¶ Intro / Opening
Bloomberg Audio Studios, podcasts, radio news.
Hello odd Laws listeners and viewers, You're about to get a conversation with Turrek Monsieur, CEO of Kelshi. This was recorded live on stage at Chicago's Untitled supper Club. We had a blast, and we hope you enjoyed the show. You're definitely having a moment. The South Park episode last night, it was all about prediction markets.
Did you watch it live?
I try to avoid watching or reading anything about us without kind of getting the third party reaction before. So we didn't know because we saw the thing, like the announcement a few days ago there apisode prediction Markets, and we started kind of imagining all the types of things that they're going to do.
It was crazy.
I mean the highlight I think is like they copied the app like, yeah, exactly, I was. I mean, they even had the referrallable and they even had some of the bugs we haven't they have. It's like it was unbelievable. So but you know, it was. It was pretty cool. I mean, there's a few parts that I disagree with, but the other for the rest, I mean, we really enjoyed it.
I watched it this.
Morning why do you think prediction markets are having this moment now after they've been around for decades? Literally? Why?
Now? Yeah, I mean I think there's like path dependence in these things, right, Like it's not sort of like I'm a strong believer. That's 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 companies. 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
¶ The Prediction Market Boom and Regulation
prices questions about the future sort of we were very drawn to it because, you know, 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 could be the most important because you know, yes, pricing the you know, Sheriff Tesla is important, but pricing whether brexfast is going to happen, or Drum's gonna win in election, or or what's you know, the
sort of 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 the room was regulatory, it was I mean, there's a very simple kind of like first order factory here. Well, well it was illegal, like you know that that that's a 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 counted in trade.
Yeah, yeah, I trade it on there.
Well you know, so so here you go, right, I mean in Trade was you know how that story kind of ended?
How familiar are you?
I don't know how to end it?
So so so John Delaney was this was a sort of founder of in Trade and it's just kind of visionary. I mean, like Dawn in many ways. I mean he really believed that. You know, he was on CNBC back in two thousand 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 like a
VPN stype set up. And then the company got shut down in twenty twelve by the government, and two weeks later John Laney died and he died climb Mount Everest, and there was 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 realized like, actually, the only way for this to go big is we got
to legalize it, like there was no other way. 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 CALSHI, like all we did was basically regulatory work.
It was like, how do we leave 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 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 the probably what the turning point is for these monkeys, like this is when we wanted the institution, Like this is when everything changed.
I think, would you have died if Trump hadn't won in November.
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 you know, we kept sort of making progress all the way up onto legalizing and launching. But then, yeah, the reality is like the prior government I think was
as hostile as it gets. That it was just not I mean, they just didn't want it to exist.
So well, you say that, like it's really important to have a change in the regular landscape, that there was no way this could have taken and off had this change, 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 lands.
I don't necessarily think that on chain off chain is sort of necessary. It kind of an unregulated regulated like like on chain doesn't mean illegal, right, Like.
Sure so, but I think that like.
But there was a lot of volume on this entity that had all kinds of things while we're talking about poly marketing.
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 regular regulation, but not really because Augur was on chain also, and like that was also sort of shut down and it was a bunch of issues.
For us.
We stood very firmly that like, for this to go mainstream, why you should avoid a VPN, you know, but also like, how do you have this be legitimized 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 manstream. There was just no way to do it outside of the like this is the universe of financial markets. You can now 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, Bally 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
¶ Regulated vs. On-Chain Markets
you account for all of that today we're like something like three x bigger within a year.
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 you know, a binary event contract that gets created on your platform.
It's a great question because that's a hard problem, right, like because the traditional markets, right the life cycle is like you know, you have an idea like grain futures or Onion futures or GPU future your future, your futures, there is a bad idea.
It's out up a protection.
I do.
I do think it's a little lame that poly market, like it hasn't done on your futures because if you're gonna look, what's the point of on train if you're not sticking it to the man anyway.
If like the Onion farmers are like finally having like instrumental hedge, And what's.
The point of crypto if you're not using it to fight against rule?
