? I mean you already have one that's sort of, I mean you're like daily in your operations already very tough. Now you're adding a second one and it doesn't scale linearly, it scales sort of quadratically. And so it's been really tough historically. But maybe now in this environment I think it might be possible and maybe we'll figure it out on Monday. So we'll see on Monday.

Tracy Alloway (25:41)

Okay, can I go back to the market makers for a second? Because this is an area where I think people have a lot of questions, but what are the actual obligations of market makers on your platform? And you talked about how in the beginning, you know, maybe you have this really esoteric contract about throwing rubber objects onto basketball courts or whatever it is.

Tariq Mansour (26:00)

We don't have that but you know. No, but theoretically that one the CFC would block.

Tracy Alloway (26:07)

How do market makers decide what contracts to actually support initially? And are they obligated to come in and provide liquidity for everything?

Tariq Mansour (26:16)

No, because, well, not everything. No, because like, well if, well you have fair access sort of requirements on a CFC regulated exchange. So you have to have rules that like basically are generally like accessible by anybody in a certain sort of like tranche or tier or whatever. But like if a market maker wants to come and trade on cashier, they could do that and they have no obligations. They can make they could take, they could do whatever they want. Generally what happens is like, you know, if a market maker wants like okay, but then how do you kind of incentivize liquidity? Then you could sort of say like okay, maybe you rebate you some fees if you basically commit to obligations. And the obligations the way they look like is like if you make on the Fed market. So that's an actual specific example. Like you put like 75,000 contracts up on each side within like four three to four cents spread and you have like 98% availability or so you're pretty much there every time you kind of probe. You could for example get your fees that you pay rebated so you don't have to pay. So that's kind of like actually our most common type. I mean this is pretty much like market program. I love them are public and people can sign up to which markets they want to participate in. So some people sign up to economics, some people do politics, some people do sports, some people do a combo of both. A lot of people do financials. And the reason you want that actually is because without any sort of structure then no one's going to commit to anything. Right. Like then people will only do it when it's like advantageous for them and they won't do it when it's maybe like a novel market where we need to kind of bootstrap liquidity and so on. So you have to figure out a sort of set of incentives, especially in the beginning and those over time go down as the market goes more and more liquid as you need less and less of them.

Tracy Alloway (27:44)

And are the rebates and incentives and I guess the information is that equal for all the market makers on the platform because you also have depends on the obligations.

Tariq Mansour (27:53)

Okay, so like. So finish the sentence.

Tracy Alloway (27:57)

Well, I was going to ask about kt.

Tariq Mansour (27:58)

Yeah, yeah. So people ask a lot about Kashi Trading. So fully it's fully information. Like we've operated for five years, it's fully siloed informationally. It's like run independently and so on and so forth. What I can say like emphatically KT has absolutely no advantages like in any way, shape or form of other market makers or market participants. And we've always said that, you know, we're, we don't think of this as a flank because it's true. And the CFC audits us and they see the numbers and the numbers, you know, are factual. They're not the best performing trader, let alone market maker on Kalshi by orders of Magnitude like, you know, I'll leave.

Tracy Alloway (28:32)

It at that they're successful because they're not that successful.

Tariq Mansour (28:37)

They're doing okay, I would say. And it's, it's fine. They, you know, try to kind of like bootstrap liquid in some markets are harder and so on and so forth. And that's a good thing. Like otherwise these markets would sort of not be there. But say for sure is they don't have any privileges or you know, benefits out aside from anybody else. Aside from sig, aside from we have some small teams, two, three people that sign up to market maker programs. Some of these teams are actually beating all the other market, the institutional, including ours. Institutional are usually better than ours. But like what we do is like there's like tiers. So if you kind of like abide by certain conditions, you can get more rebates than if you do lower conditions and less rebates. And those years are accessible to anybody that basically would do the conditions uniformly. One, because regulatory wise we have to and then two, because otherwise like people wouldn't trust the sort of marketplace. So yeah, there's no, like we get accused a lot about a lot of different things, you know, but like that's normal. I mean there's like a lot of incentives and interest that are on the other side of this equation. For specifically now sports at the time it was elections. But I think that kind of like we let the truth mean revert over time.

