Kalshi raises $1B Series E at $11B valuation as prediction markets go mainstream

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we have Tark from Kelshi with some massive news. Tark, great to see you. How are you doing stream? Good to see you.

Hey guys, thanks for having me. Very excited to be here.

You are locked in. Look at that backdrop. Fantastic. Uh please uh introduce yourself. You've been introduced. Give give us the update. What's the news? Let's ring the gong.

Uh well, we just raised our series E. Um we just raised a billion dollar billion [laughter] valuation.

Great, great wind up. Great wind up.

Honestly, I was waiting for the gong.

Congratulations.

[ __ ] sick moment.

How's it going, guys?

Uh yeah, great to have you on. Uh I don't I was thinking over the I don't know if anybody had a crazier uh Thanksgiving holiday than you. It was there was a lot there's a lot going on last week. So nice nice to come out of that with a with a with a big announcement. But um but yeah, maybe maybe kind of just update us on um uh I think everybody's has been following the prediction market wars. The the more important story I think is just how

some people are calling blood bath actually.

Yeah. [laughter] I mean just like it's been a battlefield on the timeline. But um but yeah, I think like the what's happening in the background is like this explosion of this you know new asset class that um you know again I think uh in your announcement earlier you were saying

few years ago there nobody really cared at all and now it they you know you and and the the industry broadly have million millions of users. So um it's pretty unprecedented. Um but yeah, what what's what's uh what's been the latest on on your mind? I

mean, I think the the thing that's happening right now is prediction markets, I think, have gone mainstream. Um I think every inch of evidence is pointing towards that. And I think that the

the thing that we're seeing is there's sort of one of these rare shifts in consumer behavior that you you don't see often like they they don't happen like changing the behavior of a customer, the habits of a customer is is a rare thing and it's unique. And when you you see it, you have to really go after it with all your might. Um, and it's, you know, there's like a number of things that have to align for that to happen. And I think they're aligning for prediction markets. I think it's it's happening. And I think there's, you know, one factor is the fact that people are not really trusting um the sort of legacy media and legacy sources of information and they go to prediction markets to get smarter. The other one is that they're legal now. you know, Kashi has took on this sort of battle over years to legalize this entire market and and you know, set it up as a legitimate financial asset so that anyone can participate. Um, and three, I mean, I think we're all kind sort of we sort of caught wildfire um this this this year. I mean, I think the um we're seeing people there's a little bit of this phenomena where you cannot watch a sports game without looking at the KI odds live uh and the KI charts. you cannot talk debate about a topic about the future without um you know uh uh talenting somebody to put a position on Kali on the app. So um it's it's a huge announcement. We're very excited about it. Um and it honestly really feels like we're just we're just scratching the surface of what prediction markets can be.

One thing I've noticed when uh I'm watching a sports game is there's sometimes an integration with KHI, sometimes with a competitor. Uh what's actually going on?

You know, legacy sports book.

Yeah. What what is actually going on? I feel like a lot of people who are just passively observing the timeline are seeing a lot of like announcements and partnerships with

the partnership economy

the part and people are joking about it like what's actually going on? What's at stake with some of these partnerships? What have you done and what does it actually mean? Because it feels like if you do a partnership with a specific league that doesn't necessarily mean that I can't get odds on that event somewhere else. So what what is actually going on with the partnership economy? Um I mean I'll tell you kind of our approach to this. So so we are building you know our focus is building on a business. It's very metrics driven you know and sort of for context. So we're doing a billion and a half of volume a week now.

Wow.

Um and you know we're market leader by meaningful margin. I think depending on sort of how you measure it. So we're something around 80 to 90% market share now. And I think any partnership we do, we bucket them in a bunch of categories, but they're all focused on like actually driving legitimate volume and legitimate use case into the product. So our partnership with, you know, platforms like Robin Hood, I mean, Coinbase leaked, it's coming in December. Um, uh, and Price Fix, Weeble are kind of in that bucket. Then we have partnerships with

um, a series of partnerships coming around news. Um, one of them leaked this morning in the New York Times article. Uh but they're also very [laughter]

one sentence 10 leaks.