I mean, well, the Onion Future's 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 GEP I mean, or like GPU Future, 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 a liquidity over time and you can take your time. It takes like usually these things take time, they take years to kind of build up to market them and build equity. 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
¶ Event Contract Lifecycle & Approval
to much more, much faster, and kind of my mental model for what this looks like is sort of like there's an idea that can be from a user, from a from the news, from a trend from some tweet. Then there's the 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 we've gone through like all kind of types of regulatory winters. But the first time we listed a market, it took us eighteen months.
That was just for listing and because there's a lot like the operations attack. These are tickers, right like you list them like a stock or like a like WTI crude oil. Now we do it within thirty minutes, and so we've expanded the territory quite a bit.
And when you list it, does it go to the CFTC or what.
Basically processes there's like a self certification which basically 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 build 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 it's the sort of next frontier.
But we've covered so much grounds now that like most things are like of a similar flavor.
We've been 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. 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.
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.
Like every week, we do a forecast and we beat it, and like, you know, 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 unlike any I mean anything he does.
The problem there is like there's not enough schedule, like I think there may be over just what percentages on Sunday, Like it's not I mean probably ninety percent of sports on like a regular weekdays like much lower.
And what's the gap and harm between three acts?
Maybe?
Okay, okay, so like yeah, I mean NFL Sunday is like massive, but it's a little bit like it's it's a littally like asking a question.
Like okay, well, on election Day, what was the volume? Right? Yeah, it's like nine nine 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. That's just starting from much lower baseline, and our market diversity, our liquid is just not there yet, whereas sports is much more kind of like I would say, like much more diverse and much more liquid.
Okay, so I'm going to ask the obvious question, I guess, but why is it not sports betting?
You know, I don't have kind of like as much a problem with the word betting. I think gambling is sort of where where I have a problem. I mean, you know, when like see me launch Water Future is like three four years ago, and 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 you use very sort
of loosely. But like I would say two things, the sort of the legal question and there sort of the ethic goal is this good for society?
Question?
And those are we will do both of them, don't worry.
Yeah, let's I mean, I guess. So the legal question, I mean, like our approach has always been sort of legal and regulated first, like always do it within the
¶ The Dominance of Sports Markets
bounds and expand the bounds. So we did this friction market. Then elections, you know, I mean a year ago right well ego, 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 legalized, and it was like super biased and you know, I was being accused of being more sad agent.
I don't remember that period, but like it was.
Like I missed no one, like it was like a whole thing about you know, I worked at pountry 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 doc could stop it if I 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 the I don't think safety is a sleep at the wheel, Like you know, they have less staff but they have staff, and the staff is aware of sports we talked about and it's not like we showed up one day like hey, surprise, sports markets are here.
Like, isn't Trump's nominee also on your board, the nominee for CFTC.
Well he was X nominee.
Now, I mean, we'll see, but I mean I don't know, but I don't know if it's X nominy.
But like there there's a kind of questions.
But 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 well into 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 law is pretty clear.
I mean, if you read the Commodities Exchange, actor's like a two prong test and it's is an event kind of related to war, terrism, 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 de cart We could debate whether this falls under gaming or not.
And there's actually quite a bit of a debate there.
And then the second test, which is like, if it does fall under dis category, tifcy can make an explicit
¶ Distinguishing Betting From Gambling
determination that is contrary to public interest. Right, so there is that sort of second standard, yeah, which rais me second question, which is like, I'm just shaw and believer in markets, Like I think a market based model for these market is better than the over the counter sports.
Book model because the odds are better.
Anyone can be a price better, 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 CASHI is closer to fifty to fifty.
It's just not the case and like a traditional.
Sports book, And I think that's the sort of argument that wins it long term, which is like this is just better, Like you get better prices, more transparency, and the ability to you know, influence, like basically participate in a way you can't an a traditional model.
You already said that you don't think that the distinction is not between trading and betting, the distinction between betting and gambling. See sort of preempted to 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 but I couldn't find it. I found it on a blog. But is that like an actual Kelsey ad that.
Ran, well, we have a very large marketing team and this is the ad is not there anymore, but like regardless, I mean that was what you gotta imagine a company that's like rule one hundred x so like like nothing, you.
Know, you're saying like breaking news, Like I guess what I'm saying is like we all know what's going on.
