They Made $0 for 4 Years. Then Built a $22B Startup | The Kalshi Story

1. 0:00 – 2:31

   Intro

   1. SPSpeaker0:00

      I disagree that without money you can get the same level of accuracy. A lot of the research, of course, is always in very controlled environments, right? You're getting a very small set of people and you're testing specific things. But when you actually take this into the real world, you're talking about millions of people. Incentives really matter. And that's why when people are putting money where their mouth is, when they're actually putting money behind their convictions, that's why we get the best forecast, because people, at the end of the day, are incentivized to make money. If you ask someone who they think they're going to win an election, there's a lot of research that says that people go, "Oh, of course, this person, like, the, the other person is stupid. This person's definitely gonna win." But when you ask them, "Okay, would you put money behind it?" Then they take a step back and they're like, "Well, I'm not really sure because maybe inflation is gonna make a lot of people vote this other side, or maybe COVID is gonna make people change."

   2. ESEO Studio0:42

      Talk is cheap. On prediction markets, you're able to put your money where your mouth is.

   3. SPSpeaker0:47

      We really wanted prediction markets to exist. We love markets. We love this idea that markets can bring more truth and more objective conversation to a lot of our most important questions. We really want, wanted this to, to exist, to go mainstream, for people to see its power and start utilizing it. And this was essentially the guiding light that in the hardest times kept us going and kept us trying.

   4. SPSpeaker1:06

      In the start, a single day that we call, I think, 60 or 65 Lawyers, and then when we finished the list, we were like, "Wow, none of them said this was possible." [laughs]

   5. SPSpeaker1:13

      We had talked to pretty much any lawyer that would talk to us about this, and, you know, everybody rejected us. This regulatory first approach, you cannot show progress. Other companies in our batch were shipping products, acquiring new users, and growing every week, whereas we had... We were stagnating. So as a company, the only choice we had, if we believe that we were right on the law, if we believe that this should exist in society, is to sue our own regulators, which is what we did.

   6. ESEO Studio1:35

      Forget product market fit. He doesn't have regulatory market fit. There's probably nothing more bold, more ambitious than suing your regulator.

   7. SPSpeaker1:44

      We won. And then I don't remember what happened after that, but I think everybody was screaming in the office and, like, there were chairs flying around and we celebrated that day. It was, it was really great.

   8. SPSpeaker1:51

      It was insane. It w- we got over 2 million customers in, I think, two weeks. Did over 2 billion in volume. We were still a very small team. We were 20, 25 people.

   9. SPSpeaker1:59

      'Cause we scaled 100X overnight, so. [gentle music]

   10. SPSpeaker2:10

       Prediction market startup Kalshi announced on Thursday a $1 billion Series F round, valuing the company at $22 billion. That's double the $11 billion valuation Kalshi nabbed just five months ago after raising a $1 billion Series E.

