Valuetainment - November 02, 2026


Kalshi vs. Casinos： The War Over Prediction Markets

250 Employees, $22 BILLION： Kalshi CEO Reveals His Secret to Building an Empire Kalshi’s Weirdest Markets： Taylor Swift, Goats & Onions

Episode Stats


Length

26 minutes

Words per minute

226.87

Word count

5,902

Sentence count

537

Harmful content

Misogyny

3

sentences flagged

Toxicity

1

sentences flagged

Hate speech

2

sentences flagged


Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
Toxicity classifications generated with s-nlp/roberta_toxicity_classifier .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:00.000 Who hates you?
00:00:01.260 Who is the enemy?
00:00:02.600 Is it the casino?
00:00:03.280 Yes, because-
00:00:03.780 Who were the top three enemies of you?
00:00:05.420 In the casinos.
00:00:06.840 Mainly casinos at the top?
00:00:07.620 I mean, like some, yeah,
00:00:08.560 because I think that they are the ones
00:00:10.140 that are pushing the states to come after us
00:00:11.700 and because they want a monopoly on this too, right?
00:00:13.800 Like that's how, you know,
00:00:15.080 that's a model that's more transparent.
00:00:18.060 It's healthier, but also it's a market.
00:00:20.940 Like, you know, institutional,
00:00:21.940 we have institutional clients
00:00:22.800 that are using Calci signals,
00:00:25.000 but also using it to hedge against different events.
00:00:27.960 You can now use a sportsbook
00:00:28.920 to hedge against different events.
00:00:30.000 Like, that will never happen.
00:00:30.880 Yeah, so we were doing an event in Las Vegas,
00:00:33.040 and I don't know if this got to you or not, MGM Grand Arena.
00:00:36.420 We got the big vault conference.
00:00:38.600 And while we're doing that, all of a sudden, last minute,
00:00:40.680 they're like, you can't have Calci here.
00:00:42.120 We're like, what does it have to do with anything?
00:00:43.960 Censors.
00:00:44.280 Calci cannot be a sponsor. 1.00
00:00:45.600 I said, Calci can't be a sponsor.
00:00:46.660 No, they can't.
00:00:47.680 I said, Cal, it's our sponsor.
00:00:50.440 No, you can't have Calci in here because Cal.
00:00:53.100 So what is the feud with an MGM in Cal?
00:00:55.640 There's one monopoly on this, too.
00:00:56.720 I mean, some industries, you know,
00:00:57.880 don't want more transparency into something.
00:01:00.000 you don't think they want more transactions?
00:01:02.740 Yeah, because think about it.
00:01:03.880 Like if we have an open market
00:01:05.980 where winners can win,
00:01:08.160 actually that incentivizes people to do research
00:01:09.940 and get better at the thing.
00:01:11.740 And now it compares to the model
00:01:12.800 where like every time you do a little bit of research,
00:01:14.740 you get punished for it.
00:01:15.300 You get kicked out of the casino.
00:01:16.400 What does that tell people?
00:01:18.440 Actually, oh, I'm getting really screwed with these odds.
00:01:20.980 These odds are terrible. 0.65
00:01:22.180 They're giving me bad odds.
00:01:24.080 And then also they want a monopoly on any market.
00:01:25.800 It's big business now.
00:01:26.660 And they feel like, oh,
00:01:27.200 we should have a monopoly on this too.
00:01:28.620 That's the age old question.
00:01:29.560 Why do the taxis go after Uber?
00:01:30.740 Is it because Uber was worse for a customer?
00:01:33.780 No, absolutely not.
00:01:35.120 It's never what this is about.
00:01:37.920 It's never about, because I'm actually, you know,
00:01:40.640 and by the way, this issue of young men and addiction,
00:01:42.500 I think it's a very real issue.
00:01:44.220 And I've been always saying, the beauty of cash is,
00:01:46.220 I don't make money of the people that are like losing money
00:01:48.200 and getting addicted, et cetera, as much as the DraftKings does,
00:01:51.100 because, you know, the sports books,
00:01:52.980 they're betting against those customers, and so they need them.
00:01:54.620 They keep getting more of them over time.
00:01:56.860 The prediction markets, if somebody is losing all the time,
00:01:59.560 they're losing it to somebody else.
00:02:01.620 And so in my view, I always tell the federal government,
00:02:03.660 it's like, if you're worried about customer protection,
00:02:05.340 let's regulate this and let's put sensible guardrails
00:02:08.060 where like people that are using it
00:02:09.640 in a way that's dangerous for them
00:02:10.800 and irresponsible and irresponsibly,
00:02:13.180 we use tools to add friction to their accounts
00:02:15.140 and make sure that we're giving them,
00:02:16.240 hey, you lost a lot, relax, stop.
00:02:19.380 Maybe you have to take a pause.
00:02:20.540 Maybe you have to exclude yourself and move on.
00:02:22.640 Guess who is the most against those types of things?
00:02:25.720 Casinos.
00:02:26.200 For sure, because those are the most profitable customers.
00:02:27.980 Interesting.
00:02:28.300 And those are the people that are coming out publicly saying, oh, you know, the prediction markets are the issue with young men.
00:02:32.160 Prediction markets were never the issue with young men.
00:02:33.360 How much money did they lose to you?
00:02:36.460 I don't think they are.
00:02:38.440 Because 70% to 80% of our volume is a sophisticated multi-monitor.
00:02:42.600 They're doing modeling.
00:02:43.480 They're doing all this sort of thing.
00:02:45.420 Those guys are banned from the casino anyways.