Well, the news is breaking. I mean it is legal to trade ony states. I mean that that's big news, like you know, yeah, and we are ligitally I mean you know so, but like I do actually think that, like I'm not as worried about this, like like you know, the word gambling is the one that really irks me, Like I think, you know, because like okay, zero zero DT options, like like what retail is doing work like a trillion dollars of all I mean you probably know the numbers.
What is it there?
I can't remember, but it's a lot.
Yeah, So what is retail doing the like hedging? I mean, right, no, what exactly are they doing.
They're gambling.
I don't know about that.
No, I think, I mean, I think it's fun. Like I agree with like this premise that the well.
Draw line is basically like like it's it's the sort of thing where like I mean, in nineteen oh five, I think we talked a little b about this, Like the Supreme Court there was this whole question of grain futures like should it be gambling or should it be a financial instrument?
And if it was gambling 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 War of Trade, which is like, yes, a lot of people are speculating, but there's value to these markets beyond the actual speculative.
You know, activity is taking place.
And then you get into the kind of question of like what is the standard of the Commodities Exchange Act, Like should all the activity be hedging? Well, if if that's the case, then you let's just cancel the whole act. Let's just stop trading altogether. Because in most markets, including grain futures, like ninety five percent laws is not hedging expeculative and I think that's true in the sock market.
And so you know, and then like, okay, well how do you distinguish and you know, should we take out the spectator 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 so you go into
all these different questions. But like, 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, but trading on whether breaksit 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 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 sportsboks and others. And 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 startion makes its money. It makes it funny based on fees. Same with Robin, and same with you know, same with Calci, And so I think there's a big structural difference.
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 betting, it is somehow qualitatively different than traditional betting, where you know, 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 sports book pricing.
No, that's not quite right.
Now, the job is the sports operations, listing the markets, how to settle them in all these different things, which that dynamic is very similar, right, Like you have to know which markets 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, like you know, we need I don't know, like someone who is like an expert and like you know, like programmed 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.
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?
Well, if you listen to new market right now, like on let's give an example, like even fed rates, you got to kick started 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 kickstart and move shabequity and actually are our most liquid markets. The more successful market becomes, the more profitable market becomes, the lower the percentage of market makers, like whether it's like partners like Susquehanna and in soitutional market makers and others, and the higher it is that it's basically organic liquiity. 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 got to have somebody that starts to bid asked, like otherwise you put a market and there's nothing, it's just that, And so you have to kind of break the chicken in 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 it's 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 drive.
¶ Market Makers and Liquidity Generation
Let's talk 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 extra change, a perpetual future, a perpetual Tesla future, a perpetual Apple future, a perpetual like could it be a world that we live in one day and a perpetual tenure treasury future.
I mean Goshi's 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 a future for private companies SpaceX future.
Yeah, and you know, like the idea, So I get like one, I guess general and then specific answer generally and then specifically. So the general is sort of principles, Like I think anything that has a different opinion, the difference of opinion of qualitative opinion, should basically have a mechanism to resolve that quantitatively.
Mm hmm.
So like instead of debating subjectively or something like less, debate about it objectively and quantitatively, which.
Is trading, you know, what's something and so.
And then there's some limits, like I think there are markets that do create bad incentives and I think actually see A does handle them, and like we we 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 that I mean even
pre Calci. It's not like we're But I think the SCF T C SEC relationship historically has been a big part of the bottleneck because if you're on the SEC side, you can't red don't relydo futures, and if you're on CFC side, your futures that you don't do securities.
And then you have this question like should I get reggae 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's scale its scale 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 maybe we'll figure it out on Monday.
So we'll see on Monday.
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 basket ball courts or whatever it is.
We don't have that, but but you yeah, the other that one, the CFC would block.
You know, how do market makers decide what contracts to actually support initially? And are they obligated to come in and provide for everything?
No?
Because well not everything no, because like well if well you have fair access sort of requirements and a CFC reggae exchange, so you have to have rules that like basically are generally like accessible by anybody in a certain sort of like trans or two or whatever. But like if a market maker wants to come and trade on CASHI, 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
¶ Kalshi's Vision: Markets for Everything
incentivize equity? 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 seventy five thousand contracts up on each side within like three to four cent spread, and you have like ninety eight percent.