   11. SPSpeaker2:30

       When

2. 2:31 – 4:55

   From Ballet to Building a $22B Startup

   1. SPSpeaker2:31

      I was very young, around two I think, I started doing ballet classes, and that's was, like, my first big passion was ballet, and I, I started doing it more and more and more and more up until I was doing it professionally. My days were very full. So I would used to wake up at, like, maybe like 6:00 in the morning, eat a little bit, and then go to, to normal, like, technical school. We study math and science and all those things from 7:00 to 12:30. And then I would drive to the ballet school, which started around 1:00 and ended at 9:00 PM. Then I would go back home, 9:30, and then I would actually start studying for whatever exams I had in school or SATs and all those things I had to do. So it was, like, three years that I was sleeping, I think, four, four hours a night. My parents to today make the joke that they don't know how I grew to be a normal height because, you know, in Brazil, we say you have to sleep a lot to be able to grow, and they're like, "You were not sleeping for three years. How did that, how did that work out?" [laughs] Since I was very little, I was always very disciplined and worked very, very hard. I feel like I get a lot of, like, pleasure on working hard, and it makes me feel like it's like I'm doing something with my life, and that's always, since I was very little, I remember that on the discipline side. And the other side is, like, kind of like this delayed gratification side that to me, I liked doing things that were hard and, and painful in a lot of ways because I thought there was gonna be a big reward or something that I really was looking forward in the end. And, and that's why ballet is very, very good, because you rehearse for, like, a year to have one hour on stage, right? So those things, in a lot of ways, I think my personality matched the kind of challenge I was, I was setting myself up [laughs] for. It was... It's a lot easier for me if I have a very clear goal. It was like I wanted to figure out how to both excel in normal school and in ballet, and I wanted to do that, and I know it was around three years I had. So it was kind of like a eye on the target type of thing, but definitely not typical teenager. I remember, like, multiple weekends that I'm like, "Wow, I don't have exams next week. I can just sleep, like, eight hours," and my friends would be going to parties and all that stuff, and it was just definitely not me. [laughs] I only decided I wanted to come study in the US. I ended up picking MIT because I thought it was a school that was gonna take me most out of my comfort zone. But it was very hard transition, first of all, because I used to train a lot every day, and it was a very important thing in my head. When I went to school the first Saturday I was there to- when I went to MIT, I remember going to the Boston Ballet and try to take one class, and I looked at myself in the mirror and I was like, "Oh my God, I'm losing my form. My arm looks bad," and all those things. And I thought it was better to just completely stop it so I could remember myself being very good. So that was very h- hard to, like, go from eight hours a day doing something to not, even though I think it was the right decision.

3. 4:55 – 8:58

   Conviction: 65 Lawyers Said No

   1. SPSpeaker4:58

      So I'm, I'm a big math nerd. I grew up loving math. That was my biggest passion. And I think o- one of the things that happens when you grow up in a, in a country like Lebanon, there's a lot of similar countries that have similar issues, is that everything is very dynamic. Anything could change at any given day. You have to adapt. You become very adaptable, basically. Because one day there's war, one day there's civil war, one day there's bombs, one day the country is doing okay. Lebanese people in general, they're very adaptable. They can change their entire life pretty quickly to adapt to something new that gets thrown at them. And then, two, they, they always smile at life. Like, they got so used to ha- bad things happening that, like, they don't take them too seriously. So you could have a bomb happen during the day, and then Lebanese par- people would party at night. They would not cancel their social plans or anything like that, which is, which is I think a very cool... But I think that, that definitely has c- come with me in founder journey, which is you're gonna get hit hard and there's gonna be new things. As an entrepreneur, there's always new things that get thrown at you every week, every month, and you're gonna have to adapt and then not complain too much about it. Don't take it too, too seriously. You're just gonna have to change the way you're approaching things, and then hope that over a long period of time, if you're doing the right thing, it's gonna work out I was an intern at Goldman Sachs in 2016, and I was very young at the time. I was discovering financial markets and learning about how they work. Two things really surprised me that summer. The first thing was, uh, institutions and investors, what they really cared about was not what is the price of a stock or the price of treasury bonds or other complicated assets. They really cared about whether Brexit was gonna happen or not, whether Trump was gonna win the 2016 election or not. And so at the time, there wasn't a very good way for them to get that exposure. And so for example, when people wanted to hedge against Trump winning the 2016 election, there was this thing called the Trump Trade that Wall Street bought a lot of, and it was basically shorting the S&P on the week of the election. And that was a really bad trade because people were right about their prediction, so Trump won, but then they lost money. This was really one of those moments where that made us think maybe there's a better way. Maybe you could build a financial market that essentially answers these yes or no questions about whether important events are gonna happen or not. Because if you could build that market, it would be a much more precise and direct way for people to get the exposure that they really wanted, which is whether an event was gonna happen. And, you know, so that was the initial idea for the company.