00:02:47.740 The smart traders cannot be in the sports book.
00:02:50.220 You said 80% of them only have a public school diploma, right?
00:02:54.760 Yeah, yeah, yeah.
00:02:56.140 I'm saying this is a separate stat.
00:02:57.640 80% of people that are like, the volume that comes from, 80% of the volume comes from a small percentage of people that are very, that are doing very highly, like a lot of research, a lot of analysis.
00:03:06.260 Got it.
00:03:06.540 So the 24% or the banking, well, they know what they're doing.
00:03:09.700 These guys are in the space.
00:03:11.420 Yeah.
00:03:11.620 And those guys, the point is like, it's not a high percentage, as you'd imagine.
00:03:15.000 People would think, oh, but it's not.
00:03:17.240 It's actually 50% of our customers worked in retail.
00:03:21.160 Okay.
00:03:21.640 So one of the, yeah, that's very, that's absolutely amazing.
00:03:24.660 But so it's like anyone can like if you put the effort, you can win.
00:03:29.320 Now, look, not a lot of people put the effort.
00:03:30.900 A lot of people just do it on the side or define effort.
00:03:33.280 Yeah.
00:03:33.560 Like research, time, energy.
00:03:36.300 You have to read a lot about what's going on in Texas.
00:03:40.040 Who's voting how I'm going to break down the different demographics.
00:03:43.140 Like you have to get deep the same way that you get deep on a stock.
00:03:47.140 If you're a bank, if you're a bank analyst and Morgan Stanley, what are you doing all day?
00:03:51.780 You're doing quantitative analysis, qualitative analysis.
00:03:53.840 You're doing surveys, you're polling, you're researching the stock.
00:03:57.260 Is the product going to work?
00:03:58.260 You're asking customers, do you like the product, do you hate the product?
00:04:00.220 And then based on that information, you go and say, oh, I think the stock is overpriced
00:04:03.580 or underpriced, and you trade based on that.
00:04:05.600 And that's how you make money.
00:04:06.340 You get rewarded by the open market for that information that you brought.
00:04:09.780 That's the same thing that's happening here.
00:04:11.640 But you're doing it on a much broader set of things.
00:04:13.400 Is inflation too high?
00:04:14.340 Is this sports team going to win or not?
00:04:16.300 And that provides us a public good that is this bottom-up, people-driven forecast
00:04:22.160 of what's going to happen in the world.
00:04:23.840 So I asked the question here.
00:04:25.000 I said, how much money have casinos lost to Calshi?
00:04:29.200 I'll read it to you.
00:04:29.980 You can pull up the same question and see what it tells you.
00:04:32.800 How much casinos have already lost?
00:04:34.720 In a January 2026 analysis by Citizen Estimates,
00:04:38.540 that prediction markets have diverted approximately 5% of legal sports betting volume.
00:04:43.680 This translates to $8 billion in annual betting volume redirected to prediction markets.
00:04:49.880 Approximately $800 million in potential annual sportsbook revenue,
00:04:53.360 assuming a 10% sports book hold.
00:04:56.460 $1.3 billion in potential state gaming revenue for taxes
00:05:00.180 diverted since 2025.
00:05:02.180 Does that sound about right?
00:05:03.760 I don't think so.
00:05:05.180 You think it's smaller?
00:05:06.420 Yeah, I mean, like, the CEOs of DraftKings and FanDuel
00:05:08.720 in their quarterly earnings said that there's less than 1%
00:05:11.080 cannibalization from prediction.
00:05:12.560 They've said this.
00:05:13.240 And they're right about that, yeah.
00:05:14.860 So why are they so worried about you?
00:05:16.280 You know, there's a message, like, in the casino, by the way,
00:05:19.040 and this is certainly true for casinos.
00:05:20.200 Like casinos, no one is deciding to go and trade on Calci versus like going with their buddies and have a few drinks at the casino.
00:05:27.460 If anything, actually, the people that we cannibalize, if we really did that study, we're cannibalizing Robinhood and like NASDAQ and like people that are like in the financial markets that like now have another financial tool and a financial instrument, but on things that they relate to.
00:05:41.840 Because a lot of people, when they trade in options on zero data expiry options on S&P or NASDAQ, they think they don't have an edge against the big Wall Street guys.
00:05:53.020 Whereas this is the same thing.
00:05:54.200 You're buying and selling.
00:05:54.820 You're trading in an open marketplace, but on things that you may have an edge.
00:05:57.600 People read the economy.
00:05:58.540 People read politics.
00:05:59.320 People like the weather, and they do studies on the weather.
00:06:01.400 I mean, our best, by the way, there's some analysis.
00:06:04.260 An independent school did a study on our weather markets.
00:06:07.260 It showed that it's 10% more accurate than the weather stations.
00:06:10.920 Think about that.
00:06:11.840 we're 10% more accurate than the weather stations
00:06:14.040 at predicting the weather.
00:06:16.580 And that's because of our customers.
00:06:18.080 Like they're doing all sorts of crazy analysis
00:06:19.960 on weather patterns, et cetera, that do it.
00:06:21.500 We just did an ad with Shane Gillis on this.
00:06:23.820 I don't know if you saw it.
00:06:24.800 People loved it.
00:06:26.500 Is that one with Peyton Manning or no?
00:06:29.080 It was the one with Shane Gillis and Danny McBride.
00:06:31.760 Which one is this?
