Creating prediction markets (and suing the CFTC) with Tarek Mansour and Luana Lopes Lara

**John Huang** (0:01)
Tarek Mansour and Luana Lara are co-founders of Kalshi, one of the new prediction market firms that rose to prominence in the November 24 elections. They spent four years pre-launched fighting for regulatory approval to build the first onshore prediction market in the US, and now trade more than $10 billion each month in prediction contracts.

**Luana Lopes Lara** (0:17)
Cheers.

**John Huang** (0:18)
Cheers to you guys. What is this that we're drinking, Luana?

**Luana Lopes Lara** (0:22)
Brazilian beer.

**John Huang** (0:23)
Okay.

**Luana Lopes Lara** (0:24)
It's our most famous Brazilian beer, I would say. Very light. I don't know if you like it.

**John Huang** (0:28)
I like it. So, what is the split between you guys? Maybe in terms of responsibilities, but more interestingly in terms of outlook.

**Luana Lopes Lara** (0:34)
Well, we actually come from the exact same background. We studied math, NCS at MIT, same internships, everything. But I'm a very, very optimistic person. Love taking risks. I think everything's going to work out. He's very paranoid, more on the negative side. So, it's always like a very good, I think, balance. And I think that real is outside of what we do day to day. That's really the difference between us that works out.

**Tarek Mansour** (0:56)
I mean, there's a little bit of background. So, I was going to be a trader. That was really what I was going to do. And when you're a trader, and you probably, I don't know if you've ever met, or spent enough time with the persona, but it's like a very expected-

**Matt Huang** (1:08)
John is a secret trader.

**John Huang** (1:11)
At heart, yeah.

**Tarek Mansour** (1:12)
But if you're a trader, you're like an expected value calculator. I think about these sort of tail, really bad outcomes all the time. And Luana oftentimes doesn't. And I think this is the thing that actually leads to great outcomes.

**John Huang** (1:24)
Okay, so I want to ask about that starting out, because this is really interesting. You guys started Kalshi and for several years, were not able to operate until you got CFTC approval. And that's interesting where just most companies don't start out that way. And secondly, I feel like the Silicon Valley standard, that people sometimes try out as a criticism, is sort of the PayPal, Uber, early days model, where you start doing the thing and maybe retroactively, a structure is put on top of it, but you do a bit of ask forgiveness rather than permission in the very early days. And so, can you just tell a little bit the story of how you started and that approval process? And then I want to get into whether that generalizes to other companies.

**Luana Lopes Lara** (2:09)
I think that the approach we took from the start was that financial services or health care, I think you can't ask for forgiveness. I think there's a big difference between losing people's money, see what goes wrong, like an FTX example, that can go very wrong. With health care, there's a lot of other massive examples of it going wrong, and we wanted to do things the right way, because also when we look at the market, we thought the biggest question to be answered was not, is this going to grow? It was, can we do this legally in the US? And we were like, let's just actually address the biggest problem first, and go from there. And I think the strategy for a long time, people looked at it as the wrong strategy. I think up until we won the election lawsuit, everyone was saying, the folks that went off shore, they're doing a lot better, they're growing a lot more. But I think once we won the election lawsuit and proved that the legal interpretation we had was right, and we could do the company as we want in the US, I think it just really, really took off.

**John Huang** (3:03)
What are the timelines here? So when did you start and when did you win the election lawsuit?

**Luana Lopes Lara** (3:06)
Right. So we started the company in 2019 We started in 2019 and then it took us three years to be able to get regulated and launch. I think it was up 2022 at that point. Then we won the election lawsuit at the end of 2024, and that's when we really started ramping up.

**Tarek Mansour** (3:24)
There were a lot of like, I mean, there's some overlap between the timelines. Right. But maybe going back to the question and maybe we can talk a little bit more about the service to afterwards. But I think it was like a two-fold sort of, or two-step process. One, it was a pragmatic thing, which is we felt like to get proper mainstream adoption, and institutional adoption, the elephant in the room was like, could we do it in a regulated, credible, and safe way? Because it's a complex marketplace, you're moving people's money, and we have to solve that problem first. That is the hard problem to solve, and that will be the road to success. The second thing was a bit more principled. What excited us, like when we created this stock, one page on Google Docs, and wrote a set of things like, why should we do this company, and why are we so excited about this? We wanted to build the next generation New York Stock Exchange. We wanted to build a financial market that is in the US, that is credible, that is regulated. We were not very excited about this idea of building something offshore.