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Kalshi Founder Interview: Sports Trading Accounts for 95%; Misaligned with Polymarket's Vision

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「The opponent I truly value is none other than: Robinhood, CME, Coinbase, Interactive Brokers, major banks, and Mark Zuckerberg, who is closely watching the prediction market track.」

Original Title: Kalshi's C.E.O. Isn't Interested in Management Advice
Original Author: Jordyn Holman, The New York Times
Original Translator: Luffy, Foresight News

Kalshi is much smaller in scale than many imagine. The company's 200 employees mostly work in an open-plan office in Manhattan's Meatpacking District, not even occupying a full floor of a skyscraper.

However, today, Kalshi and other prediction market platforms like Polymarket are almost ubiquitous.

They are major sponsors of various sporting events, and media outlets frequently reference their data in reporting on politics and financial markets. Users can bet on the probability of various events on these websites: the final score of a soccer match, the results of a new drug clinical trial, or what topics President Trump will mention in a speech.

Founded in 2018, Kalshi opened to the public in 2021, with its founders being two recent graduates from the Massachusetts Institute of Technology: CEO Tarek Mansour and COO Luana Lopes Lara. In May of this year, the company completed a new round of financing, valuing it at $22 billion. Mansour, raised in Lebanon, and Lopes Lara, from Brazil, are estimated by Forbes to be only 30 years old and already part of the billionaire club.

In the United States, prediction markets are regulated by the Commodity Futures Trading Commission (CFTC) and can operate nationwide once approved. On the other hand, gambling companies need to obtain licenses from each state, subject to different regulatory rules. A New York Times investigation showed that the recent reduction in CFTC staffing and enforcement relaxations have objectively boosted the development of the prediction market industry.

The rapid expansion of the industry has attracted a large number of investors and newcomers, including individuals associated with the Trump family: Donald Trump Jr. is an investor in Polymarket and also serves as a paid advisor to Kalshi. Mark Zuckerberg from the Metaverse platform Meta has also expressed interest in the prediction market track.

Some lawmakers and regulatory authorities believe that prediction markets are nothing more than gambling in disguise. The industry also faces insider trading risks: in recent months, a U.S. soldier involved in the capture of Venezuelan President Maduro bet on related events on Polymarket; a White House teleprompter operator placed bets on Trump's speech on Kalshi.

New York Attorney General Letitia James recently sued Kalshi, accusing it of operating illegally and circumventing state gambling regulations. Kalshi has called the lawsuit a "political show" and stated that states have no authority to shut down the company. This year, over a dozen states have introduced regulatory bills targeting prediction markets.

In its latest funding round disclosure, Kalshi reported that the platform's annualized trading volume surged to $178 billion. Mansour believes that allowing people to back their predictions with funds has significant value, helping to "calibrate" (a term he frequently uses) this "information-overloaded yet truth-starved" world.

The following is the content of the interview, with the text edited for readability.

Tarek Mansour

Question: You have previously proposed that one of Kalshi's visions is "Financializing Everything," a concept that many consider to have a dystopian undertone. Why do you think this is a good thing?

I believe people have taken this statement out of context. The allure of the prediction market lies in transforming subjective, emotional, and politically polarized debates into a mathematical, objective system with a clear and transparent incentive mechanism. If you dedicate yourself to in-depth research, rational analysis, and earnestly seeking the truth, you are likely to profit; if your views are biased, detached from reality, or extreme in nature, you are more likely to suffer losses.

This market has a unique sense of order: you can clearly assess the motivations behind others' views. People engage in the game to pursue the truth, with the goal of earning returns.

Question: Currently, a large number of users are participating in sports event trading. How does the trading volume of the sports category compare to other categories in event contracts on the platform?

Indeed, many are enthusiastic about trading sports events. Our users mostly enjoy mathematics, economics, and trading, and are keen on contemplating various variables that influence event outcomes with a probability-driven mindset. Sports events are an excellent training ground for probability thinking.

Question: What about specific data?

Last year, sports-related trading accounted for about 95%, which has now decreased to close to two-thirds. While there are abundant sports events weekly, political events do not appear continuously. Sports trading provides ample liquidity for other categories such as cryptocurrency, politics, and macroeconomics, significantly boosting the growth rate of other segments.

Question: How is the development of the political category progressing?

The market size for major political events can reach $50-100 million. With more participants, the accuracy of market pricing has significantly improved, making expectations more aligned with reality.

Q: Regarding the topic of "Financialization of Everything," what are Kalshi's next steps?

Everything should be done in moderation. Kalshi supports sensible regulation. We have always insisted on a compliant path. In the early days of our startup, we spent years planning to launch categories, striving for federal licensing, a very challenging process. At that time, we were only 22 years old, and the first four years of our careers were spent collaborating with lawyers to push the industry to establish a regulatory framework.