00:06:32.540 It came out on Friday.
00:06:33.980 It's fun, but it's, you know,
00:06:36.020 it's a whole skit about how Shane-
00:06:38.740 This guy?
00:06:39.420 They're both meet her up.
00:06:40.280 Oh, yes, yes, yes.
00:06:41.840 And then Danny McRod keeps getting them, you know, they're both weathermen,
00:06:45.560 and Danny McRod keeps getting it right, and Shane gets it right.
00:06:49.300 Two phenomenal guys to get to do this.
00:06:51.820 They're a lot of fun.
00:06:52.960 Yeah, so the DraftKings CEO, Jason Robbins, in August 2026 said only 1%,
00:06:57.760 and he also said 80% to 90% of prediction markets volume in states with legal sportsbook
00:07:02.620 came from professional traders and institutions.
00:07:06.040 He's exactly right.
00:07:06.740 Rather than traditional sportsbook customers.
00:07:08.920 And he's right.
00:07:09.400 So then why do they hate you?
00:07:11.140 Then why do they...
00:07:11.920 He's right.
00:07:12.480 I mean, we're not just about them.
00:07:14.160 It's the broader casino
00:07:14.920 because I think that casinos feel like
00:07:16.340 they should also get a monopoly on this.
00:07:18.400 Are they in the space or they're not in it yet?
00:07:20.400 They want to get into it.
00:07:21.660 It's too late for them.
00:07:22.500 It's always interesting.
00:07:23.160 A lot of these guys, the casinos,
00:07:25.400 first they came to us
00:07:26.280 and they were figuring out
00:07:27.380 if there's a way for them to get into it.
00:07:28.680 Then they realized they're too late.
00:07:30.200 When did they come to you?
00:07:31.060 First time?
00:07:31.920 18 months ago.
00:07:33.620 And then what did they say?
00:07:34.380 Can we work together?
00:07:35.160 They were figuring out
00:07:35.700 if there's a way for them
00:07:36.600 to get into the space, et cetera.
00:07:37.980 And a lot of them realized
00:07:38.900 that they were late.
00:07:40.140 So what do they do?
00:07:40.680 They're like, let's litigate.
00:07:42.560 It's always litigate, legislate,
00:07:43.820 and then when you finally realize
00:07:44.720 that this is here to stay
00:07:45.480 and the consumers have adopted it
00:07:47.500 and they don't want to change it,
00:07:48.980 you finally innovate.
00:07:50.320 But the state versus federal
00:07:51.700 is never about customer protection.
00:07:53.160 They're trying to ban prediction markets.
00:07:54.840 Why?
00:07:55.200 Because prediction markets,
00:07:55.940 why are markets regulated at the federal level?
00:07:58.780 Why is New York Stock Exchange regulated at the federal level
00:08:00.620 or the grain futures,
00:08:01.500 even though states want it to regulate as gambling?
00:08:03.780 Because you need a large global liquidity pool.
00:08:06.220 You need a large diversity of participants.
00:08:07.500 Imagine having 50 New York stock exchanges where in Oregon you can only buy Tesla stock from someone in Oregon.
00:08:15.660 That wouldn't make any sense.
00:08:16.880 You wouldn't be able to get them as much as you want.
00:08:18.200 You would get worse prices.
00:08:19.580 It would be completely inefficient.
00:08:20.920 It's the complete opposite of free markets, right?
00:08:22.920 If free markets get everybody on a uniform set of rules and have people in Texas trade against California,
00:08:28.560 how would we even get our prediction if the person in Texas,
00:08:31.280 if the people in California are the only ones trading against Californians for the Texas election?
00:08:36.060 It would never work.
00:08:37.500 Is it too late for them?
00:08:38.940 Because if you think about the language learning.
00:08:41.420 I'm of the view that you should always innovate
00:08:43.060 because even if you're late in the market.
00:08:45.360 Do it anyways.
00:08:46.180 Yeah, the market is always big.
00:08:47.780 I'm a positive sum thinker, right?
00:08:49.800 And if they wanted to get,
00:08:50.400 but I think it's a bit different
00:08:51.460 because the professional traders,
00:08:52.460 they're not going to really,
00:08:53.100 they don't abide by the traditional casino or sports book.
00:08:56.320 Like my biggest competitors
00:08:57.480 are like Robin Hood and Goldman over time.
00:09:00.200 And my customers, because the customers are the same.
00:09:01.960 Those professional traders that Jason's talking about,
00:09:03.640 he's right.
00:09:04.360 80, 90% are coming from professional traders
00:09:05.860 and he's right about that.
00:09:06.640 because those are traders that otherwise are trading in equities and commodities.
00:09:11.840 Would you get into their space or you're not touching what they're doing?
00:09:14.120 I'm not doing it.
00:09:14.840 You have no idea how to get into what casinos are doing.
00:09:17.160 No, no, no. Gaming is different.
00:09:18.360 Gaming is not you.
00:09:19.060 Gaming is completely different.
00:09:19.960 So what is the upside?
00:09:20.760 Because there's no price discovery coming from it.
00:09:22.360 So then what's the upside for Calgary?
00:09:23.460 I'm building the modern-day financial market.
00:09:25.860 That's what I'm building.
00:09:26.960 I'm building the next-generation CME, the Chicago Board of Trade,
00:09:29.880 because historically what we had – why do derivatives markets exist?
00:09:33.220 They give us a predictability about an industry.
00:09:36.240 And once that industry matures,
00:09:37.340 it needs instruments to manage that unpredictability
00:09:39.920 for lenders, for certainty, for investment.