Jill Weisenthal (29:39)

So obviously you have these sort of legacy market makers who are now participating on your platform. You mentioned Susquehanna, et cetera. Have you seen like, I'm very curious about whether we'll see legacy institutions become actual sort of like use your markets for actual hedging purposes. Now I'm sure there's some around the election, but some of these other things, like I'm curious, for example, do you know other hedge funds that might have a particular trade on and they want to hedge against the possibility of a negative NFP print because they think that a bad jobs report is going to bust some trade like that is the risk or maybe a sort of hot CPI trade, etc. Do you see institutions using these markets yet to actually take hedging or positional trades yet?

Tariq Mansour (30:28)

So yes, but it's kind of a size thing, right? Like the main bottleneck is basically liquidity. It goes back to the same question. It's like you have to incentivize more and more liquidity over time so that like you get the larger sizes. Like a typical. The way I think about it, Is like there's a small prop shops and the smaller shops like those are doing some and like because you can take millions of liquidity on cashier, it's not that difficult now depends on the markets and so on. But then if you get sort of the buy side firms like the larger, you know, like you know where you're just Getting the top 1015 on the street, up to 1015 hedge funds on the street and then after that corporations like then you're talking like the minimum, minimum size like for even to care is eight figures but probably 50 to 100 million. And so I don't think liquidity is there quite yet. Like elections start flirting with that sort of level. And we, we've seen some but like the, we don't see that like it's just a matter of time for liquidity to build up.

Jill Weisenthal (31:21)

Okay.

Tariq Mansour (31:22)

For the kind of like deep institutional use case to basically start, start kicking in. And I think I see this over the next two, three years. I think that's going to be a very big part of kalshi. It's always been part of the vision because you create a marketplace where you can price anything. What you're doing at that point is you're pricing risk, you're pricing any risk that's sort of happening in the wild. And then when you price the risk, it's much easier to create the liquidity the same way it's easy to create liquidity for option market today that it's much harder for some esoteric event as there's more and more price benchmarks then you can provide more liquidity. And then after that we can basically really cater to this sort of institutional risk transfer use case which I think is kind of where the TAM really expands long term.

Tracy Alloway (31:59)

I assume in addition to talking to regulators, a big chunk of your time is spent going out and talking to institutional players either on the market making side or maybe buy side who might one day potentially be interested in actually using this as a hedge. What are those conversations actually like you have this partnership with Susquehanna now. What are the concerns that they lay out when it comes to this new business and what are the sort of I guess enticements that you offer?

Tariq Mansour (32:28)

So I would say like right now it's a lot more just like learning. It's not, I say like hey, our approach is much more like let's we learn, we learn and then we figure out how to build the right product and then people come. It usually works that way. Not sort of like, oh, like sort of come.

Tracy Alloway (32:41)

Did they approach you, then we have.

Tariq Mansour (32:44)

It took a while. I mean like we had a relationship like way kind of when we started like thinking about the company and this is. We have a race with like a lot of the sort of institutional players and like market makers. And I mean I worked at Citadel before but like I don't know if like we, I mean we just had a relationship and we started talking and you know, they see the vision like so Susquehanna really believes, I mean Jeff Yats really believes in the vision of sort of like this idea of like to have some skin in the game to forecast any question about the future instead of debating about it. And he's always loved prediction markets. So there's a little bit of a natural fit there. But like going back to the kind of institutional, like what we learned is like it's there, right? A lot of them, whether they price these specific events like NFP specifically or like a CEO leaving a company specifically or they're worried about it like even if they don't price it specifically, but they're sort of like this is something that I'm worried about on my thesis. Like I have a thesis but these are some of the external factors that could like screw it up. That's a real thing and like they would use it for hedging. And I think the requirements of is like okay, some of them that are like solved like compliance, regulatory, like you know, you have a clearinghouse regulated, all the kind of usual stuff. But then there's liquidity, like how much size can I take for it to be worth it for me to kind of allocate a desk and you know, put resources into it. And then the second one is like margins which like, you know, today it's fully cash collateralized on cash. So if you want to trade $100, you have to put it up. That's very difficult for like let's say a Citadel.

Jill Weisenthal (34:05)

Well yeah, I was going to ask actually, do you anticipate on the roadmap sort of buy side traders when there is perhaps if it happens sufficient liquidity, will they be trading on Kelshi or will it be something they trade through their prime broker or their futures broker? But you like, are you in talks with the brokers?