Availability, so you're pretty much there.
Every time we kind of probe you could, for example, get your fees that you pay, rebate it 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 marketing program I love them. Are public and people can sign up to which markets they want to participate it. 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 is 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 bootshop liquidity and so on. So you have to figure out the sort of setup incentive, 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.
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 abligations. Okay, so you're like, so finish the sentence. Well, I was going to ask about kt Yeah. Yeah, so people ask a lot about Cashi trade. So fully it's fully information, like we've operated for five years. It's fully solid Informationally it's like run independently and so on and so forth. What I can say, like emphatically, Katie has absolutely no advantages like in any way, shape or form
of other marketmakers with market participants. And we've always said that, you know where we don't think of this as a flank because it's true and the safety audits us and they see the numbers and the numbers you know, are factual. They're now the best performing trader, let alone marketmaker on Calshi by orders of magnitude.
Like you know, I leave it that they're successful because they're not that successful.
¶ Deep Dive Into Market Maker Operations
They're doing okay, I would say, And it's it's fine they haven't. I mean they you know, try to kind of like booch op to quit in some of the 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
marketmaker programs. Some of these teams are actually beating all the other market institutional including ours.
Institional usually better than ours.
But like what we do is like there's like tiers, So if you kind of like buy by certain conditions, you can.
Get more rebates.
Then if you do lower conditions and less rebates, and those tiers accessible to anybody that basically would.
Do the conditions uniformly.
One because regulatory wise we have to and then two otherwise like people didn't trust the sort of marketplace.
So yeah, there's.
No, no, none, Like we got 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 interests that 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.
So obviously you have these sort of legacy market makers who are now participating on your platform. You mentioned Susquehana, 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 head dream 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,
et cetera. Do you see institutions using these markets yet to actually take hedging or positional trades yet?
So, yes, But it's kind of a size thing, right, Like the main bottleneck is basically equity, And it goes back to the same question. It's like you have to incentivize more and more equity over time so that like you get the larger sizes like a typical I mean, 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 the querity on CASHI, it's not that difficult. Now depends
on the markets and so on. But then if you get to serve of the buyside ferns, like the larger yeah, you know, like you know, we're just getting the top ten fifteen on the street, ten to fifteen hatches on the street, and then after that corporation is like then you're talking like the minimum minimum size like for even two care as eight figures, but probably fifty to one hundred.
And so I don't think liquity is there quite yet, Like elections start flirting with that sort of level, and we've seen some, but like we don't see that, Like it's just a matter of time for liquity to build up for the kind of like a deep institutional use case to basically start kicking in. And I think I see this sort overin the next two three years. Like I think that's going to be a very big part
of CASHU. It's always in part of the division because you you create a marketplace where you can price anything. You know, what you're doing at that point is you're pricing risk. You're pricing any risk 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 liquity for the option market today that it's much higher for some esoteric event as there's more and more price benchmarks than you can provide more liquidity. And then after that you can basically red cater to the sort of institutional risk transfer use case, which I think is kind of where the term really expands long.
I mean, 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 buyside, who might one day potentially be
interested in actually using this as a hedge. What are those conversations actually, Like, you know, you have this partnership with Suskahanna, Now what are the concerns that they lay out when it comes to this new business and what are the sort of I don't I guess enticements that you offer.
So I would say, like, right now, it's a lot more just like learning. It's not.
I say, like, hey, our book is much more like let's we learn, we learn, and then we figure out how to build right product and then people come. It
¶ Institutional Hedging and Partnerships
usually works that way, not sort of like oh like.
Did Sufkahana did they approach you then we have.
It took a while.
I mean, like we had a reationship like way kind of when we're starting like thinking about the company and this we have issued with a lot of the sort of institutional payers and like marketmakers, and I mean I worked at CYDA before, but like I don't know if like we I mean, we just had relationship and we started talking, and you know they see the vision, Like so s Quhanda really believes, I mean, Jeffy has really believes in the vision of sort of like this idea
of like have some skin in the game to forecast any question of the future instead of debating about it. And he's always off 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 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 like okay, some of them that are like solved, like compliance regulatory like that, 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 callarer on CALSHI, So if you want to trade one hundred dollars you have to put it up.