00:09:43.140 How do we start?
00:09:43.880 We start with grain futures.
00:09:44.740 Why?
00:09:45.340 100 years, 150 years ago.
00:09:46.620 Because the American economy was primarily agriculture.
00:09:49.680 And we moved into industrializing.
00:09:50.860 So what do we get?
00:09:51.920 Oil futures, metal futures,
00:09:53.860 things that are basically inputs and outputs
00:09:55.620 of the industrial phase.
00:09:57.600 Then we move into interest rate swaps
00:09:58.920 and interest rate futures and credits
00:10:00.880 and all these other indices, S&P futures.
00:10:03.460 Why?
00:10:03.640 Because banks and the services sector
00:10:05.440 started growing. Financial services
00:10:07.360 became bigger. And to me, Calci is a
00:10:09.420 generalization of that. It's like, do we believe there's economic
00:10:11.460 impact from politics, from sports,
00:10:13.780 from weather, from all these
00:10:15.500 different things? Certainly. And do we need an industry
00:10:17.380 to help predict the risks around
00:10:19.440 those different industries? For sure, over time.
00:10:21.500 And that demand is going to only grow.
00:10:23.400 And Calci is in some ways generalizing the stock market.
00:10:25.240 Who would Calci take business away from? If it's not
00:10:27.540 sports gambling, who would it be?
00:10:29.340 I believe these things tend to be more additive than people
00:10:31.320 make it out to be. You think so? Yeah, I think so.
00:10:33.200 Because, like, liquidity begets liquidity.
00:10:36.060 So when I add, so, okay.
00:10:39.220 There's a farmer in California a month or two ago.
00:10:45.840 He's in the goat herding business, the goat herder.
00:10:48.720 He has 3,000 goats.
00:10:49.800 Why do these goats exist?
00:10:51.500 They eat the grass that usually leads to wildfires, okay?
00:10:55.220 And that farmer, you know, he had a risk,
00:10:59.500 which is that there was a bill in the legislature in California
00:11:01.420 that was going to up goat herding wages from $70,000 to $40,000.
00:11:05.440 drive him out of business
00:11:07.200 because he can't afford these
00:11:07.960 70 to 240
00:11:09.340 more than 3x
00:11:10.880 more than 3x
00:11:11.540 so he's going to drive him
00:11:12.140 out of business
00:11:12.460 because how could you
00:11:13.000 afford his wages
00:11:13.600 he went to insurance companies
00:11:15.740 can you please
00:11:16.660 underwrite this risk for me
00:11:17.600 what'd they say
00:11:18.400 no
00:11:19.320 there's no way
00:11:19.920 who is in the business
00:11:21.380 of underwriting
00:11:21.760 these different risks
00:11:22.600 they came to us
00:11:23.680 can you list the market on it
00:11:24.740 like certainly
00:11:25.240 within two hours
00:11:26.600 the market started trading
00:11:27.620 we have a bit
00:11:28.420 you know again
00:11:28.820 30 million cost
00:11:29.280 we have a hive mind
00:11:29.980 that can you know 0.96
00:11:30.420 price it
00:11:30.720 it says there's 10% chance
00:11:32.340 of this thing happening
00:11:32.880 if you search for goat herder
00:11:34.860 You'll see it directly.
00:11:36.260 Yeah, first one.
00:11:39.680 And then he bought $50,000 at 10%,
00:11:43.260 which pays out $500,000 if the bad thing happens
00:11:45.720 as a hedge, as insurance.
00:11:47.160 And it happened, and he got paid $500,000
00:11:48.640 that he's now using to diversify his business
00:11:51.040 and stay afloat for another 18 months.
00:11:53.360 He put 50K on Cal, she made a half a million dollars.
00:11:56.360 As a hedge. 0.98
00:11:57.120 As a hedge, yeah.
00:11:57.800 Because now he has to pay all the different,
00:11:59.320 so he's offsetting some of the additional costs.
00:12:02.100 Who are we taking business from there?
00:12:04.300 Nobody.
00:12:04.740 we're bringing liquidity
00:12:06.700 to a much larger set of things
00:12:08.420 that wouldn't have been liquid otherwise
00:12:09.740 like when a sports business
00:12:11.440 a bar or a marketer
00:12:13.060 comes up and puts a hedge on Calci
00:12:14.360 to hedge themselves against sports risk
00:12:15.780 what is the alternative historically
00:12:17.480 like going and doing on draft kings
00:12:19.060 they were never going to do that on draft kings
00:12:20.100 it doesn't make any sense
00:12:20.900 they need a financial instrument
00:12:22.380 that is traded in an open market
00:12:23.840 where people are going to compete
00:12:24.800 and provide them competitive bids and ask
00:12:26.800 competitive pricing
00:12:27.580 so they can book it on their financials
00:12:30.060 as a financial instrument
00:12:30.860 and like place that hedge as a real hedge
00:12:32.480 and so it's a new market
00:12:34.520 that's being created
00:12:35.200 that basically
00:12:35.880 creates more opportunities
00:12:39.500 to price risk
00:12:40.220 and manage risk.
00:12:41.000 Who is an enemy?
00:12:42.560 Who is not happy
00:12:43.940 with Cal Sheet?
00:12:44.600 I think we talk
00:12:45.320 about the casinos.
00:12:45.860 I think the other one
00:12:46.400 is I generally feel
00:12:47.740 at my core
00:12:48.160 like elites
00:12:48.780 will always not love it
00:12:50.160 because I think
00:12:51.420 that's really
00:12:52.000 what we're over.
00:12:52.900 Like 80% of our customers
00:12:53.840 active,
00:12:55.760 they don't trade.
00:12:57.280 So if 30 million customers
00:12:58.140 that have trading accounts
00:12:58.980 but really close
00:12:59.840 to 100 million in America