   2. SPSpeaker6:59

      The first time we actually fully talked about it was when we were both working at this prop shop called Five Rings, and we were interning there together, and there was this market-making game that you'd basically make markets on it all day. You'd be, "Oh, what's the market on..." We started connecting a lot of different ideas and different things we've seen at this internship, but also previous ones. And I was like, "Well, when I was at Bridgewater, this was happening with, with this other event, and at Five Rings this was happening there." And that's kind of where we started connecting the dots of all these different kind of like Kalshi, Kalshi behavior we were seeing, and thinking about it's insane that there isn't a legalized, great, big prediction market in the US that's liquid and you can trade on everything. And that's really the first time that we thought about it. It was the winter of, um, maybe like 2017 or 2018 that we, like, put everything together, um, into kind of really the, the Kalshi idea. In the start, there was, um, a single day that we called I think 60 or 65 lawyers, and we just had a spreadsheet, and we're like, "Well, let's see. Let's see. Maybe the lawyers will, will add some clarity here." We had a list of 60 lawyers, and we're like, "Tarek, Luana. Tarek, Luana. Tarek, Luana. Who is gonna call who?" And we called everyone. And then when we finished the list, we were like, "Wow, none of them said this was possible." [laughs]

   3. SPSpeaker8:04

      Then Luana, through multiple contacts, got to Jeff. The first call we had with Jeff, he didn't say no, but he said all the reasons why this wouldn't work and how hard it is to get a regulated exchange and then a regulated clearing house, and all the difficulties that will be ahead of us. And then he also explained that there's rules. There are 23 core principles that you have to, uh, prove that you are satisfying to become a regulated exchange, and they're very hard to do, and it takes a long time. We took those rules, and we didn't have much context, but it was a Thursday night, and then by Monday we had a full analysis, Luana and I did it, the two of us by ourselves, on how we would create this entire system that would abide by those 23 rules. And I think when Jeff got that, he realized we were very serious about this. He was like, "These people, yes, they wanna build product and commit, committed to it, but they understand that there's a long regulatory journey they're gonna have to take, and they're probably going to be able to balance those two things together." And so he got excited about, you know, joining and helping us make, make this happen. Uh, and I think that was a very big early win for us.

4. 8:58 – 12:40

   Legitmacy: Four Years to Earn the Right to Launch

   1. SPSpeaker9:01

      We were started talking more about should we actually try to do this? Should we actually build this company? It was in the summer when we were both working at Citadel. And one of our first things was, "Well, why don't we just try to go to this Y Combinator hackathon?" You know, it's like where these massive companies like Airbnb and whatever, they all go there, so let's try. We presented, and we had kind of like this very janky demo that kind of ... It was stable coin based at the time, and you had to like ... It did moves place A to place B, but it was kind of only this in a very simple user interface. And the first thing he said was, "That's illegal." And then we're like, "Well, but maybe we can figure this out." And, and he's like, "Well, then why haven't other people done it?" And we didn't really have a good answer for any of that.

   2. SPSpeaker9:37

      Yeah, I definitely remember the moment. And when we were first really deciding whether to start a company and, and, and how to start it, this moment was very foundational because this was the time when, as a company, we decided to define one of the most important principles of the company, which is we're going to do everything regulatory first. We're not going to launch. We're not going to market. We're not gonna build product. We're not gonna do anything up until we figure out the most important thing for, uh, the company to exist, which is how do we legalize and regulate this, and how do we create an ecosystem that is safe and transparent for customers? And that has informed everything we have done at Kalshi till today.

   3. SPSpeaker10:11

      And I think that YC kind of... Michael Seibel actually says this to today, that he's like, "This sounds insane, but these two kids from MIT sound really motivated, and we should give them a try." When we were in YC, every other group in our batch had week over week, like, metric growth, and they were like, "Well, we grew 20%. We're making this amount in revenue. We're, we're new users and building this product." And our entire journey was we talked to these lawyers, and the next week we're like, "We talked to these other lawyers." And the other week is like, "We filed this document," and all of that. So it was a very different YC experience, for sure.