Everything leaks these days. I you know we just like nothing is news anymore. It's like sort of you know it's it's all leaks. But but the point is

we're focused on things that drive legitimate use to the products. Um and and and then drive legitimate utility to

uh the partner. And so you know whether it's a broker obviously you know this could be a big revenue line for them. And if it's a news network, it's a complement to the reporting that actually makes the reporting more accurate. And you know, um, reporters love truth and prediction markets bring truth. So you could see the synergies and how they fit.

Okay. Yeah. Yeah. Yeah. That makes a lot of sense.

Uh, yeah. What uh yeah, I think the uh some of the some of the big news out of last week is that Robin Hood is is entering uh and kind of potentially trying to verticalize the product experience on their side. What can you say about the I guess like how you see the structure of the market evolving? You guys are an exchange. Robin Hood is a brokerage. Sounds like they're trying to actually build uh an underlying exchange themselves. Uh how much should how much should uh sort of observers of the industry look to how the how stock trading and stock markets, stock exchanges have evolved versus prediction markets? like what does this market kind of look like in 5 years, 10 years as much as you can uh kind of pull out a crystal ball for us? I mean maybe the basics is like and you've seen this a little bit in AI right after you see the success we've had um it's it's basically indicative of like okay there's a massive market opportunity ahead of us um and when that happens I think you're going to inevitably see a ton of competition um and generally in those markets like the the the sort of massive surge of competition whether it's brokers there are some of the sports books like Draxkins and FanDuel coming in Um it's it's just usually a sign that there's a lot of good things to come for that market, right? It's it's a sign that like you have big companies rep prioritizing their entire road maps to go all in after this. Um and that's a positive for us like we're market leader in a market that you know everybody is starting to believe is going to be ginormous. Um in terms of the specific question of market structure I mean like you know we we have obviously the exchange we also have our direct product um in some ways are is competitive with some of our partners and I think you know the same way that we're working with a lot of different brokers over time some brokers are going to sort of diversify and work with number of different exchanges um and that's how these sort of market structure evolve over time um and the only thing that matters that kind of the thing that stands out is similar to any other market is product and product velocity is are you putting out products faster than anybody else and are you putting putting out products better than everybody else. And I think Kashi has had a pretty incredible track record of setting the pace in the industry. At least if you look at the last year, we've set the pace in the industry and everyone's following and I feel pretty good about us continuing to do so in the next 24 months.

How do you think about the market structure? I think everyone's wondering like obviously this is a new market. It's unlocking entirely new sort of asset classes. Uh and and it's it's obviously big. Everyone's excited about the numbers, but uh is this a natural monopoly? Is this duopoly? Like how many winners will there be? How do you even think about the market structure? Is there some return to scale?

It's it's interesting like I I kind of like don't think much about that. Like I think investors love to sort of investors do this thing where they're sort of going to rationalize all of it in five years. You know, everybody's going to be super smart about how they like all figured out.

But like look, I I think that like it's a very nent thing, right? It's it's a it's you know like it's it has some similarities to ride share. It has some similarities to the drafting fanduel era when that happened. It has some similarities to the online brokerage industry

and it has some similarities to financial exchanges like CME.

So where does it fall? It probably somewhere in between all of these sort of buckets.

Uh and probably not exactly the same as any of the any of these other buckets. Um

um and I think that you'll see more of um

I think with enough scale in financial services, but also true for any industry, everyone gets into everyone's territory. And so well the only thing that matters again is sort of what companies are going to rise above the others in terms of product velocity and product quality.

Yeah.

Um and I that's just what we're narrowly focused on.

There's a question from the chat. Uh can you explain how external market making works on Kelshi

that's been a for some reason a hot topic recently but [clears throat] you know market makers are part of any financial market. you you kind of need them um to basically have liquidity in in markets and um actually Koshi and prediction markets have less customer to market maker flow than traditional markets. If you look at options for example, it's like the vast majority is

you know Jordy to a market maker like Citadel whereas on cash actually the vast majority is you know Jordi versus John and then some of it [clears throat] goes to market makers and it's an open transparent order book where everyone's competing on price.