00:13:00.660 that use it for the forecast.
00:13:01.840 You see it,
00:13:02.340 Fox, CNN,
00:13:02.860 you see it,
00:13:03.520 the campaigns
00:13:04.080 are all using Kalshi.
00:13:06.100 What's the problem?
00:13:06.660 80% use it,
00:13:08.100 but don't trade on it.
00:13:08.880 They use it for the information.
00:13:09.860 They use it for the information.
00:13:10.780 That's the public good
00:13:11.320 that comes out of markets.
00:13:12.920 Would a sportsbook be able to say
00:13:14.340 80% of my customers don't?
00:13:15.460 No, there's no use to it.
00:13:16.620 What is the information
00:13:18.020 that you're getting out of sportsbook?
00:13:19.380 Right?
00:13:19.920 But that's what markets do.
00:13:20.680 They surface information to people.
00:13:22.620 But here's the key thing about it.
00:13:24.740 Elites will never love these markets 0.96
00:13:26.340 and they'll always attack us. 1.00
00:13:27.280 That's why we often get attacked
00:13:28.420 in the press, et cetera,
00:13:29.140 because it's the first time
00:13:31.320 that information is flowing
00:13:32.680 from people bottom up.
00:13:34.860 There's no gatekeepers.
00:13:35.860 There's no elite.
00:13:36.380 We're not listening to a handful of people telling us here's the truth and he's not what's true.
00:13:40.720 We don't have gatekeepers of the truth.
00:13:42.320 The truth here is being produced by millions of American people putting money where their mouth is, having skin in the game.
00:13:48.300 Okay.
00:13:48.600 So how about a fanatics?
00:13:50.920 How about a Robin Hood?
00:13:52.000 How about state gaming regulators?
00:13:54.080 How about those guys?
00:13:54.880 I think it's – look, I think we always say like we're happy to engage.
00:13:58.280 Like I always tell states it was never about – if people want to tax us, people say, oh, we're avoiding taxes.
00:14:03.520 It's not at all true.
00:14:04.220 I've always told states,
00:14:05.120 if you want to tax at a sensible rate,
00:14:06.540 I'm actually not the type
00:14:07.440 that is completely against taxes.
00:14:08.700 I'm fine with it.
00:14:09.580 Let's come to a reasonable deal.
00:14:12.620 This is a very fast-growing industry.
00:14:14.000 And look, if there's ways
00:14:14.820 where we can promote more education
00:14:16.580 and fund education resources
00:14:18.340 or education in general or healthcare,
00:14:20.140 I'm all for it.
00:14:20.780 Actually, that's my personal view.
00:14:22.020 I'm a free markets guy and I love capitalism.
00:14:24.360 But at the same time,
00:14:24.860 I think things are a little bit too out of whack.
00:14:26.140 There's too much wealth inequality right now.
00:14:27.360 We have to adjust it a little bit
00:14:28.460 to make sure we bring in more people into the system.
00:14:31.280 I think when people are out of the system
00:14:32.380 and they're sitting on the sidelines,
00:14:33.460 it's normal that over time they're going to bubble up feelings that they don't like the system
00:14:36.920 because, you know, if I was out of the system, I wouldn't like it either, right? And so that's my
00:14:41.380 view. And then if there's really, if people are worried about consumer protections, if we feel
00:14:44.580 like there's not, and I'm a pro-regulations guy, I think there needs to be sensible guardrails
00:14:47.820 around any market. Why? Because you need to make sure that it's fair. If a marketplace is not fair,
00:14:52.520 there's corruption in the marketplace, what happens? People stop trusting it. Why would you
00:14:56.140 ever participate in a marketplace that is not fair, where the guy on the other side may have a knife
00:14:59.960 and you don't, right?
00:15:00.840 Like, that's unfair.
00:15:02.340 And so I'm a believer in regulation
00:15:03.640 and tell states, look,
00:15:04.640 let's have a good faith discussion of,
00:15:06.300 if you think there's a,
00:15:07.460 if you think that we are regulated
00:15:08.380 the federal,
00:15:08.840 we spend the first four years
00:15:10.100 getting regulated.
00:15:10.880 But if you think there should be
00:15:11.500 additional consumer protections
00:15:12.500 in your state,
00:15:13.120 let's have a conversation about that.
00:15:14.240 We're open to it.
00:15:15.040 As long as it doesn't hamper
00:15:16.700 on the free markets principles
00:15:19.000 of a federal regulated exchange.
00:15:20.540 Are you in all 50 states right now?
00:15:22.640 Except for Nevada,
00:15:23.600 which you can,
00:15:24.080 makes sense.
00:15:25.080 You know,
00:15:25.320 they got to court.
00:15:26.100 Do you think you'll ever
00:15:26.920 will get in there?
00:15:27.580 I think, you know,
00:15:28.320 it's bubbling up.
00:15:29.000 There's some litigation
00:15:30.160 There's litigation that's going on,
00:15:31.260 and I think we feel very good about the way
00:15:33.680 that this needs to be regulated.
00:15:34.640 It's federal.
00:15:36.040 And I think there's a bit of kind of,
00:15:37.860 I think there's some confusion,
00:15:39.240 plus the casino lobby is doing a lot of work right now.
00:15:42.260 Interesting.
00:15:43.000 How about Polymarket?
00:15:44.900 Look, I think I like competition.
00:15:46.680 I think competition is great.
00:15:48.300 And we have competition from Polymarket.
00:15:49.540 We have Robinhood.
00:15:50.500 We have the big banks.
00:15:53.220 They've announced they're getting into the prediction market space,
00:15:55.120 which is exciting.