   4. SPSpeaker10:41

      We were stagnating. There was no real progress because we were just talking to regulators and writing legal documents and figuring out policies and procedures, all the stuff that entrepreneurs usually don't wanna deal with. It's kind of the unsexy parts of, of building a company. And it was even more hard because our, some of our competitors launched and did it offshore without the license, without really this regulatory, uh, structure that we were seeking. And I would say that was the hardest part of the path. It's not necessarily the period of time or the work itself. It's just the fact that you cannot make real tangible progress. But we were very committed to it. We did not wanna launch unless this was 100% regulated. It goes back to how we started the company. We, we were not necessarily looking for ideas to start a company. We, we started the company because of this idea. We were a bit different. So there are sometimes teams that start, and they, they pivot, and they look for a bunch of different ideas to decide which one is the best one to, to work on. We were committed to this idea from the start. And so my answer here is that we really wanted prediction markets to exist. We love markets. We love this idea that markets can bring more truth and more objective conversation to a lot of our most important questions. And we really want, wanted this to, to exist, to go mainstream, for people to see its power and start utilizing it. And this was essentially the guiding light that in the hardest times kept us going and kept us trying.

   5. SPSpeaker11:52

      Nowadays, it's very hard to find very good and reliable data sources for what's actually true and happening in the world. It's very hard to know if, uh, what I'm seeing on Twitter, is it right or is it bots, or who is writing this? What prediction markets do is that they kind of, like, take away the noise, and you can really look at a, like, forecast that's come from millions of people putting money on the line and putting money where their mouth is to really see, "I believe this is going to happen. I have a lot of conviction." And, and kind of aggregating all of that to see, to see the future. So even if people are not trading in the markets, actually, the most important part of these markets is the single point of data, the price that comes from these markets, which can benefit anyone, and I think that's the most important. If there's one thing people know about prediction markets, I really hope they, they know that if they wanna know anything about the future, it is the best way to get- A correct, unbiased forecast.

5. 12:40 – 19:21

   Payoff: Four Years of Fighting. Four Weeks to Scale 100x.

   1. ESEO Studio12:43

      I take hundreds of meetings a year. My first meeting with Tarek really stands out. We were in Caffe Lyria, which is this hipster coffee shop in New York City. It was really crowded. We could barely get a seat. We were s- surrounded by people. I'm thinking to myself, "No one [laughs] around us has any interest in this conversation." I meet Tarek for the first time. Forget product market fit. He doesn't have regulatory market fit. Part of the reason that meeting stood out so much was he's telling me this story of how he's suing his regulator. We love to back ambitious founders, bold founders. There's probably nothing more bold, more ambitious, suing your regulator.

   2. SPSpeaker13:28

      They blocked it a lot of, a lot of times, so we try to engage with them for over two years on, like, the usual process that we have for new markets. And we talked to them about the use case of this market. We actually had a public comment period that were 200 people, including very, very big academics, like head of the Council of Economic Advisers. All these folks wrote in saying, "These markets are very important. You should allow these markets to operate here, and just regulate them so that they're safe."

   3. SPSpeaker13:51

      And then we realized that, I think, working with the regulators or trying to convince them wasn't going to work. But we didn't decide to list it like competitors. We stayed committed to the regulatory first principle. So as a company, the only choice we had, if we believe that we were right on the law, if we believe that this should exist in society, is to sue our own regulator, which is what we did. It was a very difficult decision. It's very hard for a company, especially a startup, a small company, to sue the part of the government that oversees you, because they have all the power over you. But we decided to make this decision regardless, because we really believe that these markets should exist.

