No matter what mechanism, there’s still a bet made. Maybe you are offering a better deal. As far as the customer is concerned, it’s as if your particular casino is offering better odds.
Better prices is a good thing for society. But there is a fundamental difference. When you go to a traditional sportsbook, the odds are stacked against you. Our customers are more sharp. They’re a bit like Moneyball. They’re more quantitative. They love doing analysis on the economy, and they like the idea that on Kalshi you have to be smarter than your neighbor—not smarter than some sort of system that’s stacked against you. People do feel that, even in the stock market, the system is rigged against them. How are you going to beat the large hedge funds today on trading stocks? And the answer is, you probably won’t. It’s impossible for an individual to do that. On Kalshi, there’s a level playing field. If you have studied a lot about things like inflation, or Covid, or culture, or Taylor Swift, or sports, you have an advantage.
Gamblers also think research gives them an edge, whether it’s playing the horses or studying sports statistics. Obviously if you’re betting on events, if you know more you’re more likely to win.
Gambling is adverse to the end consumer, whereas financial markets are more open and transparent. You can enter when you want and you can exit when you want. If you make a lot of money at traditional gambling places, you will get shut down.
Still, people on Kalshi are risking real money, and that can have serious financial consequences. Gambling sites have to have long disclaimers and give the phone numbers of Gamblers Anonymous and other programs. You don’t have to do that. I can’t see why not.
The CFTC has an extremely comprehensive customer protection regime, and it has existed for decades. You see fewer issues with those markets, even though they’re inherently riskier than what you see in sports betting. It’s easy to just criticize Kalshi because we’re growing so fast. But we started in 2018 and didn’t launch until four years later, because we wanted to get regulated up front. What were we doing in those four years? We weren’t just waiting at the beach.
What were you doing?
It’s a bit like getting regulated as a bank. There’s a whole set of things that you have to do around market integrity, customer protection, where the funds are stored, audits and reporting visibility, and transferring to the federal government. You need to show how your entire operation is structured to make sure that it’s actually safe, legitimate, and regulated.
It’s like you hacked the system to get regulated.
Hacked? That seems like we did something wrong! Are we getting punished now for going regulated?
I don’t use the word in a pejorative sense. I wrote a book about good hackers!
We, as 22-year-old cofounders, said we want to do things right. We want to bring this innovation to America. We believed in this market so much, we were willing to spend four years—or however long it was going to take—to make it happen. We wanted to make it safe and do it responsibly, because we wanted to do it for the long term. The coverage of Kalshi misses that, because all of our competitors didn’t do any of that.