00:15:55.820 I mean, we just announced a partnership with the S&P,
00:15:57.780 which is the largest.
00:15:58.400 And the NBA.
00:15:59.360 And the NBA.
00:16:00.400 But I'm excited about S&P because it's the largest financial data provider on the planet.
00:16:05.260 And I think the difference I have with Polymark is we took a regulatory first approach to building the business.
00:16:12.480 I wanted to build it in America, the American exchange, and pro-regulation, regulate it first.
00:16:16.860 And I got regulated as a financial market and have all the right rules around banning insider trading
00:16:21.220 and banning market inflation, making sure miners are not on the product,
00:16:24.560 all the kind of sensible guardrails that it needs to be.
00:16:27.460 And I spent the first four years doing that.
00:16:29.020 right, they just launched offshore and then started growing before.
00:16:31.960 And you remember this.
00:16:33.000 A few years ago, Polymarket was the brand.
00:16:34.440 It wasn't Calci.
00:16:35.100 I remember that clearly.
00:16:36.400 But I was so committed to the regulatory first and doing the right thing.
00:16:38.700 And they didn't, right?
00:16:39.620 And they didn't.
00:16:40.100 Something happened, yeah.
00:16:40.500 That's, I think, the philosophical misalignment we have
00:16:43.300 because that's why you start hearing about the insider trades
00:16:45.880 that are going on police.
00:16:46.980 They have markets on war, and now they're stopping,
00:16:49.880 but they used to have them.
00:16:51.500 They don't verify customers,
00:16:52.760 and so all these bad things started happening,
00:16:54.260 but that wasn't us because we were doing it under the right umbrella
00:16:56.580 with the right consumer protections and the right guardrails.
00:16:59.920 But, you know, because it's a nascent industry,
00:17:01.500 people commingle us.
00:17:02.320 People think it's the same.
00:17:03.660 But, you know, there's an American regulated market
00:17:05.240 and there's an offshore market
00:17:06.300 that was not really abiding by rules.
00:17:07.700 Now they're coming in and abiding by rules,
00:17:08.920 which I think is a good thing.
00:17:09.700 Like, I hope they do more and more of that.
00:17:11.700 But as long as you have the right sensible rules,
00:17:13.760 I think you need more competition.
00:17:15.380 Competition pushes us to get better.
00:17:17.160 And so I hope over time that they really embrace
00:17:19.520 doing things the right way,
00:17:21.100 which I think they're starting to.
00:17:21.880 Is there anything different between the two of you today?
00:17:24.360 Oh, for sure.
00:17:24.920 I mean, we're regulated.
00:17:26.440 They're not.
00:17:27.100 They're still not.
00:17:27.540 I mean, a lot of it is not.
00:17:28.660 and then we ban insider traders and we police it.
00:17:31.400 We verify our customers when they're coming in.
00:17:33.000 We have consumer guarders on if people are doing, you know.
00:17:35.400 I think any of these products, there's some irresponsible use.
00:17:38.700 Losing is not bad.
00:17:40.560 Competition, some winners and some losers, you know.
00:17:42.520 Like you don't, when somebody loses in the NBA,
00:17:44.960 you don't go give them a trophy.
00:17:46.420 Like that's how it works.
00:17:48.280 What's bad is like irresponsible use and addiction.
00:17:50.800 Those exist on prediction markets.
00:17:53.780 They exist in gaming, but they also exist in Robinhood
00:17:56.760 and they exist in the financial markets, right?
00:17:59.440 How many times do you hear about a guy
00:18:01.820 who lost his shirt on trading options in the open market?
00:18:04.620 It's very common.
00:18:05.760 And you need to regulate that.
00:18:07.420 You have to have sensible guardrails
00:18:08.700 on making sure that, look,
00:18:09.780 I believe people should make their own decisions,
00:18:10.980 but you have to give them warnings.
00:18:12.020 You have to say, look, you're getting off your skis.
00:18:14.340 You're doing more than you should.
00:18:15.520 Here's all the friction
00:18:16.220 that we're going to add to your account.
00:18:17.700 Make sure that you look at how much you're losing.
00:18:19.980 Make sure to use these risk management tools
00:18:22.240 and diversify.
00:18:23.420 You're going a little too crazy.
00:18:24.960 And I think it's important to have these guardrails
00:18:27.080 because otherwise you're going to have some of the irresponsible users
00:18:29.380 because it goes unregulated, and that's not a good thing.
00:18:31.900 Now, but with you guys and Polymer,
00:18:34.000 is the NBA teamed up with both of you or just Cal Sheet?
00:18:37.460 I believe they teamed up with both of us today,
00:18:39.380 which I think is good because it's the league saying.
00:18:41.960 How does that happen?
00:18:42.560 How does it happen to team up with them?
00:18:43.620 It happens.
00:18:44.380 I mean, these big leagues have multi-partners,
00:18:46.340 and they do it with broadcast.
00:18:47.540 Within the same space.
00:18:48.280 Sometimes they do it with broadcast, right?
00:18:49.460 You do broadcast deals with two different.
00:18:51.040 Right, right.
00:18:52.020 I think it's important because one of the key things
00:18:53.760 important about that. What are we going to see as a founder? Are you going to see Polymarket and
00:18:56.880 CalShe? Oh, it's more complicated than that. Yeah, I mean, we have different teams that we