Tariq Mansour (34:25)

Yeah, this is the same exact sort of like reason like what do you need basically like and how does it work? But yes, I mean the prime brokerages are very important because like you get, you basically get like they have the full portfolio so you can get a bunch of margin benefits if you kind of do it. All with one prime broker. And that's why usually prime brokers are the gateway into financial markets.

Jill Weisenthal (34:46)

Yeah.

Tariq Mansour (34:46)

And the same way as our broker strategy for retail. Right. Like with the Robinhood and web on some of the other brokers. It's very similar actually because you have your portfolio with the prime broker and then like as you're thinking about your portfolio, it's like, hey, I could add on a hedge. And it's much easier for me to do it through my prime broker than do it on a separate platform.

Jill Weisenthal (35:02)

But by the way, it's pretty crazy if you go to the app store and you just like look at Robinhood, it's the first thing is like the football, the image of the football.

Tariq Mansour (35:09)

Oh really?

Jill Weisenthal (35:10)

Yeah, because they're trading through you. Anyway, just an interesting, on that point.

Tracy Alloway (35:16)

I mean there's a social utility question here, right? Like if I download Robinhood, okay, yes, I could get into zero or one day options and we can talk about the social utility there. But maybe I'm going to invest in an actual stock that generates some income. But now I'm seeing ads for football and sports betting and I don't know, I, I'm sure there are some old fashioned people out there potentially like me who would say, who would say, like what does this do? What's the value?

Tariq Mansour (35:45)

Do you think that, do you think that sports, like, let's even forget about like, I mean, first of all, I.

Tracy Alloway (35:50)

Don'T like sports but.

Tariq Mansour (35:51)

Well, I mean, but like, you know, I mean a lot of people love, love sports, right? And like, you know, I don't know, I think that like my job with these things, I mean, I'm a free markets person, like building a company where the name is, you know, we want to have markets for everything. So, so I'm much more in the camp of like, you know, you figure out what people want to do and figure out how to do it in a safe, equitable and fair manner. Like you know, make sure that like it's done with fair rules of the rules for everybody to participate and they want to get smart and do their own research and if they don't, that's on them and they figure it out and, and add some sort of checks and balances around it to make sure it's safe and there's customer protection. But I'm a strong believer that, you know, sort of the, the job of regulators should not be dictating what people should do with their money or their lives. Like, I'm a very, very strong like staunch sort of opponent of that sort of view of what a regulator should do. And I think that's fits there. I mean in some ways maybe that's like, like if you look at Romney like there's all these choices now and like it's a bit weird to me that like the decision here is sort of like don't let them make the choice. Like if they want to invest in great and if they want to do football then also great. I mean the solution to that feels weird to me which is like hide that option because the 50 year old or 30 year old man Robinhood needs me to figure out what to do with their money. Right. Like and so that to me has always felt weird to me and I think that's where financial regulation has sort of like gone too far in the last or even to call it regulation. I'm very pro regulation. We chose to be regulated up front. Right. So but it's sort of like I would say like I would say, I mean people like about lawfare but whatever. Like the financial regulators I think have taken it too far in that dimension.

Jill Weisenthal (37:35)

So as we've mentioned a couple of times, there's this big meeting in D.C. next week. There's going to be a roundtable incidentally. So Tracy mentioned earlier in the day we interviewed Terry Duffy for an episode and that'll be out in a couple of weeks and I guess you haven't met. He said you've never met but I guess you're going to meet on Monday. But like what should we ask Tarek? And he said I think if I'm getting this right, he said that Kelshi characterizes self as CFTC approved and he says it's not that it's instead not CFTC banned that actually because it's the self listing. Are you CFTC approved and or is it just that the CFTC has not said no?

Tariq Mansour (38:21)

Well it's factually incorrect. I mean, I don't know. You know, it's like, I mean I'll be Terry. I'm very excited about meeting Terry. I mean Terry's a legend. But like we got a license and then a second one. So we got the exchange and then the clearinghouse and then the broker license. So the exchange was like in 2020 and the bro and the clearinghouse in 2024 and then the broker one was in 2025. There's all approvals. I mean it's not like you know.

Tracy Alloway (38:44)

But for instance the individual contracts that go up to the cftc are those each getting approved?

Tariq Mansour (38:49)

Well the election was obviously Disapproved.