Q: Are you satisfied with the current regulatory environment? Are there any loopholes in the regulatory system?

As long as there is innovation and emerging phenomena, any period of regulation will have gaps. If regulation were perfect, this country would not give birth to new things.

Q: There have been rumors of a strained relationship between you and Polymarket founder Shayne Coplan. Could you shed light on the reality behind this?

Everyone is always eager to see peer opposition. But this does not amount to direct competition. The real opponents I value are elsewhere: Robinhood, Chicago Mercantile Exchange (CME), Coinbase, Interactive Brokers, major banks, and Zuckerberg, who is monitoring the prediction market track. Competing with these players excites me.

Our differences with Polymarket are fundamentally due to ideological disagreements.

Q: What are the specific disagreements?

The core disagreement lies in the development path. Choosing to operate compliantly or grow wildly unregulated. I believe Polymarket has not established a robust market risk control bottom line, which in the long run is not good for them, the industry, or even the industry as a whole.

Q: How can you make the public believe that the regulatory rules Kalshi is pushing to establish truly stand on the side of users' interests?

The continuous growth of the industry itself is a proof of trust. Users are willing to entrust their funds to us. If everyone's interests are harmed, and they no longer trust the platform, they will naturally stop using it and warn others around them.

Q: Is platform trading volume highly concentrated in the hands of a few traders?

I don't have exact percentage data, but the distribution of trading volume is indeed uneven. Some users trade sporadically each month, some treat trading as a hobby or side job, and there are full-time participants, namely super predictors. Super predictors sift through massive amounts of information. This group may account for less than 2% but contribute 70% to 80% of the trading volume.

Our most accurate inflation predictor is just an ordinary person from Kansas; the top ten political predictors also come from various backgrounds, without the Wall Street elite background, many of them are blue-collar workers, which is very interesting.

Q: What measures has Kalshi taken to prevent insider trading?

First, all users need to complete identity verification, and the platform knows the real identity of the traders, enabling quick tracing in case of abnormal trading. Second, we have built a system comparable to the NYSE to automatically flag suspicious trading patterns. Third, we implement a comprehensive transparency mechanism, making all trading data public.

There are pros and cons to this approach. The downside is that everyone can see the trading records, so any unusual activity immediately raises suspicions of insider trading; however, the benefit lies precisely in this: anomalous behavior is scrutinized by everyone. If someone tries to engage in insider trading, it would be like committing a crime in plain sight.

Insider trading is very delicate. In a sense, insider information can make market prices more efficient. But we firmly prohibit insider trading because it undermines fairness and ultimately discourages ordinary traders.

Some economists argue that insider trading can enhance prediction accuracy and actually make people trust market conclusions more. But fairness is the bottom line we prioritize.

Q: The company is expanding rapidly. How do you balance external affairs while focusing on company building?

Luana and I work very intensively, often working overtime on weekends; time can always be made. When the business enters a stable phase, many tasks can be standardized and handed over to the team. She is in charge of internal operations, and I mainly deal with external affairs, and this model has worked well.

Kalshi adopts a highly flat organizational structure, which helps drive projects efficiently. There are very few management layers to prevent managers from taking credit for the frontline employees' achievements. The doers are the team leaders, creating a sense of urgency and intrinsic motivation.

Q: Where does your management style originate from?

Lebanese people generally have a strong adaptability, as the local environment is full of uncertainty. This growth experience has made me realize that the world itself is full of variables.

In the current field of artificial intelligence, there are new changes almost every two weeks, and the environment is constantly changing. Corporate organizational structures must adapt to this pace. Therefore, we deliberately avoid rigid hierarchical structures. Whether facing major challenges or brand-new opportunities, the team can flexibly regroup and collaborate.

Q: Continuing on the topic of growth experiences, what is the most important advice your parents have given you?

My mother always told me: Always give 120% effort and strive for perfection. The difference in the end result often lies in that final 20% of effort.

Rapid Fire Q&A

Q: Which recent Kalshi trade caught your attention?

A: The hashrate price-related contract.

Q: When interviewing a job candidate, what is your favorite question to ask?

A: How do you view Elon Musk?

Q: What is your most unconventional view?

A: I believe the success of any great company is not primarily dependent on its executives.

Q: Do you consider yourself a manager?

A: No, I am not good at managing others.

Q: What is the most recent question you posed to artificial intelligence?

A: I inquired with ChatGPT about the probability of winning the 2028 midterm elections, as AI can now access Kalshi's data for extrapolation.

Q: What is the worst advice young entrepreneurs tend to hear nowadays?

A: Many people advise entrepreneurs to seek various opinions. However, there is no universal formula for entrepreneurship. People overly rely on the opinions of others, and many are keen on directing others to feel a sense of superiority, but most advice is not valuable.