00:19:00.880 partner with, et cetera. But the key pillar of that, actually, partnership, that usually people
00:19:04.860 don't talk about that. That's really what's important about this partnership. We're very
00:19:07.120 excited about them. It's not the marketing. Marketing is a piece of it. It's the market
00:19:10.640 integrity piece. Because now, what we have at NHL, we have at MLB, we have now at the NBA,
00:19:16.400 is a data sharing agreement to police the bad actors. And that's what's important. Because
00:19:21.800 market integrity is one of the foundations of a free market. I always say this, what's the opposite
00:19:26.380 of free market? It's corruption. Free markets and corruption cannot coexist, right? Why? Because
00:19:33.040 free markets has a requirement of a free, open, and fair competition. The competition needs to
00:19:40.600 be fair. Some people have access to special rules. It's not a fair competition, and nobody's going
00:19:45.060 to participate. It ruins the competition. And so markets have to work. If they have to work,
00:19:50.800 they have to be fair
00:19:51.460 and so what we do
00:19:52.620 with these leagues
00:19:53.100 is like we
00:19:53.580 for example
00:19:54.000 we ban athletes
00:19:54.740 from trading on the league
00:19:55.560 we have a bunch
00:19:56.320 of market integrity
00:19:56.940 and game integrity measures
00:19:57.920 which is like
00:19:58.320 if we ever catch
00:19:59.280 an athlete
00:19:59.760 that was trying
00:20:00.200 to do something weird
00:20:01.340 they're going to get punished
00:20:02.920 and they're going to get
00:20:03.360 criminally indicted
00:20:04.020 do they currently do it?
00:20:05.200 they do it on the sportsbooks
00:20:06.360 in general
00:20:07.020 most of the cases
00:20:07.800 that happen
00:20:08.100 not with you guys
00:20:08.760 we have a very stiff regime
00:20:10.420 around policing that
00:20:11.080 how do you find it?
00:20:11.740 how do you identify it?
00:20:12.300 a few things
00:20:12.580 so one
00:20:13.260 customer verification
00:20:15.240 and by the way
00:20:15.620 it's the same thing
00:20:16.000 with elections
00:20:16.460 so actually
00:20:17.460 if you open the senate race
00:20:18.300 in Texas
00:20:18.700 or you know
00:20:20.740 either any of these races in the elections yeah if you go down a little bit a little bit more
00:20:25.140 uh slightly more slightly more uh a little bit more i'll tell you when no that other market
00:20:31.840 yeah but if you scroll down so a little bit more i'll tell you when stop right slightly
00:20:39.220 a little bit lower lower lower a little bit lower okay if you look at here insider trading is
00:20:45.760 prohibited you open that those are all the people that are not allowed to trade on this market
00:20:50.060 to people that are involved
00:20:51.860 in the campaigns.
00:20:53.120 And so who are these?
00:20:54.020 These are the people
00:20:54.520 that have insider information.
00:20:56.780 And you want to police them
00:20:57.720 and you want to ban them
00:20:58.320 out of the system.
00:20:59.160 And we do that.
00:20:59.880 We actually,
00:21:00.500 if our systems,
00:21:01.340 when you do the customer verification flags,
00:21:02.720 okay, this person might be involved
00:21:03.700 in that campaign.
00:21:04.120 So we ban them proactively.
00:21:05.700 Now what people do is they,
00:21:06.860 you know, when you want to,
00:21:08.200 if you have a cousin at Tesla
00:21:09.260 that wants to trade
00:21:09.780 on insider information,
00:21:10.500 what do they do?
00:21:10.800 They don't do it themselves.
00:21:11.880 They give you the information
00:21:12.720 so you trade on it.
00:21:13.420 How do you catch them?
00:21:14.560 We use the same systems
00:21:15.360 as the NASDAQ.
00:21:15.940 We have actually a partnership
00:21:16.600 with the NASDAQ
00:21:17.300 and a bunch of other systems.
00:21:18.500 It's the same system.
00:21:19.160 So what happens is there's a suspicious pattern.
00:21:21.820 And when we look at a suspicious pattern,
00:21:22.820 we're on investigation.
00:21:23.780 A third of our team is like compliance.
00:21:25.640 Those guys have investigatory-
00:21:26.960 A third of your team is compliant.
00:21:27.980 A lot, yeah.
00:21:28.420 So how many compliance people do you have?
00:21:30.320 We have now, I mean, over 50, 60.
00:21:32.240 I mean, it's, and like the compliance market regulation lawyers,
00:21:35.680 and they are basically in the business of like,
00:21:38.120 they look at these flags that the system brings
00:21:40.020 and they look at a case, who is the person,
00:21:41.500 how they trade, why they trade.
00:21:42.800 And then if they find that there's something wrong,
00:21:45.080 it goes from fines, all the way, criminal prosecution,
00:21:47.100 We can refer to the DOJ, which we have.
00:21:49.340 We've referred, you know, George Santos to the DOJ.
00:21:51.620 What happened there, by the way?
00:21:52.400 Something happened with that story.
00:21:53.260 He tried to manipulate the market, and we caught him immediately.
00:21:55.300 You know, the other thing that's great about prediction markets,
00:21:56.900 there's not more inside trading on prediction markets than the stock market.
00:21:59.520 What's great is it's all transparent.
00:22:02.640 All the traders look at it, and they say, hey, something is weird here.
00:22:05.940 Oh, they tell you.
00:22:06.960 For sure, because all the traders are transparent.