That's very difficult for like let's say a citadel.
Well, I was gonna ask, actually, do you anticipate on the road map sort of byside traders when there is perhaps if it happens sufficient liquidity, will they be trading on CALCI or will it be something they trade through their prime broker or their futures broken cabo? But do you like are you in talks with the brokers?
Yeah, it's the same exact sort of like reason means like what do you need basically like and how does it work. But yes, I mean the prime brokerges are very important because like you get you basically get like they have the full portfolio, so you can get a bunch of margining benefits if you kind of do it all with one prime broker. And that's why you usually
prime brokers are the gateway into financial markets. Yeah, and the same way as a broken strategy for retail, right like with the robin and Mebo and 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 is like, hey, I could add on a hatch. It's much easier for me to do it through my prime broker then do it on a separate platform.
But by the way, it's pretty crazy if you go to the app store and you just like look at robin Hood. It's the first thing is like the football, the image of the football right already because yeah, because they're trading through you. Anyway, just an interesting.
I mean, well on that point, I mean there's a social utility question here, right, Like if I download robin Hood, 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'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?
Do you think that?
Do you think that's sports? Like let's even forget about.
Like I mean, first of all, I don't like sports.
But well, I mean but like you know, I mean a lot of people love love sports, right and and like you know, I don't know that like my job to view with these things. I mean, I'm a free markets person, like you know, 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 role 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 text and balances around it to make sure it's
safe and there's customer protection. But I's tetly like I'm a strong believer that, you know, sort of 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 fits there.
I mean in some ways, maybe that's like like if you look at romod, like there's all these 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, then if they want to do football, then also great.
I mean, and the decision.
That feels weird to me, which is like hide that option because the fifty year old or thirty year old man, so Robin needs me to figure out what to do with their money, right like, and so that to me, that's always felt weird to me. And I think that's where financial regulation has sort of like gone too far in the last I would even 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 are like what law fair but whatever, like the financial regulars.
I think I've taken it too far in that dimension.
So, as we've mentioned a couple of times, there's this big meeting in DC Nextrik, there's gonna be a round table. Incidentally, so Tracy mentioned earlier in the day we interviewed Terry Duffy for an episode 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 gonna meet on Monday. Bro, Like, what should we ask Trek? And he said, I think if I'm getting this right, he said that Kelsey characterized
¶ Social Utility and Regulatory Philosophy
itsself 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.
Well, it's actually incorrect. I mean, I don't know, you know, it's like I mean, I'll be Terry Vice meaning Terry I mean Terry's.
Legend, but like.
We got a license and then a second one. So exhanged, and then the clearinghouse and then the broker license. So the exchange was like in twenty twenty in the in the clearinghouse is twenty twenty four, and then the broker one was in twenty twenty five. There's all approvals, I mean, it's not like you know.
But for instance, the individual contracts that go up to the CFTC, are those each getting approved.
Well obviously not actually dissip right like, and we had to see over it and it was we were clearly right on the log given that we won the district and then the in the appeals court. So maybe there's a separate dimension here, which is also the regular is not always right. But you know, there's a whole other thing there. But self certification is a regime which by the way, CME is also operated within and they've you know,
so from from that specific perpecive for each market. Yes, it's not that every market goes through a perspectus like and the SEC and then gets approved.
It's actually like a disapproval regime.
Yeah, But the CFC has authority to stay things and it's a very broad authority. Right, So maybe it's a good question to see f to see because you know, I can't speak on their.
Behalf, but you can ask them on Monday.
Yeah, I don't know if they'll be on that table. But you know what is the uh, well, we talk to safety all the.
Time, so you know, obviously polymarket is a major competitor to you. What do you see as 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 hit he could see in five years almost everything being on chain, Like do you see that?
Yeah? Maybe? I mean, well it's interesting because Pallly, now I was they're doing.
So there's kind of the on Chaine 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 this sort of they're pivoting to ours basically. That's that's and so our view, jomally is like, well, it's a pretty positive signed for our strategy, probably right, because you know, but but.