   4. SPSpeaker14:20

      And it was a very hard decision, because four years for us to get regulated, and we were kind of putting that in jeopardy in a way by suing them. Because we're basically saying... Like, we're, we're trying to really, like, okay, we're, we're fighting. I [laughs] very officially fighting, uh, in court, um, at that time. And but it was two things that really mattered to us. One, these markets are the holy grail of prediction markets. They should be legal. They should be regulated. They should be in the US. They're very important. And the other side is we knew we were right on the law. We ended up winning, actually. Every judge that looked into our case, uh, ruled in our favor on the district court and in the appeals court. For two weeks, and then when we won, it was amazing. The next day, the government's like, "We're going to appeal this. We are extremely against. I think this decision is wrong." And then the stress all came back up. Okay, so now we have to go through the entire appeals court and process. Is it gonna be done in time? 'Cause at that time, we are, like, two months before the election. Maybe there was a chance that we're gonna run out the clock, and we would lose the 2024 elections, even if we won the lawsuit. So then it was one month of, like, we had this one big hearing on the appeals court and the state, um, pending appeal. And I remember it was like, both Tarek and I, we, we listened to, to the court hearing at the, at the time, and we were just pretty much only listening to this one recording of, [laughs] of the court and, and trying to, like, get the company to keep moving and building things and all of that in case we won. But in our heads, we were like, "This is the most important thing ever." We weren't being able to focus on anything else or sleep or eat or, or anything like that. But after we, we won, I think it, it was, like, at 1:00 PM, and we were extremely happy. It was like, okay. But then next day, we have to launch this market. And then we're going through, like, the... We're gonna go through actually the most intense period ever, because it's four weeks for us to go from a small niche website that not a lot of people know about what are prediction markets, to hopefully one of the most important things in the 2024 election and one of the most important data sources.

   5. SPSpeaker16:02

      We won, we won, we won, we won. These moments are great, because it's part of what a lot of entrepreneurship is about. You get frustration after frustration and no and disappointment after disappointment. But then all of these are counterbalanced by these very short moments where you get big wins. And those big wins make the whole experience totally worth it, because, you know, you put so much effort, and you see results. Yeah, those moments, I think it's, uh, it's important to try to celebrate them. But, but it's also important for us, at least, we, we don't try to celebrate them for too long. We celebrate them for a bit, and then we go back to work, because then you have the next milestone. We're lucky enough that we got this win. We have to now make it count, and we have to figure out how to scale the product, bring in the customers, make the election market count. And we only had a month to do that, so we celebrate for a few hours, and then we got back to work.

   6. SPSpeaker16:40

      One of the very tricky things about Kalshi is that a lot of our story is tied to very external factors that we don't have control over, right? So it's the government, it's a lawsuit, it's this, this, and that. But it was one of the first times that actually it was fully in our hands how big it was going to be and if we were gonna win or not.

   7. SPSpeaker16:55

      We felt like we had fought so hard, you know, for years to get to that, to get the chance to be able to do these markets. We felt like it was our shot. We, we cannot mess up that shot. We have to deliver. So we decide, like, you know, for, for this whole month, our entire team, and it's not just Luana and I. I think we oftentimes get, get disproportionate credit, because a lot of the real work was basically the team. It was the engineers, the product, markets, the marketing. Everyone was just like, for four weeks, put their life on pause. They will be close to 24/7 in the office in the weekends, just completely committed to making this thing work. It was really hard, because we scaled 100X overnight, and that's not easy for systems to sustain and a team to sustain. But we, you know, we had a very small team that made that happen.

   8. SPSpeaker17:34

      It was insane. It, we got over 2 million customers in, I think, two weeks. Did over 2 billion in volume. It was crazy. We were having... Everything engineering-wise was kind of breaking, right? We've never gotten that many deposits, like ever, in the years of the company. And everything was kind of breaking. But yeah, it was like the, the, the numbers, the result that we got in the end, it was actually... We even would have grown a lot more, but the problem was that our deposit flows and sign-up flows were breaking because of the amount of people coming in that we had to kind of, like, almost, like, slow down.