00:22:09.440 And, like, when somebody cheats against you, you're incentivized to say, hey, somebody cheated.
00:22:12.720 And so when we look at it, like, okay, well, there was cheating here,
00:22:14.940 and, like, we're going to enforce it.
00:22:16.080 It's like a crime.
00:22:16.720 It's financial crime.
00:22:18.140 How do you police crime long-term?
00:22:20.000 You catch it, and then you heavily punish it
00:22:23.160 so you deter the next person from doing the same thing.
00:22:25.240 And that's what we do.
00:22:25.840 That's what the New York Stock Exchange does.
00:22:27.280 The difference in prediction markets is, like,
00:22:28.380 I think there's more insider trading in the stock market
00:22:31.720 than the prediction markets.
00:22:32.620 The difference in prediction markets is we catch more of it
00:22:34.040 because it's so transparent.
00:22:35.360 Tell me why.
00:22:36.480 All the trading activity is transparent.
00:22:37.760 Everybody can see it.
00:22:38.500 So is it kind of like a decentralized, like, on Bitcoin
00:22:41.340 where you can kind of see what's going on?
00:22:43.160 We're not decentralized.
00:22:43.940 We just, like, show all the trading activity publicly.
00:22:46.660 And then it's so obvious.
00:22:47.720 If something is trading at 10%
00:22:50.220 and all of a sudden somebody is buying it in bulk,
00:22:52.680 you're going to look at that.
00:22:53.580 Why are you buying it at 10%?
00:22:54.920 What do you know?
00:22:56.060 What happened here?
00:22:57.560 Who are you?
00:22:58.700 Who'd you call?
00:22:59.380 What is the piece of information?
00:23:00.180 Do you reach out to them?
00:23:01.440 Our investigation team replied.
00:23:04.000 Are you getting faster?
00:23:05.740 I want to put a stop to it so it doesn't manipulate.
00:23:07.440 Yes, we're very fast on it.
00:23:08.360 We immediately banned the account.
00:23:09.500 But here's the key thing.
00:23:11.360 Instead of trading cases on your construction,
00:23:12.660 they take time to bring.
00:23:13.600 Why?
00:23:13.920 Because you have to bring a real case.
00:23:15.180 are standard in America, which is a good standard.
00:23:17.160 It's innocent until proven guilty.
00:23:18.820 So you have to establish a fact pattern and go through due process.
00:23:21.660 You have to go through the courts and then show that you...
00:23:25.380 I mean, sometimes people settle.
00:23:26.380 They say, I'm sorry, I did the wrong thing.
00:23:28.020 Let me know what I need to do.
00:23:29.260 And a lot of people do that.
00:23:30.320 A lot of people decide to fight it.
00:23:31.920 And there you have to...
00:23:32.720 What happened with Santos?
00:23:34.580 I don't remember, honestly.
00:23:35.720 I think he's decided to fight it.
00:23:37.040 I forgot.
00:23:37.480 Or he paid the fine.
00:23:38.260 I'm not sure.
00:23:38.800 I completely forgot, to be honest.
00:23:39.980 Or life after a prediction market company found he misled public about whether he would
00:23:44.920 We fined him $72,000.
00:23:47.240 And then Cal Shea is going to impose a financial penalty.
00:23:49.380 You guys fined him $72,000.
00:23:51.100 Which is way more than he made, yeah.
00:23:53.120 Wow.
00:23:54.240 And then when we make those fines, we give them to like a nonprofit
00:23:59.040 that basically like works on educational resources around like insider trading
00:24:02.120 and like training people to business.
00:24:03.780 So you don't even take that money?
00:24:04.560 You give it to the charity?
00:24:05.920 Yeah, yeah.
00:24:06.740 Very cool.
00:24:07.300 I mean, you know, we now hire like a bunch of FBI, ex-FBI agents
00:24:11.120 and forensics experts to police the markets because they're very good.
00:24:14.280 You almost have to, right?
00:24:15.800 Yes, yes.
00:24:16.640 You know, it's systems.
00:24:17.740 People ask me, are you done?
00:24:19.140 No, because it's like cybersecurity.
00:24:21.480 Are we ever safe from cybersecurity?
00:24:22.800 You know, like fraudsters get better at circumventing the defenses,
00:24:25.340 and so the defenses need to keep getting better.
00:24:27.140 What role does AI play in CalShift for you guys?
00:24:30.160 We use a lot of AI.
00:24:30.880 You know, I mean, it's amazing, honestly.
00:24:33.320 It's truly amazing how much, like, productivity gains you can get.
00:24:37.940 And look, I think I've been thinking about this a lot,
00:24:42.340 Like how much AI is being used in traders?
00:24:44.780 Like are they using AI?
00:24:45.800 And what I've seen is I talk to our top traders.
00:24:48.060 It's AI plus human that is their best strategy.
00:24:51.200 So the AI lets you code faster,
00:24:53.240 lets you summarize information better,
00:24:54.880 but the layer of human judgment is necessary.
00:24:58.600 Because I think AI, what it does is it memorizes all of our past.
00:25:03.440 But you know how there's an idiom,
00:25:04.480 which is like past performance in the financial markets
00:25:06.560 are not indicative of future performance.
00:25:08.920 And I think that's true in prediction markets
00:25:10.420 and in these financial markets too.
00:25:12.340 And so humans still have this unique judgment of like, I think this one is different this time.
00:25:17.800 And this is why I think I'm going on my gut intuition.
00:25:20.760 And that gut intuition has, I'd like to believe that it hasn't been replaced yet.
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