Even setting a certain top, well, my boy is like they're regulated.
To me, it's a regulated like front. It's more so okay, there are a lot of benefits. I really believe that, and I think the being on shape, yeah, because like
¶ CFTC Approval and On-Chain Future
one of the ones that I'm less interested in is sort of like skirting regulation like that. 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 twentieth 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 rags and then they close the door behind them, and that was sort of that, and
there's a much more complexity to that. But to me, this sort of whole on chain thing is is it imagine a bit like having given that problem to a bunch of smart, like like hard working developers without any
limits and let them build. Right, Obviously, that's gonna be there's a lot of good that's gonna come out of that, and then there's gonna be some bad that comes out of that, obviously, But like to me, it's like, well, there's a lot of liquity on chain today, so that's something that we should access in at some point.
Two.
I think the clearing side there's a lot of benefits for you know how, like you have to do no ovation, and you have to do immute immutability, and usually right now we do it from a like operational legal perspective, and obviously there's some tech, but aunchin 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 is, and then also more transplancy, like the trades and the transactions are all transplants for everybody to see, and then people can build interesting like UIs and interesting projects on top of that 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 comedies like Robinhood like companies, like a lot of companies are leaning in. I think, well, Cawshi is also leaning in. So I'm pretty scorry about it.
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 Kushi?
You know, right now it's the question I haven't been real 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 way more than we could have possibly imagined, even in the most bullish scenarios, even both post winning the election lawsuit every like, even like December twenty twenty four with like foregus for twenty twenty five, like, there's nowhere near what it is today.
So 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 very deep pipe on a broker, so that's great. And more sports. I think it's the frontier is the sec thing. So I think it's like more markets, like and I think we have a lot of what we want. I think over time is like how do we start doing company with dated prediction markets?
And we're very excited about that.
I just have one last question, and it's kind of a softball. But like after years of fighting all these different battles, regulatory battles, should states, et cetera. Like 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.
It's weird because I don't know if I feel that it's about this year than last year. I mean, Juan and I whly started the company. We really build a company around. I love this book. So have you ever read the book? Like the score takes care of itself.
I don't think it's a great book, but life like everything, honestly, Like I really it's just you know, like so John Woden was of basketball coaches, like most legendary about I mean, the whole thing was always about like never mentioned winning, but training the teams like folks in 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 I would say a few things.
I see, these things are sort of there's good times in 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 then you focus on the new problems.
It would be so much.
The one person 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 twenty twenty, like three going off to our board, you know, like Seicoya and munch of others and 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 of our team over it and like company might die, and actually what we're going to it was a good triple down and sew our regulator now, so you know that was they looked at us and 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 seventh,
¶ Celebrating Growth and Future Challenges
the day we won the election lawsuit, was probably the day I felt happiest.
What did you do when drop the lawsuit?
That was not that important. It was the one where we the appeals.
Yeah, that was important because well I first screamed a lot and like we just like you know, all got hit faced in the office and like you know, you know, it was amazing.
But then you know, then.
We got back to work because were 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 one hundred x overnight, Like it was crazy. And so that was the three weeks away. 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 He's on the election market. I know, if you knew that, it was an intentional decision because like the KPI here is we've got to show the word that these markets work. Yeah, and it's done safely and nothing that 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. What we'll see the shift that's happened in culture where like the level of embracing that's happening with prediction markets now, it's that's that's pretty.
Nice to see.
Plus south Park and south Park.
Yeah, Trek Mansur, thank you than so much.
Thanks having thanks lot, Thanks so much. Guys.
That was our conversation with Turik Monsour, recorded live on stage in Chicago.
I'm Tracy Alloway. You can follow me at Tracy Alloway and.
I'm Joe Wisenthal. You can follow me at the Star Wart. Follow our producers Carmen Rodriguez at Carman armand dash O Bennett at Dashboard in Keil Brooks at Keil Brooks. From our Odd Laws content, go to Bloomberg dot com flash odd Lots with the daily newsletter and all of our episodes. You can chat about all of these topics twenty four to seven in our discord Discord dot slash.
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