Forecasting the Future with Kalshi: America’s First Regulated Prediction Market

**Sarah** (0:05)
Hi, listeners, and welcome back to No Priors. Today, I'll be talking with Tarek Mansour, co-founder and CEO of Kalshi. Kalshi is a recently CFTC regulated prediction market exchange that's changing how people forecast future events, like the upcoming US election, the weather, the date of arrival of AGI, and the jobs report. Tarek started Kalshi after studying at MIT and working at Citadel and Palantir. We'll discuss what a prediction market is if it's a threat to democracy. Building a regulated exchange and how Kalshi fits into the broader financial ecosystem. Welcome, Tarek.

**Tarek Mansour** (0:40)
Great seeing you, Sarah. Thanks for having me.

**Sarah** (0:42)
It's going to be a super exciting small number of weeks before the election. Can you please explain to anybody who hasn't been on it yet, what is Kalshi?

**Tarek Mansour** (0:50)
Kalshi is actually the first legal platform in the US where you can basically bet yes, no on any future questions. The thing that's really cool is like we basically create a financial instrument where the thing that you're actually buying or selling or trading or betting on is not a stock, it's not a bond, it's not a commodity like oil. It's something more intangible. It's actually whether an event is going to happen or not. So on Kalshi, you can basically buy shares of whether it's going to rain tomorrow, whether TikTok is going to get banned, whether Eric Adams is going to get fired as New York mayor, or whether Donald Trump is going to win the next election.

**Sarah** (1:20)
Okay, cool. I feel like the easiest way to get a sense is like, let's make a trade. I'm going to share my screen. Okay, here I am. You got Kalshi?

**Tarek Mansour** (1:29)
Yes, it's kalshi.com/elections. This is actually our live election forecast page. You can see that Trump is up 55-45 right now, and 19 days left. So we'll see how that evolves. You can go. Yeah, I think you're clicking. So this is the election market. I'm actually going to let you figure it out.

**Sarah** (1:49)
No, no, no. I understand here. I think Trump at 55%, that feels underpriced to me. Let's go in on it. $267. Oh, I got, I have 150 in cash. I'm going to go all in on this. It feels like a trade I want to make. Let's see. What happens? Market closes when the outcome occurs. Two hours after closing. I'm ready.
Did that just happen?

**Tarek Mansour** (2:23)
Yeah, it's done.

**Sarah** (2:25)
Oh, wow. Okay. Wow. You're going to bankrupt me. This is too easy.

**Tarek Mansour** (2:28)
Yeah. I mean, it's pretty cool, right? So I think like the cool thing about this is like, you can actually also sell it before. So if you click on Donald Trump right now, you can see your position or on the, yeah, right here. And then you can see your position. You can actually exit it if you want to. So you can sell at 55 if you want to. You should now. But so right now, obviously, if you sold it directly, you'd just be paying the spread, paying the bid-ask. But if things move, if his odds go up in a few days or tomorrow or whatever, you can sell it at a profit. The other thing that's actually really cool, and we launched this just now, is now you have a bet on Trump, you also only get paid interest on that bet. So it gets deposited in money markets in US treasuries, and you get paid 4.1 percent interest while sitting there waiting. And so it's cool because usually people say like, hey, these are kind of zero-sum type things, like you either win or lose, whereas in here, whether you win or lose, you're getting paid interest while waiting.

**Sarah** (3:25)
Excellent. I will go deposit more of my total wealth given money market accounts now. You recently were involved with a long-term kerfuffle with the CFTC to get regulated trades on political events. So you've been at this for I think six years as a company?

**Tarek Mansour** (3:47)
Yeah, five and a bit, yeah.

**Sarah** (3:49)
Five and a bit, okay. It's a totally insane thing to try as a startup to go up against the CFTC. Can you talk about that?

**Tarek Mansour** (3:58)
We hold two core beliefs. I think one, prediction markets have the potential to be the next large thing in financial markets. I do genuinely think that like, you think about it from first principles, like people like to take exposure on things. They like to speculate. Sometimes, they want to hash. Or it could be either betting or hedging.
But it feels like the current instruments are a bit like, you have things like, okay, you have stocks, that's fine. You also have options and futures. They're all just so loaded. It's so Wall Street-y and people don't really care. But if you think about prediction markets, what they do is they achieve a similar sort of urge, or I think they're talking to a similar market, but instead of these kind of traditional, boring financial instruments, you're taking positions on things you care about. Like I have a view on the weather, I have a view on climate, I have a view on AI, which a lot of people have a view on now. And then you can basically take a stake in that. So I think that one, they're going to be very big. I think so. And then two, I have yet to see a financial market that has gone really big without being properly regulated. I have yet to see that in history. It's always like you have to do it legally safe, compliant. So our core approach from the start is like legal and safe and compliant and trusted first. A bit like Coinbase, how Coinbase approached crypto. And I've always liked their approach. And so before we launched anything, we spent actually close to three years getting regulated upfront by the CFTC. So we've written a lot of the regs. We actually spent literally 14 to 16 hours a day for a year and a half doing nothing else other than writing law and regulations for how prediction markets could be regulated in the US. And we got it done with the CFTC and we got approved. So we were the first actually market in history that actually could do prediction markets and legally in the US. So that was one, step one.