Um and we have actually a separate company called cash trading that trades on the exchange but they're very small percentage of any liquid markets. Really their function has been for new markets are a little bit weird.

Liquid markets. Yeah, that makes sense cuz it's if it's some really really niche thing, who's going to put in the first 500 bucks? Like you take the risk

and they're not very profitable. It's actually we really like they're really focused on providing a good customer experience so that we bootstrap markets.

Yeah.

Um rather than like any meaningful part of the business model today. Um and if we took it out, it'd be actually a worse experience. So I I think it's definitely not positive for the ecosystem. But it's a bit like Uber, you know, when the adverse interests got impacted.

Sure.

The taxis, they were coming up with all these reasons, right? like you know about all these kind of random reasons but I I don't think there's much truth to it.

Yeah. So so uh I'm sure you can't comment on any specific lawsuit. Uh there's there's a number of them. Uh but uh what what what has been the uh I think there was quite a lot of prediction markets experts that have looked at some recent lawsuits again against prediction markets and said uh they they clearly don't understand how this works. like can you comment at all on some kind of like misunder misunderstandings broadly?

Yeah. So we what what KCI has done is first regulate prediction markets as a financial instrument uh under this agency called the CFTC. People have been hearing more about the CFC recently because it also regulates crypto.

Mh.

Um and that's one of the main financial agencies. There's the SEC that does stocks and CF that does commodities.

Um and then we did the same thing with elections and now we did the same thing with sports. Um, and the way that it works is like financial markets, those are regulated at the federal level. And so the law around these markets is just federal. They they kind of report to a federal government and federal regulator, not a state government and state regulator. And there's a bunch of reasons for that, but you know, it's kind of how the constitution was formed, which is some stuff makes sense at the federal level, and some stuff is more local and makes sense at the state level. And we are one of these things that fall under the federal level and federal law preempts state law. So if you are okay on the federal side, state law doesn't really kind of apply to that exchange. Um and that's why we have one regulator which is the CFTC, our federal regulator. And again, like I think it's normal with like when something so disruptive happens to an industry, the people that are adversely impacted are going to come after it and come up with all sorts of arguments for why it shouldn't exist or why, you know, Airbnb was terrible and all these different things. But at the end of the day, the thing that drives it longterm is is this a great product and are consumers loving it and using it and the answer is yes in those ca in this case.

Um off of the success of Khi and Poly Market, there's been a bunch of net new prediction market startups that are created. Is there a possibility that that uh this market like ends up having these sort of like niche uh maybe more like vertical marketplaces or do you think that the platforms with the greatest liquidity and and the deepest liquidity will will uh ultimately just absorb those submarkets. Um it depends on how narrowly we define prediction markets versus broadly like I I really think of prediction markets as kind of just like a next gener like like expansion of financial markets to touch anything. Calcium means everything in Arabic but really if like if markets kind of progressively grew over time what we did is just like kind of widened that set dramatically over what it could touch. So I could see some you know startups innovating on like specific verticals over time and doing reasonably well but there is real concentration of liquidity and concentration of volume that happens in those type in in these types of markets. Uh that is hard I would say to battle with um and so I think at least from from that aspect like I think that the cards are probably mostly shuffled uh already.

That makes sense.

Last question. Um, there was a viral clip of you talking about uh Donald Trump Jr. is do you have anything more to share on his involvement? Uh, because I was watching that and I was like, "Yeah, there it's kind of like uh, hey, where are we going with this thing?" Uh, it seems like politicians have a deep insight on how campaigns use these uh, prediction markets, but uh, can you share anything more about his involvement in the company?

Yeah, I mean, look, f first of all, that clip is a clip and you know how these clips are taken. Uh but you know

who needs context?