   9. SPSpeaker18:01

      So the hardest thing that happened is, at the time, there are two key pieces to running a financial market. There's the exchange and then the clearinghouse. The exchange is the marketplace that matches buyers and sellers. The clearinghouse is the place that handles all the money movement, like how much money you have to put up to back this trade. Where does the money go? How do you keep it safe? We, at the time, had the Kalshi exchange, and we were using a third-party clearinghouse. We had just gotten approval for our own clearinghouse, so to stop using the third party. But we were not ready to use our own clearinghouse at the time. The issue is when we won the lawsuit, and this was really unfortunate, the third-party clearinghouse decided to block the election market. They did not wanna let us list it. And so the hardest thing we had to do in that weekend, and we knew we had only four weeks left, so we had to do it really fast, is basically move all of our business from the old clearinghouse to the new clearinghouse. And usually, you do this over the span of a s- of, of a six-month window. You plan it. There's a lot of different things that go into that movement. It's very complicated. It's a very big migration. And we had to do it over a weekend, because otherwise we wouldn't be able to do the election market. So it was a very disappointing situation, but we made the most out of it. And honestly, the engineers had done an incredible job navigating that. But that was definitely the hardest part, uh, of the month. That was very, very difficult.

   10. ESEO Studio19:12

       If you look at the 2024 election, Kalshi was able to call the results before the media. You were able to see live probabilities

6. 19:21 – 24:02

   Signal: Not a Casino. A Market for Truth

   1. ESEO Studio19:21

      throughout the night. And so long before it was declared that Donald Trump was the 2024 winner on mainstream media-

   2. SPSpeaker19:31

      The question of whether prediction markets are betting or gambling is very similar to the question of whether financial derivatives are gambling or betting, and that has always been a question, uh, historically that has happened in financial markets. And the reason this question exists is because there is speculation in financial markets, and speculation can look, in some, uh, cases, like a bet. It's like you're putting money to make more money on something you don't control. But there are key differences. One is, are you participating in something that is a natural risk? It exists in the real world. It is tangible. You know, people care about it. Versus, like, rolling a dice that has no... You know, it's an artificial thing that you're creating for the purpose of, uh, betting. The second core, uh, pillar of this, the market structure. In gambling, the market structure is you walk into a casino or a house. The house's revenue is equal to the customer losses. There is inherent conflict of interest in the business model, 'cause the company benefits when their customers lose. Prediction markets, just like traditional financial markets, like the New York Stock Exchange or other places, yes, the underlying is different. Like, what you're trading on is different, but how you're trading or how you're participating is the same. It's an open marketplace, it's fair, and people are trading against each other. So the market is neutral. The market doesn't make more or less money if their customers lose. It's more of a fair and transparent place for people to participate. And that's why it makes it, you know, a financial market, and makes it kind of structured or, or a place in a, in a very different way than traditional, you know, betting or gambling places.

   3. SPSpeaker20:51

      I disagree that without money you can get the same level of accuracy. A lot of the research, of course, I come... My background is in academia, so a lot of the research is always in very controlled environments, right? You're getting a very small set of people, and you're testing specific things. But when you actually take this into the real world, you're talking about millions of people. Incentives really matter. And that's why when people are putting money where their mouth is, when they're actually putting money behind their convictions, that's why we get the best forecast. Because people, at the end of the day, are incentivized to make money. And you see a lot of it as, like, the decrease of polarization, right? If, if you ask someone who they think they're going to win an election, there's a lot of research that says that people go, "Oh, of course, this person. Like, the, the other person is stupid. This person's not gonna win." But when you ask them, "Okay, would you put money behind it?" Then they take a step back and they're like, "Well, I'm not really sure, because maybe inflation is gonna make a lot of people vote this other side, or maybe COVID is gonna make people change." So it kind of decreases polarization. But it's the whole point about money being the incentive to bring truth and information to markets, which you can't have if, if you don't have it.

   4. ESEO Studio21:47

      Prediction markets cut through the noise. They're the true signal of what's happening. If you think about social media, it's qualitative opinion. If you think about prediction markets, it's quantitative conviction. Talk is cheap. On prediction markets, you're able to put your money where your mouth is.