Tracy Alloway (38:52)

Right.

Tariq Mansour (38:52)

Like, and we had to sue over it. And it was a. We were clearly right on the law given that we won the district and then the appeals court. So maybe there's like a separate dimension here, which is also the regulator is not always right. But you know, there's a whole other thing there. But self certification is. Is a regime which by the way, CME is also operated within and they've, you know, so from a. From that specific perspective for each market. Yes. It's not that every market goes through as a prospectus like in the SEC and then gets approved. It's actually like a disapproval regime. Yeah. But the CFTC has authority to state things and it's a very broad authority. Right. So maybe it's a good question to the CFTC because, you know, I can't speak on their behalf.

Tracy Alloway (39:31)

Oh, you can ask them on Monday.

Tariq Mansour (39:32)

Yeah, I don't know if they'll be on that table. But you know.

Jill Weisenthal (39:35)

Oh, what is the.

Tariq Mansour (39:36)

Well, we talk safety all the time, but yeah.

Jill Weisenthal (39:38)

So, you know, obviously polymarket is a major competitor to you. What do you see is like, what's your vision for what is traded on chain and what are like, could you imagine, you know, we just talked to Don. He said in his. He could see in five years almost everything being on chain. Like, do you see that?

Tariq Mansour (39:59)

Yeah, maybe. I mean. Well, it's interesting because probably now is. They're doing. So there's kind of the on chain strategy and then the kind of what we did, the regulated, you know, normal clearinghouse, like reggae clearinghouse strategy and like now they're doing a sort of. They're pivoting to ours basically. That's it's. And so our view generally is like. Well, it's a pretty positive sign for our strategy probably. Right. Because you know, but.

Jill Weisenthal (40:19)

But even setting aside.

Tariq Mansour (40:20)

Well, my point is like they're regulated. To me it's a regulated like front. It's more so. So. Okay. There are a lot of benefits. I really believe that and I think that to being to. On Shane.

Jill Weisenthal (40:30)

Okay.

Tariq Mansour (40:31)

Yeah. Because like one of the ones that I'm less interested in is sort of like skirting regulation. Like that's. But. But I think that like there's a number of things which is like my mental model for it is. Is a bit like, you know, the banking rails were set up in the kind of early 20th century. It's like JP Morgan, a bunch of his friends are like, hey, how do we dominate this whole thing? And you know, they set up a bunch of regs and then they closed the door behind them and that was sort of that. And there's a bunch more complexity to that. But to me this sort of whole on chain thing is imagine a bit like having given that problem to a bunch of smart hardworking developers without any limits and let them build. Right. Obviously that's going to be. There's a lot of good that's going to come out of that and then there's going to be some bad that comes out of that obviously. But to me it's like, well there's a lot of liquidity on chain today, so that's something that we should access at some point. 2 I think the clearing side there's a lot of benefits for you know how like you have to do novation and you have to do immut immutability and usually right now we do it from a pro like operational legal perspective and obviously there's some tech but on chain really helps with that. That's like basically what it's designed to do. And so over time like I think I hope as sort of regulators get more permissive. Like I see some parts of clearing going on chain where you know, it enables some of these use cases and also more transparency like the trades and the transactions are all transparent for everybody to see. And then people can build interesting like UIs and interesting projects on top without us having to sort of this whole permissionless sort of concept. And so I'm very bullish on it. I do agree with Don actually that like over the next four or five years you see companies like Robinhood, like companies, like a lot of companies are leaning in. Well Kalsha is also leaning in. So we're pretty excited about it.

Tracy Alloway (42:12)

So obviously the trajectory of your business has changed enormously just over the past year. Less than a year really if you were thinking about it now, today as we sit here, what's the biggest? I guess blockage to further growth for Couchie.

Tariq Mansour (42:30)

You know, right now it's a question I haven't been really thinking about. It's been growing so much right now it's like all about how do we like not break basically because like, I mean honestly like we grew up way more than we could have possibly imagined. Even in the most bullish scenarios, even post winning the election lawsuit, even like December 2024 forecast for 2025, there's nowhere near what it is today. And it's interesting because we're not, it feels like we're sort of like halfway through, like there's still just the current Structure. I think we're not even halfway through. Like, we have more brokers, we have a very deep pipeline of brokers. So that's great. And more sports. I think it's the frontiers, the SEC thing. So I think it's like more markets and I think we have a lot of what we want. I think over time is like, how do we start doing company related prediction markets? And we're very excited about that.