Yeah, it's [laughter] like we don't need context. It's a completely you know but anyways look I think that um

uh you know uh we have done like one of the main products that took us mainstream was an election market and that brings a lot of attention from politicians on both sides of the aisle and you see it you know Trump at the time was using his prediction markets all during the election

and actually Mamani more recently was using his calcia odds pretty consistently during his election

and and so in some ways like you're going to see a lot more like prediction markets are going to touch financial markets going to touch the news and going to touch the political process because they bring more truth to all of the above all of these categories and in some ways it's good that like we get more and more I would say like um politicians involved and like engage with these markets. Um the one thing I'll say about this and like

again it's it's very it's in the same bucket as as the you know as as the other things that we discussed where like there's industry dissident that are against prediction markets that find all these different reasons for why prediction markets might be bad. But the thing that happened is not this administration necessarily even though this administration is pro innovation is we won that lawsuit on the election market which has really redefined what the landscape what the boundaries of what the financial market is and that lawsuit was one you know was is a is in the court of appeals in DC with relative it's a very progressive panel it was a a panel of democratic judges where we won three zero so people want to make it out to be a partisan issue even though I I don't think truth needs to be a partisan issue it's just you know uh these markets people love them and they generate a lot of insight out of them. Um, and I think that will win the win the day at the end of the day.

Last question from my side. How does the CFTC view when a market participant uh has some type of alpha or or non-public information and they're uh they're they're betting they're betting on a market, you know, based on that information. From my view as somebody who like gets data from, you know, we work with Poly Market, we we look at we use Poly Market data on the show. If somebody has sight information and they're they're they're trading on that information, it actually makes the markets more accurate. So, in some ways, as a user who's just like viewing markets, it's I want people that have inside information on global events to be trading so that the markets actually better reflect reality. Uh, but what is like the CFTC's view on that type of activity because like things get thrown around all the time, insider trading this or that, but I don't actually know like what the actual law says.

Yeah.

Yeah, that's a great like that's actually a great question. It's a it's a point of debate um in in this land, but I think there's some distinction. So, so cash is a regulated exchange. So everything we do in some ways a lot of the laws and the rules are very similar to what you would expect in a New York stock exchange in some of the traditional financial markets. Um the question of insider trading is interesting because what you just said could also apply to the stock market, right? Like if you want to accurately price a stock, maybe we should let insider trading happen. Sure.

And the reason why it's actually not allowed is because it makes the game unfair. It makes the market unfair. And if the market is unfair, liquidity dries up. people just stop participating.

Yeah.

Right. And and that's why you have to have reasonable rules of the road where people can reasonably expect to be treated fairly in this marketplace where there's no kind of asymmetric uh or structural advantage for for one participant versus the other. And we take the similar approach here. So if you actually have insider information, which is information that like you're not supposed to reveal to the public, you're not supposed to trade on it because trading on it is a way to reveal it to the public. Um and and so and so that makes kind of the more balanced, more fair marketplace and I think we're very focused on that. Um but it's a very interesting question. It's it's one the industry is battling with. But we we take a hard stance on insider trading.

Yeah. Because if somebody goes and and uh they go and they vote in a local election and they see like, okay, I talked to I talked to somebody there and they said they were voting this way and I talked to another person, they all says that they were voting this way. And then somebody trades on that information. like is it actually like is is that you know how how how do you define that type of activity, right? It's like anybody could go down

to the polling, you know, any anyone could go down to the polls and and kind of like uh uh uh or or voting center and just see like ask the same question, right? So anyways, uh

well, I was going to say is it's the same as the stock market, right? If you go and sit in front of Walmart and count everybody that's going in and out and then you know during the day and forecast their sales from that, that's actually fair game. Now, if you call your cousin at Walmart and ask them for information they have internally that they're not supposed to reveal to the public, that's inside of trading. And I think we have a very similar line here.

Yeah. Yeah. Yeah. That makes that makes sense.

Um uh very cool. Well, super helpful. Um and yeah, congrats to the whole team. It's pretty massive milestone.

Huge.

And uh yeah, great great getting the update. Thanks so much for taking the time to help us. Thanks for having me. We will talk to you soon.

Talk soon.

Have a good one.

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