   5. SPSpeaker22:05

      Regulation means a lot of different things, but I usually bucket them into two main pieces. One is market integrity, which means fairness. Is the market fair? And then number two, customer protection, which means, like, clarity and transparency. And if we find that people did something wrong, it's the same as the stock market. We can do a fine or we can refer to the government for a criminal prosecution. If someone commits insider trading on Kalshi, it's the same as insider trading in, in the stock market or other places. And this is all structured, all these different rules are structured so that you get... Like, you get a marketplace that is fair. And then the customer protection piece, it's really all about making sure you're treating all your customers the same way, that everything is transparent. So all of the trades, we have a duty to make all of our trades and activity publicly available so that everybody can see it, and we report to the government. We cannot have discriminatory access. We have to give the same rights and same obligations to everybody else, which is one other thing that's very unique about financial markets or Kalshi, where, like, you cannot, for example, block the winners and then promote the losers so that, you know, if somebody wins on your platform, you s- you block them, like some of the gambling sites do. And if somebody loses money, you basically figure out how to get them hooked. You cannot do these types of things on a regulated exchange, because it has to be neutral.

   6. ESEO Studio23:11

      The biggest misconception about prediction markets is they're just around sports. It's all about sports. And sports is a meaningful portion of prediction markets, 10X. But non-sports today has 300 to 400 million of weekly volume. That translates to 15 to 20 billion annualized. And while everyone talks about sports and it's growing so fast and it's so much of the volume, if you were to just look at non-sports, it's growing really fast too. It's growing 5X year over year. These markets cover economics, like where are interest rates going. Politics, who's gonna be the next president? Who's gonna be the Fed chair? Culture, who's gonna win the Oscar? Even the weather, how many inches is it gonna snow in New York next week? But these other categories are growing really quickly, and in the next few years are gonna represent meaningful portions of the volume.

7. 24:02 – 28:40

   Edge: Where Knowledge Becomes a Market

   1. SPSpeaker24:05

      So, uh, my name's Joel. I am a full-time prediction market trader and content creator, only for the last six months, so still very new to this. I trade a variety of markets, but I'm most well known for mention markets, which are markets on what someone will say in a speech, and within that, even more so focused on kinda Trump speeches. Being an accountant and following, you know, companies very closely, loving to read, like, a 10-K or a 10-Q, and I realized that, like, I can't really compete the, the equities market, right, in terms of, like, picking stocks or something like that, because who is my counterparty? Who am I up against? It's gonna be a hedge fund or, uh, just a much more sophisticated investor. So seeing prediction markets was a huge draw to me, because I'm like, "Okay, here's something that I believe is very inefficient for the time being," and that's why it was a natural draw, is I felt like I could get an edge, I guess. Made in the past year just over, uh, 200K trading. But since going full time back in end of September, uh, I've made about 170,000 in the last five months or so, uh, trading. When I'm trading, I'm doing heavy kinda research. Like, for, for Trump, um, I'm looking at, you know, as many historical speeches that he's given to kind of try to gain an edge of what is this guy gonna say. I'm very, very in tune to talking points of the administration. As new news is breaking out, how is this gonna impact what he's gonna talk about in his next speech? I will watch every single one of Trump or Mamdani or Powell, every single one of his speeches. So the intuition I've been able to build up over kinda what he's gonna talk about on a given day, and then staying very, very in tune with what's happening around the world and how that's gonna impact talking points. Uh, have, uh, a database that I use of historical speeches for, for anyone that I'm, I'm trading in. So I'm not gonna, like, re-watch all of his past speeches, but any time he's gonna go live for a speech, I'm always watching it. It started as a very kinda quantitative thing, where you're looking at historical speeches, things like that, and it's evolved into a lot more intuition-based, where I just know I can trust my intuition when it comes to someone like Trump, because I've watched hundreds of his speeches.

   2. SPSpeaker26:03

      I'm Brandon Feen. I'm a 25-year-old in Bucks County, Pennsylvania, and I am a public school teacher. I teach sixth graders at an elementary school and direct the school plays. So I have $150,000, um, that I've made from Kalshi. I just hit that milestone today. I went downstairs to my parents and I said, "Mom, Dad, I just made, like, $8,000." And I'd been very quiet about Kalshi, like, beforehand 'cause I wasn't having success with it. Ever since I was in eighth grade, I have studied the music charts. I have over-analyzed them. I've tracked them in the little notes app on my phone. Travis Scott was selling CDs for his single, Four By Four. If you copied the HTML page source and you looked in the code of it, you could actually see the inventory for how much was stock. I bought very low stakes, paid out of $8,000. That was crazy that just looking at the source code of a website that's public to everyone, you can just hit source code, it's right there. I made $8,000 off one click.