Jill Weisenthal (43:20)

I just have one last question and it's kind of a softball, but after years of fighting all these different battles, regulatory battles, issues with states, et cetera, how good does it feel? It must feel really good to actually kind of know that the business is real and have these battles. Yeah, I mean, just like describe that feeling.

Tariq Mansour (43:41)

It's weird because I don't know if I feel that much better this year than last year. I mean, Luan and I, when we started the company, we really built a company around. I love this book. So have you ever read the book, like, the score takes care of itself?

Jill Weisenthal (43:52)

I don't think so.

Tariq Mansour (43:52)

It's a great book. But life like everything, honestly, like I really, it's just, you know, like. So John Wooden was sort of basketball coach most legendary. I mean the whole thing was always about like never mention winning. Train the team is like focusing the process and like day in, day out, like just fall in love with the training and like, if you do, you just start winning. And like I would say a few things. I see these things are sort of, there's good times and bad times for all companies. And so yes, right now we're having a pretty great time. Like as good as it gets for a company. But I don't feel that different. I think it's just like solutions bring new problems and like you then you focus on the new problems.

Jill Weisenthal (44:28)

It must be so much nicer.

Tariq Mansour (44:30)

I will say the one part I feel pretty good about is winning the election lawsuit. Like that one, because we were so. There was some pretty big time vindication there. Like I think we were, you know, because imagine like in 2020, like three going up to our board, you know, like Sequoia and a bunch of others. It's like, hey, like, yeah, we're not really figuring this out. It's been two years of like, you know, pouring money into this and like we're, you know, and nothing is working. We lost half our team over it and like somebody might die. And actually what we're going to do is we're going to triple down and sue our regulator now. So it's you know, that was a. They looked at us, they're like, well, that, that, that doesn't feel right. You know, like. And we still went through with it and like it ended up being absolutely the right decision. So that I think maybe like October 7th, the day we won the election lawsuit, was probably the day I felt happiest.

Tracy Alloway (45:17)

What did you do when CFTC dropped the lawsuit?

Tariq Mansour (45:20)

That was not that important. It was the one where we, the.

Tracy Alloway (45:22)

Appeals were you actually. That's. Sorry.

Tariq Mansour (45:24)

That's what I mean.

Tracy Alloway (45:24)

Yeah.

Tariq Mansour (45:25)

Yeah, that was important because, well, I first screamed a lot and like, we just like, you know, all got shit faced in the office and like, you know, you know, it was amazing. But then, you know, then we got back to work because we got extremely anxious about set, like, you know, launching the thing. Yeah, that was a brutal three weeks because we had to ramp up really aggressively. And I mean we really went from. We really grew 100x overnight. Like it was crazy. And so that was the three weeks that I worked the hardest in my entire life. I was sleeping in the office. Like, you know, I was like, I was given this chance, like we have to basically like, you know, utilize it to the fullest. And it was. And we didn't charge fees on the election market. I don't know if you knew that it was intentional decision because like the KPI here is we got to show the world that these markets work. Yeah. And it's done safely and nothing bad is going to happen and democracy is going to be totally fine. And actually, and you'll see we're announcing a few things with some, some big news organizations. Pretty soon you'll see the shift that's happened in culture where like the level of embracing is that's happening with prediction markets now. That's pretty nice to see. Plus south park and south park. Yeah.

Jill Weisenthal (46:25)

Tarek Mansour, thank you. Thank you so much for coming to Oddballs Live.

Tariq Mansour (46:29)

Thanks a lot. Thanks so much, guys.

Jill Weisenthal (46:31)

That was our conversation with Tariq Mansour recorded live on stage in Chicago.

Tracy Alloway (46:36)

I'm Tracy Alloway. You can follow me at Tracy Allaway.

Jill Weisenthal (46:39)

And I'm Jill Weisenthal. You can follow me at the stalwart. Follow our producers, Carmen Rodriguez at CAR Carmen Armand, Dashiell Bennett at Dashbot and CalebrookSailbrooks. For more Odd Lots content, go to bloomberg.comoddlots where the Daily newsletter and all of our episodes. You can chat about all of these topics 24. 7 in our Discord Discord GG oddlauts.

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