   3. SPSpeaker27:09

      My name is Shannon. I work at Kalshi in operations, and I am originally from Alabama. I started trading on Kalshi back in 2021. I went to school for meteorology, and so some friends that I went to school with had said, "Did you know that you can trade on high temperatures?" And I thought that was super interesting. My first deposit was $50. From there, I mean, it was just kind of like, let's see what happens with this. Uh, I rode out Hurricane Ivan back in 2004, Hurricane Katrina in 2005, Hurricane Michael in 2018. I have a lot of experience with tropical storms, tropical cyclones, hurricanes, things of that nature. I think it's really important from a climatological perspective to utilize those weather markets in a way that is almost like insurance. But whenever I did live on the Gulf Coast, my homeowner's insurance deductible for a hurricane was over $10,000. So essentially, i- if a hurricane were headed to my house, the way I would hedge that is with buying yes, that a hurricane would hit. So let's say that that's at 10 cents. I take $1,000 and put that on yes, that a hurricane is going to hit. So if I bought 10,000, I'd get $10,000, so a $9,000 return. I would then use that to pay the homeowner's insurance deductible to recover things, you know, from the loss from the hurricane at my house.

8. 28:40 – 31:10

   Scale: From Niche Market to Global Infrastructure

   1. SPSpeaker28:40

      Well, I think the company has grown a lot since we last spoke. I mean, I think the, the way that consumer marketplaces work is there's network effect aspect to them. They compound over time. It's a bit like an exponential, and the exponential, things grow, but you don't really notice that growth up until it starts getting to big numbers and all of- and then an exponential basically becomes big, very big very quickly. Um, and I think that's what happened with Kalshi. In the last two years, I think the company has gone mainstream. We've grown a lot in size. Significant per- percentage of Americans now are active on the product, whether they're trading actively or they're getting informed about the forecasts. They use it a bit like a newsfeed, and I think we now have a global recognizable brand. One of the places that we really wanna invest in is essentially defining what the brand stands for and explaining to people who we are, who we're not, what we want to do, and what we wanna achieve, and I think there's a lot of work to, to be put on the brand, basically explaining to people what that brand means. We wanna go international. We wanna diversify our customer base, and you know, we feel like we're in a very, very early inning of people using prediction markets actively. Even though the numbers have grown a lot, I think they could really grow significantly more. You know, we get into basically every corner of the internet. If you have an interest or a passion or you care about something, there will be a market that you can relate to or engage with or you can get informed about. Because that's whole, the whole vision. The whole thing was people feel like Wall Street is rigged against them. Most people don't relate to the stock market or understand options or, or complicated financial instruments, but they read the news. They follow trends. They are on X. They care about politics. They care about culture. They care about sports. And this is a market where they can find a place for topics that they're passionate about with other people that have the same similar passion and then, you know, debate on their opinions about these things. So we, we have a long way to go.

   2. SPSpeaker30:14

      We really want to go more into the institutional use case. When we started the company, it was the idea of Kalshi and how we, how we first encountered this, this type of Kalshi behavior was in institutions, right? It was in a Goldman Sachs, a Bridgewater, Five Rings, a Citadel. And for us, it's kind of full circle. We actually... That is where we wanna really land. It's, like, these extremely liquid markets that everyone from retail to a massive institution and bank is trading on. And I think that in five years, if we're very successful, I think that prediction markets are the size of the stock market. The participation of, like, the types of users participating in it are similar to that, and it's just a very more, a way more mature market. But yeah, I just hope Kalshi grows even, even more. [laughs] [gentle music]

Episode duration: 31:10